Different Patent Systems, Similar Controversies

01 January 2007

Trevor Cook, Bird & Bird 

The issue of obviousness is so factdependent that even by the standards of patent law it is rarely considered by the highest courts anywhere. In 1952, US law was changed in an effort to get the courts to uphold more patents against obviousness objections, and subsequently the Court of Appeal for the Federal Circuit (CAFC) was established to provide a single appellate jurisdiction in patent matters, in part because the 1952 amendment alone had not had the requisite effect. Many now feel that the pendulum has swung too far the other way, and their views will be tested in KSR International Co v Teleflex Inc, where the Supreme Court has acceded to the defendant’s petition to review the case and will give judgment in 2007. The petition attracted considerable support for using the case as a vehicle to “reinvigorate the obviousness standard”, in an amicus brief from various law professors arguing that the CAFC, by holding that obviousness can be shown only by producing a “teaching, suggestion, or motivation” to combine prior art, had in this as in other cases over the years, disregarded clear Supreme Court precedent on the subject of combination inventions. 

In its amicus brief on the petition, the US Government – having been asked for its views by the Supreme Court – was also critical of the approach adopted by the CAFC. The government, together with companies such as Cisco, GM, Intel, Time Warner and Viacom, supports the petitioner in its amicus brief on the merits, emphasising the wider significance of the case. This can readily be appreciated when one recognises that most inventions outside the fields of chemistry and biotechnology reside in a combination of elements that are either known, or are modified from elements that are known. 

In Europe however, we already treat such combination inventions in a similar way to US Supreme Court precedent, as confirmed by the judgment, late in 2004 in Sabaf v MFI, one of the rare patent cases heard by the UK’s highest court, the House of Lords (which judgment was overshadowed by the higher profile judgment of the House on claim construction delivered one week later in Kirin Amgen v TKT). In this the House of Lords followed not only old English case law on “the law of collocation” dating back to 1935, but also the rather more current European Patent Office (EPO) guidelines, in holding that where each of the combined features performed its own proper function independently of the others (ie there was no synergy between them), inventive step was to be assessed in relation to each feature separately, so that if each feature was virtually the same as that found in the prior art, there was no invention. In Europe, where we are emerging from the bruising and intellectually unsatisfactory ‘debate’ that surrounded the run-up to the rejection in 2005 of the Commission’s proposed Computer Implemented Inventions (CII) Directive, we contrast our situation with that in the USA, which lacks the express exclusions from patentable subject matter under which we labour in Europe, and we are used to thinking of patents for computer programs and for business methods as an accepted feature of US patent law. Although they are indeed so in practice, it is salutary to realise that business methods patents have never been sanctioned by the US Supreme Court. Laboratory Corporation of America v Metabolite Laboratories, a case in a wholly different technical field – that of diagnostics – and which the Supreme Court initially agreed to hear, offered the Court the opportunity to review the whole area of patentable subject matter, with potential consequences for the patentability of computer programs and business methods. Numerous amicus briefs were filed, including one from IBM which, though criticising the current lenient standards of patentability in the USA, urged the Court not to use this particular case as a vehicle to address business method patent eligibility, advice which the Court, by a majority, took when in June 2006 it decided that it should not have taken the case in first place and left the decision below undisturbed. However, a trenchant minority opinion provides a strong basis for future forays into this area. 

Meanwhile back in Europe, freed from the polemic of the CII Directive controversy, the English Court of Appeal in Aerotel’s and Macrossan’s Applications, in November 2006, has reviewed authoritatively the EPO approaches to excluded subject matter and identified conflicts within the extensive EPO case law on the exclusions from patentability for computer programs and business methods that it considers can only be reconciled by a reference by the EPO president to its enlarged board of appeal. 

Business method patents also feature in eBay v MercExchange LLC, in which the US Supreme Court in May 2006 supported eBay’s challenge to the automatic grant of permanent injunctions against patent infringers, leaving courts with greater scope to deny such relief to ‘patent trolls’ who have no plans themselves to exploit the invention, but who extort high royalties from manufacturers under threat of injunctions. Business method patents came off particularly badly, with one opinion taking a swipe at “the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times … [whose] potential vagueness and suspect validity … may affect the calculus … test [for the grant of a permanent injunction]”. In Europe, perhaps because we lack business method patents, the issue has yet to be raised so starkly, but the judgment of the German Federal Supreme Court of July 2004 in Standard Tight-Head Drum (Standard Spundfass) shows how competition law considerations can, in the context of attempts to assert patents for industry standards, require patentees to grant licences irrespective of whether or not a licence might be available under the statutory compulsory licensing mechanisms that we also have in Europe, but that the USA lacks. 

The pharmaceutical industry has not escaped the interest of the US Supreme Court, which requested amicus briefs from the US Government in two cases in that sector. One, Federal Trade Commission v Schering-Plough Corporation, concerned the competition law aspects of agreements between innovators and generics, involving the payment of reverse premiums by research based pharmaceutical companies to generic companies as part of the settlement of patent litigation, which also involves specifying when the generic company will enter the market. However, although in Europe we lack the particular linkage between the patent and regulatory systems that provides the primary driver for such deals in the USA, competition law issues on generic entry are a continuing subject of European Commission interest. Already, in its AstraZeneca investigation (currently under appeal), and albeit in the context of article 82 unilateral practices rather than article 81 agreements, The EC has signified its interest in the activities of innovators in trying to slow the entry of the generic product to market. In another, SmithKline Beecham Corporation v Apotex, examined the law of novelty in the context of the various different crystalline forms (polymorphs) of paroxetine hydrochloride, better known as Paxil in the USA or Seroxat in Europe. Europe has seen more than its fair share of litigation over paroxetine hydrochloride, but of greater legal interest was the decision of the UK House of Lords in October 2005 in SmithKline Beecham v Synthon, a case concerning another salt of paroxetine – paroxetine mesylate – which importantly lacks polymorphs. Again however, the issue was that of novelty, the House of Lords holding that for a prior disclosure to deprive a claim of novelty it must meet two separate statutory requirements arising in two different statutory contexts, in that it must both disclose and enable the claimed subject matter. However it was important that the two requirements be kept distinct, as a failure to apply them separately could result in a confused and incorrect analysis such as that undertaken by the Court of Appeal in this case. 

Finally, there is the question of the territorial scope of patent litigation. In the USA the controversy which at present is raging in several cases at different levels of the system, takes the form of the extent to which a US patent may be infringed by activities undertaken, at least in part, abroad, or even whether a US court can adjudicate on disputes under foreign patents. The Supreme Court is now set to address some of these issues in Microsoft v AT&T, first raised albeit in a somewhat different statutory context in Research in Motion Ltd v NTP Inc, better known as the Blackberry litigation. The defendant’s final petition to the Supreme Court, rejected late in January 2006 shortly before the matter settled, sought to question whether an internet based system such as the Blackberry wireless email system is used within the USA, in the sense required by the statutory definition of infringement, while components crucial to the system’s operation are located abroad, in this case Canada. In a similar issue in Europe a few years ago, Menashe Business Mercantile Ltd v William Hill Organisation Ltd concerning an internet based betting system, the English Court of Appeal ruled in favour of the patentee, but the issue is dependent to some extent on claim language, and to a large extent on the specific statutory language as to what constitutes infringement. It does not require too much imagination to foresee an expansive view of their jurisdiction in such cases by the US courts, leading to attempts to assert US business method patents against internet based systems operating out of Europe, which would certainly stoke the embers of business patent controversy in Europe. 

Europe did not escape its own version of the Blackberry litigation, which took place in both England and Germany, but with a different patentee and a different patent to those in the USA. This raised questions of territoriality in a different context – that of the unedifying spectacle of a race to trial. The English court acceded to a request by the defendant for a fast timetable to trial for the English revocation action, brought by the defendant in response to a German infringement action against it and in which, because of the split litigation system in Germany, it was unable effectively to challenge the validity of the patent. 

Each action was national in effect, but the wording of the UK and German patents was identical, being both national designations of a European patent granted by the EPO, and the substantive law was the same. As it was, the courts in the two countries came to the same overall conclusion – that the particular patents in issue were invalid, with the English court finding all claims invalid either as obvious or anticipated. This is hardly an ideal way of resolving such disputes in Europe, but we still squabble about how best to litigate patents under a basis that is more than purely national. With the European Court of Justice ruling in the summer of 2006 in GAT v LuK and Roche v Primus and Goldenberg, we have reached the end of the line in the pan- European litigation that was so popular only a few years ago, and so further development of a pan-European jurisdiction can only take place through legislation. This will take either the form of the European Patent Litigation Agreement or EPLA (allowing European patents to be litigated in one court but with effect in multiple jurisdictions), or a community patent acceptable to industry, or preferably both. On any basis the community patent as an object of litigation is many years away. 

It is thus encouraging that as a result of its consultation in the first half of 2006 the European Commission seems to be relenting in its long-standing opposition to the EPLA, and we must hope that it will at long last remove the block that it has in recent years (no doubt in an attempt to force agreement on a community patent proposal which in its present form is seen as deeply unsatisfactory by all sections of industry) placed on its progress.

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