1. An Overview of European Patent Litigation and Enforcement Measures for AIPLA Corporate Practice Committee Susan Kirsch, Partner October 2015

2. A Comparison of the UK, German, and French Patent Courts

3. United Kingdom

4. The European Courts - UK court structure Court of Appeal Supreme Court High Court (“Patents Court”) IPEC UK Intellectual Property Office appeal appeal (with leave; points of law only) Transfer possible in some cases Application for revocation only ** * Infringement action and/or claim/counterclaim for revocation 4

5. UK - IPO Normally validity-only cases Can hear infringement if both parties agree, but very unusual Primarily a written procedure, but hearings available Hearings in 1 day, but no more than 2 days Disclosure requests possible, but unusual “Specific” most likely; “standard” inappropriate Cross-examination available Prior request required; normally allowed 6-10 months from initial claim to trial Costs: £50-£150K for revocation only Recoverable costs are small, per fixed scale But off-scale costs (“approaching full compensation”) awardable proportionately for breaches of rules, delaying tactics, unreasonable conduct, etc. 5

6. UK Courts Choice of courts: Patents Court (High Court) Intellectual Property Enterprise Court (“IPEC”) Not bifurcated: infringement and validity together Quick to trial/decision (9 – 12 months) Discovery Evidence in chief in writing Expert evidence, comprehensive cross-examination Appeals are quick (~6 months) 6

7. 7 UK - IPEC or High Court? – IPEC – Recoverable costs capped to £50,000 for the liability phase and £25,000 for the damages phase – Damages awards are capped at £500,000 per action – Pro-active case management – Two day trial maximum – High Court – Unlimited damages – Pro-active case management (increasingly) – Costs recovery for successful party (~70%)

8. 8 UK - Preliminary Injunctions – Preliminary injunctions rare in patent cases, except for certain pharma cases – Test: – Serious issue to be tried – Irreparable harm – Balance of convenience – Cross-undertaking in damages – Speedy trial option available as an alternative to PI relief

9. 9 UK – Disclosure of documents – “All the cards on the table” – not as burdensome as US discovery however more than elsewhere in EU (exception is Ireland) – Requirement generally limited to two years either side of the priority date – If relevant, documents should be disclosed, even if damaging to own case but cannot be used elsewhere without permission – Obligation (ongoing) is to search for, and disclose, documents currently or formerly in a party's control though based on a reasonable and proportionate search

10. 10 UK - Experts – Detailed reports are evidence in chief – Oral cross-examination during trial – Duty of experts to help the court on matters within their expertise – Skilled person or team – critical to get the right expertise – Manner of instruction of experts is increasingly scrutinised

11. 11 UK - Final Remedies – Injunctions – usually granted, but discretionary – Damages (compensate patentee for its loss) – – Lost profits (sales the patentee would have made) – Lost sales (primary and ancillary) – Price depression – Springboard and post-expiry sales – – Reasonable royalty (sales patentee would not have made) – Account of profits (infringer's profit) – – Rare (infringer may deduct a proportion of its overheads in addition to direct – costs) – Delivery up/destruction – Limited punitive damages

12. Germany

13. The European Courts – Germany Preservation of evidence Seizure orders Protective briefs Interim injunctions Bifurcated procedure - Infringement Four main district courts - speed varies (~10-15 months) Very short trials (hours) Expert evidence rare, no cross-examination Invalidity arguments largely discounted Stay of injunction pending validity court ruling cannot be relied upon Düsseldorf very pro-patentee 13

14. Germany - Bifurcation Bifurcated procedure - Invalidity One court in Munich Slower than infringement courts (18-24 months) Will not rule if there is an EPO opposition on the same patent Appeals (so can be very slow) Take some time (~4 years) Still bifurcated at second instance Infringement and validity only combined in the Supreme Court 14

15. 15 Germany: Preliminary Injunctions – Infringement must be reasonably clear – Validity must be reasonably certain: – a decision in nullity or opposition proceedings, or – submissions filed by infringer in application process – arguments of infringer obviously without merit – Timing: PI application must be filed within one month of notice/awareness of infringement, or patent was confirmed in opposition/nullity proceedings

16. 16 Germany: Final Remedies – Injunctions – no discretion: granted if infringement found – non-compliance: fine/imprisonment – Damages (compensate patentee for its loss) – lost profits (sales the patentee would have made) – reasonable royalty (sales patentee would not have made) – Account of profits (infringer's profit) – Delivery up/destruction – No punitive damages

17. France

18. The European Courts – France Preservation of evidence Saisie-Contrefaçon Protective letters Interim injunctions Not bifurcated Since 2009, one specialist court in Paris Inexperienced first instance judges Court of Appeal more experienced No cross-examination Short trials Relatively inexpensive 18

19. 19 France: Preliminary Measures Saisie-contrefaçon – Saisie-contrefaçon – pre action seizure of infringing materials – Aim: proof that on a certain date, infringing acts took place in France by seizing samples, documents etc. – Ex parte: authorized by the Court, executed by bailiff and an expert designated by plaintiff

20. 20 France: Preliminary Injunctions – Usually granted inter partes. – ex parte possible but rare – Infringement must be reasonably clear. – Court can: – require patentee provide bond/security, as a condition of granting PI – require alleged infringer provide bond/security, as condition of allowing continuation of alleged infringing acts

21. 21 France: Final Remedies – Injunctions – usually granted if infringement found – non-compliance: fine/imprisonment – Damages (compensate patentee for its loss) – lost profits (sales the patentee would have made) – reasonable royalty (sales patentee would not have made) – Account of profits (infringer's profit) – Delivery up/destruction – No punitive damages

22. Costs An overview

23. 23 Costs – Enforcement Directive, Art. 14 – Unsuccessful party should pay “reasonable and proportionate legal costs and other expenses” – UK – High: £150-300k (in IPEC) - £600k -several million (in High Court) – In High Court, loser pays around 70% of winner’s costs, or costs awarded on an issue by issue basis, and if not agreed, the court will assess costs – IPEC, costs capped at £50k for liability stage/£25k for quantum stage – Germany – Medium: €100k-over 1 million, but court fees higher than UK – Loser pays winner according to statutory limits, e.g. a modest case costing €50k, loser will pay ~50 % – France – Low: €50k-350k – Loser pays winner fees based on external counsels' fees and disbursements, and the length and complexity of the case

24. 24 Stays – If a patent is opposed at the EPO, will the national courts stay their parallel proceedings? – UK – in general, no, but see Actavis v Pharmacia. – Germany – – bifurcated system. – Infringement court will only stay proceedings if the invalidity argument is very strong. – Nullity court will not hear a national revocation action while EPO opposition is pending. – France – in general, no.

25. European Patent Litigation Statistics Graham & Zeebroeck, 17 Stan. Tech. L. Rev. 655 (2014)* * Data set: Darts IP database, 2000-2010

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29. The proposed Unitary Patent Court (UPC) Procedure How will the UPC change things?

30. Why is the UPC a big deal? With the advent of the European Unified Patent Court, European patents will become enforceable across a single jurisdiction encompassing approximately 360 million people (approximately 400 million with Poland). This would be about equal to the U.S. market size, but patent litigation costs would be significantly less.

31. What the UPC offers – All parties: – flexible language regime – same procedure everywhere – emphasis on written submissions plus one day hearing – but discretion in procedural matters – bifurcation, document production, use of witnesses/experts – experienced judges and a technical judge if required – speed – 12 months – to judgment – single appeal court ensures harmonisation – one set of proceedings, one set of costs – Patentees: enforcement (including PI relief) through a single court system in all relevant countries – Defendants: one counterclaim or revocation action deals with all threats

32. CJEU on EU law issues Court of Appeal Central Division London Paris Munich Central Division London Paris Munich Local divisions Regional divisions Appeal facts & law limited procedural appeals Court Structure Court of Appeal Luxembourg Legally qualified judge Technically qualified judge Optional technically qualified judge Legally qualified judge (local) Likely : Romania, Bulgaria, Cyprus & Greece Sweden, Estonia, Latvia & Lithuania Czech republic & Slovakia So far: England & Wales, Netherlands, France, Germany x4, Belgium, Finland, Denmark, Ireland So far, English an available language in all courts except France

33. 33 What will each court do? – Court of Appeal – Appeals from Central, Regional and Local divisions – Central Division – Three locations: Paris (IT and technology), London (life sciences) and Munich (engineering) – Actions for revocation or declarations of non-infringement in the absence of an infringement action – Non-EU based defendants may be sued for infringement in Central Division – Regional and Local divisions – Claimant may choose local or regional division to bring infringement claim – Invalidity claims (with/without infringement claim) may be transferred to the Central Division

34. 34 Anticipated UPC Timeline Event Weeks to Trial (1 day trial) Stage 1: Issue Identification Claim52 weeks Defence and Counterclaim Response to Defence and Counterclaim Stage 2: Preparation Interim Conference~30 weeks Identify Issues Assess need for witnesses, experts, disclosure of documents, further evidence, separate hearings for cross-examination Encourage parties to discuss settlement Stage 3: Hearings Witness/expert hearings (if any)~15 weeks Oral hearing (1 day) Judgment Stage 4: Appeal 12 months

35. 35 Types of UPC Action Infringement claims Declaration of non-infringement Invalidity/Revocation claims In certain circumstances, infringement claims and invalidity claims may be heard at the same time, or the court may bifurcate the claims and hear them separately

36. UPC – Bifurcation Bifurcation of infringement/validity Article 33.3 of the UPC Agreement – whether to bifurcate or consolidate is left to the discretion of the local division Rules of procedure give no guidance except that infringement will be stayed if invalidity is highly likely – a difficult threshold to meet? Industry is against it; lawyers will make use of it. Forum-shopping will result Some local divisions could be pro-patentee caused by inter-division competition for patentee's business

37. UPC – Preliminary Remedies The UPC will have the power to: order provisional measures to preserve evidence and the inspection of premises, or “saisie-contrefaçon” (Article 60.1 and.3 of the UPC Agreement) order a party to produce evidence (Article 59 of the UPC Agreement), order a party not to remove assets from the jurisdiction, or “freezing orders” (Article 61.1 of the UPC Agreement) grant provisional and protective measures such as preliminary injunctions against an alleged infringer or any intermediary (Article 62.1 of the UPC Agreement) order the seizure or delivery up of suspected infringing products, seizure of property and blocking of bank accounts (Article 62.3 of the UPC Agreement)

38. UPC – Final Injunctions Expected to be issued as a matter of course Bifurcated proceedings: May be issued anyway May be issued subject to the condition subsequent that the patent is not found to be invalid May be stayed and will be stayed if there is a high likelihood that the patent is invalid May be granted subject to a cross-undertaking

39. Unitary Patent – Revocation Minimising pan-European revocation at one sitting probably the most compelling reason for opting-out Do you want to put your important cases at risk in an untested court, and for all countries? Over time it seems likely that UPC case law will converge with national case law (same judges) so perhaps reasons for opting out decrease with time? Even if UPC outcomes are similar to national courts, is there a risk bias? Do you prefer: 70% chance of winning in UPC Or win 7/10 times in national courts? EP and opt-out for important cases that are likely to be challenged?

40. Court fees and legal costs, May 2015 Consultation Paper – Fixed court fees at each major stage e.g. for infringement, for counterclaim, for damages determination, for appeal – Infringement claim, DNI, or counterclaim €11,000 – Revocation claim €20,000 – Value-based fees are payable in addition for infringement and counterclaim – Each party will assess value of case – Judge-rapporteur will decide value at the Interim Conference – value €1m = fee €5,000 – value €30m = fee €150,000 – value > €50m = fee €220,000 – Possibility of reimbursement for withdrawal, early settlement, and use of single judge, and of reduced fees and legal aid for SMEs or persons without means.

41. Court fees and legal costs, May 2015 Consultation Paper – “Reasonable and proportionate” costs recoverable by the successful party – Recovery unlikely to be as high as in the UK (60-70%), but will be much higher than in Germany Value of Action € UPC €UK €Germany € 1M150,00060-70%~25,000 5M600,000~85,000 10M800,000~160,000 30M1M~450,000.50M3M~450,000

42. An Overview of European Patent Litigation and Enforcement Measures for AIPLA Corporate Practice Committee Susan Kirsch, Partner October 2015