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).
With antibodies accounting for seven out of the top ten global drugs¹, it is of critical importance that those companies that invest huge sums of money into R&D in this technology space are able to protect their investment from unlawful competition. Whilst the patent system provides a pretty good framework for achieving this, the approaches taken by patent offices in different parts of the world can vary widely, potentially impacting one’s ability to secure optimal patent protection (in terms of territorial scope and/or patent claim scope). Unsurprisingly, therefore, the risk of failing to achieve commercially viable patent protection in a key jurisdiction (plus loss of an important revenue stream) provides a strong incentive to operate at the highest possible patentability threshold. Here, we will focus on the European Patent Office (EPO), and on the key issues you will likely need to address in order to obtain patent protection in Europe for a new antibody therapeutic.
Obtaining Patent Protection for Antibody Subject-matter at the EPO
For antibodies directed at a new target, such as a new antigen structure that has not been targeted before, it may be possible to obtain broad patent protection at the EPO for antibodies that bind specifically to that target. However, these broad patents are becoming less common because it is now unusual to discover such a new target. Most antibody patents, therefore, relate to antibodies that bind to a known target, and where other antibodies binding to the same target have been described.
The EPO allows the patenting of new antibodies, but only when said antibodies also demonstrate an unexpected technical effect (i.e. an inventive step) when compared to antibodies that were known before. Unlike some patent offices around the world, which may concede that a new antibody is inventive because of a unique structure or sequence it possesses when compared with previously known antibodies, a difference in structure or sequence alone is not enough to establish inventive step at the EPO. Moreover, this remains the case irrespective of whether said unique structure or sequence maps to the framework regions or to the complementary determining regions (CDRs) of the antibody. Thus, a new antibody against a known target will only be considered inventive by the EPO if it shows an unexpected property, or if it was unexpected that such an antibody could be produced at all.
A key component of the EPO’s reasoning is that many techniques in the field of antibody production are routine, and that antibodies against a given target can be produced in large numbers without any inventive input being needed. For example, the EPO considers it routine to immunise animals with an antigen, to obtain a large number of different antibodies against that antigen that are produced by the animals, and to screen the resulting antibodies to confirm binding to the antigen of interest. Because the generation of antibodies in such immunisation methods is essentially random, the EPO assumes that essentially all antibodies against that antigen could be found eventually by just routine trial and error experiments, given a sufficient amount of time and resources. As a starting point, therefore, the EPO will assume that any antibody that has been produced against a known target could have been found in a routine way, and so is not inventive. Thus, the burden lies with the applicant of a patent application to convince the EPO otherwise.
The EPO also considers that other techniques in the antibody field, such as humanisation and affinity maturation, are now routine, and again that trial and error would eventually produce any effective humanised or affinity matured variants of a starting antibody. This suggests that over time, it may become increasingly difficult to persuade the EPO that antibody claims are inventive, as more techniques for antibody production, optimisation and selection become routine in the field. Thus, for new antibodies that bind to a known target (particularly if other antibodies against that target are known), the applicant must demonstrate there is something that makes said antibodies surprisingly better than other antibodies that were known to bind to the same antigen (else surprisingly better than would have been expected based on what was known about the target antigen and corresponding antibodies).
In theory, any kind of advantage can be relied upon. For example, this might relate to the way that the antibody binds to its target, such as improved specificity, cross-reactivity, or affinity; it might relate to improved properties of the antibody in vivo or in vitro, such as improved pharmacokinetic properties, low immunogenicity, or improved biological activity; or it might be based on other properties of the antibody which do not relate directly to its binding properties, such as improved storage stability, improved formulation properties or improved expression levels.
In practice, any advantage relied on must be surprising in its own context. For example, for a humanised antibody, the EPO might reasonably expect that it will have reduced immunogenicity compared to an antibody that is not humanised, so such a technical effect alone is unlikely to be enough to confer an inventive step. However, if a humanised antibody were to retain a high affinity for its target antigen, this might reasonably be considered surprising and thus supportive of an inventive step. Conversely, if an asserted technical effect is found to be unsurprising, then it is unlikely the EPO will allow any patent claim to the antibody, irrespective of whether the antibody in question is defined by reference to all six CDR sequences, both variable domain sequences, or even the full amino acid sequence of the antibody molecule. In such scenarios, even a very narrow “picture” claim is unlikely to be awarded.
Having established the presence of an unexpected technical effect (and thus inventive step), the next question to be considered by the EPO is that of claim scope. Namely, how broad can I claim variants of the antibody?
This assessment flows from analysis of the scientific principles that underpin the asserted unexpected technical effect, and attempts to ensure that the scope of patent claim awarded is commensurate with the level of scientific contribution the invention provides above and beyond the prior art. To put this another way, the EPO’s general approach is the unexpected technical effect relied on to support inventive step must be demonstrated across the full scope of the awarded patent claims. In more detail, it must be at least technically credible that all the antibodies across the scope of your defined claims demonstrate the same unexpected technical effect / advantage. The EPO’s analysis will, therefore, involve considering the properties or features of your antibody that are responsible for that advantage.
For example, you may be able to establish that your antibody is inventive because it has particular binding selectivity for one antigen and not to another. If your inventive step is based on the binding specificity or selectivity of your antibody, then the EPO is likely to take the view that the advantage might reasonably be shared by other antibodies that have the same set of six CDRs, or both variable domain sequences of your antibody. For this type of advantage, the EPO will, therefore, usually insist that you limit your patent claims to antibodies that include all six CDR sequences, or both variable domain sequences, of your antibody. It can be possible to obtain broader protection than this, but to do so, it is likely that you will need evidence that the same advantage is also found for other antibodies that do not have these particular sets of sequences. For example, to obtain a patent that does not require all six CDR sequences to be present, you might need data showing that antibodies with fewer than six CDRs, or antibodies having particular variations in the CDR sequences, will retain the same inventive advantage. The scope of patent claims that you will obtain will depend upon the related antibody sequences that you can persuade the EPO will retain the inventive advantage.
Another common advantage that is used to establish an inventive step at the EPO is improved affinity. The EPO considers that the choice of framework regions, as well as the CDR sequences themselves, may considerably influence antibody affinity. This means that if inventive step is based solely on an antibody having improved affinity for a target, then the EPO is likely to require the framework regions and the CDR sequences to be defined in the patent claim. In practice, this means that you will be asked to limit your patent claims to antibodies having the same heavy and light chain variable region sequences as your antibody. Again, if you wish to obtain broader patent scope, then it is likely that the EPO will require supporting evidence that the improved affinity would be retained with other framework.
The same principles will be applied by the EPO to any advantage that you are relying upon to obtain an inventive step. If the advantage is linked to a particular structure or feature of your antibody, then the EPO is likely to require that structure or feature to be defined in the claims. For example, if your advantage relates to improved effector functions, then the EPO may require particular Fe domain sequences to be recited in the claims. If the advantage relates to a physical property of the antibody, such as its stability or production yield, then the EPO may consider that to be a property of the molecule as a whole, and so require the full antibody sequences to be defined in the claims.
If you need to rely on a technical advantage over other antibodies, then how can you establish that such an advantage exists, and when do you need to provide that information? The EPO considers that it must be derivable from your original patent application that the invention had been made before that application was filed. This does not mean that your patent application needs to provide absolute proof of the advantage. Indeed, it may not be possible to include the ideal comparisons in your application to prove that an advantage exists. For example, the EPO requires that an inventive step is established when compared to what it considers to be the “closest prior art”. In this field, that is likely to be an earlier antibody that binds to the same antigen and that has similar properties. However, you may not know at the time of the patent application being filed what other antibodies may exist to the same target, and you may not be able to determine which antibody the EPO will later consider to be the “closest”. Even if you are aware of earlier publications describing other antibodies, those antibodies may not be publicly available, and so it may not be possible to carry out any direct comparison in order to confirm that an advantage exists.
What the EPO will look for in the patent application is enough information to make it technically plausible that the advantage would be achieved. Your patent application might include data demonstrating particular effects or measuring particular parameters for your antibody, and might, therefore, provide data that could be used for a subsequent comparison with other antibodies, or it might include technical reasons why an effect or advantage can be plausibly derived from the available data.
If you can meet this threshold and persuade the EPO that your advantage was technically plausible from the information in your original patent application, then you may be permitted to rely on additional evidence, not included in the original patent application, to confirm the existence of the advantage. For example, you may be able to submit in vivo data confirming effects that were shown in vitro, or you may be able to submit comparative data confirming that your antibody does show an improvement when compared to particular antibodies that the EPO has selected as the “closest”.
In conclusion, the EPO takes a technical and scientific approach when considering inventions in the antibody field. Every case will be judged on its own facts, but in general, the EPO will start from a number of preconceptions about what could have been done in a routine way, and the burden is likely on you to counter those preconceptions in order to persuade the EPO that your antibody is inventive.
An antibody that is new, and that is effective at binding its desired target, is unlikely to be considered inventive by the EPO unless it also exhibits some kind of unexpected technical effect (e.g. an advantage) when compared to other antibodies against the same target. This is worth considering when you draft a new patent application in this field. Ideally, your patent application will include some data supporting the superior properties of your antibody, or it will at least include a technical rationale to make it credible that your antibody has such an advantage. You should also consider the scope of claim that the EPO is likely to allow based on the advantages that you can establish. If you want to obtain broader claims than are likely to be allowed by default, then you may need to obtain more data before filing the application, to show that your advantage can be obtained with a broader range of antibodies than might otherwise be expected. Most importantly, when preparing a patent specification, you should think ahead to present a tiered range of (plausible) technical effects that may be relied on to provide potential fallback positions during prosecution and beyond.
This article was originally published in the International Biopharmaceutical Industry Journal.
1. Urquhart (2020) Nature Reviews Drug Discovery 19: 228
Fintech places particular demands on high frequency computing (HPC) that requires significant investment into computing resources such as CPU and GPU, in addition to the requirements of data scientists’ and quants’ time to maintain a complex and ever-evolving code base. New, more effective solutions are required as sophistication of regulations and increased risks grow.
Machine learning (ML) is also increasing in prevalence. In so-called supervised learning, ML models are trained on input data sets that have known outcomes; they are then able to ‘learn’ from these and predict outcomes for new input data sets.
The intellectual property (IP) in such techniques is of enormous value. Over the last few years, there have been significant changes in the legal landscape, both in terms of trade secrets protection and what is eligible for patent protection in major jurisdictions. More changes are coming. This article explains some of the challenges surrounding IP in this area and gives practical direction in how to approach the issue.
The main patent granting authority for Europe (the EPO) is preparing to issue a landmark decision on the granting of patents for the computational techniques used for ML and the modelling of complex systems. There is justifiable speculation that that decision will herald a more liberal approach to the granting of patents in this area – many of which may have clear relevance to the fintech sector. This is important and financial institutions should take note.
Patent infringement represents a very significant hazard. For an infringer in financial services, the cost of paying damages to the patent holder could be just one of the problems they face because a patent holder may obtain an injunction overnight to prevent use of a patented technology. The infringer may thus be forced to withdraw service from a client immediately. If such sudden disruption of service causes consequential losses for the client, the infringer may be liable to their client for those losses. This is to say nothing of the damage to the client relationship, and the not insignificant financial cost and reputational damage of being found to have infringed a patent.
Patents are unique amongst IP rights in the fintech space. Confidential information and trade secrets in Europe only provide a private contractual right against those who have agreed to confidentiality. Copyright is a little broader, but direct or indirect copying must be proven if copyright is to be enforced. Neither copyright nor trade secrets offer any protection outside these limited bounds. Patents on the other hand can be enforced against anyone who uses a technology, regardless if they learned it honestly or created it independently themselves.
Help is at hand: the strategies that have been used in other fields of engineering for decades can be applied directly to fintech. Innovators must conduct sensible patents searches to identify the most likely risks. If found early, problem patents can be opposed at the EPO before they come into force, because defending against them later is at least two orders of magnitude costlier and riskier. This cannot catch everything however, so the most widely used strategy for controlling risk from third party patents is to secure patents of one’s own. The aim of this ‘defensive strategy’ is that one’s own patents present a risk to the competition, or at least cover desirable technology. A competitor who knows they might themselves infringe a patent is unlikely to assert their own patents against the holder of that patent. This strategy has kept the peace in the telecoms and electronics industries for generations, and a leading patents judge once described it as “the only rational way to use the patent system”. What makes the ‘smartphone wars’ newsworthy is that they buck this decades’ long trend.
Dmitri Golubentsev is the founder of Matlogica, a young fintech startup offering a niche proposition for large financial organisations focused on improving risk management capabilities in terms of performance and cost effectiveness. As a challenger startup, Dmitri says he has proven that the technology their competitors do not believe is possible brings demonstrated and significant performance improvements.
Technology designed to improve performance of applications built using high-level, object-oriented languages has always been challenging to protect with patents. However, Matlogica’s approach works by breaking down and rebuilding the primal code into a recorded function, which is thread safe and can be safely executed on multicore systems. This provides a technical benefit which is the basis of patentable technology.
There is more to life than patents. Any business operates in a landscape of commercial relationships. The IP and trade secret issues which arise in that landscape just add a further dimension to the existing considerations
in managing those relationships. Other factors may be more or less important at different stages, but taking careful and measured steps at the right time can increase leverage and achieve significant market impact. These steps can be as simple as just ensuring sensitive information is handled properly; ensuring that agreements with development partners are properly drafted and address the key IP issues; or identifying patentable inventions and choosing when to protect them.
Asked to comment for this article, Dmitri said: “Although we are now publicly recognised by leading experts as a breakthrough technology, it is natural to expect some friction during our business’ first steps. By investing in IP, we are not only reducing our barrier for entry, but also increasing chances for partnerships with established vendors. Our patent and IP position allows us to approach a wide range of potential clients, partners and competitors without risk of the technology being easily copied.”
It is common for fintech businesses to overlook these questions, or assume that technology is not patentable, or that questions of ownership can be dealt with once the value in a technology has been demonstrated. Experience shows that this is not the right approach: the value of simple steps done early cannot be overstated.
A version of this article was originally published in The Patent Magazine in October 2020, and a version of this article featured in Fintech Bulletin in September 2020.
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.
Investors come in all shapes and sizes – from professionals to friends or family members. This spectrum results in an investment risk profile that is related to the investment experience, the familiarity with the investment opportunity and the independent advice provided prior to the investment decision.
The friends and family end of the spectrum also has additional ‘emotional’ complexity, that in an ideal world would not play a part in the decision, but in reality can be a significant factor.
While the professionals will have a team of experts to advise them, friends and family often rely on emotion to make the investment decision. While this is understandable, it greatly increases the risk of a bad outcome which can include the loss of friendships and family disputes. Investors of all kinds should take the opportunity to offer counsel to the investee, rather than getting swept up in the excitement of investing or overwhelmed by the enthusiasm and apparent knowledge of the investee.
Best practice is to expect a well-researched business case, including worst case analysis with detailed justifications for any assumption regarding markets and competition.
If emotion has to play a part, then the best approach is to write off the investment at the beginning and have no expectations of the outcome, any positive outcome is then a bonus.
Unfortunately, we often speak to disappointed investors and generally we find that the key mistakes were made at the very start of the project by not approaching the investment in a professional way. As the saying goes, ‘preparation prevents poor performance’, which includes appropriate due diligence on the subject matter, markets and the investee. A sceptical stance will offer more investor protection and flush out any ‘soft’ proposals (i.e. if the investee is not able to offer sufficient evidence to support a proposal).
This may appear difficult with friends and family, but a third party opinion from a business advisory can be a sensible way to avoid conflict of interest and bad investments, as well as wasted investee efforts, thus a benefit to all concerned.
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 addition to a myriad of new innovations focusing on hydrogen production, there are an equal number of companies developing technologies to use hydrogen safely and efficiently as an energy source.
Significant advances have taken place in recent years in both hydrogen production and its use as a source of clean energy. In a recent white paper from the International Energy Agency (IEA) titled ‘The Future of Hydrogen – Seizing today’s opportunities’ (IEA, 2019) produced ahead of the G20 meeting in Japan in June 2019, the potential for hydrogen as a source of clean, secure and affordable energy was heavily promoted, with the potential to decarbonise a number of high CO2 emitting industries such as long-haul air-travel and haulage, as well as chemical and steel production. As hydrogen production is not weather dependent, is has the ability to assist where variable output and intermittent renewable sources such as wind or solar may struggle.
While the potential use of hydrogen is widespread and its use in vehicles – particularly for public transport – has already begun, significant policy changes, and more importantly changes in attitude and industry support, will be required to fully take advantage of the benefits that hydrogen energy can offer. International demand for hydrogen is on the rise, and specifically in China, South Korea, the US, Europe and Japan, it is expected to increase up to 10 times over the coming decades. Many countries have therefore already begun introducing hydrogen energy strategies to roll out its use and to ensure that infrastructure and production can meet demand. The European Commission recently adopted a new strategy on the use of hydrogen and development of hydrogen technology in Europe, from research to production over the coming years (European Commission, 2020). In addition, in March 2020 the European Clean Hydrogen Alliance (ECH2A) was announced, bringing together multiple stakeholders to meet the hydrogen production and distribution needs across Europe (ECH2A, 2020). To help realise the growing demand for hydrogen production and hydrogen energy infrastructure/distribution, many high innovation companies across the world are developing new technologies for the safe and sustainable production, use and transportation of hydrogen.
One such innovator, a member of ECH2A and a client, is hydrogen generator designer and manufacturer, Enapter, with operations in Germany, Italy, Thailand and Russia (Enapter, 2020). Enapter has developed a patented technology based on Anion Exchange Membrane (AEM) technology that produces green hydrogen (H2) gas via the electrolysis of water, without the need for expensive and environmentally unfriendly noble metal or titanium plates, often seen in other electrolysis solutions. The solution is compact and offered as a single unit and as such is stackable, meaning that hydrogen production via the Enapter system can be easily scaled as demand dictates. The technology has already been implemented around the world for residential purposes and for rural electrification and microgrid storage. This latter use has been highlighted in a recent article by Forbes: ‘Hydrogen May be the Crucial Jigsaw Piece for Green Microgrids’ (Silverstein, 2020).
Enapter’s activities have attracted significant attention in Germany, homeland of senior founder Sebastian-Justus Schmidt, where the company has won in the ‘Industry’ category at the annual Handelsblatt Energy Awards (Handelsblatt, 2020) in January 2020. More recently, the German government has adopted a national hydrogen strategy plan for the production and use of hydrogen, which will likely further drive and incentivise innovations in this sector in Germany and further afield.
In addition to a myriad of new innovations focusing on hydrogen production, there are an equal number of companies developing technologies to use hydrogen safely and efficiently as an energy source. Many of these innovations have taken place in the development of hydrogen fuel cells in the automotive sector. The number of patents filed worldwide in this sector have reached in the thousands per annum over the last 10 years (Pohlmann, 2019). The companies mainly responsible for new filings in fuel cell technology have been Japanese automotive companies such as Toyota Motors, Honda, Nissan, and Korean Hyundai; although both Ford and General Motors have shown increased activity in recent years. A recent article by the American Chemical Society has highlighted the rise in innovations since 2009 focusing on mechanism of safe transportation and storage of hydrogen, through existing infrastructures centred around ammonia and methylcyclohexane, from which hydrogen can be later extracted (Sayfullin, 2020).
In the UK, considerable efforts have been made to demonstrate the extensive production and supply of hydrogen with the awarding of significant government funding for large-scale projects such as Dolphyn, which integrates floating offshore wind turbines with integrated water treatment units and electrolysers, which could then pipe the hydrogen to shore; Hynet, which is based on Johnson Matthey low carbon technology and a consortium of other companies including Progressive Energy, Essar and SNC-Lavalin; or HyPER from Cranfield University which is based on a sorption enhanced steam reforming process developed by the Gas Technology Institute (GTI) (Crown Copyright, 2020).
Increasing innovation and heavy investment in research, and consequently in intellectual property (IP) assets such as patents, in the both the production and use of hydrogen has not been lost on the investment community worldwide. A Financial Times article published earlier this year (Sanderson, 2020) highlights investors’ interest in hopping on the hydrogen bandwagon as shares in numerous hydrogen production companies have soared, partially due to increasing large investments from a number of large multinationals and increased government subsidies.
Bosch has had a JDA agreement in place since 2018 with UK-based Ceres Power, which has developed a solid oxide based fuel cell technology as well as making an equity investment of circa £9m in the company, while UK-based developer of IP heavy businesses IP Group Plc had an 18.6% equity share in the business (IP Group, 2020). Earlier this year, Bosch increased its stake in Ceres Power to 18% following a share subscription (Proactive Investors, 2020), while IP Group recently sold some of its shares in the business.
Likewise, UK-based Electrolyser company ITM Power has recently entered into a joint venture with gas supplier Linde to form the new entity ITM Linde Electrolysis GmbH (ITM Power, 2020) following significant strategic investment by Linde in late 2019 (ITM Power, 2019).
European utility company Enel has announced that it will launch a hydrogen business in 2021 (Reuters, 2020), while venture capital (VC) interest in supporting early-stage hydrogen companies has steadily increased. BGF recently invested in fuel cell company Bramble Energy, while a hydrogen-focused VC fund called ‘AP Ventures’ was established in 2016 in London to support companies in the hydrogen value chain and already counts companies such as US Altergy (PEM fuel cells) and Norwegian ZEG Power (High purity H2 and CO2 production) amongst its portfolio companies.
Overall, it is clear that there is significant interest from private industry, the investment community and governments worldwide in further developing the hydrogen economy, although many realise that hydrogen remains too expensive (and the required infrastructure too intermittent) at this time to enable widespread adoption in the near term.
With so many innovations taking place in hydrogen production and use, and more generally across the energy sector, it is becoming increasingly important for these cutting edge energy companies to not only actively protect their technology via patents, but also to identify and actively protect other intangible assets including designs, trade secrets, software assets, algorithms and data as these assets not only drive growth and increase value in the business, but also provide a way of attracting investors to aid in the development and commercialisation of the technology.
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.
