Patents Court sets FRAND royalty and grants first FRAND injunction
In a landmark decision in the telecoms licensing battle between Unwired Planet and Huawei, Birss J has set what he considers to be a FRAND (Fair, Reasonable and Non-Discriminatory) rate for a licence, having decided that the parties' respective offers and counter-offers were not FRAND.
In particular, given the nature of the Unwired Planet portfolio and the multinational licensee status of Huawei, he concluded that a worldwide licence would be FRAND. Given the finding of infringement/essentiality/validity, and that Huawei was only prepared to engage with a UK portfolio licence, he subsequently ordered a 'FRAND injunction' against Huawei (stayed pending appeal).
Birss J stressed that the Court's power to grant an injunction against an implementer only arises once at least two conditions are satisfied: (1) there must be a FRAND licence available for the licensee to accept (or case management means to settle one) and (2) there must be a SEP held by the court to be valid and essential. An implementer who refuses to take a FRAND licence in those circumstances will be at risk of an injunction.
The decision considers a number of important issues including (1) what is FRAND? (2) abuse of a dominant position and (3) the impact of the CJEU's decision in Huawei v ZTE. It will set the standard for future licensing negotiations, but the Court of Appeal hears Huawei's appeal in May 2018, at which point further guidance can be expected. Following a further hearing on confidentiality, Birss J issued an updated version of the decision, to make certain patent licensing information public.
Commission issues guidance on the EU approach to SEP licensing
In December 2017, the European Commission issued guidance on three areas of SEP licensing that it considered needed improvement, in particular in the context of the standardisation of 5G and the Internet of Things: (1) opaque information on SEP exposure (2) unclear valuation of patented technologies reading on standards and the definition of FRAND and (3) the risk of uncertainty in relation to enforcement of SEPs. The Commission has identified two main objectives in devising its 'holistic' approach to SEPs: (1) incentivising the development and inclusion of top technologies in standards, by preserving fair and adequate return for these contributions and (2) ensuring smooth and wide dissemination of standardised technologies based on fair access conditions. However, the guidance is merely that, it is not a statement of the law.
Patents Court grants 'Arrow' declarations in Humira dosage regimen case
In the battle concerning AbbVie's 'Humira' product (the highest-selling prescription drug in the world by global sales), Henry Carr J ordered declarations in favour of Fujifilm and Samsung Bioepsis/Biogen, that administration of their intended biosimilar adalimumab products in particular dosage regimens were obvious and/or anticipated at the claimed priority dates of certain of AbbVie's patents. The decision follows the Court of Appeal's judgment in January 2017 that so-called 'Arrow' declarations were permissible.
READ MORE on the Court of Appeal's decision
An Arrow declaration (named after the first case in which such a declaration was considered, Arrow v Merck) is to the effect that a product would have been obvious and/or anticipated at the priority date of a particular patent application. As a result, if that application then proceeds to grant, the party with the benefit of the Arrow declaration can rely on it as a pre-emptive defence (i.e., as a squeeze through a 'Gillette' defence) to a claim for infringement.
The Court concluded that, on the unusual facts of the case (including AbbVie's conduct of threatening infringement whilst abandoning proceedings at the last minute), the declarations would serve a useful purpose. The Court of Appeal hears AbbVie's appeal in March 2018.
Meanwhile, in Generics v Yeda, Arnold J confirmed that the grant of Arrow declarations will be heavily dependent upon the patentee's conduct; simply filing divisional applications and making statements of strength in relation to a patent portfolio will not be sufficient. More is needed to demonstrate the need for the certainty provided by an Arrow declaration, likely involving clear attempts to shield a patent from scrutiny.
I consider that, on the most unusual facts of this case, there are special reasons which support the grant of the declarations. These include AbbVie's conduct of threatening infringement whilst abandoning proceedings at the last moment (in order to shield its patent portfolio from scrutiny); the amount of money at stake for the Claimants in terms of investment in clinical trials and potential damages if they launch at risk; and the need for commercial certainty, having regard to AbbVie's threats to sue for infringement throughout the world."
Henry Carr J
No claim to future profits when injunction not sought
In Glaxo v Wyeth, a decision from January 2017 that was only published at the end of the year, Henry Carr J considered the situation where the successful party had decided not to seek an injunction in relation to an infringing meningitis B vaccine, but then sought an account of profits for both future and past infringements. The Judge rejected the application in relation to future profits. An account of profits is based on the principle that there is some improper or unconscionable conduct by the defendant. However, given the recognition that it was in the interests of public health for GSK to continue to supply its vaccine, there was nothing improper to form the basis for an account of profits.
Permission to appeal: no more likely in patent cases than other cases
The Court of Appeal has formally disapproved the notion that permission to appeal should be more readily given in patent cases – in its decision in Teva v Boehringer, it confirmed that the Court of Appeal's approach in Pozzoli, that the technical complexity of a case is a factor in favour of granting permission, should no longer be followed. Whilst the Patents Court and Court of Appeal have not, in practice, tended to specifically adopt the Pozzoli approach, permission to appeal has routinely been given in patent cases. The Court's decision to lay the Pozzoli approach to rest is therefore welcome. Whilst it will remain prudent to assume that a losing party in a patent dispute will likely be given permission to appeal, a more rigorous filter may now be applied, thereby introducing a greater prospect of finality for parties at an earlier stage.
Challenges to validity of foreign patents
In recent years, the English courts have demonstrated their willingness to adjudicate on claims relating to the infringement of foreign IP rights. Following the landmark Supreme Court decision in Lucasfilm v Ainsworth, which confirmed that the English courts have jurisdiction over enforcement of foreign copyrights, the long-running case of Actavis v Lilly saw the Courts consider a claim of non-infringement in relation to foreign designations of European patents. In Actavis v Lilly, however, Actavis undertook not to challenge the validity of the foreign designations in the proceedings, because Article 22(4) of the Brussels I Regulation (Article 24(4) of the Re-cast Brussels I Regulation) provides that such questions must be determined by the courts of the EU Member State where the patent is registered.
The issue of whether questions as to validity of a foreign patent outside of the Brussels I regime are justiciable before an English court was considered in Chugai Pharmaceutical v UCB. The Judge, Henry Carr J, did not ultimately have to determine this question. However, he set out what he described as 'powerful arguments' against direct challenges, where validity of foreign patents is the principal issue, being justiciable before the English courts.
In a more recent decision between Lilly and Genentech, a Judge has granted Lilly permission to serve proceedings out of the jurisdiction on Genentech in the US - in which Lilly is seeking a declaration of non-infringement of six national designations of a Genentech European Patent (UK, France, Germany, Spain, Italy and Ireland). The Court's decision considers in detail the jurisdictional basis for the claim based on the 'accessory' service gateway for service out of the jurisdiction – i.e., that Lilly's claims for declarations of non-infringement in relation to the non-UK designations arose out of the same or closely connected facts as the UK designation. Effectively, the UK designation anchored the other claims to the UK.
Employee compensation goes to the Supreme Court
The long-running dispute between Professor Ian Shanks and Unilever over the question of employee compensation for an invention which generated £24.5m for Unilever will be heading to the Supreme Court in 2018/2019. In January 2017, the Court of Appeal dismissed Professor Shanks' claim for compensation because the invention was not of 'outstanding' benefit to Unilever, with the case attracting headlines of 'too big to pay'.
The Court of Appeal decided that 'outstanding' was a relative concept to be measured against relevant factors in the case; for a large conglomerate like Unilever, turnover and profitability were relevant factors, as they were in every case, albeit not the only ones. When deciding whether or not an invention is of 'outstanding' benefit to an employer' it will often be necessary for the Court to take a nuanced approach, balancing considerations of financial return against the effort and cost involved, rather than simply comparing the income generated by the invention with the overall revenue of the employer.
However, given the size of Unilever, the £24.5 million return, while not insignificant, was not of 'outstanding' benefit. While stopping short of stating that Unilever was "too big to pay", the Court of Appeal suggested that, had the employee been working for a smaller business, he might well have succeeded in his claim. The case will now be heard by the Supreme Court.
Expert Evidence
In a number of decisions this year, the Court has raised concerns over the evidence of expert witnesses, with issues including the spectre of the 'professional' expert. For example, in Edwards v Boston Scientific, Boston's expert had given expert testimony in nine patent infringement cases, five on behalf of Boston. Whilst the Court accepted that it was rare for an expert witness to be wholly objective by the time of the trial, it concluded that the expert had "developed what he might regard as an expertise in giving evidence ... his first priority was to avoid saying anything that might damage Boston's case".
Meanwhile, in AbbVie, AbbVie's expert had given evidence on its behalf before the EPO, USPTO and Canadian Patent Appeal board. Whilst, again, there is nothing wrong in instructing the same expert across several jurisdictions, the Judge (Henry Carr J), choosing his words carefully, criticised the expert's lack of objectivity and inability to see the other side of the picture: "...it is not merely a question of an expert stating that he/she has read and understood the relevant duties. Rather, the expert needs to adhere to them strictly."
Disclosure of workup materials in relation to experiments
In a procedurally complex decision between Magnesium Elektron and Neo Chemicals & Oxides, Daniel Alexander QC (sitting as a Deputy Judge) has considered the scope of Mayne Pharma disclosure relating to experiments that had been conducted by Magnesium as part of an earlier application for permission to serve proceedings out of the jurisdiction. Neo sought disclosure, following Mayne Pharma, of 'workup' material relating to the experiments, notwithstanding that it might be legally privileged. The Deputy Judge said there were two kinds of cases in which the Mayne Pharma approach can be clearly and easily applied: (1) inevitable result cases and (2) completeness of data cases. For other cases, such as this one, the position was less straightforward and a relatively cautious and restrictive approach to waiver of privilege should be taken. He concluded that the disclosure sought should not be given.
Navigating the new groundless threats regime
The Intellectual Property (Unjustified Threats) Act 2017 came into force on 1 October 2017 and implements an updated regime relating to groundless threats of IP infringement proceedings. Whilst the revisions are 'evolutionary' in form rather than 'revolutionary', there are a number of important changes. The changes are more significant for trade marks and designs (because a number of reforms had already been made in the Patents Act 2004), but the following are worth noting in relation to patent claims:
- A new statutory test for a threat: a threat must be understood to relate to an act done in the UK or which would be done in the UK. This change was needed because of the Unitary Patent, where the threats regime will apply.
- New guidance on 'safe harbour' communications with secondary infringers.
- A new 'reasonable steps' defence where the primary infringer cannot be found (cf. 'best endeavours').
- Repeal of the defence re belief in validity of invalid patent.
- New defence for professional advisers.
Exclusive licensees and patent infringement
A couple of cases have considered the importance of careful drafting in licence agreements. An exclusive licensee may bring patent infringement proceedings in its own name (which is significant as it may have suffered loss that had not been suffered by the patent owner); the licence must be to the 'exclusion of all others' including the patentee. In Illumina v Premaitha, one of the licence agreements under consideration granted a licence to 'Illumina and its Affiliates'. The Judge concluded that this meant that the licence was not an exclusive licence, which may have an impact on the quantum of damages available to Illumina.
Meanwhile, in Oxford Nanopore Technologies & Harvard v Pacific Biosciences, Deputy Judge David Stone concluded (albeit with some hesitation) that an otherwise exclusive licence which provided that a third party had an option to take a licence under the patent, but had not yet done so, remained an exclusive licence. In particular, he considered other licences in the Illumina decision which contained an equitable right to call for a licence – where that right is conditional, an otherwise exclusive licence remains exclusive unless and until the contractual conditions are fulfilled that enable the grant of the licence.
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.
