Patent Trolls: A View from Europe

Last week’s posting “Patent Trolls:  A Global Perspective” prompted a reader to ask if information could be provided regarding patent trolls in the European Union.   This post is in response to that suggestion. 

Patent Trolls in the European Union 

While there has been a fair amount of patent troll activity in the European Union, it has not risen to the level seen in the U.S. or in Russia.  Three patent trolls that have been involved in several patent litigation actions in Europe include the German based companies of IPCom GmBH (IPCom) and Papst Licensing GmBH & Co. (Papst) and the Luxembourg-based company, High Point SARL (a subsidiary of Inpro Licensing) (High Point).  

IPCom is the owner of several patents relating to mobile telecommunications technology which were acquired from Robert Bosch GmBH in 2007.  IPCom has sued several companies, including Nokia, HTC Corp., T-Mobile GmbH and Apple (seeking US $2 billion in damages – one of the largest damage awards ever sought in German history) for patent infringement in the District Court in Mannheim, Germany.  Many compare the Mannheim District Court to the District Court in the Eastern District of Texas because of its quick resolution of patent infringement cases.  In fact, the courts in Mannheim, Düsseldorf and Munich are well known for their speed in deciding patent infringement cases.  The reason for such speed is Germany’s bifurcated system where patent infringement and validity (revocation) actions are decided on separate tracks in different courts.  This split system allows the German courts proceed very quickly, especially in infringement cases.  For example, a permanent injunction can be obtained by a plaintiff in a successful patent infringement lawsuit in Germany in as little as eight months.  In contrast, a decision on the validity (revocation) of a patent may take anywhere from 18 months to two years.  Additionally, plaintiffs in Germany (including multi-national corporations) enjoy wide-forum shopping latitude because a court has jurisdiction if a patented product is marketed over the internet in its district.  However, patent trolls in Germany have to be careful when bringing patent infringement actions because under German law, the non-prevailing party in litigation must pay the legal fees of the prevailing party in an amount proportional to the estimated value of the case.  Given the estimated value of these patent infringement lawsuits, the legal fees to be paid to the prevailing party can be quite significant.

Papst is the owner of an European patent relating to road pricing systems.  Toll Collect GmbH (Toll Collect) was hired by the German government to develop and place electrical road pricing system for trucks on German roads.  The systems also involved placing terminals in The Netherlands and neighboring countries.  Papst and Toll Collect were involved in patent proceedings in Switzerland and Germany regarding patent infringement and invalidity of the patent and damages.  Toll Collect also brought invalidity proceedings before the Dutch Court.  The Dutch Court partially upheld validity of the patent and found infringement by Toll Collect. 

High Point asserted the Dutch counterpart of EP 0 522 772B1 (relating to mobile communication networks) against KPN (the largest Dutch provider of telecommunications and information technology services).   Ultimately, the Dutch counterpart was found invalid by the District Court in The Hague.  However, High Point sued E-Plus, Ericsson and Nokia Siemens Networks in Germany, Sprint Nextel (and others) in the U.S. and KDDI Corporation (a Japanese telecommunications company that provides mobile cellular services) in Japan.  Interestingly, the German Federal Court upheld the validity of the German counterpart of EP 0 522 772B1.  

Patent Trolls and the Unified Patent Court 

While the U.S. continues to work on measures to avoid or at least reduce the effect of litigation originating from patent trolls, the European Union (EU) institutions are working on the future centralized litigation system known as the Unified Patent Court (UPC).  The agreement setting out the main principles and structure of this future litigation system was signed by the various participating States in 2013; nonetheless, the rules of procedure are still being finalized.  However, this may lead you to wonder what the finalization of the rules of procedure has to do with patent trolls?  Well, the success by which patent troll litigation will be facilitated or prevented in proceedings before the UPC will greatly depend on the wording of the rules of procedure.  In fact, the UPC agreement (UPCA) contains two provisions which are particularly controversial and whose implementation may significantly influence the behavior of patent trolls before the UPC. 

The first provision is contained in the article related to provisional and protective measures (Article 62 of the UPCA).  According to this provision, when requested to grant  preliminary injunctions, seizures or delivery up orders, the UPC may … require the applicant to provide any reasonable evidence in order to satisfy itself with a sufficient degree of certainty that the applicant is the right holder and that the applicant’s right is being infringed, or that such infringement is imminent.”  Because of the inclusion of the term “may”, this provision confers a near endless degree of discretion regarding the extent to which a Patentee needs to prove its case, especially with respect to proof of infringement, in order to obtain the requested measures.  The concern is that some of the divisions of the UPC will require a very low standard of evidence, making it very simple (perhaps even too simple?) for any Patentee, including a patent troll, to obtain such preliminary measures, with the risk of such measures being granted in cases where they are not truly justified. 

The other provision is contained in the article related to the competence of the first instance of the UPC (Article 33 of the UPCA).  Specifically, this provision establishes that infringement proceedings will generally be brought before the UPC division in the area where the infringer is located or where the infringement occurred (called a “local” division).  If an alleged infringer counterclaims for revocation of the patent, the local division of the UPC handling the infringement action has the option, at its discretion, of referring the counterclaim to another UPC division (the central division, which is competent predominantly in revocation actions), thus resulting in a bifurcation of the infringement and validity determinations, similar to that described above in connection with German patent proceedings.  If a local division of the UPC decides, at its discretion, to proceed with the infringement action, it does not have to wait for the outcome of the counterclaim for revocation.  Therefore, the result of such an action is to nullify the defensive effect of the counterclaim thus increasing the likelihood that the local division will find a potentially invalid patent infringed.  It bears noting that if this option is exercised too freely or frequently, it may enable patent trolls to obtain favorable infringement decisions on invalid patents. 

A sense of just how controversial the above two provisions are can be found in a letter published on September 26, 2013 in the New York Times.  This letter is addressed, inter alia, to the various EU institutions that promoted the enactment of the UPC system and are presently working on the UPC rules of procedure.  The letter alerts these institutions of the risks of the above provisions.  What is significant to note is that the signatories to this letter, including Apple Inc., Samsung Electronics Co. Ltd., BlackBerry Ltd., Cisco Systems Inc., Google Inc., Yahoo! Inc. and Microsoft, are some of the world’s largest corporations with immense patent portfolios and a high number of patent-related litigations worldwide.  The collection of these signatories is even more striking when one considers that some of these companies are parties against one another in several patent-related litigations.  However, despite this reality, these companies felt the need to publicly take a joint position on the UPC.  Additionally, the signatories push strongly for the adoption of rules of procedure that will “allow operating companies to focus on innovation instead of litigation, thereby fostering economic growth and prosperity in Europe.”

When the letter was published, the UPC Preparatory Committee had been working on the 15th draft of the rules of procedure.  Given the comments in the letter, the 16th draft is eagerly awaited.  It will be interesting to see whether or not the 16th draft will include any mechanisms to prevent abuse of the new system by patent trolls, particularly considering that when the EU institutions pushed for passage of the UPCA after its long and arduous 40-year long debate, it most certainly never contemplated a system that might encourage abusive patent litigation.  

This post was written by Lisa Mueller and Micaela Modiano of Modiano & Partners.

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