Experience in Patent Litigation in the New Member States

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Experience in Patent Litigation in the New
Member States

• Dr. Lukas Pfister
• Merck Sharp Dohme
• Budapest, September 10th, 2005

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.. if we succeed in developing the potential of
our citizens by fostering a creative spirit of
adventure, individuals and nations will become
rich, even if they are without much capital,
labor or natural resources. Kim Dae-jung Former
President of the Republic of Korea
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Outline

• The core of IP protection is enforcement
• Europes competitors
• Harmonization and Fragmentation in Europe
• Enforcement Experience in Central and Eastern
  Europe
• Actors in Cooperation
• Promotion, accessibility and commericialization
  of IP protection

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Without enforcement - no intellectual property

• Directive 2004/48/EC
• ... without effective means of enforcing
  intellectual property rights, innovation and
  creativity are discouraged and investment
  diminished.
• Without property no value created, no
  investment, no venture capital, no trade
• Enforcement authorities play a key role

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Economic DevelopmentThe Human Factor Counts Most

• Human Capital is the single most important factor
  for economic growth

Physical Capital 16
Natural Resources 20
Human Capital
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Source World Bank study quoted by Hanzek, M.
(ed.) Human Development Report Slovenia 1999,
Institute of Macroeconomic Analysis and
Development/UNDP
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Economic contribution if IP enforced

• scientific research scattered across territories,
  institutions
• economic value
• numerous ways to commercialize inventions
• fund raising from venture capitalist to expand
  research
• royalties from licensees
• milestone payments from partners in joint
  research
• trade of inventions
• investment in neglected inventions
• creates jobs, creates business for suppliers,
  generates income to individuals and tresury

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International Patent Applications by Origin
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Global Research Development

• 80 confined to US, Japan and Europe
• EU is currently losing RD investment to other
  countries
• changing in favor to China, India Brazil
• EU 7th Framework Program for Research
  Technological Development to attract RD
  investment

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Competing with the U.S.

• EU Strengths
• great diversity of societies and cultures
• well-educated workforce
• lower employment costs for researchers
• leading-edge technology capabilities
• world class universities and research institutes

• US Strengths
• better in commercializing its basic research
• early adoption of new technologies
• more fluid supply of venture capital
• long tradition and culture of collaboration
  between universities and business

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Competing with Japan

• 2002 IP Policy Outline
• Nation built on Intellectual Property
• Growing concern over decline in industrial
  competitiveness
• Creation Strategy
• Protection Strategy
• Exploitation Strategy
• Enhancement of Human Foundation to support
  strategies

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Competing with Innovative Singapore

• Strategy to attract foreign RD activities
• Agency of Science, Technology Research
• to put in place policies, resources and research
  and education architecture to build indigenous
  biomedical science RD competencies
• More than 500 million invested in new research
  centers with another 1 billion in funding
  committed through 2006
• Economic Development Board
• promotes investment in early stage dedicated to
  biotechnology firms

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Singapore Growth of Pharmaceutical Products
Manufacturing
Year Output mm No. workers Value Added mm Fixed Asset mm Val.Add/ Labor 000 Val.Add/ Output Capital/ Labor 000
1990 1,020.8 1,664 809.1 Na 486.2 79.3 Na
1995 1,339.0 1,855 1,083.5 583.7 584.1 80.9 314.66
2000 4,839.1 1,928 2,998.4 858.6 1,555.2 62.0 445.31
2001 5,134.2 2,375 2,796.8 2,085.3 1,177.6 54.5 878.01
Average Per Annum Growth Rate () Average Per Annum Growth Rate () Average Per Annum Growth Rate () Average Per Annum Growth Rate () Average Per Annum Growth Rate () Average Per Annum Growth Rate () Average Per Annum Growth Rate () Average Per Annum Growth Rate ()
1990-2001 15.8 3.3 11.9 23.61 8.4 18.71
Percentage of Total Manufacturing Percentage of Total Manufacturing Percentage of Total Manufacturing Percentage of Total Manufacturing Percentage of Total Manufacturing Percentage of Total Manufacturing Percentage of Total Manufacturing Percentage of Total Manufacturing
1990 1.4 0.5 3.7 Na
2001 3.7 0.7 8.8 4.3
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Patent Fragmentation in the Community

• National patents
• EPO patents, but no Community Patent
• elements of harmonization
• Supplementary Protection Certificates
• Pediatric Indications
• National court systems
• Mostly national procedural rules

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IP Harmonization in the Community

• Harmonization of enforcement
• TRIPS member states and Community bound
• Art. 41 effective enforcement
• Art. 34 reversal of the burden of proof
• Art. 50 preliminary injunctions
• Directive 2004/48/EC On the Enforcement of IPR
• Council Regulations 1383/2003 and 1891/2004 on
  customs measures against goods suspected of
  infringing certain intellectual property rights
• counterfeits

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Legislative experience Lowest Common Denominator

• Association Agreements
• IP protection level similar to the one in the EU
  by 1997-99
• Reality
• Selective interpretation of similar level of IP
  protection
• Bolar provision in most CEE patent laws
• Late introduction of SPC
• Regulatory data protection six years and linked
  to patent
• TRIPS 39.3 not recognized as mandating regulatory
  data protection

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Enforcement experience in CEE institutional
weakness

• Lack of courts or court units specialized in IP
• underdeveloped IP capacity in the courts
• little technical expertise allocated to the
  courts / scarcity of expert witness
• Independence of courts?
• refusal to accept foreign experts where most
  nationals can be linked to one party
• low salaries
• low respect for judiciary
• young tradition of spirit of court independence
  from administration

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Enforcement experience in CEE institutional
weakness

• Impartiality of courts?
• Nullity counterclaim against later process patent
  of defendant not dealt with by court
• Lack of effective deterrents against
  infringement
• Insufficient publications of judgments and their
  motivation
• Medicines administered prices of patented
  products undermine market value of patents

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Enforcement experience in CEE weak enforcement
practice

• Reversal of the Burden of Proof
• denial on the grounds of competition of
  patents theory
• Preliminary Injunctions difficult to obtain
• difficult to obtain particularly for preventing
  infringement
• official information difficult to obtain before
  launch of infringing goods
• taking defendants interest into account beyond
  TRIPS 50
• showing of irreparable harm even where not ex
  parte
• prohibitive amounts of bonds particularly for
  SMEs
• how to enforce preliminary injunctions? Court
  bailiffs?

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Enforcement experience in CEE weak enforcement
practice

• Statute of limitations reducing enforcement
  possibilities
• 3 years from first infringement of which aware
• 3 months for filing for an injunction
• Appeals
• inadequate deadline of as little as 8 days from
  judgment
• Extraordinarily slow proceedings
• unlimited possibilities to make submissions
• no resolution until patent expiration 

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Why Reluctance to IP Protection in CEE?

• Tradition of weak protection of property in CEE
• good business with lack of IP
• Resistance to change
• survival of pre-existing alliances
• distortion caused by conflict of interest not
  eliminated
• IP not perceived as opportunity
• lack of positive experience with IP
• Tradition of low economic freedom
• low tradition of rewarding based on merits
• low tradition of valuing human capital

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Directive 2004/48 on the enforcement of
intellectual property rights

• Contents
• Scope (Art 2)
• General obligation (Art 3)
• Entitlement (Art 4)
• Presumption of authorship ownership (Art 5)
• Evidence (Art 6)
• Measures for preserving evidence (Art 7)
• Right of information (Art 8)
• Provisional and interlocutary measures (Art 9)
• Corrective measures (Art 10)
• Injunctions (Art 11)
• Alternative measures (Art 12)
• Damages (Art 13
• Legal Costs (Art 14)
• Publication of judicial decisions (Art 15)
• Sanctions by member states (Art 16)
• Codes of conduct (Art 17)
• Assessment (Art 18)
• Exchange of information and correspondence (Art
  19)

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Enforcement Directive (2004/48/EC)

• Codification of common EU15 standards
• Art. 3 enforcement measures
• not unnecessarily complicated
• not unnecessarily costly
• no unreasonable time-limits or unwarranted delays
• effective, proportionate and dissuasive

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Enforcement Directive (2004/48/EC)

• Art. 9 interlocutory injunctions
• to prevent any imminent infringement
• recurring penalties for continued infringement
• preventative seizure of goods suspected of
  infringing
• evidence the judges sufficient degree of
  certainty that
• applicant is the rightholder
• applicants right is being infringed

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Counterfeit Statistics 2004
Sourcehttp//europa.eu.int/comm/taxation_customs/
customs/customs_controls/counterfeit_piracy/statis
tics/index_en.htm
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Counterfeits of Medicines
source FDA
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The costs Europeans bear

• Product piracy is responsible for
• 70.000 working places less each year
• Damage to the German economy alone 20 25 bn
  each year
• 500 bn yearly turnover in fakes (10 of world
  trade)
• Role of Customs Authorities
• fight against counterfeiting
• performing the best possible controls and goods
• help prevent consumption of unsafe products

Source Wirtschafts Woche, Nr. 27, June 30.2005
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Council Regulation 1383/2003

• Customs measures
• improve enforcement at border against
• import, export, re-export of goods infringing
  certain IPR
• detention of products suspected of infringement
• Art. 11 simplified procedure under national law
• good abandoned for destruction
• no need to determine infringement
• consent from right holder, at right-holders
  expense

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New EU Members Have What It Takes

• Remarkable scientific potential especially in
  the CEEC is not properly mapped (2002 Study by
  ALLEA)
• Most of the CEE countries have skill levels
  comparable to those of countries at the cutting
  edge of technological innovation (UN-Human
  Development Report 2001)

Sources Report presented to the ALLEA General
Assembly, March 13-15, 2002 (ALLEA the
Association of All European Academies) UN Human
Development Report 2001, Annex 2.1
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• Medals 2003 2004
• www.brussels-eureka.be

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Medals 2004
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Effective IP Enforcement through Cooperation

• Effective IP enforcement requires sophisticated
  interaction between actors
• Actors
• cooperation between legal community, academia and
  scientists and creators
• patent offices to promote IP and facilitate usage
• venture capitalist, investors and scientists,
  creators of IP
• courts, publication and discussion of reasoning
• enforcement authorities prosecutors, police,
  customs authorities

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European Patent Officewww.epo.org

• Free access - available in all European languages
• Events, Seminars
• European Patent Documents
• Journal, Bulletin, Databases News, Events
• PatLib (Patent Library) Network
• 301 centres in Europe
• patent info related issues (trade marks,
  design)
• practical assistance
• annual events

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EU 7th RTD Framework Programme
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Turning brain into a competitive advantage

• foster academic infrastructure for basic research
• ensure proper funding (3 of GDP)
• ensure maximum exchange of information
• ensure that researchers seize IP opportunities
• legal and business advice - create investable
  property
• capitalize on competitive research
• honor best proposals and promising projects
• help attract venture capital
• make significant innovation in processes,
  products and services understood and known
• help evaluate IP and negotiate investments
• endorse harmonized IP protection levels
  unwaveringly

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Innovation will occur but where?

• Weak IP enforcement contributes to
• brain drain
• creation of innovation elsewhere
• import of innovative products
• delayed access to new technology
• potential health risks

• Strong IP enforcement contributes to
• attract creators of brain products
• broad variety of inward investment
• positive contribution to trade balance
• early access to technology
• access to pioneers and independence

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European Research and Competitiveness
Curiosity and creativity are in our genes. These
form the basis of research. And research is the
key to change, to innovation. Janez Potocnik,
European Commissioner for Science and Research