Irides: Weekly patent litigation update

The Irides Weekly Update is our round-up of patent litigation news highlights from around the world. Taking its name from the plural of “iris” - a nod to the ability of Irides to see what’s happening around the world.

Our latest edition - 15 November 2024 - is below:

AUSTRALIA

Federal Court clarifies position on routine steps.

On 23 October 2024, the Federal Court of Australia handed down its decision in Sandoz v Bayer regarding two patents for Bayer’s product rivaroxaban (Xarelto®), a factor Xa inhibitor.  Sandoz appealed the first instance decision from 2023, where the court found that the two Bayer patents in suit were not obvious and therefore valid.  Australian Patent No. 2004305226 (AU 226) protects a method for the production of a solid, orally applicable pharmaceutical composition to improve bioavailability and Australian Patent No. 2006208613 (AU 613) protects a once-daily dosing regimen.

The Federal Court allowed the appeal, rejecting the approach to determining inventive step taken at first instance, with the decision centring around the routine development work that would be carried out by the skilled person once rivaroxaban had been identified as a lead candidate upon review of a prior patent application, WO 919. Following such selection, routine and conventional pre-clinical and clinical studies would be carried out in the course of a well-established drug development pathway. There was no evidence that (i) any issues would have been expected to arise during these studies and, (ii) that the formulation of rivaroxaban in AU 226 or its dosage regime adopted in AU 613 would not have been identified during the course of the trials. The primary judge had placed too much emphasis on the risk of failure and unknowns where these risks are inherent to the routine development of a drug candidate; the skilled person need not have an expectation that the compound would pass through all stages of the development. In this case, it was clear from the expert evidence that there would be no hesitation taking rivaroxaban forward, notwithstanding the risks and uncertainties. The correct approach is to measure the relevant expectation against the ordinary level of expectation and risk inherent in routine work in the particular field, with the relevant test being a mere expectation that the steps may well work. Once the routine development was underway, both the dosing regimen and formulation asserted by the patents would have been discovered by the skilled person. Accordingly, the Federal Court found that both AU 613 and AU 226 lacked inventive step.

The Federal Court also provided clarity on the standard for “ascertained” under s. 7(3) of the Patents Act  The Raising the Bar amendments introduced in 2013 amended this standard, but it remains relevant to patent applications filed prior to its introduction and therefore in this case. The standard does not require proof that the skilled person would ascertain the prior art document relied on, but rather there needs to be a reasonable expectation that the skilled person would do so, on the balance of probabilities. In this case, the evidence supported the fact that the skilled person would have conducted searches of the patent database using search terms including factor Xa inhibitors, and these search results would have returned WO 919. 

Further, an expert witness identified WO 919 as “top priority” from search results conducted during the case.  It is not relevant that additional searches could have been performed or that additional documents could have been identified as relevant.  It was therefore established that, on the balance of probabilities, WO 919 could be reasonably expected to have been ascertained by the skilled person.

GERMANY

Court of Appeal provides opinion on FRAND defence assessment.

On 30 October 2024, the Munich Higher Regional Court (OLG) provided its preliminary legal opinion, in VoiceAge v HMD, on the updated approach for assessing the Defendant’s FRAND defence, applying the CJEU’s decision in Huawei v ZTE and German Supreme Court’s (BGH) decision in FRAND-Einwand II.  The decision covers some key aspects of the expected behaviour of the parties and the operation of the FRAND defence in Germany.

First, the Court looked at the requirement on the SEP holder to provide notice of infringement.  It queried the consequences of a failure to give proper notice, but considered that on the facts of the case this did not matter as the Claimant had filed an action for damages which should be sufficient notice of the alleged infringement.

Second, the Court considered that it is not necessary to analyse whether the implementer initially gave a sufficient/timely declaration of its willingness to take a licence, if (as on the facts of this case) the SEP holder subsequently makes a licence offer and the parties enter into negotiations.

Third, the Court explained that an SEP holder’s first offer is not decisive as to whether its conduct should be considered abusive.  If the first offer was already FRAND or within the FRAND range, the only acceptable reaction would be to accept it.  However, a non-FRAND first offer should not automatically lead to a FRAND objection, otherwise there would be no need for further negotiations.  Rather, the first offer only represents a starting point for the negotiations from which a FRAND-compliant offer can be developed.  Similarly, as regards the subsequent step of the implementer providing a counter-offer, the Court cast doubt on whether the implementer can simply skip this step and just provide security to rely on the FRAND defence.  The Court’s reasoning was that the SEP owner must have the opportunity to improve its initial offer by taking into account the implementer’s counter-offer.

Finally, regarding security, the Court considered that previous unwillingness on the part of the implementer (such as implementing delaying tactics) could be cured by providing security.  However, the security should be based on the SEP holder’s offer, which may be to a global portfolio licence, rather than at a level chosen by the implementer.  As such the Court considered the security provided by the Defendant so far in the proceedings, which was only provided for acts of use in Germany in respect of the specific patent in suit, would not be sufficient.

CHINA

Anti-monopoly guidelines on SEPs come into force.

China’s State Administration for Market Regulation (SAMR) has published its Anti-Monopoly Guidelines for Standard Essential Patents (SEPs).  The Guidelines came into force on 8 November 2024 and are intended to provide general guidance on competition behaviour in the field of SEPs rather than being mandatory.  The Guidelines contain provisions directed at both SEP holders and implementers as well as transferors of SEPs and patent pool administrators.

Chapter 2 sets out guidelines to encourage SEP holders to disclose SEP information “in a timely and full manner, make fair, reasonable and non-discriminatory [FRAND] licensing commitments, and conduct good-faith licensing negotiations with standard implementers”.  Article 7 gives examples of what the SAMR considers “monopolistic behaviour” to include: licensing at unfairly high prices, refusing to license without justification, bundling, attaching other unreasonable conditions to the transaction or practicing differential treatment of SEP implementers.  More detailed provisions on each of these topics are set out in the later sections of the Guidelines.  Additionally, Article 8 sets out some requirements for conducting good faith negotiations, including lists of the types of information an SEP holder is expected to provide as part of its licensing offers.

The Guidelines also set out provisions relating to whether an agreement is a “monopoly agreement” (Chapter 3); abuse of a dominant market position, including in relation to seeking relief based on SEPs (Chapter 4); and the determination of a “concentration of operators” involving SEPs (Chapter 5).

UPC

Paris Central Division hands down two decisions in parallel revocation actions.(UPC_CFI_309/2023 and UPC_CFI_315/2023).

On 5 November 2024, the Paris Central Division handed down two decisions, one in a revocation action concerning Juul Labs’ patent EP 3504991 (EP 991), and the other in a revocation action concerning Juul Lab’s patent EP 3498115 (EP 115).  Both revocation actions were brought by NJOY and both decisions involve overlapping aspects in relation to admissibility of late filed submissions and evidence.  The two patents are both entitled “Vaporisation Device Systems”.  EP 115 was found invalid for added matter, whereas EP 991 was found to be valid, being both novel and having inventive step over the cited prior art.

Admissibility of late filed documents

In respect of admissibility of submissions and evidence, in each case there were questions as to whether the numerous new documents which were filed as part of the Claimant’s reply to the Statement of Defence were admissible.  The Court explained that they were admissible only in so far as they were a reaction to the arguments in the Statement of Defence. Similarly, in respect of the Defendant’s Rejoinder to the Reply to the Defence to revocation, including an additional expert report, there was provision for such documents in r. 52 RoP which required it to be limited to a response to the matters in Reply.  The Court considered each of the topics covered in the relevant documents, noting that it is not always possible to draw a clear distinction between newly introduced arguments and arguments raised as a mere reaction to previously filed arguments and that “a generous standard is to be applied” to safeguard the fundamental right to be heard.  Accordingly both sets of documents were admitted.

However, the Court also emphasised the front-loaded procedure of the UPC and as such, arguments in the Claimant’s Reply to the Rejoinder and Reply to the Defendant’s Application to amend the Patent that were not limited “to matters raised in the Reply” (in accordance with r. 32.3 RoP) were held to be inadmissible on the basis that the Claimant had already had an opportunity to present its case.  Similarly, there was no good reason to admit later submissions filed by the Defendant which had no basis in the RoP.

EP 115 – added matter

EP 115 is a second generation divisional application, having both a parent application and a grandparent application.  The Court followed the decision of the Hague LD in UPC_CFI_131/2024 in stating that an amendment can only be made within the limits of what a skilled person would derive directly and unambiguously, using common general knowledge, and seen objectively and relative to the date of filing (or priority date, where appropriate) for the whole of the document as filed. Subject matter introduced is unallowable if the overall change in the content of the application results in the skilled person being presented with information not directly and unambiguously derivable from that previously presented, even taking into account matter implicit to the skilled person.  The Court concluded that Claim 1 was invalid as it extended beyond the scope of all of the earlier applications, and EP 115 as granted could therefore not be maintained in its entirety.

Auxiliary requests and Art.  65 (3)

The defendant had submitted a conditional application to amend the patent, containing a set of 57 auxiliary requests, and the Court considered whether EP 115 could be limited and revoked only in part pursuant to Art.  65(3) UPCA.  According to the dispositive principle (procedural maxim), a dispute before the Court is generally controlled by the parties (Art.  76(1) UPCA), and in this case the defendant had requested the court to consider its application(s) to amend the patent.  Pursuant to r. 30 (1) (c) RoP, proposed conditional amendments must be reasonable in number in the circumstances of the case.  The Court considered the conditional amendments proposed by auxiliary requests 1 to 12, as narrowed by the defendant, to be reasonable.  The claimant had argued that auxiliary requests 1-12 should also be dismissed as the requests were narrowed down two days too late following an Order from the Court.  However, the Court used its discretion under r. 9.2 RoP to admit auxiliary requests 1-12 given that the defendant had acted to streamline the hearing to the benefit of both parties and in any case, the two day delay was over a weekend and did not cause substantial harm to the claimant.  However, auxiliary requests 1-10 were found to also claim subject matter that extended beyond the scope of the application as filed, and auxiliary requests 11 and 12 were unclear and therefore unallowable.  

Notwithstanding these findings on the auxiliary requests, the Court was then required to consider the patent as granted and, pursuant to Art.  65 (3) UPCA, evaluate whether the grounds for revocation affected the patent only in part.  The Court found that the grounds for revocation affected EP 115 as granted in its entirety, with all of Claims 2-7 in combination with Claim 1 extending beyond the scope of the earlier applications as filed.  Finally, the defendant had submitted a further request in the alternative, to maintain the patent in accordance with Claims 2 to 7 in combination with Claim 1 of the auxiliary requests 1-12.  First, the Court noted it was not obliged to consider this request, as Art.  65 (3) pertains only to the granted patent, and therefore each combination covered by this additional request must be viewed as a further auxiliary request.  Second, the Court considered this request unclear and unallowable, as the specific combinations of claims were undefined and therefore ambiguous, with the number of proposed amendments being unreasonable in number.

EP 991 – novelty and inventive step

NJOY argued that EP 991 should be revoked based on (i) lack of novelty, in light of a Chinese patent application (Chen) and a US patent application (Thompson), and (ii) lack of inventive step over different cited prior art – a US patent application (Cohen) in combination with the common general knowledge and/or Cohen combined with another US patent application (Cross).  The Court conducted a detailed analysis of interpretation of the claims from the skilled persons’ perspective, following the legal framework set out by the Court of Appeal of the UPC in Nanostring/10x Genomics.

 In relation to novelty, the Court found the invention claimed in EP 991 to be new, with certain features not disclosed in the cited prior art.  In its assessment of inventive step, the Court emphasised that an objective approach must be established and applied, notably considering that limiting the evaluation of inventive step to certain elements of the prior art, for example a document perceived to be “the closest prior art” generally bears the risk of introducing subjective elements into the evaluation.  The Court did note, however, that in some cases it may be justified to focus the debate for reasons of procedural efficiency.  The Court first determined the problem solved by the invention by reference to the patent, which was to optimise the parameters of the inhalable aerosol that is inhaled by the user, by virtue of the heater chamber being at the first end of the cartridge and therefore further from the mouthpiece, allowing distance for condensation to occur.  The Court analysed Cohen as a starting point, noting that the claimed invention differs from Cohen in that the heater is affixed to a first end of the cartridge.  There was no suggestion in the cited prior art to affix a heater to a first end of the cartridge and a mouthpiece to the second end of the cartridge and this could not be established from the common general knowledge.  Thus, the invention did not follow from the prior art in such a way that the skilled person would have found it in an attempt to solve the underlying problem.

The Court considered it would have been feasible to further evaluate inventive step having regard to Chen or Thompson.  However, as the scope of evaluation of a revocation action is defined by the claimant, who did not cite Chen or Thompson as a starting point for inventive step, this issue was left undecided.  The Court’s preferred approach would therefore seem not to be the predictable problem-solution approach starting from the “closest prior art”, but rather a more objective approach of determining the problem solved by the invention by reference to the patent, and then considering the prior art as a whole.

UPC

Court of Appeal Rules on transitional regime and withdrawal of opt-outs under Art. 83 UPCA (UPC_CoA_489/2023 and UPC_CoA_500/2023).

On 12 November 2024, the Court of Appeal handed down a decision in the AIM v Supponor case relating to the extent to which a patent proprietor can withdraw an opt-out following national litigation concerning a ‘classical’ European patent (EP).

Art. 83 UPCA provides for a transitional regime lasting at least 7 years.  During this period, the “exclusive” jurisdiction of the UPC to hear disputes concerning EPs is shared with the national courts. Art. 83 UPCA was introduced in part in response to concerns of EP holders that their potentially valuable and pre-existing patent rights were to be transferred to a litigation system that they had not signed up to, nor with which they had any previous experience.  The transitional regime provides that actions concerning EPs (specifically actions for infringement or revocation) may continue to be brought before the national courts, notwithstanding that the UPC has exclusive competence to determine such actions under Art. 32 UPCA. The transitional regime also contains a provision whereby patentees can opt their patents out of the jurisdiction of the UPC (Art. 83(3)), although only if an action concerning that EP has not already been brought before the UPC. Further, the patentee can also then choose to withdraw said opt-out in the future unless an action has already been brought before a national court (Art. 83(4)).

In this case, AIM had registered an opt-out of the patent in suit on 12 May 2023 during the sunrise period for opting out EPs prior to commencement of the UPC on 1 June 2023. The patentee applied to withdraw this opt-out on 5 July 2023, and on the same day filed an infringement action against Supponor. Supponor contested the effectiveness of the withdrawal of the opt-out, based on proceedings before the German national courts that had been commenced in 2020 and which were still pending before the Bundespatentgericht and Munich Higher Regional Court on the date of withdrawal of the opt-out.  At first instance, the Helsinki Local Division of the UPC ruled that the withdrawal of the opt-out was ineffective in light of these earlier national German proceedings and therefore that the UPC did not have competence to hear the action. It was this decision that AIM appealed.

The Court of Appeal ruled in favour of AIM. The Court interpreted the provisions of Art. 83 UPC according to the rules of interpretation laid down in the Vienna Convention (the UPC Agreement being an international agreement entered into outside the EU legal framework).  This required the relevant provisions to be read in the context of Art. 83 UPCA as a whole. In the Court’s view, withdrawals of opt-outs under Art. 83(4) are only blocked where the earlier national action was filed on or after 1 June 2023, i.e. from the date on which litigation could have been started in either the national courts or the UPC during the transitional regime.  Historic actions started before the commencement of the transitional regime, even if still pending, were not considered to be “actions” for the purposes of Art. 83(4).

In coming to this conclusion, the Court of Appeal also held that the reference to “actions” in Art. 83 UPCA applied to all actions listed in Art. 32 UPCA, not just infringement and revocation actions concerning EPs (and SPCs based on those EPs), notwithstanding the clear limited wording of Art. 83(1).  As a result the shared jurisdiction during the transitional regime applies more broadly than expressly provided for in Art. 83(1).  This makes sense in relation to e.g. actions for declarations of non-infringement or provisional measures and injunctions relating to EPs. However, the actions in Art. 32 UPCA are broader in scope and include actions in relation to granted unitary patents including some actions that can only be brought in relation to unitary patents. Although it does not seem that it was the intention of the signatories to the UPCA that actions concerning unitary patents would be shared between the UPC and the national courts during the transitional regime, that is one reading of the Court of Appeal’s decision in tying the definition of “action” in Art. 83 UPCA to that in Art. 32.

One additional point of interest is that the judgment of the Court of Appeal, and presumably the submissions of the parties (although these are not public), proceeds on the assumption that the shared parallel jurisdiction under Art. 83 UPCA operates so as to allow actions concerning EPs to be brought before either the UPC or the national courts unless an opt-out has been filed, but following the registration of an opt-out an action can only be brought before the national courts (unless the opt-out is subsequently successfully withdrawn).  This coincides with what appears to be the majority view on interpretation of Art. 83. However, the language of Art. 83 UPCA as well as much commentary at the time actually suggests that the UPC would have exclusive jurisdiction during the transitional period for EPs unless an opt-out was filed (this being the language of Art. 83(1)), with the registration of an opt-out having the effect of extending the jurisdiction to national courts without excluding that of the UPC. The Court of Appeal has now implicitly adopted the former interpretation of the provisions, even if the latter position may not have been argued by the parties.