House of Lords - European Communities

Select Committee on European Communities Twenty-Sixth Report

PART 2 ISSUES AND EVIDENCE

Basic Structure

50. Sir Hugh Laddie said that there should be a court of first instance and an appellate court both with Community-wide jurisdiction (QQ 215-6). Just having a European court of appeal for patents was unattractive. The absence of a European-wide court of first instance would create immense problems for the European court of appeal: "you would still have the same sort of problems as I see we have at the moment, having, importantly, very different procedures, very different ways of assessing evidence, in many respects different forms of relief about what damages you should give and so on and so forth, all tunnelling into a single court of appeal, and I can see that causing problems". The procedures of the national courts feeding the European appeal court would require standardisation of such matters as procedures and rules of evidence in the national courts at least as regards patents, else problems like the Italian torpedo would remain (QQ 216, 222).

51. Sir Robin Jacob thought that securing the necessary degree of harmonisation of procedures and remedies for national courts to feed into a European appeal court was "a colossal challenge" but not impossible if absolutely necessary. Sir Nicholas Pumfrey was not so confident and pointed out that patent actions frequently did not stand on their own but were often mixed with other infringement actions (including copyright, unregistered designs, utility models and misuse of confidential information): "If you are looking to have one set of procedures for patent litigation you will end up requiring one set of procedures across the whole field of what is loosely called intellectual property" (Q 218). Judge Brinkhof, however, said that there was good experience (in the Community and in the Benelux) of judges working together to find solutions for such problems (Q 219). Both Sir Robin and Sir Nicholas said they would prefer no change to the "half-way house" of national courts with Community-wide jurisdiction with a right of appeal to Community court of appeal. They did not believe that would be acceptable to industry (QQ 223-7).

52. Both the TMPDF and the CBI wanted a Community patent court operating as a court of first instance. This court should be centralised but should also be peripatetic so that it could sit in the country of the applicant in the proceedings (Q 176). The CBI thought that the court should also have an appellate jurisdiction before a different panel of judges, with appeals on points of law only to the European Court of Justice (p 32). CIPA supported the establishment of a "Common Appeal Court", staffed by experienced judges from national courts, to adjudicate on patent validity and infringement for the whole Community. If it were possible that court should also operate at first instance (p 13, Q 76). LES had proposed a Community Court operating at the appeal level. Mr Cannon said that LES was not opposed to the court operating at first instance but had thought that for practical considerations it would have to be at appeal level (Q 77).

Relationship with existing Community Courts

53. The TMPDF saw the CFI as the first rung of a Community patent court system court (Q 177). The IPBA envisaged the CFI being the (first) Court of Appeal, though that role was dependent on the co-option of judges with patent experience (p 101). The Law Society also thought that if the appellate court was to be the CFI it must be composed of competent patent judges and have a wide jurisdiction over the EPO and national courts. If this were not possible, the Luxembourg Convention should be amended to achieve such a court (p 106). Professor Cornish also expressed concern about the ability of the existing CFI to handle patent appeals regularly. But he said that the possibility of making the patents appeal court a special chamber of the CFI should be kept alive (p 88).

54. Sir Nicholas Pumfrey thought a separate court would be better than an adapted CFI, though Sir Hugh Laddie thought it was a matter of terminology: "If you could get a separate chamber of the CFI to do what we want it to do, then I do not care whether it is called the CFI or not" (Q 231). Sir Robin Jacob thought there would be difficulties in using the CFI, in particular as regards the extent of any appeal therefrom to the Court of Justice. He doubted whether the senior court would want the role (Q 232). The Patent Office said that there was a question to be considered carefully as to whether the appeal mechanism would be effective if it were restricted only to matters of law, since in patent actions issues of fact and law can be closely linked (Q 275).

Staffing, workload, costs

55. There was a general consensus that any Community or pan-European Patent Court should be staffed by experienced judges. Sir Hugh Laddie suggested that the court of first instance might be manned on a temporary basis by a panel of judges from the national systems who have expertise in patent matters (Q 216). Sir Robin Jacob had estimated the number of judges presently deciding patent cases and considered that such a proposal was feasible (Q 220). Professor Cornish accepted that staffing the new court from experienced national judges might be a temporary solution, which would permit a degree of experimentation and provide some flexibility, but doubted whether such a body would be cohesive enough to establish an acceptable reputation (p 88).

56. The Patent Office said that it was necessary to consider the ability of a supranational court to deal swiftly and effectively with what could be a very heavy caseload if it operated at both first instance and appeal levels and took the bulk of the work of national patent courts in Europe. The cost and simplicity of its procedure were also important factors (Q 274). Sir Hugh Laddie expressed concern about the potential costs and volume of cases for the new court: "If you are talking about a court having jurisdiction over all patent disputes for the whole of the Union you are talking about a fairly large workload and it would mean having one or more courts available in there as sedentary or peripatetic and the cost burden on the party would be significant". The court would also have to be available to deal with emergency applications at reasonable cost. Sir Hugh saw organisational problems in achieving that. The question of the number of judges needed depended to some extent on how likely the new court was to give applicants what they wanted and how cheap and quick its procedures were (QQ 216,220). Sir Robin Jacob said that account should be taken of changing technology: "I believe that it will be possible to operate this court sometimes without its ever convening except electronically" (Q 221).

(c) Other Defects

(i) Exhaustion of rights

57. A number of witnesses expressed concern over the possible implications for parallel imports and the doctrine of exhaustion of rights developed by the European Court of Justice.[7] Under that doctrine, goods which have been placed on the market by or with the consent of the patentee must be allowed to circulate freely. At present, the failure to take out a patent in one Member State does not imply consent by a patent-holder in another Member State to the manufacture of the patented goods in the first State and their circulation in the second.[8] Mr Burnside referred to this as the "holes in the basket" problem: "the Commission used to "threaten" that if companies did not take out patents throughout the European Union then the end result might be that goods would flow freely from an unpatented country to a patented country" (p 86).

58. LES said that the Community-wide patent should not change the present approach: the patentee's rights were not exhausted by the sale of a product in a Member State in which there was no patent protection in the absence of real consent. Consent should not be inferred where the patentee had chosen not to obtain or maintain the patent (p 19, Q 95). Mr Connor, for LES, said that there was a school of thought in Germany which said that was implied consent(Q 94). Sir Nicholas Pumfrey conceded that there was a respectable academic argument but added: "One's feeling is that if the question is ever referred to the ECJ, it will receive a dusty answer"(Q 249). However, a number of witnesses, including the TMPDF and the CBI, recommended that any legislation should make it clear that the existing rules of exhaustion were not to be widened in favour of an infringer following the introduction of a Community patent (p 31, Q 124).

(ii) Compulsory Licensing

59. The TMPDF said that the Luxembourg Convention had not dealt with the issue of the different regimes in Member States for compulsory licensing. This could cause problems in the administration of a portfolio of patents throughout the Community (Q 125). The CBI identified the similarity, in the context of a Community patent, of the potential problem to that relating to the exhaustion of rights. Mr Nott said: "If compulsory licences were to be granted on a Community basis under a Community patent, that could effectively destroy the benefit of the patent to a small manufacturer in a single country because a major competitor in another country who had got a compulsory licence would then be able to sell his goods throughout the Community" (Q 132).

(iii) Prior Use

60. When the Agreement relating to Community Patents was signed in 1989 the signatory States resolved to revise the Agreement to provide for the position of parties who had used or possessed an invention the subject of a Community patent before the application for that patent. To date there has been no action on this matter. The Green Paper asked if such action was necessary. The TMPDF said that the problem was that the circumstances under which a prior user could continue to work the invention despite the grant of the patent differed from one country to another (Q 127). CIPA also said that the absence of a provision in the Luxembourg Convention dealing with prior use rights was a defect. In their view, under a unitary patent system any prior use should extend to the whole Community (p 15, Q 88). The CBI said that a prior user should be entitled to develop the prior use right which he has obtained within the full scope of the relevant patent and to transfer that right of prior use to any third party (p 31).

(iv) Renewal Fees

61. A number of witnesses identified high renewal fees as a potential weakness of the existing Convention. They were critical of current fee levels under the EPC regime. For the CBI, Mr Nott said: "We feel that the fees are very much higher than they need to be, not least because they go to a large number of patent offices. If there were to be a single Community patent run from a single European Patent Office, we would hope and expect that the fees would be able to be reduced substantially, coming down to the sort of level that exists in America and Japan" (Q 195). The TMPDF said that it was no answer to say that the fees would be no more that the sum of current fees in Member States, since the present system provided the flexibility to maintain patents in only those States of real interest (p 35). The Law Society compared the position in the USA, where no renewal fees were charged (p 105). CIPA said that the patent system ought to encourage people to take out patents to protect their investment in research and development. If that could be done by keeping official fees down at an early stage, by cross-subsidy from renewal fees, that would be a worthwhile endeavour. CIPA also took the view that part of the renewal fees of a Community patent should be allocated to the national patent offices whose continued existence for the foreseeable future CIPA supported (QQ 85, 86).

62. The BIA said that though many of its members were SMEs it did not see the introduction of reduced fees for SMEs as being particularly helpful or desirable. Fees were not the most significant cost in an international patent application filing programme and, in the biotechnology sector, the US experience showed that inventions were often the subject of a collaboration with major companies which precluded any fees reduction. The BIA said that they would rather see the moneys spent on recruiting and training staff in order to improve the speed of search, examination, opposition and appeals procedures: "reducing the long period of uncertainty is much more valuable than reduced fees" (p 28).

FURTHER ACTION—THE CHOICE OF LEGAL INSTRUMENT—CONVENTION OR REGULATION

63. The CBI supported the notion of a Community-wide patent system (p 31). But, the TMPDF said, Community action had to be aimed at providing a system with real practical advantages for all industries. The existing national and European patent systems should continue, providing a choice for users (QQ 111, 122). Zeneca said that this would provide the flexibility required by both large and small industries. Dr Smith said: "we are not talking about a replacement; we are talking about an additional opportunity" (p 37, Q 120).

64. Witnesses were divided on the best way forward. CIPA believed that although a regulation would allow a new system to be brought into force more rapidly than a Convention, there was a possibility that it might be brought in with some defects still unresolved. CIPA saw greater merit in a new international convention. In their view, it could provide a greater degree of harmonisation (by allowing, for example, the inclusion of non-EU States for which the EPC caters) and also enable the creation of an appropriate court system. A Regulation might be brought too quickly and without adequate preparation (pp 15, 17, QQ 76,97). Zeneca also favoured a Convention (p 38). Having regard to the need to provide satisfactory judicial arrangements, Sir Nicholas Pumfrey thought that a convention was the "inevitable and preferred route. It is the preferred route to have another Treaty to establish a complete jurisdiction, because if that has to be done ... it has to be done properly" (Q 229).

65. The Patent Office believed that it would be better to have a regulation. It would mean a common start date for Member States which was consistent with a single market measure (Q 277). The TMPDF said: "A free standing Convention would be too inflexible to adjust when developments in the approach to patentable technology call for adjustment, would probably be very difficult to get ratified and would be awkward to accommodate in enlargement negotiations" (p 36, Q 186). The CBI also favoured a regulation. It would not be dependent on ratifications to take effect and would be easier than a Convention to amend to take account of changing circumstances (Q 187). The Law Society of Scotland said: "A regulation had been used for the trade mark system and no reason could be seen why it should not work for patents" (p 107). IPLA also referred to the experience on trade marks. Attempting to achieve unitary patent protection by convention had not been successful. The Community Trade Mark Regulation showed what was possible under the EC Treaty (p 103). The IPBA said that a regulation would have the advantage of flexibility if changes proved to be necessary. They accepted, however, that a regulation had limitations as regards the establishment of a European Patents Court. They therefore advocated what they called a middle route, "using a Regulation for the substantive law and procedure and a Convention to establish the necessary judicial arrangements" (p 101).

66. Professor Cornish considered that Article 235 of the Treaty gave the Community a legal basis for action and thought that "As the means for altering authority over the future European patent system, and for placing it under an acceptable management structure, such a Regulation seems the only sensible way forward". He also pointed out the implications for the Community's external competence: "One consequence [of a Regulation] would be a simplification in Europe's dealings in patent matters with the rest of the world, whether this consists in the negotiation of treaties at the international level, or the conduct of discussions with major trading countries, such as the US and Japan" (p 89). The Patent Office acknowledged that there was a political issue for Ministers here (Q 287).