World IP Day – our take on patent trends and developments

WIPO member states designated the 26th April as World IP Day, to commemorate the day on which the WIPO Convention came into force in 1970. On a day set to allow consideration of the role of intellectual property (IP) in encouraging innovation, we reflect on current and upcoming trends in the patent litigation space.

How has the patent litigation sector fared during the pandemic?

Patent actions respond to long term commercial objectives and patent actions have remained stable in the UK patents court/European courts, in spite of the pandemic.

This sustained level of activity is not in itself all that surprising, since:

• in times of economic contraction, companies look to capitalise on their assets;
• patent litigation is often the result of long-term strategic imperatives to protect valuable innovative assets, or defend important products, which are not directly impacted by downturns;
• many IP courts have adapted quickly to the use of technology in the course of the pandemic, with the use of remote hearings and electronic filing allowing European IP litigation to continue to operate as “normal”.

What have been the hot topics in the last year and what topics are here to stay?

SEP and FRAND 

Standard Essential Patents (SEPs) and FRAND (Fair, Reasonable and Non-Discriminatory) patent litigation continues to be a particularly hot topic in the UK, throughout Europe and globally – this is fuelled by the growing importance of inter-operability, particularly in the Internet of Things economy. For a time, FRAND litigation was the concern of a few companies in the telecoms sector. This no longer holds true. Telecommunications technology is now central to other digitalising sectors such as the automotive, home goods, energy, finance and medical devices industries. The ongoing dispute between Nokia/IP Bridge vs. Daimler in Germany concerning connected cars, for example, raises the interesting question as to who in the product value chain (if willing) can obtain a licence from an SEP holder.

In addition, the global nature of FRAND proceedings makes it an issue that companies cannot ignore.

• The UK Supreme Court’s recent ruling confirmed that UK courts have jurisdiction to determine the terms of a FRAND licence on a global basis. No other senior court has expressed such willingness to determine what constitutes FRAND licensing terms on a global basis. Unless and until that changes, then the UK will continue to be a venue of choice for SEP holders. We expect this to fuel more UK FRAND litigation, including jurisdictional battles.
• In Germany, the Federal Supreme Court (FSC) issued its first decisions on FRAND over the past twelve months in the Sisvel vs. Haier dispute. With a shift focussing on the implementers’ obligations and the licensee’s willingness, even after its first decision issued in May 2020 and subsequent decisions of lower courts, the landscape still remains unclear. The Dusseldorf Regional Court has recently referred ten questions to the CJEU in the Nokia vs. Daimler dispute (C-182/21) – one of the issues in that case is whether an SEP holder is permitted, within the terms of its FRAND undertaking, to determine to whom in the supply chain it will offer a FRAND licence and not to make such an offer to others. Nokia had appealed the decision to refer the FRAND questions to the CJEU but, in February this year, it abandoned its appeal. However, the German FSC remains sceptical about the level of clarity that can be expected from the CJEU’s answer to the ten FRAND questions referred to it. 

Indeed, the German FSC further tightened the reins of the implementers of SEPs in its second Sisvel vs. Haier decision issued in November 2020. According to the FSC, time is of the essence – the implementer’s conduct over time is highly relevant in the course of negotiations. An implementer who reacts too late to SEP proprietors cannot claim to be engaged in negotiations in a purposeful manner. After all, the same obligation applies to the patent proprietor, meaning that both sides are obliged to conduct negotiations with the aim of achieving a speedy licensing arrangement that is in line with the interests of both parties. How this principle is followed and its concrete application by the courts of first and second instance remain to be seen. However, the wait should not be long – the calendars of the courts of German first instance are already full of SEP cases.

• In addition, Germany has seen the emergence of anti-anti-suit injunctions in the connected car patent cases (see our blog post) – the German courts maintained their right to continue hearing infringement cases while US courts determined FRAND rates. In a number of subsequent cases concerning mobile handset manufacturers, the Munich District Court granted anti-anti-suit injunctions, as well as anti-anti-anti-anti-suit injunctions. In a new twist, the Munich court has now established that if an implementer has filed an anti-suit injunction at any time before, it established a sufficient likelihood of a threat of filing a new anti-suit injunction for any other patent owner to request an ex parte anti-anti-suit injunction, unless the implementer explicitly declared not to seek an anti-suit injunction. Furthermore, the court indicated that it would consider any implementer who filed an anti-suit injunction an unwilling licensee and would reject its FRAND defence.

The key ruling of the CJEU in relation to FRAND issues, Huawei v ZTE, has been largely ineffective in providing clarity on how SEP holders and implementers should behave in licensing negotiations – as is clear from the divergence in approaches between different national courts described in our blog posts here, here and here.

The European Commission recognises that “the current system does not offer the tools businesses need in order to come to fast, effective and fair SEP licensing arrangements”.  In its IP Action Plan published in November 2020, the European Commission suggested possible reforms, “aiming to clarify the SEPs framework and offer effective transparency tools”.

However, reforming the SEP system is no easy task, as outlined by the range of views expressed in the EU’s SEP “expert group” January 2021 report on the future framework for SEPs licensing and valuation.

Artificial Intelligence (AI)

AI continues to be high up on governments and IP offices’ agenda. Futurist Ray Kurzweil had predicted that by 2099, machines will have been granted the same legal rights and freedoms as humans. AI is not (yet) truly capable of inventing autonomously, i.e. without some human input and patent offices like the European Patent Office (EPO) (in the DABUS case) and UK Intellectual Property Office (IPO) (as upheld by the English High Court) do not yet recognise AI as patent inventors – that title is still reserved for humans (see our posts here and here).

The implications of AI on intellectual property policy (and IP on AI) were considered in a consultation run by the UK government between September and November 2020. The UK government published its response on patents on 23 March 2021 here. The UK government has committed to take further action in respect of two main areas:

• AI as an inventor – AI systems are not, or not yet, independent agents seeking patent rights without human intervention. That said, the UK government noted the concern that the current approach to inventorship criteria might have a detrimental impact on innovation, including transparency in the innovation process. As such, the UK Government said that it would consult later this year on a range of possible policy options, including legislative change, for protecting AI generated inventions which would otherwise not meet current inventorship criteria.
• Conditions for grant of a patent – respondents to the consultation expressed mixed comments about existing exclusions in the UK patent system, commenting that there should be more clarity to improve predictability for patent application outcomes. As a result, the UK government has committed to:
  • publishing enhanced IPO guidelines on patent exclusion practice for AI inventions (the IPO will review its patent practice in preparation for the guidelines and establish any difference in outcome for AI patent applications filed at the IPO and the EPO); and
  • commissioning an economic study to enhance our understanding of the role the IP framework plays in incentivising investment in AI.

At European level, the European Commission considered in its IP Action Plan, the issue of adequacy of the IP framework to AI-assisted inventions and creations. It concluded (relying on a report prepared by IVIR and JIPP in November 2020) that the EU IP framework and the European Patent Convention appeared broadly suitable, although “harmonisation gaps and room for improvement remain”.  The Commission said it would engage in stakeholder discussions as a next step, although we are not anticipating any significant overhaul in the year to come. This is consistent with the European Commission’s New Coordinated Plan on AI published on 21 April 2021.  

AI developers will welcome the EU’s proposal that all AI systems that it says are to be subject to assessment obligations as part of its recently published Proposal for a Regulation on a European approach for Artificial Intelligence, will only require self-assessment (except for those systems for biometric identification and categorisation of natural persons, which are subject to conformity assessment by a notified body). The use of self-assessment for most high-risk AI systems is significant, saving AI developers from having to disclose their algorithms and the underlying training data to external parties for review, thereby ensuring intellectual property protections and trade secrets for those assets are not compromised.

COVID-19 and patent rights

In the course of 2020, pharmaceutical companies responded en masse to the call for new vaccines, treatments and tests to fight the COVID-19 pandemic. The pandemic has highlighted the traditional tension between incentivizing the development of drugs through intellectual property rights and ensuring treatments, tests and vaccines are delivered quickly, widely and fairly. Governments globally have come under pressure to respond and consider the tools at their disposal to bypass patent rights and trading rules, such as compulsory licensing and use orders (‘flexibilities’ within the patent system that are only permitted within strict limits).We discussed the interrelation between COVID-19 and patent rights in our blog posts here (focussing on Crown use), here (focussing on compulsory licensing) and here (outlining the ways in which free movement was put to the test).

The UK Court of Appeal handed down a decision on Crown Use in IPCom v Vodafone in February 2021, a telecommunications patents case. One of the issues was whether Vodafone could rely on the defence of Crown use because Vodafone was using the patent in compliance with the UK government’s scheme. Mr Recorder Douglas Campbell QC at first instance considered that it could, but the Court of Appeal disagreed, Lord Justice Arnold holding that the Crown use defence could only be relied upon where there has been “an express authorisation to work the patent or an authorisation to do a particular act in circumstances where that act necessarily infringes the patent”. The decision seemingly narrows the scope of the defence of Crown use and requires express authorisation from government to work a patent.

The German FSC’s and Federal Patents Court’s Isentress/Raltegravir and Praluent/Alirocumab decisions remain the only recent decisions on compulsory licences in Germany. With regard to the requirements for a compulsory licence directed at COVID-19 medicines, it can be concluded from the Raltegravir decisions that (in addition to the requirement around the alleged infringer’s efforts to get a licence)  the decisive criterion for deciding whether or not to grant a compulsory licence, is the existence of a treatment method with the same effect/no worse side effects for the relevant patient groups. If such treatment is available, a compulsory licence is ruled out. The number of persons benefitting from the compulsory license is not decisive, i.e. it can also be granted for the treatment of small patient groups.

Overall however, and despite an extraordinary 12-18 months, we have noted no real uptick as yet of compulsory licences relating to vaccines or medical equipment. This may be due to brands still doing what they can to support health systems, patients and help stop the pandemic (see our post here). However, as some of the authors pointed out in the article,IP and the supply of COVID-19-related, early on already, the COVID crisis brought to light fragmentation both globally and within the EU block as countries around the world have turned inwards to protect their populations. Ngozi Okonjo-Iweala, the WTO’s director general, at a virtual trade policy event taking place on Monday 26 April 2021 advocated against that stance, urging “countries that are not sharing or exporting to do so as quickly as possible” (see reports here and here).

Interplay between preliminary injunctions and compensation

The issue of appropriate compensation, if and when an injunction preventing a generic manufacturer to put its product on the market is lifted, is not new. However, the issue is currently before the English Patents Court in mammoth proceedings relating to Lyrica (pregabalin) which are likely to weigh on decisions whether to grant interim applications going forward. The case is well known to patent lawyers. Pfizer obtained a marketing authorisation for Lyrica (pregabalin) in July 2004. In Europe, Lyrica was initially indicated for the treatment of peripheral neuropathic pain and epilepsy, and the indication was extended to generalised anxiety disorder and central neuropathic pain. The first generic companies launched their products in 2014. Pfizer applied for various interim injunctions, but its patent was later revoked. The damages claim was started in 2020 and the National Health Service bodies and five generic groups are now seeking damages, with a total approaching £1bn. Following the December 2020 hearing, a three-trial process has now been set (in 2021, 2022 and 2024) to determine these claims. We will report on these in due course.

London partner Christopher Stothers will soon be publishing an in-depth and comparative review of the relationship and tension between the issue of preliminary injunctions and compensation in Bioscience Law Review.

Germany’s automatic injunction

The discussion on Germany’s automatic injunction has reached new heights over the past months, triggered not only by the connected cars litigation mentioned above, but also by proposals for a patent modernisation act. In this context, not only proportionality considerations are at issue, but also amendments to the proceedings at the German Federal Patent Court aiming at closing again (to some extent) the injunction gap which has been widened over the past years. The outcome of this discussion remains to be seen.