Patent Litigation 2018

The Patent Litigation 2018 guide provides expert legal commentary on key issues for businesses. The guide covers the important developments in the most significant jurisdictions

Last Updated August 03, 2018


Authors



Hogan Lovells offers extensive experience and insights gained from working in some of the world's most complex legal environments and markets for corporations, financial institutions and governments. Lawyers identify and mitigate risk and make the most of opportunities. A fast-changing and inter-connected world requires fresh thinking, combined with proven experience. The team's experience in cross-border and emerging economies gives us the market perspective to be a global partner for clients. The Hogan Lovells teams bring a broad range of legal capabilities to the table. The firm has major strengths in corporate law, dispute resolution and finance, alongside world-class capabilities in areas such as competition, government regulatory, intellectual property, tax and real estate. This means that the firm is able to advise its clients seamlessly on the full spectrum of legal issues, on a global scale.


2017 was another active year for patent litigation and 2018 promises to be at least as active. With the delay in the introduction of the Unitary Patent Court in Europe, litigants continue to refine their global litigation strategies. It is now more common than ever before to see parties litigating in China, Japan, Europe, and the US ITC, more or less at the same time. No effort is spared to get into pole position for settlement or obtain strategic advantages over the competition. Being able to win an injunction is always at the forefront of every effort, which is why the US ITC has become a more important forum than ever before, while defendants rely increasingly on the PTAB to get undesired patents kicked out. Portfolio management, clever acquisition strategies, and the effective use of patent litigation strategies continue to command boardroom attention and have become key factors in successful business development strategies. A few more recent developments deserve a more detailed analysis:

Europe

Developments in the Application of the Doctrine of Equivalents

Following the German Supreme Court's Pemetrexed decision in 2016 (Lilly v Actavis) discussing the scope of equivalence, the relevance of statements by the patentee during prosecution and the application of a waiver doctrine with regard to the doctrine of equivalents, patent litigators have been arguing about whether the UK's "purposive construction" approach to claim scope was still in line with the rest of Europe and the revised version of the infringement provisions in the European Patent convention (EPC 2000, revised protocol to Article 69). The last time the UK's highest court looked at claim scope was in Kirin Amgen ([2004] UKHL 46). The House of Lords in that case proposed that a single question could answer the issue of claim scope: "The question is always what the person skilled in the art would have understood the patentee to be using the language of the claim to mean."  Many viewed that as limiting claim scope to the words of the claim, contrary to the approach taken in other EPC-contracting states. The issue was reviewed in 2017 by the UK Supreme Court in the Actavis v Lilly case ([2017] UKSC 48). The crucial issue on infringement was whether the test from Kirin Amgen complied with the revised protocol to Article 69 EPC which states: "For the purpose of determining the extent of protection conferred by a European patent, due account shall be taken of any element which is equivalent to an element specified in the claims." It is clear from the result of the case that the UK Supreme Court considered some adjustment needed to be made to reflect the revised EPC text. A revised three-step guide to assessing scope of protection was formulated by the Supreme Court. The application of the test in the Lilly case shows that the courts need to keep the invention of the patent firmly in mind when assessing claim scope. Crucially, it is now clear that there can be infringement beyond the normal meaning of the claim language. A similar approach is now also applied in the Netherlands.

Scope of Second Medical Use Patents

The courts in Europe have also become more generous in considering the scope of so-called "second medical-use patents." Until recently, patents which protect a specific "use" of a pharmaceutical product (eg a specific indication/disease or a specific group of patients) could only be infringed when the packaging or the product actually referred to the specific protected use. But many European courts are becoming more flexible, considering one must look at the overall context of the marketing for the product. This shift may ultimately benefit patentees in effectively enforcing this type of patent. It also means that defendants' companies will ultimately need to do more to avoid patent infringement than simply invoking a "skinny label".

US Patent Litigation Trends

Recent developments in US patent litigation have greatly impacted where such litigation is conducted, as well as whether certain types of business methods are patentable. The US Supreme Court's decision in TC Heartland has caused a sea change on the issue of venue for patent cases. Prior to that decision, more than half the patent cases were brought in the Eastern District of Texas ("EDTX"). The reasons why plaintiffs (particularly non-practising entities) chose that venue are varied, and include a jury pool perceived to be very pro-plaintiff, local patent rules that made it difficult to dispose of cases on motion, and other factors. The District includes a number of relatively small cities such as Marshall, Tyler, Texarkana, and others. TC Heartland focused on an apparent conflict between provisions in two separate venue statutes. One provision states a defendant may be sued anywhere it is subject to personal jurisdiction. Since the sale of an infringing product gives rise to personal jurisdiction, almost all major companies would be subject to suit in EDTX if they sold an allegedly infringing product in the district. But there is a separate statute providing that suits for patent infringement may be brought where a corporation resides (which is its state of incorporation) or where it commits infringing acts and has a "regular and established place of business." Prior to TC Heartland, courts had held that the general venue statute applies to patent cases, despite the separate statute which specifically refers to patent cases. But the Supreme Court held that the narrower statute supersedes the broader one. Because Texas is not a particularly popular state of incorporation, plaintiffs wishing to sue there must rely on the second basis to establish venue in EDTX. The critical factor is the requirement of a "regular and established place of business." Most companies do not have such a place in EDTX, and hence would not be subject to suit there. Since TC Heartland was decided in June 2017, plaintiffs have tried a number of clever arguments to support venue. For example, the fact that a company's products are sold at a Staples store in EDTX is argued to be an "established place of business." Similarly, the fact that a corporation has an employee who works out of her home, which happens to be in EDTX, has been relied on. But in those and similar cases, courts have said no. Thus, EDTX has seen the number of cases filed there plummet. Few tears have been shed over that result.

Another major development in US patent litigation is the Supreme Court's upcoming decision in the Oil States case, which will consider whether the entire Inter Partes Review ("IPR") procedure is unconstitutional. Since their creation under the America Invents Act, IPRs have become the preferred procedure for attempting to invalidate issued patents based on prior art. The proceedings are conducted in a new forum, the Patent Trial and Appeal Board ("PTAB"). A three-judge panel hears and decides IPRs. The judges are trained both in the law and in the technology or science that is applicable to the proceedings. This is in stark contrast to patent litigations in court, which are heard by a single judge who almost never has such training. In addition, the standard for invalidating a patent in the PTAB is preponderance of the evidence, which is used in US civil cases generally. But a challenge to patent validity in court is based on the much more stringent "clear and convincing evidence" standard. Because of these differences and others, there has been a marked decrease in district court litigation, as many accused infringers choose to go to the PTAB to contest validity. The PTAB has already invalidated hundreds of patent claims.  Should the Supreme Court hold those proceedings to be unconstitutional, it will raise numerous difficult questions about the prior rulings, among other things.

A third major trend has been the rise of challenges to patent validity based on the Supreme Court's Alice decision a few years ago. That decision made it much easier to invalidate business method patents on the ground that what was claimed was an abstract idea, and was therefore not patent-eligible. Not only has Alice led to the nullification of many patents, but judges in most districts are considering such challenges at the beginning of a case rather than waiting until discovery and claim construction has been completed. This has been especially beneficial to defendants facing lawsuits by trolls.

Litigation Trends in Asia

Equivalence in Japan

In Japan, after years of uncertainty and differing interpretations of the doctrine of equivalents, the Supreme Court in March 2017 handed down a welcome decision (in the Maxacalcitol case) that confirmed the possibility of infringing a patent under the doctrine and, importantly, clarified the criteria for doing so. The previous Supreme Court authority (the Ball Spline Bearing case) from 1998 had set out five criteria, but these had not been applied uniformly by the lower courts. This Maxacalcitol decision now provides a uniform standard for interpreting the criteria. It is also the first decision to find infringement under the doctrine equivalents in the field of medicine. In endorsing the findings of the Tokyo District Court (first instance), and the Intellectual Property High Court, sitting as a Grand Panel (appeal), the Supreme Court decision adds to the international clarification of the doctrine of equivalents in 2017, notably by the UK Supreme Court in Eli Lilly v Actavis.

SEP Patent Litigation in China

In China, Huawei, the well-known Chinese multinational networking and telecommunications equipment maker has been confronting Samsung. Parallel litigation was filed in the US. Only recently, Huawei obtained an injunction from the Shenzhen Intermediate People's Court despite the fact that it had based its claims on two Standard Essential Patents (SEPs) relating to 4G technology (Chinese Patents No 201110269715.3 and No 201010137731.2). Huawei alleged that Samsung manufactured, sold and offered for sale and imported products that used Huawei's patents without permission. Further, Samsung failed to observe its FRAND obligations during the negotiation for licensing of the SEPs since 2011. Samsung defended against the claims arguing that it did not exploit the asserted patents and that Huawei had not met its FRAND obligations.

In January 2018, the Shenzhen Intermediate People's Court found that Huawei had not breached its FRAND licensing obligations during its cross-licensing negotiations and that it was Samsung who had breached its FRAND duties. Specifically, Samsung had tied the licensing of its SEPs with non-standard essential patents. Further, Samsung had refused to accept arbitration and delayed the negotiation in bad faith. Also, Samsung had offered royalties to Huawei that were three times the amount of the Huawei offer. In addition, after careful analysis, the Court found that Samsung's product did in fact infringe Huawei's SEPs and issued the requested injunctions.

This is the first injunction issued in China in relation to an internationally recognised standard (4G). The Beijing IP court had previously issued an SEP injunction against SONY in March 2017 but it was based on the WAPI standard, a rarely-used protocol which is only implemented in China.

Business Method Patents in China

The amendments to the Patent Examination Guide which came into force as of 1 April 2017 are of particular relevance for business method inventions. They specify that inventions involving computer software are eligible for patent protection although pure computer software is not. This amendment, which is contrary to developments in other jurisdictions, aims at encouraging more innovation in the area of business methods.

Authors



Hogan Lovells offers extensive experience and insights gained from working in some of the world's most complex legal environments and markets for corporations, financial institutions and governments. Lawyers identify and mitigate risk and make the most of opportunities. A fast-changing and inter-connected world requires fresh thinking, combined with proven experience. The team's experience in cross-border and emerging economies gives us the market perspective to be a global partner for clients. The Hogan Lovells teams bring a broad range of legal capabilities to the table. The firm has major strengths in corporate law, dispute resolution and finance, alongside world-class capabilities in areas such as competition, government regulatory, intellectual property, tax and real estate. This means that the firm is able to advise its clients seamlessly on the full spectrum of legal issues, on a global scale.