England v Germany in patent race – who will be first?

Two recent cases illustrate the extent to which the English courts will flex to enable patent trials to take place and judgments to be delivered, before decisions are issued in parallel proceedings in Germany.

Why the need for a race? 

The first case: trial expedited

The first case relates to patents for tobacco-heated products.   It is between two giants in the tobacco world, Philip Morris and British American Tobacco (BAT).

As part of a global patent battle, more or less simultaneously in April 2020, BAT commenced patent infringement proceedings in Germany against Philip Morris, and Philip Morris commenced an invalidity action in the English Court in respect of the UK designation of the same patent.   Philip Morris subsequently made an application to the English Court for the case to be expedited.   The judgment on that application is available here.

As recorded in the judgment:-

"A party who has sued for infringement in Germany often seeks to schedule the UK validity action or, rather, to be accurate the UK action which will involve both validity and infringement, in such a way that the outcome relating to validity is likely to be available and public before the German infringement court decides the matter."

The reason for this is that Germany operates a bifurcated system: questions of patent infringement are decided by a different court, and on a different timetable, to questions of patent validity, the latter typically following a year or more later.   This can mean that in Germany, following a finding of infringement, a party can be injuncted for a year or more until the validity of the patent is tested - not a happy situation for a party that has a weak non-infringement defence, but a strong invalidity claim. 

There are several "safeguards" in place according to the German civil procedure provisions as applied by the infringement courts:

1. First of all, the defendant may, and usually does, file a copy of the parallel revocation action or opposition and request a stay of the infringement litigation pending the validity decision.  If the invalidity case is very strong, in particular if the defendant is able to convince the infringement court that there is previously unexamined and novelty-destroying prior art, then a stay will usually be granted.  However, if the validity attack is weaker than that, a stay is unlikely and additional options such as starting an English invalidity claim become more attractive.
2. Following the infringement decision including an injunction, there are several more opportunities to avoid the consequences of injunctive relief.  In many cases, the claimant decides not to request the enforcement of the injunction because if the judgment is later overturned, the defendant has a damages claim against the claimant based on the unlawful enforcement.  The potential damages can, and usually are, referred to in the infringement proceedings, because they are the basis of the bond (specified in the judgment) which the claimant has to provide together with the enforcement request.  The higher the potential damages due to unlawful enforcement, the higher the bond.  Obviously, this can have a deterring effect and the claimant may decide not to place the bond and therefore not enforce the injunction.
3. A third important situation where an injunction may be avoided is the publication of the "preliminary opinion" by the Federal Patents Court or the European Patent Office in the validity case.  This preliminary opinion, if not completely in the patentee's favour, may be used by the defendant to request a stay of any possible enforcement, which is almost always granted. 

However, there are cases in which the defendant anticipates that none of these "safeguards" are likely to work, eg when the invalidity attack is based on an obviousness attack only and the issuing of a preliminary opinion is not likely because the validity court is too busy.  Consequently, in such cases, the English courts are engaged to obtain an invalidity decision before the German infringement issue is decided.  This is because, although not binding on the German courts, a decision of the English court that the UK limb of a European patent is invalid is often sufficient to dissuade the German infringement court from issuing an injunction after a finding of infringement.

As has been held in previous cases this is a factor that the English court takes into consideration when deciding whether a case should be expedited, but never a decisive factor on its own account.

In the Philip Morris v BAT case, Philip Morris adduced evidence that there were other commercial factors at play, and in particular that it was faced with making important investment decisions in the growing market for tobacco-heated products, and an early decision on the validity of BAT's patent, even if only in one country, was an important factor in the decision-making process.   Even though expedition would make a difference of only a few months, the judge (Birss J) accepted that this was an important factor.   Further, as expedition would not cause adverse prejudice to either party, or to other court users, this tipped the balance in favour of expedition.  

A judgment of the English court on Philip Morris' invalidity claim (as well as BAT's counterclaim for infringement) therefore can be expected before the judgment of the German court on infringement. This would substantially mitigate the risk that Philip Morris faces of being injuncted in the period between the German infringement and validity decisions - assuming, of course, that they prevail in their invalidity claim before the English Court.

The second case: Shorter Trials Scheme

A similar dynamic was at play in a patent dispute between Facebook and Voxer.  Voxer having commenced patent infringement proceedings in Germany, Facebook commenced an action in the English Court seeking to revoke the English limb of Voxer's European patent.  Facebook then made an application to fix a trial date in the Shorter Trials Scheme.  Birss J was again the Judge - his judgment is available here.   As Birss J records, Facebook:-

"makes no secret of the fact that one of its motivations is in order to have a decision on the validity of the UK patent prior to the consideration of the infringement claim brought by Voxer in Germany."

Usually trial dates are fixed at a Case Management Conference (CMC).  In this case Facebook made an early application for a trial date.  This is in contrast to Philip Morris' application for expedition, but the net effect is the same and would lead to a decision of the English court on validity (and infringement) just ahead of the German decision on infringement, and a long way ahead of the German decision on validity.   Again, Birss J made an order that would achieve this.

Comment

Due to the potential leverage given to the patentee that the threat of an injunction in Germany in the year or more between the German infringement judgment and the German validity judgment, the German bifurcation system is viewed by some as unfair and pro-patentee.   As these decisions show, the English courts will, in the right circumstances, take steps to help an accused infringer mitigate that unfairness. 

In the meantime discussions are underway in Germany to reform the patent litigation system to remove or mitigate the so-called "injunction gap".  If these reforms are passed, in exceptional circumstances a defendant could ask for the injunction to kick in only after a grace period following the judgment (which has already been discussed in cases decided on the basis of the existing patent law), and – perhaps more importantly – the Federal Patents Court may have to issue the preliminary opinion before the infringement trial, making it easier for the infringement court to decide about a stay.