1. INTERNATIONAL PATENTING AND ENFORCEMENT David Healey Fish & Richardson Houston, TX a/k/a “Patentmath.com” State Bar of Texas Advanced Patent Litigation Course July 14-15, 2011 -- For Discussion Purposes Only!

2. PATENTMATH.COM - Blogging on the business of patent assets… - Sign up for RSS, Twitter follower, facebook page, or send a linkedin request to me.

3. But first a word from my GC These slides and this speech are not legal advice No attorney client relationship is formed by this talk These ideas and thoughts are for discussion purposes only and to promote academic dialogue These ideas, thoughts, and positions do not represent the views of Fish & Richardson, its attorneys, clients, or even of the author… State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 3

4. How to think about IP– Think Ahead Value is driven by size of market + cost of enforcement + predictability of result. Value can change over time: Must think ahead 5 plus years Utility patents, design patents, trademarks & copyrights, last a long time – think long range. 20 years for patents from first application. Copyrights 50 years or more & trademarks perpetual… Where will your markets be in 5, 10, 15 years? Where will your competitors come from in the future? State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 4

5. Think Like A Business Person State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 5 Attorney and Expert fees Internal litigation expense Drain on internal business functions Total out- of-pocket cost Infringing salesLost sales/ market Price Erosion VERSUS What is probability of positive result? How long and how much before return on investment? What is risk of loss? Money? Invalid patent? Publicity? What is risk of Countersuit? “Blow-back”?

6. U.S. Litigation Landscape Trial court litigation 1 year to 3 years (or more) No pre-trial injunction (as a practical matter) Most final injunctions stayed on appeal No injunctions where cannot meet market demand for product – e.g., NPE, Research Cos., Start-ups. Trials decided by Juries chosen at random with no floor competency (other than ability to understand English). Appeal is 18 months-2 years post-trial. 45% reversal rate at Federal Circuit Court of Appeals. Reversal can result in second trial. Risk of loss of IP: 75% of mechanical patents obvious. EXPENSIVE AND INTRUSIVE DISCOVERY: Depositions, document production, source code production State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 6

7. Why Look Abroad? Germany as an example: Injunction – is still main relief – for NPE or others Faster – 1 year in first instance (trial court) Cheaper – 250,000 to 1,000,000 dollars No discovery – No distraction of employees/inventors More predictable results – Judges not Juries; court- appointed independent expert not “hired guns”. Large Market/Distribution Center – Many international sellers of products do business in Germany, U.K., etc. Similar forums exist in other countries: e.g., U.K. (all have their “twists”) State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 7

8. EU TODAY Obtain EPO patent, then must convert to National Patents: Total cost for complete coverage is over 32,000 Euro, most of which is translation and validation at national stage. Costs can be controlled by focusing on key population and distribution centers: U.K., Germany, Italy, France, Ireland (for pharma/bio- tech), Spain (for telecom) Each country enforces its own patents. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 8

9. EU – London Agreement – 1 Patent April 13, 2011 – EU press release touted continued work on a “single EU patent” that would reduce cost from 32,000 Euro for EU wide coverage to 700 Euro. EU court decision in March 2011 struck down plans for unified patent court system but gave road map for revisions to implement this system. April 13, 2011 – EU states it is continuing to work on a common patent enforcement system using March court decision as a road map. Common enforcement mechanism would mean 1 case in 1 court for entire EU: Dramatically reducing costs and logistics for enforcement. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 9

10. Time Matters State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 10

11. “London Agreement” – subset of EU countries Entered into force on May 1, 2008 = Cost reduction through a cost-attractive post-grant translation regime: States with national language = one of EPO’s official languages (France, Germany, LI, LU, MC, CH, UK): No translation necessary! States with national language # EPO’s official languages: Translation of claims, Spec in English: Netherlands, Sweden, DK; EU patent is growing out of expansion of membership in London agreement. Hold outs on EU wide patent are Italy and Spain due to language issues. Recent Steps Towards Unified European Patent System State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 11

12. London Agreement (EU) Patent – 300-500 MM Consumers Italy and Spain are now hold-outs State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 12

13. EU: Germany is Likely Model for Future Enforcement System Germany is large EU distribution center and consumer market. Until 2009, Germany, not China, was biggest exporter to US in dollar volume. Pro-enforcement (pro-patent) bi-furcated system; “caps” on loser pays. UK Intellectual Property County Courts at Law is modeled after German system (no bifurcation is main difference). Switzerland is now implementing a new patent enforcement system on German Model. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 13

14. EU Today: Germany 1 yr German enforcement expense in typical patent case (including separate infringement and invalidity cases and appeals): Legal fees $300,000-$500,000 Court Costs (filing fees) up to about $200,000-$400,000 No discovery No common law defenses – e.g. inequitable conduct Loser pays is limited (capped) risk for court costs and statutory schedule of attorney fees: Approx. your own spend up to cap State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 14

15. EU Today – Germany 1 yr German system: Infringement case almost always decided first; Infringement has no common law defenses (e.g., equitable estoppel, inequitable conduct); Infringement – only defenses are license and non- infringement; Judge not jury – court not private experts; Decision 1 year (did I mention no discovery?); Validity case allows patent owner to amend claims, but takes longer due to both, “lag time” in filing after infringement case and slower forum: Favors patent owner in negotiation as injunction will come first in time. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 15

16. EU Today – UK County IP Court UK County IP Court in London Went “On Line” Oct 2010. Very streamlined process. Goal is case disposition under 6 months at low cost. Max on loser pays is under $100,000. No depositions, no or limited document exchange, 1-2 days trial, no or limited testimony (also Judge no jury). Best uses: Design patents and trademarks, Avoid transfer motion to UK High Court. Avoid typical narrow or invalidating UK rulings on EPO patents. Judge is experienced “Q.C.” IP Lawyer. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 16

17. …. And “EU Seizure Proceedings”? Fast Inexpensive Simple Typical EU Entry points: Port of Rotterdam Airport of Frankfort Port of Hamburg State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 17

18. EU - Seizures All EU countries allow seizure pre-suit of goods alleged to infringe: No court order needed, request to customs only; Must file suit in 14-28 days after seizure but only if goods claimed; USE OF EU SEIZURES HAVE DOUBLED IN LAST YEAR! Many “copy cat” goods not claimed; France and Italy permit for confiscation by police of sample products from stores or factories for evidence: Rambus seized masks from Micron Avenzzano Italy semiconductor plant as “evidence”; Usually creates “buzz” for enforcement. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 18

19. Avoid Problems with US Proceedings Shorter times – Much more predictable No discovery (interrogatories, depositions, requests for admission, production of documents, electronic discovery) Continental countries: No equitable defenses Future EU patent enforcement system likely based on German model Injunction regardless of “equities” State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 19

20. Comparison US v EU USEU No pre-judgment relief (generally)Pre-suit seizure without court order Jury trial Discovery No jury No or little discovery (varies) 45% or more reversal rate from trial (often requires 2 nd trial) Low reversal rate Judge only/Court appointed experts Injunction only where equitable Suspended pending appeal Injunction as matter of course Injunction enforceable pending appeal 3-6 years/3-10 million dollars1-2 years/1,000,000 or less per side/Loser pays (can be capped) State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 20

21. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 21 Foreign Patent Filings - PCT

22. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 22 Foreign Patent Filings - PCT

23. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 23 Foreign Patent Filings - PCT

24. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 24 Source of Change in Total Patent Applications by Office (%), 2008-09

25. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 25 Trend in Patent Applications

26. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 26 Share of Top 5 Offices in Total Applications

27. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 27 Patents In Force By Destination and Source, 2008

28. Cost-Effectiveness of Enforcement State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 28 TaylorWessing Global Intellectual Property Index 2011, Available at www.taylorwessing.com/ipindex

29. Foreign Patent Filings – U.S. Patentees State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 29 Inovia U.S. 2011 Global Patent & IP Trends Indicator

30. Foreign Patent Filings – U.S. Patentees State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 30 Inovia U.S. 2011 Global Patent & IP Trends Indicator

31. Patent Indices State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 31 TaylorWessing Global Intellectual Property Index 2011, Available at www.taylorwessing.com/ipindex

32. Other Countries – China System is unpredictable. Some judges have looked at equitable defenses. Highly formalistic in submission of proof. No independent judiciary. BUT CHINA IS AN ESSENTIAL MARKET for patenting Chinese companies are applying for patents in China, US and EU at rates many times their past rate of applications Chinese companies now in top ranks of patent applications worldwide. 5-10 years how will Chinese use their patents? Exclude competition? Will you need Chinese patents to trade for space in China market? State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 32

33. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 33 Other Countries – China

34. State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 34 http://www.China-Pat.com

35. Other Countries – China State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 35 http://www.China-Pat.com

36. Other Countries – China State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 36 http://www.China-Pat.com

37. Other Countries – China State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 37 http://www.China-Pat.com

38. Other Countries – China State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 38 Source: EPO

39. Other Countries -- Japan Narrow claim scope in patents. Long and expensive enforcement system. But Japanese companies negotiate for Japanese licenses based on number not quality of patents. If you want to do business in Japan, you need Japanese patents… Otherwise, slow, expensive, processes make this an unattractive way to spend your money… State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 39

40. India – “Danger Will Robinson” State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 40

41. India – “Danger Will Robinson” State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 41

42. India – “Danger Will Robinson” Huge population. But patents last a long time – value unknown 5-10 years from now… Very corrupt patent application/PTO. Very corrupt government. Presents problems under FCPA and UK Anti-bribery Act. Unpredictable system due to corruption & need to police your patent firm to avoid criminal problems with U.S. or U.K. authorities… State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 42

43. Other Countries – the Up and coming For oil exploration, software, electronics, pharma: Brazil (oil and telecom) Australia (much like UK High Court) (oil) Mexico – Administrative enforcement, trade zone by border exempt, corruption and violence unattractive, depends on long-term play (why?) Russia – BIG QUESTION MARK?????? Israel – Small market but lots of R&D Ireland – Small market now, but pharma and medical devices manufactured there for both EU and US markets, fast and cheap time to trial (as little as 6 weeks)(resembles U.K. High Court system). State Bar. TX Adv Pat Lit July 2011 - For Discussion Only 43

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