AIPLA Annual Meeting 2014 Bifurcation before the UPC Dr. Jochen Pagenberg Attorney-at-law, Munich/Paris Past President EPLAW Prinzregentenplatz Munich T +49(0)

I. The German practice of bifurcation Q: Do German courts disregard invalidity defense in infringement proceedings and grant an injunction? (cf. New York Times…) Certainly not if -if this argument has been raised -in time - by filing a revocation action

Bardehle Pagenberg What is Timely: - revocation action must be filed with the Federal Patent Court (BPatG) in Munich ca. one month before the infringement hearing - with a copy of the revocation complaint submitted to the infringement court

2. This not always done A defendant, who is not convinced of his grounds against validity, may on purpose come late with his defense But if he hopes that he can thereby start a discussion in the infringement hearing, confuse the judges and delay the injunction, he is wrong The court will not even read the brief

3. Stay of infringement case? What will the court do, if the brief is filed in time? German View: Presumption of validity for a granted patent - Patentee has a right to an immediate injunction against an infringer - Alleged infringer has the burden of proof for the invalidity allegation

II. What are the legal rules for a stay? § 148 Code of Civil Procedure: A court may stay proceedings if the outcome of the case depends on the outcome of another pending (!) law suit. [Therefore the revocation action must already be pending]

BGH (German Supreme Court) in patent cases: Courts have a discretion to stay, if the chance of invalidation has been “plausibly proven” (glaubhaft gemacht).

Is Germany a dangerous country for alleged infringers because of the threat of rapid injunction? Is it an unbalanced situation which favors the patentee?

The focus is indeed on effective enforcement - is patent legislation not there to help defending the results of costly research? - and not to help an imitator who copies the patent?

However, an infringement court in Germany would never grant an injunction if invalidity has been plausibly argued in time. This is the reason why infringe- ment judges do not like bifurca- tion if there is a long time be- tween an infringement decision and the judgment in the nullity suit (“injunction gap”)

III. UPC The UPC is a bit more complicated. Does it protect the defendant? Certainly not. It does require good lawyers and experienced judges I try to lead you through the jungle

1. Art 33 (3) UPC-Competence of the divisions A counterclaim for revocation.. may be brought in the case of an action for infringement. The local or regional division concerned shall (?), after having heard the parties, have the discretion..

…either to (b) refer the counterclaim for revocation for decision to the central division and suspend* or proceed with the action for infringement; [ * discretion to suspend, which resembles the German discretion, but no further details on conditions]

2. Rule 37 – Application of Article 33(3) of the Agreement ….the panel shall decide by way of order how to proceed with respect to the application of Article 33(3) of the Agreement. The parties shall.. be heard. The panel shall set out in its order brief reasons for its decision. ( no details about conditions )

3. Rule 118 (3) (a) Decision on the merits The local division may render its decision on the merits of the infringement claim, including its orders, under the condition.. that the patent is not held to be wholly or partially invalid by the final decision in the revocation procedure ( Broad discretion for granting an injunc- tion? Contrary to R. 118 (3) (b) below)

4. Rule 118 (3) (b) Stay of infringe- ment proceeding If, while there are infringement proceedings before a local or regional division, a revocation action is pending between the same parties.., the local or regional division …

(b) may stay the infringement proceedings pending a decision in the revocation procedure and shall stay the infringement proceedings if it is of the view that there is a high likelihood that the relevant claims of the patent will be held to be invalid. [Narrow discretion or two levels of likelihood?]

Order of ruling by the court I. First discretion whether bifurcation will be used ( 33(3) (b)) II. Second discretion whether infringement case will be stayed (R 118(3)(b)) (interim evaluation?) III. Third mandatory stay (if high likelihood of invalidation) (R118 (3)(b)) (final decision?)

Not very clear how to deal with these rules - two levels of likelihood? - What if the high likelihood is denied in the second alternative, can the judges go back to „may“ and stay nevertheless ? (see below) - Which criteria should they apply? Plausibility of invalidation like in German law?

Some ideas which deal with the first discretion as to whether to choose bifurcation under the UPC:

If the revocation arguments are “thin” (same prior art and same arguments as in the granting procedure; late filed counter action), the division should not bifurcate and instead ask the President of the Court of First Instance to allocate a technically qualified judge, and then examine whether the revocation action can swiftly be dismissed before dealing with infringement;

If the Central Division is overburdened and hundreds of cases are waiting for a hearing date, the local division should not bifurcate either, but again ask for a technical judge from the pool and keep the entire case for decision

If the revocation action contains new prior art, the technical arguments are time consuming (e.g. expert opinion) and the Central Division has not too many cases pending, the infringement division may bifurcate

In a second step the local division may stay the infringement action, if it finds that there is a “high likelihood” that the relevant claims of the patent will be held invalid What are the criteria? How thorough shall the evaluation be? Should the division give reasons? Cf. R. 118 (7) (b) where reasons are obligatory.

R. 118 (3) (a) and (b) describe a situation comparable to the German practice, but the German court is obliged to give reasons for both alternatives (stay or no stay). UPC only requires reasons for decision on the merits:

R. 118 (7) (a)The Court shall give the decision on the merits as soon as possible after the closure of the oral hearing. The Court shall endeavour to issue the decision on the merits in writing within six weeks of the oral hearing. (b) The Court shall give reasons for its decision (??).

Under the German practice the judge would grant an injunction after a thorough examination of the revocation action filed* in time but not regarded persuasive. An injunction would then be granted where the judge is convinced that the revocation action is only a manoeuvre to delay and thus constitutes a misuse. (cf.German Supreme Court GRUR 1959, 320) Such a rule is missing in the UPC Rules * The same in R. 118 (3) „is pending..“

Many open Questions: - how do you define high likelihood? - what would be the lower level of conviction below high likelihood? - will there be divisions which always stay? - they must give reasons why they bifurcate, but not why they stay? - how will the divisions achieve a balance of fairness between patentees and defendants?

It will take a decade before there will develop consistent case law And you need good judges for this! Will you get them?

THANK YOU FOR YOUR ATTENTION