One of the most frequently-discussed concerns regarding the unified patent court agreement is the possibility of bifurcation*. This has, in turn, lead to concerns in some quarters that local divisions of the unified patent court could set themselves up to be patent proprietor friendly but send validity counterclaims back to the central division. In such scenarios, the argument goes, a patent owner could secure an injunction in the local division based on the issue of infringement that would have effect across the whole of the unitary patent area before validity has even been heard in the central division.
Regardless of the above “doomsday” scenario, however, it is noted that according to the UPC agreement the defendant will be able to raise validity as a counterclaim within an infringement action. It will then be up to the local division in question as to whether they hear both infringement and validity (I&V) or whether they kick the validity part of the action back to the central division (and thereby create a bifurcated case). [This IPcopywriter has assumed (probably naively) that local divisions will probably follow the practice of the country within which they are set up.]
However, on a review of the final text of the UPC agreement, we have come across a particular scenario, written explicitly into the agreement, in which the defendant is apparently not even able to raise validity as a counterclaim in an infringement action. We are referring to Article 47(5) UPC agreement and the scenario where an exclusive licensee brings an infringement action.
Article 47(5) states: “The validity of a patent cannot be contested in an action for infringement brought by the holder of a licence where the patent proprietor does not take part in the proceedings. The party in an action for infringement wanting to contest the validity of a patent shall have to bring actions against the patent proprietor.“
So, on the face of it, this appears to be saying that if you, as a defendant, are unfortunate enough to be on the receiving end of an infringement claim where the action is brought by the exclusive licensee as opposed to the patent proprietor (and the proprietor is not taking part in the proceedings) then you cannot even raise validity as a defence, regardless of whether the local division supports combined actions (I&V) or not!
This seems incredible to a UK-based attorney. The equivalent part of the UK Patents Act 1977 is section 67(3) which requires the proprietor to be made a party to the proceedings. The UPC agreement however makes no such statement.
If we consider this point further it is not difficult to conceive of cases where an IP creation company places IP into a separate holding company with an exclusive licence back to the IP creation company. If the IP creation company brings infringement proceedings against another entity then that entity is apparently precluded from raising validity as a defence in those proceedings. Instead they must raise a separate validity action, with the central division, in order to try and revoke the patent.
If the local division hearing the infringement action and the central division hearing the validity action run at different speeds then potentially the defendant is going to be looking down the barrel of an injunction for a significant period of time before they can even get their “counterclaim” heard.
Plenty of patent applicants already run such “IP holding-creation” set-ups and if the above is correct then IPcopy can see many more companies going down this route. One might even cynically suggest that such a set up would be more easily exploited by large entities than by SMEs.
So, we’ve heard what the UPC agreement says. What about the Rules of procedure of the Unified Patent Court? Well, as of the time of writing, the Rules of procedure have not been agreed. IPcopy understands that a 12th draft is currently being discussed. A copy of the 9th draft can be found here.
IPcopy notes that these rules of procedure seem to be at odds with the text within Article 47(5) of the UPC Agreement (people who have seen the 12th draft of the rules have confirmed to IPcopy that they are broadly the same as the 9th draft as far as the issue of revocation counterclaims is concerned).
The relevant parts of Rules 23 and 25 are reproduced at the bottom of the post below. Based on these rules, it would seem that a counterclaim for revocation is allowed, even when the infringement action is brought by an exclusive licensee. Rule 25 in particular appears to cover a situation where the patent proprietor is not party to the proceedings, but a counter-claim for revocation has been made – a situation that is at odds with Article 47(5).
So, where does this leave us? Apparently, with a unified patent court agreement that doesn’t permit a revocation counterclaim to be made where an exclusive licensee is bringing the action (and where the proprietor is not part of the proceedings). And also, apparently, with a draft set of rules of procedure for the unified patent court that seem to be at odds with the unified patent court agreement.
IPcopy will be looking forward to the public consultation on the rules of procedure of the unified patent court to see how this issue plays out. The public consultation is expected to commence next month. In the meantime, are you part of the group developing the rules of procedure? Has this issue been raised? How is it being dealt with?
Mark Richardson 22 January 2013
Rule 23 – Counterclaim for revocation
3. Where the plaintiff is not the proprietor of the patent (or patents) concerned the Registry shall as soon as practicable serve a copy of the Counterclaim for revocation on the proprietor(s) in accordance with Rule 11(di) and shall supply a copy of each document referred to in Rule 23.2.
Rule 25 – Examination as to formal requirements of the Statement of defence
1. The Registry shall, as soon as practicable after the lodging of the Statement of defence:
.. (c) if the patentee is not a party to the infringement action serve the Counterclaim for revocation on the patentee in accordance with Rule 11(d)(i).
*Bifurcation refers to a patent system in which the validity of a patent and the infringement of a patent need to be challenged in separate actions in front of the courts. The UK system doesn’t do bifurcation whereas the German system does.