Effectively Managing a Global Patent Litigation Strategy

Reprinted with permission from the 2006 issue of the Lexpert/ALM Guide to the Leading 500 Lawyers in Canada. (c) Thomson Carswell.

Patent litigation is increasingly fought on a global basis. This is particularly so in the field of patented medicines, although by no means exclusively so. The explanation may be due to at least four converging events. First, increased globalization: international trade and investment have increased exponentially. For instance, while the volume of world trade was approximately US$58 billion in 1950, it reached approximately US$9,000 billion by 2004.¹ Patented products, particularly pharmaceuticals, are reaching more markets.

Second, there has been an increase in corporate concentration. By 2000, more than a quarter of the world’s economic activity was in the hands of 200 corporations. In the steel, oil, chemical, media and electronic industries, the five leading firms had reached more than 30 per cent of total global sales by the 1990s.² The pharmaceutical industry has seen a significant consolidation as the majors fight to be the largest.

Third, in the "new economy" the emphasis is on intellectual capital: "brainware" as opposed to material objects.³ The focus of competition is on the strategic protection (or attack) of intellectual property, rather than on more traditional pricing wars or manufacturing efficiency. The pharmaceutical business has always understood the importance of intellectual property. However, the trend today is on obtaining broader, more commercially useful patent coverage rather than simply claiming the basic compound. Although statistics are not available, the trend to more comprehensive patent coverage has translated into more patent litigation worldwide. For example, as of February 2006 Pfizer had 300 patent infringement cases in more than 50 countries. More specifically, in protecting its "blockbuster" drug Lipitor,® Pfizer had overlapping litigation in the United States, the United Kingdom, Spain, Norway, Nicaragua, the Andean Pact and Austria.⁴

Finally, with the adoption of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement in 1995, a minimum standard of patent protection has been secured in the industrialized world and countries with more checkered histories in terms of respecting patent rights are slowly being brought around to understanding the importance of intellectual property.⁵

What this means to patent holders is a pressing need to develop patent litigation strategies that take account of the increased global nature of patent litigation. The thesis of this article is that for each significant invention, a global patent litigation strategy must be developed that takes account of the reality that the litigation will be fought in several jurisdictions, under varying patent regimes, subject to different substantive and procedural environments, cognizant that the evidence of and outcome in one proceeding can aid or undermine the success of related proceedings in other jurisdictions.

This article will highlight some of the pitfalls of multijurisdiction litigation by examining a number of examples drawn from patent cases. An understanding of the significance of these differences between litigating a patent case in the US versus the UK versus Canada (for example) will assist counsel in developing a winning global patent litigation strategy.

While patent protection may be territorial, the successes or setbacks of patent litigation in one jurisdiction can have an unintended ripple effect, spilling over national borders. In this regard, while a foreign judgment is generally not binding on a domestic court⁶, an adverse outcome in a foreign jurisdiction can undermine the success of a domestic litigation on a related patent. This is not a new problem, per se. In 1973, a US judge from the 3rd Circuit (Northern District of Illinois) held in the context of a US patent litigation regarding a previously decided case in Canada: "Patent litigation is costly, and the Canadian case was hard fought. Why begin from scratch? Conservation of resources is the principal objective of the law of preclusion, and that is a vital objective when costs are high, the more so when similar patents have been secured in many of the industrial countries. …I propose…to examine the Canadian judgments, to learn what has been decided, and to apply those decisions to this litigation to the extent—and only to the extent—they are legally relevant, and the findings are free of the influence of legal differences."⁷

Similarly, in Warner-Jenkinson Co. v. Allied Chemical Corp., the court determined that related proceedings before the German and Dutch patent offices would be taken into consideration in the US patent proceeding: "[w]hile the decisions of the two foreign patent offices ‘are in no way controlling upon this court…they are valuable as opinions of trained experts in the country of the inventor and where the art is best understood. The opinions of such men, learned, able and disinterested, officially expressed after thorough examination, are persuasive to say the least.’"⁸

Likewise, in Lubrizol Corp. v. Imperial Oil Ltd. (1989), 22 C.P.R. (3d) 493 (F.C.T.D.), Justice Barbara Reed of the Federal Court of Canada granted an interlocutory injunction to the plaintiff, a very rare occurrence in Canadian patent infringement suits, on the basis, inter alia, that an interlocutory injunction had been issued in US patent litigation involving related patents.

Foreign settlements can also have a powerful impact on the outcome of domestic cases. For example, in Unilever PLC v. Procter & Gamble Inc. (1993), 47 C.P.R. (3d) 479 (F.C.T.D.), Unilever sued Procter & Gamble (P&G), alleging that P&G’s Bounce® dryer product infringed Unilever’s patent. In defense, P&G pleaded that Unilever’s patent was invalid. Unilever contended that P&G was barred from arguing invalidity, having entered into a settlement with Unilever’s US affiliate in parallel litigation in which P&G had acknowledged the validity of the corresponding US patent. The Canadian trial judge dismissed Unilever’s estoppel argument but held that P&G’s invalidity allegation was so "tattered and worn" that "nothing but strict proof" would do "them any good in this litigation."⁹ In the result, Justice Francis Muldoon found the Unilever patent valid and infringed.

In addition to foreign judgments and settlement agreements, statements made under oath by a witness (e.g., an inventor, an expert, even the patentee’s agents) in one proceeding may be admissible (such as for impeachment purposes) in parallel litigation elsewhere. For example, in Molins PLC v. Textron, Inc., 48 F. 3d. 1172 at 1180 (Fed. Cir. 1995), the Court of Appeal for the Federal Circuit supported its finding of inequitable conduct against the patentee, ultimately finding the patents were unenforceable, on the basis of statements made by the patentee’s agent during the prosecution of foreign patents. The agent had made representations to the foreign patent office regarding the relevance of certain prior art, which the patentee had failed to disclose to the US Patent Office during the prosecution of the US patent.

The issue of foreign testimony being used in different proceedings is an acute problem in pharmaceutical patent litigation because the innovator often faces off against the same generic manufacturer(s) in courts in different countries. Furthermore, a finite number of qualified experts is available to each side to testify. One can easily envisage a situation in which a pharmaceutical patent is being litigated in Canada, the US, the UK, elsewhere in Europe, Japan and so forth, all with the same expert witnesses. Protective orders offer little "protection" when the same parties are involved. Moreover, patent prosecution files are available for inspection so that if a patent agent has made statements in the course of the patent’s prosecution, you can expect those statements to be reviewed by your opponent in litigation proceedings.

As the following examples attempt to illustrate, foreign judgments, settlement agreements and statements made under oath can have ripple effects well beyond national boundaries. Long before stepping into court, a patent holder must map out what has been said in the course of the patent prosecution in the different patent offices, and devise one strategy that takes account of the fact that how the case is marshalled in one court will have a profound effect on litigation elsewhere. What follows is a discussion of some of the significant features of patent litigation around the world that one must have account for in developing one patent litigation strategy.

Although patent laws have become increasingly more uniform among WTO countries since the TRIPS Agreement, when mapping out a global patent litigation strategy it is very important to appreciate that substantial differences still exist in basic patent jurisprudence, for example, the legal test for claims construction, obviousness and infringement.

The approach to patent claims construction varies from country to country, even amongst common-law jurisdictions, notwithstanding the similarity of our patent laws. The legal approach to claims construction is set by the jurisprudence (as opposed to statute law), and like constitutional law, is a reflection of many years of developing case law. These differences can result in conflicting results in relation to the same patented invention. A classic example of this divergence is in the Improver litigation, which occurred concurrently in the UK and Germany. In the UK litigation, the court adopted a narrow interpretation of the patent claims, and ultimately held that the patent was not infringed. In contrast, the German court held that the patent was infringed¹⁰ based on a broader reading of the patent claims.¹¹

In Canada, the Supreme Court has mandated a "purposive approach" to claims construction¹². The claims of the patent are to be read in the context of the patent as a whole, but extrinsic evidence is not permitted; the court’s analysis is restricted to the four corners of the patent. In the US, the courts take a more expansive approach to claims construction, having reference to the cited prior art or statements and admissions made in the prosecution history. Whether this leads to a broader or narrower construction is arguable. Certainly, the use of file wrapper estoppel in the US is often used to limit the scope of the claims.¹³

As noted by the learned Canadian author Roger Hughes, Q.C. (now Justice Hughes) in Hughes and Woodley on Patents (2nd ed. 2005), as a result of amendments to the Patent Act in 1996, the Act contains a provision on obviousness ("the subject matter must be defined by a claim in an application that must not have been obvious to a person skilled in the pertinent art or science having regard to information disclosed to the applicant…more than one year before the actual filing date in Canada, or information disclosed by third parties before the claim date, in such a manner that the information became available to the public anywhere"), yet nowhere is "obvious" defined.¹⁴

Thus, the legal test for what is "obvious" has been left to the courts to decide. In Canada, the courts have held that obviousness must be "plain as day" or "crystal clear" to the hypothetical skilled technician "without the necessity of his having to do any experimenting."¹⁵ This was recently affirmed by the Federal Court in a pharmaceutical patent case where the issue of validity came down to whether the notional skilled person would have to do testing to arrive at the invention, the defendant’s expert having admitted that a "package of experiments" would have to be conducted in order to understand what excipients could be removed to create an abridged formulation of a drug tablet.¹⁶ As Canadian courts have noted, this test for obviousness is different from the UK test where experimentation and testing can be taken into account if the skilled technician would have thought that experimentation was "worth a try" because of the "reasonable prospect" of it being successful.¹⁷ As a result of this difference, a Canadian court held that a patent for an oral release capsule was non-obviousness, even though an English court had come to the opposite conclusion in regards to the same capsule.¹⁸

The Patent Act in Canada does not define "infringement," so as with claims construction and obviousness, the courts have been left to define the legal test for infringement. Not surprisingly, the legal test for infringement varies from country to country, even amongst the common-law jurisdictions and notwithstanding that the prohibition on infringement is similar, in part because the approach to claims interpretation varies.¹⁹ Due to the fact that the jurisprudence has evolved at its own pace in each country, judicial consideration of the problem of infringement has developed in different ways.²⁰

The differences become more acute when you examine the different approaches to what is an essential versus nonessential element (i.e., obviously substitutable to a person skilled in the art or science) as of a given date. In Canada, the Supreme Court has recently clarified the jurisprudence, as mentioned above, regarding claims construction (the "purposive approach"),²¹ prior to which the courts had begun to adopt a "pith and marrow" approach akin to that followed in the US—namely, whether the infringer’s device (notwithstanding some differences) performed the same function in substantially the same way, to obtain the same result as the claimed invention.²²

In the US, the courts have adopted a more expansive approach to infringement, called the "doctrine of equivalents," ²³ which one English judge has said "allows the patentee to extend the monopoly beyond the claims" so as to prevent an infringer from stealing the benefits of the invention. The problem becomes where to draw the boundaries for a US patent under the doctrine of equivalence. The same English judge, commenting on the US approach, noted that the American courts have restricted the scope of the doctrine by relying upon prosecution history or file wrapper estoppel.²⁴

In the UK, claims interpretation is made according to the principles laid down by Lord Diplock in Catnic Components Ltd. v. Hill & Smith.²⁵ However, what constitutes infringement of those claims depends in part on both article 69 and the Protocol of the European Patent Convention,²⁶ which are now part of the UK law. Art. 69.(1) reads: "The extent of the protection conferred by a European patent or a European patent application shall be determined by the terms of the claims. Nevertheless, the description and drawings shall be used to interpret the claims." Protocol on the Interpretation of Art 69 reads: "Article 69 should not be interpreted in the sense that the extent of the protection conferred by a European patent is to be just understood as that defined by the strict, literal meaning of the wording used in the claims, the description and drawings being employed only for the purpose of resolving an ambiguity found in the claims. Neither should it be interpreted in the sense that the claims serve only as a guideline and that the actual protection conferred may extend to what, from a consideration of the description and drawings by a person skilled in the art, the patentee has contemplated. On the contrary, it is to be interpreted as defining a position between these extremes which combines a fair protection for the patentee with a reasonable degree of certainty for third parties."

While attempting to reconcile these different approaches to claims construction and infringement is well beyond the scope of this article, the lesson to be learned here is that despite a superficial similarity to the patent law systems between common-law countries, differences in the laws can have a profound impact on your case. The challenge for the patent litigation strategist is to be aware of these differences when deciding how to marshal your case, what theory to advance, what evidence to tender and argument to make, in each country in which the patent will be asserted. As these different tests illustrate, patent holders have to appreciate the differences in jurisprudence, even in circumstances where the patent statutory language is very similar.

In the previous section, we highlighted some of the significant substantive differences in patent laws between common-law countries to illustrate the point that how one marshals a patent case must be tailored to the particular venue, but with an understanding of how the outcome in one case may impact on the outcome in other countries. In this section of the article, we discuss some important differences in procedure between the courts of common-law countries, which will impact where you choose litigation and how you prepare your case.

In Canada, the gathering of evidence before the trial is one of the most labor-intensive and costly stages of the patent litigation process. The Federal Court Rules provide for very comprehensive documentary and oral discovery. Each party is obliged to deliver an affidavit of documents setting out a list and description of all relevant documents in the possession, power or control of the party (Rule 223 (2)(a)). "Document" is defined to include an audio recording, video recording, film, photograph, chart, graph, map, plan, survey, book of account, computer diskette and any other device on which information is recorded or stored (Rule 222(1)).

The test for relevance is very broad, particularly at the pre-trial discovery stage. In the context of a pharmaceutical patent infringement action, the patentee is normally expected to list documents from its Canadian subsidiary as well as the foreign parent where the invention was made. Failure to provide an adequate or sufficient affidavit of documents can lead to sanctions, including the striking of pleadings and the award of costs (Rule 227). There is also a continuing obligation to provide an update to the affidavit (Rule 226). A party may also move for production from non-parties with leave of the court (Rule 233).

The Canadian Federal Court Rules also provide for expansive rights of pre-trial oral and written examination of a witness on behalf of each party (Rule 234). Each party must select a representative to be examined (Rule 237 (1)) who may be required to better inform himself (Rule 244(1)). The Rules also provide a right to examine the assignor of a patent, for example, an inventor (Rule 237(4)). There is also the opportunity to inspect property (Rule 249).

All of the foregoing is to be contrasted with the process of pre-trial evidence in the US and the UK. In the United States, under the Federal Rules of Civil Procedure, there is typically no requirement for a party to list all relevant documents; a party typically has the right to depose up to 10 individuals, including an individual not a party to the litigation, and has very wide discretion in terms of whom it chooses to examine, for example the inventors and drafters of the patent.²⁷ In the UK there is no automatic right to examine a person absent court order.²⁸ Instead, the parties simply exchange documents and respond to written questions (interrogatories).

In civil-law countries such as Germany, discovery is even more distinctive, with the judiciary (as opposed to the adverse parties) culling the evidence. For instance, German judges themselves conduct research, actively question witnesses and set the schedule for as many pre-trial hearings as necessary to resolve the pertinent technical issues. In many civil-law countries, the adverse parties are not even allowed to submit evidence of their own experts, but must rely on court-appointed experts.²⁹

Protective and confidentiality orders, although important, offer only illusory protection. One must assume that a damaging document or admission in one pre-trial examination will surface in other related proceedings.

There are countless other differences between countries in terms of evidentiary procedures, especially at the trial itself, including how expert evidence is adduced, the right to cross-examine, how trials are conducted, the role of the judge and counsel and so forth.

These differences in pre-trial and trial procedures can have a profound effect on how a patent case is prepared, particularly if the battle will be fought in several different jurisdictions.

OTHER EVIDENTIAL CONCERNS:

• Counsel should always be aware that the scope of privilege attached to expert reports or consultations varies across jurisdictions. Care should be taken to ensure that counsel adheres to the strictest standards. This is especially important since typically less than a dozen "top- tier" experts are available to opine on complex biological or chemical patents, and often the same experts turn up in Canadian, U.K. and U.S. patent litigation.

• When an innovator is concerned about the ability to independently view infringing activities, instruments or materials in a short period of time, thought should be given to bringing an action in a jurisdiction where the patentee is able to quickly obtain evidence from alleged infringers. For example, in Italy, a plaintiff may file for a description order (Descrizione, Sect. 81 Legge Brevetti, Italian Patent Act) which entitles the plaintiff, assisted by a bailiff and a court expert, to inspect and describe the allegedly infringing product or processes. Such an order can be made on an ex parte basis, as long as the applicant demonstrates that there is a risk that the alleged infringer may remove evidence.³⁰ In contrast, in most common law jurisdictions, an innovator’s representatives are not allowed to directly enter the property of an alleged infringer except under special circumstances. For example, to obtain an Anton Pillar order in the United Kingdom or Canada, which allows an applicant to enter and seize the property of the respondent, the applicant must demonstrate: (1) an extremely strong prima facie case; (2) serious potential or actual damage; and (3) clear evidence that the respondents have in their possession incriminating evidence and that there is a real possibility that they may destroy such material before an inter partes application can be enforced. See: Anton Piller K.G. v. Manufacturing Process Ltd., [1976] Ch. 55 (C.A.).

A final consideration. How patent cases are decided varies significantly between countries, for example, jury trials in the US, non-specialist judges in Canada and the specialized patent court in Germany. Evidence and arguments must be carefully tailored to the background and expertise of the audience. In the case of pharmaceutical patents which involve extremely sophisticated chemical or biological inventions, it is crucial to pitch the case at an appropriate level of scientific and legal inquiry so as to be understood by the decision-maker. This is an important consideration when mapping out the case theory at a global level.

In the US, a patent suit may be brought before either a judge or a jury. While patent trials in front of juries were historically uncommon in the US, accounting for less than 3 per cent of patent trials prior to 1940, the number of patent trials in front of juries had skyrocketed to 62 per cent by 1999.³¹ Further, with the exception of certain circuits (e.g., Delaware, Northern California, eastern district of Texas), most of the judiciary is relatively inexperienced with patent cases as they make up only a very small portion of the court’s docket. In contrast, Germany has specialized patent courts with expert judges, often with technical backgrounds, who focus primarily on patent litigation.

Between these two extremes stands Canada. While both the federal and provincial courts have jurisdiction over patent matters, the vast majority of patent-related litigation (more than 90 per cent) is heard by the Federal Court, which has sole jurisdiction over the impeachment (revocation) of a patent. Further, although the Federal Court is not a specialized patent chamber and the judges typically do not have technical backgrounds, a significant part of the docket in the Federal Court involves intellectual property disputes. As the preceding implies, a sophisticated scientific argument in a German patent case will probably be totally inappropriate for a US jury trial, where submissions need to be kept simple (juries often cannot even take notes) and information needs to be limited to the clearest examples of infringement, as counsel searches for the "smoking gun" admission.

It is critical for patent holders to ensure that they manage the timing, scope and effect of multi-jurisdictional litigation. This calls for a holistic approach, in which the patentee develops a unified international litigation strategy while simultaneously remaining flexible to the substantive, procedural and adjudicative differences of each country. The ability to successfully implement this approach is dependent on the patent holder carefully constructing its strategy early, coordinating regularly with national litigation counsel, and ensuring that the overall vision of the litigation is global in perspective.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.