In this article for Intellectual Property Magazine, partner Andrew White discusses how the automotive ‘patent battles’ are heating up in light of the Nokia dispute.
The automotive standards essential patents (SEPs) wars are heating up. The decision of the Mannheim regional court in Germany, which was announced on 18 August 2020, secured a win for Nokia against the Mercedes carmaker Daimler, but many questions still remain. In particular, it is still not clear whether Tier 1 suppliers are required to be the licencees of any relevant SEPs or whether it is the carmakers themselves.
The decision related to only one of 10 connected suits filed by Nokia against Daimler, and the litigation has garnered much attention from other car makers, suppliers and even politicians. While the eye-wateringly high bond of €7bn required by Nokia to obtain an injunction against Daimler is very high, Nokia claims it will help bring Daimler back to the negotiating table. The decision itself also raises questions as to the conduct of the patent holder (Nokia), and it is expected that if Daimler is to appeal the decision, clarification would be sought from the Court of Justice of the European Union (CJEU).
This article was originally published in Intellectual Property Magazine in October 2020 – click here to read the full version (login required).
In this article for The Patent Lawyer, partners Sean Leach and Andrew White lay out a general roadmap to help non-European practitioners navigate the landscape.
Partners Sean Leach, Andrew White and Juliet Redhouse have hosted a webinar on this topic – click here to download a recording.
A patent or patent application in the hands of a third-party, which covers a product which you wish to exploit presents a difficult challenge, and even more so if it is in a foreign jurisdiction. Preliminary qualitative research indicates that, in the US at least, the options to monitor and mitigate risks from European patents are not widely known. All but the most internationally focused US and Chinese attorneys use the European procedures infrequently, and their clients even less so.
Whether defending patent infringement action, reducing the risk posed by such actions, applying for complete or partial revocation of a patent, or opposing grant of a problem patent in the first place European jurisdictions offer many effective options, which by comparison with similar measures in the US are low-cost, low-risk and procedurally simple. Much can be done anonymously, and there are very good tactical reasons to take advantage of the possibility to remain anonymous.
In addition to these helpful features of the European procedural and legal landscape there are other issues, such as bifurcation in Germany and the losing party’s liability for the other side’s legal costs, which can represent very significant risks in their own right.
The EPO provides a centralised examination procedure, through which a single application granted by the EPO is turned into a bundle of independent national patents.
Each patent must be dealt with separately after grant in the courts of each relevant national jurisdiction. Complete revocation of a granted European patent may thus require court proceedings in multiple jurisdictions, each conducted in a different language, under different evidential and procedural standards.
To a third-party to whom a European patent presents a risk, it is thus far better to take action at the EPO when possible. This can be done by filing so called “observations”, or by filing an opposition within a nine month time window after grant to have the patent revoked centrally at the EPO. Both can be done anonymously, which conveys a very significant tactical benefit because arguments can be advanced without constraining the conduct of future proceedings and because a patent proprietor forced to amend by an anonymous opponent cannot know the infringement target which they are aiming to hit.
In EPO proceedings there is no discovery or disclosure obligation on the parties, and only a very limited liability for the other side’s costs. There is no estoppel, the quality of the decisions is high and the rules of evidence and the standards applied by the EPO mean that outcomes are, by comparison to national proceedings, straightforward, fast and predictable.
1. Before grant: the options to attack an EPO or national application prior to grant in Europe
So-called “third-party observations” can be filed anonymously at the EPO at any point until the patent grants (and can even be filed against PCT applications before they enter the European Regional Phase).
The best time to file third party observations is thus early in examination before minds have been made up, and so the Examiner will be obliged to take them into account (the EPO Guidelines state that if the observations call into question the patentability of the invention in whole or in part, they must be taken into account). Experience suggests that unless the issue of patentability is prima facie clear, the observations may be less effective than one might hope. On the other hand, if the observations are fully substantiated and filed prior to any communication of intended grant, the EPO will normally issue a new office action within three months of their receipt.
The objections likely to fare best are clear added matter objections and clear novelty objections. Importantly, in Europe there is generally no presumption of validity. This is significant because a document being cited during prosecution does not mean that a national court will presume that a patent is valid over that document.
A potential downside to third party observations is that the applicant may amend the patent application so as to strengthen it. Thus there may be attacks which could be made but which would be much better saved for an Opposition (see below). However, an applicant responding to anonymous observations does not have any infringement target in mind. It may thus be possible, by carefully calibrated attacks, to shepherd an applicant toward a desirable amendment to clear a product without them ever having been aware of it.
2. Post-grant: the EPO opposition procedure, and its German national equivalent
As noted above, once a European patent application grants, it is converted into national rights, and litigation must be done at a national level at national courts. This can rapidly become expensive. One tactic adopted by some is to litigate in a single territory first and use the outcome of that litigating to force mediation/an agreement elsewhere. However, even adopting such a tactic, costs will be higher. For example, the cost of patent litigation in the English courts (even via the relatively cheaper Intellectual Property Enterprise Court) is typically measured in multiples of hundreds of thousands of pounds with further costs if there is an appeal.
By comparison, the cost of most EPO oppositions is generally less than £100K in all but the most complex cases, and simple cases can be won for far less. At the time of writing this article, an opposition (including detailed professional searches for prior art) could be concluded for about £30K-70K, and takes around two to four years to complete. Normally, first instance proceedings culminate in an in-person hearing at the EPO. An opposition decision can be appealed, which can add another two to four years and further cost – although appeals can be accelerated.
The EPO issues on average around 2000 opposition decisions a year, and roughly 30% result in the patent being upheld as granted, about 30% result in the patent being revoked, with the remaining 40% resulting in the patent being maintained in amended form. Therefore, opposition proceedings represent a good prospect of having the scope of a granted patent changed in some form or other.
To take advantage of the Opposition procedure it is of course necessary to be aware of the patent within the nine month Opposition period. Only during this window of opportunity can the patent be challenged centrally at the EPO. It is therefore prudent to search for competitors’ patent applications at the EPO and to monitor their progress. If the Opposition window is missed it cannot be reopened.
3. Post-grant: the options to control risk from national patents after grant and EP patents outside the EPO opposition period
a. UKIPO infringement and validity opinions
If the opposition period has been missed, or if it simply isn’t relevant (e.g. the patent was filed directly in a selected number of European territories) there are still options available to challenge and cast doubt on the validity of granted patents in Europe without costly court proceedings.
In the UK it is possible to obtain an opinion from the UKIPO either relating to the validity of the patent and/or as regards infringement. Opinions are fast and low cost and can be used to influence the conduct of later proceedings, and may have implications for awards of costs. Opinions can be requested anonymously.
UKIPO validity opinions are limited to issues of novelty and inventive step. The official fee is around £200 and the request can be filed against any patent or SPC, even if it is no longer in force. A list of opinions issued last year can be found here. The patentee is given an opportunity to comment, and the UKIPO will normally issue a validity opinion within three months. The opinion is non-binding, but the UKIPO can revoke a patent in cases where the patent is clearly invalid. This is rare. The procedure for obtaining an opinion on validity is relatively new, and to date 90 opinions have been issued, with 43 finding the patent to be invalid. Only 36 final decisions have been issued, with about half resulting in the patent being amended. In six cases the patent has been revoked.
Infringement opinions follow similar procedure and are also non-binding, but may serve as a useful negotiation tool to avoid or resolve a potential dispute.
b. Revocation actions in the national courts & before the UKIPO
In the UK, a revocation action can be taken before the UKIPO or the courts (The Intellectual Property Enterprise Court (IPEC) or the High Court (Patents Court)). The action can be raised on essentially the same grounds as for an EPO opposition. If action is taken before the UKIPO, a typical timeframe may be between 6 months to a year. Notably, decisions from the UKIPO can be appealed to the Patents Court. While a revocation action cannot be filed anonymously, any individual or legal entity can apply for revocation and (unlike e.g. in the US), there is no requirement for any threatened or actual proceedings.
If action is taken before the IPEC or Patents Court, it would probably take around 12 months to go to trial. Notably an application for revocation can be stayed pending the outcome of any pending EPO opposition proceedings.
The costs of the proceedings will be determined by the complexity of the case but may typically be in the range of £10,000 to £30,000 before the UK IPO, £50,000 to £200,000 before IPEC and £250,000 to £1,000,000 or even higher before the Patents Court. In English litigation, the losing party generally has to pay the other side’s costs. While costs are limited before the UKIPO and IPEC (in the IPEC the costs are capped at £50,000), in the Patents Court there is no limit on the award of costs
Whilst the procedure before the courts of each jurisdiction is independent, and courts in different European countries do sometimes reach different conclusions on the same patents, a successful outcome from the court of a major jurisdiction is likely to at least influence proceedings in other territories.
c. Bifurcation and protective briefs in Germany
In Germany validity and infringement are dealt with separately (in so-called bifurcated proceedings). It is thus possible for a patentee to obtain a preliminary injunction very quickly and without any invalidity defence even being considered.
To defend against this risk a protective brief can be filed pre-emptively at a German court setting out arguments against infringement or validity of the patent concerned. It is only disclosed to the patentee if they apply for a preliminary injunction. The benefit of a protective brief is that it ensures an invalidity defence must be addressed by the patentee and considered by the court before a preliminary injunction can be issued.
We have had a series of conversations with non-European attorneys to understand their view of European patent risk. The conclusion we drew from those conversations is that the monitoring and watching that most European attorneys do for their clients is not adopted as widely outside Europe as it could be. When faced with a European patent or patent application which presents a risk, forewarned is most certainly forearmed. The EPO opposition procedure is predictable, fast, and low cost. More people should use it. Although such action before the EPO has much to recommend it, there are also a range of options available in national jurisdictions to control risk without launching revocation proceedings as a first resort.
This article was first published in the Sept/Oct 2020 edition of The Patent Lawyer (pp. 76-79).
We are pleased to announce that Mathys & Squire has maintained its tier 1 ranking for the PATMA: Patent Attorneys category in the latest edition of The Legal 500 – the definitive guide to the legal market.
As well as top tier recognition for our patent practice, our trade mark team has once again been recommended in the PATMA: Trade Mark Attorneys category. Patent partners Jane Clark, Paul Cozens, Chris Hamer, Alan MacDougall and Martin MacLean, alongside trade mark partners Margaret Arnott and Gary Johnston, have been ranked as Recommended Lawyers in this year’s guide, with Anna Gregson, Philippa Griffin and Craig Titmus recognised as Key Lawyers:
‘Jane Clark is a pre-eminent prosecutor who is always my first choice. [She makes herself] available for all important matters as well as many less important matters.’
‘Paul Cozens produces work of a consistently high quality and is very commercial. He is especially adept at dealing with software in the context of engineering.’
‘The individuals we work with in Mathys & Squire are all highly skilled, clear, driven and provide excellent service, especially under pressure. We would like to single out Chris Hamer, who has been exemplary. Chris is equally at home working with us on patent filings and advice one minute and the next advising CEOs and board members on the status of IP and influencing our commercial strategy. He is always available no matter what time of day.’
‘Anna Gregson and Martin MacLean are accessible, knowledgeable and provide a really outstanding, can-do attitude.’
‘Margaret Arnott has played a hands-on role in managing all of our trade mark work, and promptly makes herself available to discuss matters and management issues. She has quickly adapted the way her team works to meet our operational requirements and manage costs.’
‘Margaret Arnott explains everything in plain English, which makes decision-making much more straightforward.’
‘The team under Margaret Arnott’s lead are well organised, reliable and responsive. We value their timely reminders and also that they are always keen to provide advice and support.’
‘Craig Titmus is an exceptional lawyer. He has read our patent so carefully and thoughtfully that his work with the patent offices tends to result in our favour. He presents the commentary and issues with such clarity that we don’t need a legal interpreter to understand and respond to them. This saves a lot of time and fees. Besides being a really clever lawyer, Craig is a truly nice person. We hope to work with him for all of our IP and patents going forward.’
‘The team has an excellent technical understanding of our technology area, which is very niche and hard for most individuals to grasp. This makes the patent development process so much easier. During the process of trying to get the invention down on paper, the team are able to suggest areas of potential innovation or to point out common knowledge at a very early stage, saving time and money but at the same time potentially generating new commercial IP in the form of sub patents.’
‘Broad experience across the range of technologies that my company has exposure to.’
‘Extremely responsive and eager to understand my company’s needs. Flexible and accommodating when it comes to matching expectations regarding timing and budget.’
‘The Mathys & Squire team has made the entire process of the patent application an exceptional experience. We have received appropriate advice to enable us to gain better positioning. Their billing is also transparent and has shown good value for money compared to other firms we work with.’
‘Showed great technological knowledge and effective support in prosecution in front of the EPO. Cost effective and very responsive.’
‘The diversity of patent concepts we bring forward in our field across a range of activities is always met by a team of experts with relevant expertise to draft patents quickly, enhance our concepts and provide assurance to our sponsors on the novelty and enforceability of our IP. We have always had priority for important filings. Advice to support our commercial partnerships and their strategic direction has always been generous and valuable.’
‘Mathys & Squire LLP really can’t do enough for you. If you want a firm that will go the extra mile and provide industry-leading client service then I would wholeheartedly recommend them. We have entrusted our most important patent portfolio to them and continue to be impressed by the diligent, professional and successful way they have managed the prosecution.’
‘Approachable and friendly, which is a key factor. Very knowledgeable in all manners of managing, and applying for, IP. Very swift in their response time.’
‘A partner-led service which has made a strong effort to meet our requirements and adapt to changes within the business.’
‘Very much like working with people who are members of the same team as you.’
‘The team provide us with in-depth knowledge and expertise in relation to all trade mark matters and provide pragmatic advice whether we are registering new trade marks or taking steps to protect existing ones.’
For full details of our rankings in The Legal 500 2021 guide, please click here.
We would like to thank all our clients and contacts who took part in the research, and congratulate our individual attorneys who have been ranked in this year’s guide.
One-stop platform offers small business community access to insightful information and connections to help facilitate the startup process.
We are delighted to announce the launch of our Scaleup Quarter, a one-stop microsite resource focused on smaller and growing businesses, including startups, scaleups and SMEs, to harness their passion and energy for innovation and provide crucial IP services that are dynamic and energetic, adding value and supporting businesses as they grow.
While IP is an important (although often overlooked) aspect of a business’ success in its growth journey, we have partnered with other agencies, accelerators and incubators, including GrantTree, Royal Academy of Engineering Enterprise Hub, Startupbootcamp ASPIRE, and Connected Places Catapult, to offer a full spectrum of early-stage business services. The Scaleup Quarter will provide integrated services and support for growing businesses and entrepreneurs, offering access to bespoke IP advice at each stage of growth as well as building a community where these businesses, individuals, investors, supporters and advisers can come together and learn from those who have already built and scaled up their businesses.
As virtually everything a business creates sets it apart from its competitors and is likely to attract some form of IP, including patents, trade marks, design rights, copyright, trade secrets and IP agreements, it is important to recognise the significance of IP to any business and the importance of protecting it. Mathys & Squire’s Scaleup Quarter provides comprehensive access to a range of tools, resources and content in a single location.
Commenting on the launch, partner Andrew White said: “Startup and scaleup businesses often overlook the vital competitive advantage to be gained by identifying, strategising, protecting and even commercialising IP at the right time in a company’s development. Our Scaleup Quarter offers dynamic businesses at the frontline of innovation an opportunity to utilise our resources, created by an expert team of industry and sector specialists, and join a community of like-minded entrepreneurs.”
To find out more about the Scaleup Quarter and how we can help support your growing business, visit our microsite. To keep up to date with our most recent posts, follow our LinkedIn page: Mathys & Squire Scaleup Quarter.
This article has been featured in Startups Magazine and The Patent Lawyer Magazine.
To reap the rewards of artificial intelligence and machine learning, biotech companies must overcome the legal, regulatory, and commercial hurdles.
Developments in artificial intelligence (AI) and machine learning (ML) are playing an increasingly influential role in the pharma sector. FDA approvals of AI algorithms have increased exponentially over the past few years (1), and the AI healthcare market is predicted to reach US$6.6 billion by 2021 (2). A 2019 survey of pharmaceutical and biotech professionals by ICON suggested that 80 percent of survey respondents were using, or planning to use, AI technologies (3). The trend has driven the formation of new partnerships between the tech and healthcare industries; for example, AI startup Concerto HealthAI is currently working with BMS, Pfizer, and Astellas, to support precision oncology initiatives, while Roche’s acquisition of Flatiron Health and Foundation Medicine provided proof-of-concept that clinically meaningful insights can be generated through large-scale analysis of genomic and clinical data (4). Meanwhile, major tech players, such as Google, IBM and Microsoft, have all taken steps into the biotech space; among other developments, 2019 saw the announcement of several new healthcare-related collaborations by Alphabet-owned Verily (5), and a partnership between Microsoft and Novartis aimed at integrating AI across clinical development and commercialisation (6).
The use of AI in drug design is considered speculative right now. At the time of writing, no AI-designed drugs have been approved and very few have reached clinical trials. UK-based startup Exscienta was the first company to put an AI-designed drug into clinical trials (7). In collaboration with the Japanese pharmaceutical firm Sumitomo Dainippon, Exscienta succeeded in reducing the development time of its OCD drug to just twelve months. The drug is currently undergoing phase I trials.
The COVID-19 outbreak has created a new sense of urgency as researchers race to develop treatments. There is greater interest than ever before in accelerating the drug development process. With the spread of COVID-19 outpacing the capacity of global healthcare systems, alliances between the pharmaceutical and tech sectors have become more influential than ever in combating the spread of the disease. Though there has been great optimism about AI’s potential to assist in drug development, the COVID-19 crisis may reveal which approaches can truly deliver.
Several companies are already employing AI-mediated approaches to combat the pandemic. BenevolentAI, for example, has applied its proprietary AI platform to the prediction of COVID-19 drug candidates (8). The software highlighted members of the numb-associated kinase (NAK) family as potential targets for treatment, and identified baricitinib, currently used to treat rheumatoid arthritis, as a potential therapeutic agent based on its antiviral and anti-inflammatory properties, and safety profile. Meanwhile, South Korean company Deargen’s deep learning technology has identified the antiretroviral atazanavir, used for the treatment of HIV, as another possible candidate (9).
US-based biotech company Insilico Medicine has taken a different approach. Rather than attempting to identify commercially available drugs that could be repurposed for the treatment of COVID-19, the company employed AI to accelerate the synthesis and validation of new drug candidates. Their platform has identified six new small molecules, predicted to target a key viral protease, which they suggest could be synthesized and tested for efficacy. Meanwhile, Moderna, the first company to bring a COVID-19 vaccine into Phase 1 trials, suggested that its $100 million investment in digital technologies (including AI) was a key factor in its ability to push products rapidly through the development cycle. Indeed, the speed at which Moderna responded to the emergence of the novel coronavirus is considered unprecedented. Phase III trials have already begun for the company’s mRNA vaccine.
When it comes to using AI in the drug development process, companies need to consider how they create and protect their intellectual property (IP) – especially with the trend towards personalised medicine. With some products being applicable to just a handful of patients, there is likely to be a greater emphasis on patents that capture the potential value across all stages of the clinical development process – not only the final product. In particular, patents will need to protect novel strategies for accelerating drug discovery, improving patient selection, and enabling treatment optimisation, as well as methods of data capture and the analytics underpinning them.
Obtaining such protection will not be without its challenges. In Europe, for example, the approach of the European Patent Office (EPO) to patentability in this area is still evolving. In 2018, the EPO updated its Guidelines for Examination to include, for the first time, specific guidance on how the patentability requirements for algorithms and computer programs should be understood in the context of AI and ML. Meanwhile, in decision T 0694/16, the EPO’s Technical Board of Appeal acknowledged that a claim directed to the use of a known drug in a purposively selected patient subgroup could be considered novel, even where the identified subgroup overlapped with the previously treated patient group (10). This decision paves the way for patentability of existing drugs that have been identified by AI and ML platforms, such as those used by BenevolentAI and Deargen, as potential candidates for repurposing.
In addition, broader questions arising from the use of AI are likely to impact approaches to IP in biotech. Standards for inventiveness may need to be revised, as AI interprets and processes information in an entirely different way to a human inventor. Under current law, to obtain a patent, the invention must not be obvious to a person of skill in the relevant field, on the basis of publicly available information. Yet questions will arise as to how this standard should be applied in the context of AI-generated predictions. While it could still be argued that Insilico’s novel protease candidates are within the scope of what could be achieved by a skilled synthetic chemist, for example, this type of algorithm could conceivably identify drug candidates that are entirely non-obvious to a human expert, but nevertheless an obvious outcome of the application of AI. The more commonplace these methods become, the more difficult it may be to determine the inventiveness exclusively by reference to the perspective of a human inventor.
Such applications of AI also raise issues around the nature of inventorship. Currently, inventorship is generally considered to reside with the person who developed the AI. Yet this situation is likely to become increasingly complex as the capabilities of AI develop and the role of human supervision becomes less prominent. There are currently no specific legal provisions addressing the notion of AI as an inventor. And most jurisdictions require the named inventor to be a natural person (11). Both the UK Intellectual Property Office (UKIPO) and the EPO recently rejected applications because the named inventor was an AI named DABUS, despite acknowledging that the criteria for patentability were met, and the UKIPO has now updated its Manual of Patent Practice to explicitly exclude the AI being named as an inventor.
But this is unlikely to be the end of the issue. As technologies developed by unsupervised learning algorithms become more prominent, we’re probably going to see more cases where the extent of the developer’s oversight is increasingly insufficient to justify human inventorship – bringing the issue back to the fore.
As more companies switch to AI- and ML-driven approaches, the case law will necessarily develop to take account of such issues and ensure that AI-driven biotech inventions do not risk slipping through the gaps in current IP law. Drug development is a notoriously costly process, and the chance of not being able to obtain a return on investment is likely to significantly disincentivize innovation. The field also needs a balance between ensuring companies can protect the value of their investment and making sure that the monopolies do not unduly limit the potential for progress. Ensuring that a consistent approach to patenting AI and ML inventions will also be important here. Patents require public disclosure; without robust systems for protecting IP, companies may increasingly choose to protect novel AI and ML processes as trade secrets – depriving the research community of the opportunity to build on their progress.
These are fundamental issues and navigating them will be complex, requiring careful consideration and close collaboration with stakeholders across the pharmaceutical and tech industries. Addressing these uncertainties surrounding the role of AI within the biotech field will be essential to move towards an era where the industry can truly embrace technology.
So far, few drug development predictions made by AI have been validated, and the extent to which many of these technological solutions can be implemented in the real world remains to be seen. Critics have also alleged that, although AI may be faster than medicinal chemists at identifying novel drug candidates, the development process for these drugs does not necessarily lead to better outcomes. Nevertheless, the risk of failure is an unavoidable part of drug development and achieving the same outcomes at an accelerated rate now, more than ever, appears a goal worth pursuing. Validation of AI predictions is likely to be expensive and time-consuming, especially where they require the synthesis and trial of new compounds or large-scale clinical trials. Companies investing in this kind of research need to be convinced that the chances of success are worth the risks.
The challenges of using and validating AI can be emphasized by looking at the healthcare sector and diagnostics. Recently, an AI algorithm developed by Google Health in collaboration with Imperial College London made headlines for out-performing human radiologists in the diagnosis of breast cancer. A meta-analysis comparing the diagnostic performance of deep learning algorithms and healthcare professionals suggested that algorithms performed at least as well as human experts in diagnosing a wide range of diseases from medical imaging. However, the authors noted that very few of the studies they analyzed were carried out in conditions that realistically reflected clinical practice. And we must remember that the margin for error is low. Despite the interest in using AI to diagnose patients, the reality is that any mistake could cost lives. This risk is particularly problematic for unsupervised algorithms, which generally offer little insight into the processes underlying their final output, leaving healthcare professionals unable to determine whether anything critical may have been missed. Further work is needed to demonstrate the extent to which algorithm-based approaches to diagnostics could lead to tangible benefits for patients and healthcare systems. Even the most advanced machine learning models are limited by the quantity and quality of the datasets they are trained on, and in the healthcare sector, much of this data may still be inaccurate, incomplete, or biased towards specific populations. Furthermore, algorithms cannot yet take the full clinical picture into consideration in the way that a human doctor would, nor are they able to account for the wider context of a problem, such as its emotional or economic impact.
Although new collaborations between tech giants and biotech or healthcare companies have the potential to drive significant technological progress, they also give rise to a new set of legal, ethical and regulatory issues, which must be resolved soon if progress is to be made at the speed envisaged by the tech sector.
As reported in November 2019, the Nanjing Intermediate Court made a first-instance decision between Huawei and Conversant in a standard essential patent (SEP) royalty dispute in China. This article provides two recent updates.
Conversant filed an appeal on 18 November 2019 to the first-instance decision at the Chinese Supreme People’s Court (CSPC). The appeal is still pending.
On 8 August 2020, one of Conversant’s Chinese patents, ZL200580038621.8, concerned in the first-instance decision was revoked and this decision was appealed. On 27August 2020, Düsseldorf Regional Court ruled on the corresponding German case that Huawei infringed Conversant’s patent EP1797659 (the same family with ZL200580038621.8), and Conversant didn’t violate its FRAND obligation. Düsseldorf Regional Court has prohibited Huawei’s activities in Germany, including selling UMTS (Universal Mobile Telecommunications System)-enabled devices.
Huawei immediately applied to the CSPC for an ‘anti-suit’ injunction against the German decision on the same day. The CSPC granted Huawei’s request just one day later to temporarily prohibit Conversant from enforcing the Düsseldorf Regional Court’s decision until the CSPC makes decisions for the Chinese appeal case. In case of violation of this decision, a fine of RMB 1,000,000 (around GBP 114,300) per day will be imposed from the date of violation.
The CSPC explained that the decision was made based on the following considerations:
August was indeed a very busy month for Huawei and Conversant. Behind the long-running litigation, we are now starting to see the use of ‘anti-suit’ injunctions. It will be interesting to see how their use develops globally. We will of course continue to watch the ongoing cases.
It has been known that the Nanjing Intermediate Court chose to use the ‘top-down’ approach formula to calculate the Chinese SEP royalty rate. In the recently published full first-instance decision, a detailed calculation has been set out as follows:
Step 1. Calculating the cumulative royalty in China from the global cumulative royalty
Based on general industry perceptions, the Nanjing Intermediate Court first determined that:
Step 2. Calculating the numbers of Chinese SEP patent families
The Nanjing Intermediate Court relied on the numbers of Chinese SEP families for 2G/3G/4G, as calculated by an IP consulting firm used by Huawei. Conversant, however, did not accept Huawei’s data, and further did not provide any approved data or sufficient evidence to overturn Huawei’s data. Therefore:
Step 3. Calculating the royalty rate for a single-mode mobile terminal product
For each standard, dividing the cumulative royalty in China by the number of Chinese SEP families gives the base rate of the SEP royalty of a single patent family for a single-mode mobile terminal product:
Then, the royalty rate for a single-mode mobile terminal product is calculated based on the base rate and the true value of SEP families. Here, N2, N3 and N4 are the true value of SEP families in the concerned patent package. In Huawei’s accepted evidence, N2 and N3 are 0 and N4 is 1. On balance, the court decided the royalty rate for a single-mode 4G terminal product is 0.00225% based on the range (0.0019-0.0026)%.
2G: 0.0042% × N2 = 0.0042% × 0 = 0
3G: 0.0018 % × N3 = 0.0018% × 0 = 0
4G: (0.0019-0.0026)% × N4 = (0.0019-0.0026)% × 1= (0.0019-0.0026)%
Step 4. Calculating the royalty rate for a multi-mode mobile terminal product
Considering 2G, 3G, and 4G technologies contribute differently to the total value of an individual product, the weights (contribution ratios) of the three technologies are different. Therefore,
the royalty of a 2G/3G/4G multi-mode terminal product = (0.0042% × N2 × weight2) + (0.0018% × N3 × weight3) + [(0.0019-0.0026)% × N4 × weight4].
Here the weight2, weight3 and weight4 for 2G, 3G and 4G are 10%, 10% and 80%. Then, the royalty of a 2G/3G/4G multi-mode terminal product = 0.0042% × 0 × 10% + 0.0018% × 0 × 10% + (0.0019-0.0026)% × 1 × 80% = (0.0019-0.0026)% × 80% = (0.00152-0.00208)%.
On balance, the court decided the royalty for multi-mode 2G/3G/4G terminal products is 0.0018%, based on the range (0.00152-0.00208)%.
As seen above, the final calculated SEP royalty rates ruled by the Nanjing Intermediate Court are:
In this article for Automotive World, partner Andrew White explores the implications of Nokia’s win in a recent dispute with Daimler over patented telecoms tech.
The automotive patent wars are heating up following a recent decision of the Mannheim Regional Court in Germany, which held that Daimler had infringed on a Nokia patent for connected car technology. The decision relates specifically to Nokia’s European patent EP2981103.
This case represents one of a number of 3G/4G/5G patents that are part of the Avanci patent pool with which other car makers, including BMW and Volkswagen, have already concluded licences to some degree or another. It has been reported that Daimler’s co-litigants in the proceedings were Continental, Huawei, Robert Bosch, TomTom, Valeo/Peiker and Bury, and this case is part of a wider litigation campaign by other members of the Avanci patent pool including Conversant and Sharp.
One of the key issues that Daimler disputes is whether, as a car maker, it is required to obtain a licence from Nokia to use the patented technology itself, or whether it should be the Tier 1 suppliers (in this case Continental) of the connectivity modules that should obtain the licence. This could have something to do with the royalties payable – because patent royalties are typically calculated as a percentage of sales price of the product sold, and so the percentage royalty on a complete car may be somewhere higher in absolute terms than the same percentage of a component part.
This decision only related to one of ten connected suits filed by Nokia against Daimler, and the litigation has garnered much attention from other automakers, suppliers and even politicians.
Nokia claims the decision will help bring Daimler back to the negotiating table. However, the court set an extraordinarily high bond of €7bn (US$8.3bn) that Nokia would be required to pay if it wishes to obtain an injunction against Daimler. This is because of the possibility of an appeal coming to a different decision and therefore the potential damages that Daimler could incur as a result of a potentially unjustified injunction. Daimler seems confident that this won’t stop its ability to make and sell cars in the short term.
Due to the effect this might have on the wider auto industry, it is expected that if Daimler opts to appeal the decision, clarification would be sought from the Court of Justice of the European Union (CJEU).
Many parties weighed in on the dispute, including the German Federal Cartel Office which, in June 2020, recommended that the Mannheim Regional Court suspend the case pending the referral of a number of questions to the CJEU. The questions touched on issues of competition law, querying whether Nokia, in holding such an important patent (relevant to a telecommunications standard) abused its dominant position for refusing to license to a supplier, and also whether the patent holder is free to pick which companies they license to.
However, the Mannheim Regional Court reportedly decided not to make such a referral to the CJEU because it held that Daimler was already unwilling to conclude a licence (because Daimler considered it should be its supplier, Continental, that obtained the licence). Since the decision was announced on 18 August 2020, Daimler has stated its intention to appeal the decision.
Regardless of the outcome (i.e. if Nokia opts to pay the €7bn injunction or if Daimler does indeed appeal), this decision strengthens the hand of the telecoms patent holders and those members of the Avanci patent pool. It appears that automakers are having to play catch up in a world that was, until recently, traditionally dominated by telecoms companies.
Commenting on the decision, Avanci provided the following statement: “While we don’t comment on the details of cases we are not party to, Daimler’s legal disputes with Nokia, Sharp and Conversant could still be resolved easily and quickly by Daimler taking an Avanci licence. Our vision of making patent licensing easier and more efficient has already seen 15 automakers, including Audi and BMW, join our one-stop platform. Our single Avanci licence covers thousands of cellular essential patents from 38 patent owners.”
This article was originally published by Automotive World in September 2020.
We are pleased to announce the promotion of attorneys David Hobson, Juliet Redhouse and Andrew White to the Mathys & Squire partnership. The firm now has 30 partners and 10 offices across the UK and Europe.
Working in the life sciences team, David Hobson has a background in biochemistry and represents UK and overseas clients in a range of industries. He demonstrates particular skill at drafting and prosecuting challenging life sciences subject matter through to the grant of commercially-relevant patents. David’s principal sectors of expertise include biotechnology, pharmaceuticals, and food and beverages, encompassing enzyme biotechnology, therapeutic antibodies, and cell-based therapies. He is also experienced in providing therapeutic freedom to operate and validity advice, and handling opposition proceedings before the EPO. Some key hearings include: “Recombinant EPO” (Sterrenbeld Biotechnologie; Polymun Scientific Immunbiologische), “Modified Clostridial Neurotoxins” (Ipsen Bioinnovation; Merz Pharma), and “Antibody-Containing Stabilized Preparations” (Chugai Seiyaku Kabushiki Kaisha; Mathys & Squire).
Juliet Redhouse also works in the firm’s life sciences team, specialising in molecular biology, pharmaceuticals, and biotechnology. With particular expertise in the areas of antibody technology, vaccine technology, protein and peptide based medicines, formulations, personalised medicine and diagnostic assays, Juliet is experienced in examination and opposition proceedings at the EPO, as well as drafting, prosecution, and management of global patent portfolios. She also advises clients on infringement, validity and freedom-to-operate.
Andrew White is part of the firm’s IT & engineering team, with extensive experience managing international portfolios in the med-tech, software, telecoms, and automotive sectors, with a specific focus on electric vehicle and AI-based technologies. Andrew is very active in the startup community, working with a number of accelerators and incubators, providing regular IP workshops and one-to-one IP clinics covering all aspects of IP ranging from ownership and licensing to patent filing strategies. He frequently presents at tech and startup focused events, and is regularly published in both IP and industry publications.
Commenting on the new appointments, partner Alan MacDougall said: “We are delighted to welcome these next generation partners to further enhance our high-level skills across two of the firm’s core sectors. Their promotions are testament to not only their success and expertise in their individual fields, but also to the passion and dedication they bring to their clients.
“We are confident that the firm will benefit from the appointment of such talented and focused individuals, who clearly represent the firm’s core values of both technical and commercial excellence and will continue to drive this focus as they progress their careers as partners. We wish David, Juliet and Andrew the best of luck as they join the Mathys & Squire partnership.”
This promotion news has been featured by The Patent Lawyer, The Patent Magazine, ICLG and World Trademark Review.
The firm is also delighted to announce the promotions of Miranda Kent, Alexander Robinson and Harry Rowe to managing associates. Congratulations to all!
In a landmark decision, the UK Supreme Court today upheld decisions of both the UK High Court (as reported here) and the Court of Appeal (as reported here). A copy of the decision can be obtained here.
As noted in the decision itself, the issues decided upon have major importance to the international telecommunications market and in particular relating to Standard Essential Patents (SEPs). It holds that a UK court has the jurisdiction to, and may properly exercise a power to, both (a) grant injunctions and (b) determine royalty rates for a global licence of a multinational patent portfolio. It also holds that the English courts can be an appropriate forum to hear such matters.
The decision clarifies a number of disputed issues:
1. Whether the English courts have the jurisdiction to set a global FRAND rate
The Supreme Court looked to industry practice and noted that due to the size of telecom companies’ patent portfolios and the large number of SEPs, the “practical solution therefore is for the SEP owner to offer to licence its portfolio of declared SEPs” (paragraph 60). The court acknowledged that such a portfolio may include “untested” patents (which may be of questionable validity and/or not infringed) but held that “by taking out a licence of an international portfolio of generally untested patents the implementer buys access to the new standard. It does so at a price which ought to reflect the untested nature of many patents in the portfolio; in so doing it purchases certainty.” The court held that the commercial reality means that the licences must have international effect and therefore be global (paragraph 62).
The Supreme Court also held that the previous decisions by the High Court and Court of Appeal did not rule on the validity or infringement of a foreign patent, as that would be beyond their jurisdiction. Instead, the court held that the lower courts had looked to the commercial practice in the industry in determining what is FRAND behaviour. The Supreme Court noted that while it has not been industry practice to challenge patents that had been licensed as part of a global licence, “it might in our view be fair and reasonable for the implementer to reserve the right to challenge those patents or a sample of those patents in the relevant foreign court and to require that the licence provide a mechanism to alter the royalty rates as a result.” (paragraph 64). The court looked to practice in other jurisdictions and noted that, while foreign courts may not yet have gone so far, there appeared to be a willingness in principle (at least in the US and Germany) to do so (paragraph 84). As such the court concluded that the English courts do have the jurisdiction to set a global FRAND rate.
2. Whether the English courts are an appropriate forum to hear such disputes
It had previously been argued that China was a more appropriate forum for the action rather than the UK (not least because China represented a greater share of the relevant market than the UK). The decision noted that “how the dispute should be defined has been the main bone of contention between the parties” (paragraph 95) (i.e. are they proceedings relating to obtaining a global FRAND licence, or are they proceedings to enforce a national patent). The court held, however that “a challenge to jurisdiction on forum conveniens grounds requires the challenger to identify some other forum which does have jurisdiction to determine the dispute” … “In the present case, China is the only candidate which the appellants have put forward.”. In response to this, the court noted that “the Chinese courts do not, at present, have jurisdiction to determine the terms of a global FRAND licence, at least in the absence of agreement by all parties that they should do so. Even in the event of such an agreement … the prospect that the Chinese courts would embark on the exercise [is] no more than speculative.” (paragraph 97). As such, the English courts were held to be an appropriate forum.
3. How “non-discriminatory” do FRAND terms have to be?
This issue really focused on whether an SEP holder needs to license on comparable terms to similarly situated patentees (i.e. “hard edged”), or whether it is more general and only requires an SEP holder to licence according to market circumstances, which may for example allow lower rates as an incentive for licensees that enter into a licence earlier. The court looked to ETSI’s IPR policy (the body responsible for standard setting in Europe) and held that “the non-discrimination element in the FRAND undertaking is ‘general’ and not ‘hard-edged’” and that “since price discrimination is the norm as a matter of licensing practice and may promote objectives which the ETSI regime is intended to promote (such as innovation and consumer welfare), it would have required far clearer language in the ETSI FRAND undertaking to indicate an intention to impose the more strict, ‘hard-edged’ non-discrimination obligation”. As such, the court held that the FRAND terms are not ‘hard-edged’ and that different licence rates can be offered to different licensees.
4. The interplay between UK law and European competition law
This issue really relates to the conduct of the patentee and their obligation to make a FRAND offer in order to avoid falling foul of European competition law. The court held that the duty on the patentee to make a FRAND offer only arises when the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms. Although the court did not explicitly decide on this issue, they indicated that a patentee making a FRAND offer may represent a “safe harbour” from abuse of a dominant position (paragraph 153). The court did hold that it does not necessarily follow, however, that an absence of a FRAND offer necessitates an abuse of a dominant position. Instead “to answer that, due account has to be taken of the particular circumstances of the case” (paragraph 153).
5. The proportionality of injunctions
The court noted that the requirement when working with SEPs to license on FRAND terms meant that concerns surrounding the use of injunctions as a threat to obtain exorbitant royalty rates did not apply. The court held that “we are not in any event persuaded that there is any basis on which this court could properly substitute an award of damages for the injunction” (paragraph 163) and that “the threat of an injunction cannot be employed by the claimants as a means of charging exorbitant fees, or for undue leverage in negotiations, since they cannot enforce their rights unless they have offered to license their patents on terms which the court is satisfied are fair, reasonable and non-discriminatory.” The court also noted that “if the patent-holder were confined to a monetary remedy, implementers who were infringing the patents would have an incentive to continue infringing until, patent by patent, and country by country, they were compelled to pay royalties. It would not make economic sense for them to enter voluntarily into FRAND licences” (paragraph 167). As such, the court held that injunctions are proportional when considering SEPs.
This is a far-ranging decision with international significance. It holds that the UK is an appropriate forum to hear SEP disputes, that the English courts can set global FRAND rates, and that injunctions can be an appropriate remedy. It also provides further guidance on the conduct required of SEP holders and on the terms that they can offer to different licensees.
In this article for Vehicle Electronics, Mathys & Squire partner Andrew White discusses the case in which Nokia secured its win in a standards essential patent (SEP) dispute with Daimler.
In a ruling that took place on 18 August 2020 at the Mannheim Regional Court in Germany, Nokia secured a win against Mercedes-Benz car maker Daimler following a long-running IP dispute over the use of Nokia’s patented 4G technologies in its cars.
Of the ten infringement cases filed by Nokia against Daimler, this SEP case relates to connected car technology (European patent EP2981103B1).
This article was published as part of Vehicle Electronics’ guest blog in August 2020 – click here to read the full feature.
