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The UK Courts have, in the recent decision of HTC Europe Co Ltd v Apple Inc, opened the possibility of super-expedited patent proceedings as a vehicle to attempt to assist an application to stay parallel German infringement proceedings pending the outcome of German invalidity proceedings.
In the absence of a unified European patent system, parties in multi-jurisdictional disputes often try strengthening their strategic position by forum shopping and hence exploiting the differences both in procedural and material law that still exist between jurisdictions. One common strategy employed by patentees is to take advantage of the bifurcated German system, where infringement and validity proceedings are heard by different Courts.
Provided that there is a Germany wide infringing act, a patentee has a choice of twelve regional Courts in which to bring an infringement action. Some of those Courts, in particular Düsseldorf and Mannheim, are likely to hand down a first instance decision within a year and sometimes as quickly as five to six months. In contrast, the Defendant in a patent infringement action only has one forum in which to bring parallel nullity (invalidity) proceedings: the Federal Patents Court in Munich.
Due to the fact that all nullity actions are heard in this Court, the caseload is significant and a first instance nullity decision can take around two years.
The German Courts apply a very high hurdle when considering whether to stay an infringement action pending the outcome of a parallel nullity case. Because a patent is an examined right, a stay will generally only be granted if there is a very high likelihood that the patent in suit will be invalidated. In practice, that requirement means a strong nullity attack based on a new, not previously examined piece of anticipatory prior art. Consequently, there is a very high risk of an infringement finding up to a year (or longer) before a decision on the validity of the patent in suit.
A first instance infringement decision is not final while the nullity case and/or an appeal in the infringement case is pending. An injunction can therefore only be enforced by depositing a security bond. This is nonetheless a formidable weapon, in particular in high value disputes in quick moving consumer markets. The damage caused can be irrecoverable even if the injunction is lifted later on.
In contrast, patent proceedings in the UK consider infringement and validity in the same action. Since the introduction of the so-called streamlined procedure, bringing a UK nullity action has often been used to balance an infringement action in Germany. However, there is inevitably a time delay involved in responding to German infringement proceedings by commencing a UK invalidity action, and the German Courts, in particular Mannheim, have been speeding up their first instance infringement proceedings. Hence such a strategy is likely to still leave a Defendant at a significant time lag disadvantage.
In HTC Europe Co Ltd v Apple Inc, HTC was faced with exactly this kind of scenario. Apple had brought patent infringement proceedings against HTC in two German courts: Munich (the “Munich Action”) and Manheim (the “Manheim Action”). HTC countered the German infringement cases with both German nullity proceedings and a parallel UK revocation action (the “UK Action”) in respect of the UK equivalents to the German patents in suit. However, HTC clearly faced the risk that both of these actions would be decided after the Munich Action and, in particular, the Mannheim Action.
Fearing the risk of an injunction in Germany, HTC proceeded to apply for the UK Action to be expedited. HTC hoped to obtain an early UK judgment on validity which it could then present in the Mannheim and Munich Actions to sway the Courts to stay the infringement proceedings.
HTC applied for a higher degree of expedition in respect of the patent in suit in the Mannheim Action. According to HTC, that action could be scheduled as early as January or February 2012 with a judgment some four to six weeks later. In contrast the Munich Action was likely to take place later in 2012.
Whilst the Mr Justice Arnold granted some degree of expedition to the UK Action, he did not go as far as granting a super-expedited trial. He confirmed that a relevant factor could be the fact that an English decision on validity might be of assistance to a party in parallel German infringement proceedings. Such consideration was not, however, the only factor to be considered and had not been treated in previous cases as a particularly strong or important factor.
Mr Justice Arnold concluded that good administration of justice required the UK Action to consider all patents in suit at the same time, including the equivalent to the patent in suit in the Mannheim Action. There was an unavoidable minimum technical and legal complexity which the parties needed to address. Granting super-expedited proceedings in respect of the patent in suit in the Mannheim Action, such that the trial would take place as soon as January 2012, would put undue pressure and prejudice on Apple. Other factors which the Judge considered included the fact that no timetable had yet been set in the Manheim Action, and that the judgment in that action was not expected until some four to six weeks after the trial. Further, the Judge took into account that HTC would possibly be able to make an application to delay or suspend any injunction resulting from the Mannheim Action once the High Court’s Judgment becomes available.
In summary, whilst applications for super-expedited proceedings will be considered by the UK Courts, the greater the degree of expedition sought, the stronger the applicant’s case will have to be. Given that the applicant will have to overcome persuasive arguments of good administration of justice and prejudice, it is likely that only simple technical cases concerning a single patent in suit will be successful.
It is, however, important to remember that even if a case has a good chance of being super-expedited in the UK, it will only be worthwhile if the application to stay the German infringement proceedings is successful. Given that, for the time being, patents remain national rights, a parallel UK decision will only ever have persuasive character in German Courts; however that persuasive character may be sufficient to tip the balance in favour of a stay of the German infringement proceedings.
Nonetheless, the route of super-expedited patent proceedings is well worth exploring, as is the alternative of pre-emptive revocation proceedings, as the potential commercial benefit to the alleged infringer of such successful proceedings could be significant.
Please feel free to get in touch with David Knight, Ulrike Till or Beatriz San Martin on any of the above issues.