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What are the procedural means to invalidate a patent in Germany and in the United States?
Dr. Anja Lunze, LL.M.[1] What are the procedural means to invalidate a patent in Germany and in the United States? [2] A.Introduction There is a constant increase in the economic importance and value of technical property rights. With the change from production to knowledge economies, the protection of technical inventions is becoming more and more important. This trend is evidenced by the increasing number of patent applications and patent grants worldwide.[3] The practical relevance of technology protection is reflected in the sharp increase in international licensing of these technologies. From a German perspective, most licenses are exchanged with the U.S.[4] With the increasing dependence of a company's market position and balance sheet on the value of a patent portfolio, the question arises as to whether the company's patents are actually legally valid. A patent may be declared invalid with retroactive effect if it is established that the prerequisites for patentability, in particular novelty and inventive step, were not given at the time the patent was filed. Although patents both in Germany and the U.S. are only granted after they have been examined by the competent patent office, there is, for their entire term, a constant risk that a third party could assert the nullity of the patent in court, relying, for example, on newly found material which had not been considered in the granting procedure. The present paper gives a comparative overview of the procedures for invalidation of a patent in Germany and in the U.S.
[1] Attorney at Law with Reimann Osterrieth Köhler Haft in Düsseldorf. [2] A slightly different German version of this paper has been published in DAJV-NL (Newsletter of the German-American Lawyers' Association) 2008, 26. [3] See http://www.eds-destatis.de/de/downloads/sif/ns_06_02.pdf.
[4] Statistische Sonderveröffentlichung 12 of the Deutsche Bundesbank: "Technologische Dienstleistungen in der Zahlungsbilanz" [Technology services in the balance of payments], June 2006
B.Germany I.Opposition Proceedings
After the grant of patent has been published, an opposition can be filed against a German patent within a period of three months. An opposition results in the revocation of the patent if it is established that there is no patentability, if the invention is not sufficiently disclosed, or if there has been a usurpation or an inadmissible broadening of the subject matter of the patent (see Sec. 21 PatG). Anyone has the right to file an opposition, except in the case of usurpation, when only the infringed party has the right to oppose the patent. An opposition can also be filed against a European patent which has already been granted. In this case, the opposition period is nine months (Art. 99 Para. 1 EPC). The revocation of a patent has retroactive effect in favour of and against all parties.
II.Nullity Suit After the opposition period has lapsed, it is possible at any time to file a nullity suit pursuant to Sec. 81 German Patent Act in Germany. Anyone has the right to file a nullity suit, including the licensee. If the patent proprietor and the licensee have agreed on an immunity from suit which obliges the licensee not to attack the validity of the patent during the term of the license agreement, this agreement then renders the nullity suit inadmissible. It must be borne in mind, however, that non-attack clauses may be invalid according to European law, if they are liable to impair the trade between the EC states in a substantial manner.[1] A patent is deemed valid as long as there is no decision of the Federal Patent Court or the Federal Supreme Court to the contrary. One particularity of the German system is its bifurcation: Patent infringement proceedings have to be conducted before the ordinary courts of justice (Sec. 143 German Patent Act), while a nullity suit must be filed with the Federal Patent Court. Patent infringement proceedings are therefore dealt with by the Regional and Higher Regional Courts (Landgericht and Oberlandesgericht), and by the Federal Supreme Court in only the last instance of appeal. In nullity proceedings, the first instance, the Federal Patent Court, is followed by the Federal Supreme Court. Since the grant of the patent has a generally binding effect,[2] the infringement court has to work on the assumption that the patent is valid. For this reason, it is not possible to assert the invalidity of the patent in the form of a counterclaim or in the form of a mere nullity objection during infringement proceedings. Only if parallel nullity proceedings are pending, the infringement court would be able to stay the infringement proceedings pursuant to Sec. 148 German Code of Civil Procedure. In practice, however, the infringement courts are rather reluctant to stay infringement proceedings, in particular the Regional Court Düsseldorf. An overwhelming likelihood that the patent will be nullified is required as a prerequisite for a stay of the proceedings.[3] As the patent protection is limited in time, the requirements for a stay of proceedings are higher in first instance proceedings in order to ensure that the patent proprietor may effectively enforce his rights. In the event that the patent proprietor obtained a favorable first instance infringement decision - which is preliminarily enforceable - a stay of proceedings in second instance is more likely than in first instance.[4] Due to the bifurcated system, it is therefore possible that although a decision in favor of the patent proprietor has been passed in the infringement proceedings, the Federal Patent Court or the Federal Supreme Court may subsequently declare the patent null and void.[5]
III.Effects of the invalidation If the patent is declared invalid, its effects of the patent are deemed not to have existed ab initio (Sec. 22 Para. 2, Sec. 21 Para. 3 sentence 1 German Patent Act). The situation is to be considered as if legal protection for the invention had never existed. In the particular situation of a prior infringement judgment and a subsequent nullification of the patent, the party adjudicated for patent infringement has the possibility to initiate proceedings for restitution against the infringement judgment pursuant to Sec. 580 No. 6 German Code of Civil Procedure.[6]
C.United States I.Reexamination
In the U.S., too, it is possible, upon the request of a third party, that the pre-requisites for patentability may be examined subsequent to the grant of the patent in a procedure before the USPTO, the so-called re-examination procedure (35 U.S.C. § 301 ff.).
II.Action for declaration of nullity of the patent Once a patent has been granted, there is a legal presumption of its validity (35 U.S.C. § 282 Para. 1 S. 1). In contrast to Germany, the possibility of an isolated nullity suit does not exist in the U.S.. For many years, the validity of a patent was only assessed in infringement proceedings after the defendant in such proceedings had raised the objection of nullity in order to defend himself. The disadvantage of this practice was that companies who considered a competitor's patent to be invalid were not able to attack the patent, but were forced to wait until the patent proprietor himself sued them for patent infringement. For this reason, the Supreme Court decided as early as in 1952 that a competitor of the patent proprietor who deems the patent to have been wrongfully granted, does not need to wait until he is sued by the patent proprietor for patent infringement, but is able to have the validity of the patent assessed in proceedings for declaratory judgment.[7] In order to file a successful action for declaration of nullity of a patent, the plaintiff has to overcome a number of procedural obstacles. Generally, pursuant to 28 U.S.C. § 1338 (a), the Federal Courts have the exclusive jurisdiction for patent disputes. This applies e.g. for actions for determining the true inventor or for actions with respect to the interpretation of patent claims. Therefore, patent infringement proceedings are generally conducted before the Federal Courts.[8] In contrast to that, the State Courts have jurisdiction over actions relating to contractual claims. These include, for example, actions for performance, or actions on account of breach of a license agreement. If an objection is raised which is purely based on Federal Law, e.g. if the licensee defends himself against an action by the licensor for payment of royalties by asserting the invalidity of the patent, then this does not represent a dispute on Federal level. Therefore, the first prerequisite for an action for declaratory judgment before the Federal Courts is that the dispute is a patent law dispute.
III.Action for declaration of nullity by the licensee Pursuant to 28 U.S.C. § 2201, the courts may declare the rights and other legal relations of any interested party upon the filing of an appropriate pleading.[9] The statutory formulation "in a case of actual controversy" means that a particular legitimate interest in taking action is necessary. Up to now, two requirements had to be met in this context: Firstly, the conduct of the patent proprietor had to have given rise to justified concerns about an impending patent infringement action, and secondly, the party wishing to assert the nullity of the patent must already have commenced the presumably infringing acts, or at least have made specific arrangements to do so, e.g. it must already have manufactured or sold the presumably patent infringing product or have made arrangements to do so. If the establishment of the nullity of a patent is being requested, the requirement for a legitimate interest in taking action dictates that there must be a serious risk of a patent infringement action by the patent proprietor.[10] As far as the relation between licensee and patent proprietor was concerned, it had been assumed that as long as a valid license agreement existed, the licensee was authorized to use the subject matter of the invention and therefore was not exposed to the risk of being sued for patent infringement. For this reason, licensees were denied the right to assert the nullity of a patent. Ultimately, the consequence for the licensee was that he would first have had to terminate the license agreement, in order to acquire the right to file an action for declaration of nullity of the patent, despite the risk of a patent infringement action being filed against him by the patent proprietor. In as early as 1969, the Supreme Court decided that the licensee must not be prevented from withdrawing from his contractual obligation to pay royalties by asserting a lack of validity of the patent.[11] Before that, it had been assumed that the licensee was protected by the license agreement against infringement suits by the patent proprietor, and was therefore obliged in return not to attack the property right of his contracting partner (so-called "licensee estoppel"). In the Lear vs. Adkins decision, the Supreme Court clearly stated that it is not only the contractual relationship of licensee and licensor that counts, but that the public interest in the destruction of patents which do not meet the requirements of patentability also has to be taken into account. This decision was taken based on the consideration that the licensee, more than anyone else, has detailed knowledge about the invention, and is usually the only party who has an economic interest in having the patent declared null and void. In 2007, the Supreme Court ruled in MedImmune Inc. v. Genentech Inc.[12] that an "actual controversy" is already present even if there is not yet reason to fear patent infringement proceedings. In the case underlying this decision, the patent proprietor had forced the licensee to pay royalties by informing him that the refusal to pay royalties would lead to rescission of the contract and the subsequent initiation of infringement proceedings. The Supreme Court ruled that the licensee is not forced to discontinue the payment of royalties, thus committing a breach of contract, or to decline a license offer by the patent proprietor, before being able to file an action for declaratory judgement. The defendant's argument that the quid pro quo of the license agreement is put aside if the licensee is able to enjoy protection from infringement actions based on the license agreement on the one hand, while being able on the other hand to attack the patent of his contracting partner from a safe position, was explicitly rejected by the Supreme Court. The court established that there is no general principle according to which the promise to pay royalties does not at the same time imply the promise not to assert the lack of patentability of the patent in court.[13] The view held in the relevant literature with regard to the effects of MedImmune Inc. v. Genentech Inc. is contradictory. Some believe that actions for declaratory judgement can now be filed more easily, not only by patent licensees, but also in trademark disputes.[14] Others are of the opinion that the judgement is merely limited to the procedural question concerning the jurisdiction of the court and leaves more questions open than it answers.[15] Ultimately, we will have to wait and see how far-reaching the effects of MedImmune Inc. v. Genentech Inc. will prove to be. At any event, this decision certainly shows that the controversial nature of the relation between patent proprietor and licensee that was already apparent in the Lear vs. Adkins decision is still an issue and will probably remain so in the future.
IV.Effects of the invalidation As far as the legal force of a nullity decision is concerned, in the U.S., it must be taken into account that - unlike in Germany - a nullity decision only takes legal effect between the parties involved and their legal successors. The consequence of this is that, despite the nullification of his patent, a patent proprietor would nevertheless be able to assert the infringement of the same patent against another defendant in other proceedings.[16] Following the Supreme Court decision Blonder Tongue Laboratories, Inc. v. University of Illinois Foundation[17] taken in 1971, it is possible to raise the existence of a decision to the contrary as an objection in subsequent proceedings in which the patent is being asserted, provided that the patent has already been declared null and void by a Federal Court.
D.Summary
The opportunities which are open to presumable infringers and third parties for obtaining a court declaration of patent nullity are very different in the U.S. from those in Germany. In the U.S., the focus is on the question to which extent and under which conditions patent licensees are able to assert the lack of patentability of a patent in court. In contrast, anyone is able to request the nullification of a patent in Germany, as a general rule, and a nullity suit is only inadmissible if a valid agreement concerning an immunity from suit has been concluded between the parties. Nonetheless, in both countries, nullity suits are mainly filed by competitors of the patent proprietor, so that, in actual practice, the procedural obstacles that apply in the U.S. are levelled out. Compared to the German system, the U.S. provides a procedural simplification by allowing the presumable patent infringer to assert the nullity of a patent as a defence in infringement proceedings initiated by the patent proprietor. Such defence is not possible in Germany where only a stay of infringement proceedings could be requested if there is a high likelihood that the patent will be declared invalid in parallel pending opposition or nullity proceedings. The unsatisfactory situation that may arise in Germany in cases where first an infringement decision is passed against a patent infringer and the patent is subsequently declared null and void with retroactive effect, is thus avoided in the U.S. from the outset.
[1] ECJ, GRUR Int 1989, 56 57 - Nichtangriffsklausel.
[2] Benkard/Schäfers, § 49 PatG, No. 8.
[3] BGH GRUR 1987, 284 - Transportfahrzeug II; LG Düsseldorf, InstGE 3, 54 - Sportschuhsohle.
[4] OLG Düsseldorf, Mitt. 1997, 253 - Steinknacker. [5] On the consequences of this, see Lunze, Rechtsfolgen des Fortfalls des Patents [Legal consequences of the invalidation of a patent] Nomos-Verlag 2007, p. 44 ff., 129 ff. [6] Benkard/Rogge/Grabinski, § 139 PatG, No. 149. [7] Kerotest Mfg Co. v. C-O-Two-Fire Equipment Co., 342 US 180, 185 f. (1952). [8] Moore/Michael/Lupo, Patent Litigation and Strategy, 2003, S. 63 f., 76 f. [9] 28 U.S.C. § 2201 (a): "In case of actual controversy within its jurisdiction, .... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration (...)". [10] Adelman/Rader/Thomas/Wegner, Cases and Materials on Patent Law, S. 1021 f. [11] Lear v. Adkins, 152 U.S.P.Q. 1. [12] MedImmune, Inc. v. Genentech, Inc., Supreme Court No. 05-608, 549 U.S. (2007). [13] P. 16 of the judgement. [14] Matheson/Greenstein, Managing IP September 2007, 28, 29 f. [15] Mayer, VPP-Rundbrief No. 2, 2007, p. 64, 70 f. [16] Wehr, GRUR Int. 1973, p. 131, 132. [17] Blonder Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 US 313 (1971).
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