Table of Contents
"Reopening the Software Patents Debate in Europe" is a report from the FFII working group on European Affairs. This is a working draft 1.0a.
This report looks at the the latest proposal ("EU-EPLA") by the Portuguese EU Presidency for an EU Patent Court. The report examines the proposal, and concludes that its main goal is the legal validation of the European Patent Offices (EPO)'s controversial granting of software and business method patents through "interpretation" of the European Patent Convention (EPC).
The report details the process by which national high courts, which do not agree with the EPO's practice, would be eliminated and replaced by trusted judges and patent experts. The report concludes that this proposal gives excessive law-making and enforcement powers to the EPO, nominally an administrative, not a legislative body, and achieves EU-wide software patents, despite the EU Parliament's formal rejection of this in 2005.
"The acrimonious debate over the proposed directive on computer-implemented inventions might never have arisen if the patent litigation system in Europe had been unified, thereby eliminating the possibility of disparate national rulings on the same patent matter." - — David Sant, former EPO lobbyist in Brussels
In the 1990s a general consensus predisposed patent professionals in Europe for a scope expansion of patent law to software and business methods that was met with little notice by software professionals who focussed on what persons in the business are supposed to do. The development of patent case law in the United States preceded administrative decision moves of the European Patent Office's Boards of Appeal which forced examiners to grant software patents.
But ever since the legal enforceability of these granted software patents has been in question, and uninitiated politicians tend to blame "mistakes" of examiners for dubious patents. Patents are arbitrated in national high-courts, which have kept a view closer in line with the exclusions of patentable subject matter. In the field of software, national courts often reject patents which are granted by the EPO and upheld by its Technical Boards of Appeal (TBA). Legal Judges often found the interpretations of the Boards of Appeal flawed which has many reasons, among them institutional dependence and absence of legal qualification.
The first attempt to overcome that situation in European substantive patent law was the revision of the European Patent Convention in 2000. Unexpectedly the diplomatic conference did not delete "programs for computers" from the list of invention exclusions in Article 52(2) and the software patent industry continued to rely on the workaround teachings. The next attempt was an EU directive on the patentability of computer-implemented inventions that was finally rejected by European Parliament in 2005. It would have codified the workarounds of the EPO that are applied in its granting practice. The intense public debate shocked the patent technocrats and players from non-EU countries who were unwilling to capitulate to the European Parliament that affirmed the legal exclusion of software patenting.
Another remaining possibility for getting enforceable software patents is to unify the national patent courts in support of software patents. This can be done by informal means of judicial coordination or by the creation of an European Patent Court that handles jurisdiction for Europe as a whole, staffed with trusted judges. A already existing model for a specialized court is the US Court of Appeal of the Federal Circuit (CAFC) which institution in 1982 led to an erosion of substantive patent law in the United States without interference of the legislator.
The European Union already discussed a proposal for an European Patent Judiciary in Luxembourg for the Community Patent which did not receive a warm welcome from the patent community. Against this EU solution and the stalled community patent, the EPO staged its European Patent Litigation Agreement, that would effectively get it a judicial arm and would make it further independent from political influence. It would also block any EU patent policy.
The European Parliament in a resolution put forward its demands for improvements to EPLA (12 Oct 06): independence of judges, democratic control, litigation costs and a patent quality process. A consequent legal study ordered by European Parliament concluded that EPLA could be carried out outside the EU as patent policy is part of the acquis communutaire. The German presidency ignored the Parliamentary resolution and legal study, and continued to push for EPLA. This EPLA proposal is now "dead" (J. Gaster1). However, the German delegation in the European Council of Ministers is bent to include many elements from the EPLA and the German patent court system in a new EU-EPLA proposal.
The Portuguese EU-EPLA proposal
- 11622/07 Portuguese Presidency: Towards an Enhanced Patent Litigation System and a Community Patent - How to Take Discussions Further, Jul 12 20072
- 13675/07 Portuguese Presidency: Towards an EU Patent Jurisdiction - Points for discussion, Oct 10 20073
- 13878/07 German delegation: The Separation of Invalidity and Infringement Proceedings and the Use of Technical Judges in a European Patent Court System, Oct 12 20074
- 14492/07 Portuguese Presidency: Towards an EU Patent Jurisdiction - Points for discussion in the IP (Patents) working group, Oct 30 20075
- 14912/07 Portuguese Presidency: Enhancing the patent system in Europe (progress report for permanent representative), Nov 7 20076
- 15162/07 Portuguese Presidency: Enhancing the Patent System in Europe (progress report for the competitive council), Nov 16 20077
Based on wide consultations with selected business groups, the Portuguese Presidency transformed elements from the EPO-EPLA into a new proposal for an EU-EPLA and tries to push for a new specialized patent court together with Germans. According to the ECJ GAT vs LuK case, the competence of judging European patents lies in the jurisdiction of the National courts of the Member States. The EU-EPLA draft gets national courts completely out of charge for cases that involve national bundle patents granted by EPO and future Community Patents.
EU-EPLA is a model for a regionalized European Central Court specialized in patents with two instances. Member states can chose to establish up to three regional chambers and can share regional chambers. Regional chambers are not mandatory. The costs for the Central court is borne by the EU. A right of appeal to the European Court of Justice is available subject to a prior approval by the First Advocate General.
The new court is aimed to be dominated by technical judges and an advisory pool of technical experts. Contrary to popular belief, "technical" here refers to patent professionals that are not eligible to a judicial office (i.e. "legal" judges) who received an academic title prior to becoming patent professionals, but they are not professionals skilled in the art with recent first hand work experience in a field of technology. The right of proposal for both technical and legal judges rests upon a committee of patent professionals. This raises certain concerns over the impartiality of the Court.
Patent professionals usually lack a required judicial neutrality in matters of substantive patent law since commercial and institutional interests of their community clearly profit from expansive interpretations. Their incentives and belief systems as part of the "patent community" discourse are for instance evidenced by Dr. Birgitte Andersen (Birkbeck College, University of London). The same applies for the proposal to recruit judges from the patent institutions and boards of appeal which would carry the institutional smell. It is not ruled out that members of the patent judiciary and advisers could also serve as patent professionals, for instance as attorneys, members of patent offices, boards of appeal or other functions which imply a conflict of interests. The only independence safeguard is that "members of the Boards of Appeal of the EPO should not be eligible to serve in parallel to their functions as members of the Boards of Appeal as a judge of the EU patent jurisdiction". The EU-EPLA model as discussed by the Council states that:
Judges could be recruited amongst members of the EPO or national offices' Boards of Appeal, patent judges, patent attorneys etc. To this effect a pool of distinguished patent judges would be created at Community level.
The German delegation has put great pressure on the bifurcation of invalidity and infringement procedures. Their Council paper was perfectly orchestrated two days after a Portuguese proposal. According to the German plan, only chosen specialized judges of the Central Court may decide certain invalidity cases. A general disadvantage of a bifurcation is that it drives costs of proceedings for all parties up. Another practical problem from the split model surfaced in Germany, where such bifurcation is the national practice: in invalidity proceedings, patent holders tend to narrow the patent down while in infringement proceedings, the patentee aims to broaden the coverage. Unlike bifurcation a joint procedure keeps a better balance between both parties involved.
The current proposal from Portugal discriminates a party that seeks invalidation and is therefore disproportionate.In cases of invalidity the regional court is limited either to reject the invalidation or to refer it to the central court, along with a preliminary opinion. The discrimination of the regional courts in terms of invalidity proceedings points that the drafters do not trust judges of the regional chambers. This is further shown by the designation of specialists from the Central Court to help the regional chambers. Member states (MS) need to be aware that foreigners will take part in regional patent litigation proceedings and sit on the same bench:
The judges of the first instance divisions at MS level should come from the Member states concerned. However, these divisions would be entitled to include judges from another MS on the bench.
A curiosity of the Portuguese Proposal is the depiction of judges as incompetent. According to the Portuguese presidency, "internships" and "judges academies" are required to build up a pool of judges:
A training framework for patent judges should be set up at Community level in order to improve and increase available patent litigation expertise and to ensure a broad geographic distribution of such specific knowledge and experience […] The training framework would reflect best practices in Member States and focus on gaining practical experience. Towards this end it would involve internships in the patent judiciary of other Member States already having substantial levels of patent litigation activity.
The background is a lack of legal judicial qualification of future "technical" judges. The judges academy may be due to forge the "ability required for appointment to judicial office". Furthermore, the judges' drill facility synchronizes the future members of the judiciary, therefore keeping the pluralistic experience of transnational cooperation under control.
Finally, we note that the current EU-EPLA deliberations in the Council have not addressed the concern of "forum shopping". With multiple regional chambers and bifurcation that aspect is certainly worth to get further examined to fully understand the legal economics of the EU-EPLA court.
The EU Treaties provide a legal base for a centralized jurisdiction for patents in Europe. It needs to be carefully examined if they are sufficient for the current EU-EPLA to come into force.
|Nice art 225a||Lisbon art 225a (amendments emphasised)|
|The Council, acting unanimously on a proposal from the Commission and after consulting the European Parliament and the Court of Justice or at the request of the Court of Justice and after consulting the European Parliament and the Commission, may create judicial panels to hear and determine at first instance certain classes of action or proceeding brought in specific areas.||The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, may establish specialised courts attached to the General Court to hear and determine at first instance certain classes of action or proceeding brought in specific areas. The European Parliament and the Council shall act by means of regulations either on a proposal from the Commission after consultation of the Court of Justice or at the request of the Court of Justice after consultation of the Commission.|
|The decision establishing a judicial panel shall lay down the rules on the organisation of the panel and the extent of the jurisdiction conferred upon it.||The regulation establishing a specialised court shall lay down the rules on the organisation of the court and the extent of the jurisdiction conferred upon it.|
|Decisions given by judicial panels may be subject to a right of appeal on points of law only or, when provided for in the decision establishing the panel, a right of appeal also on matters of fact, before the Court of First Instance.||Decisions given by specialised courts may be subject to a right of appeal on points of law only or, when provided for in the decision establishing the specialised court, a right of appeal also on matters of fact, before the General Court.|
|The members of the judicial panels shall be chosen from persons whose independence is beyond doubt and who possess the ability required for appointment to judicial office. They shall be appointed by the Council, acting unanimously.||The members of the specialised courts shall be chosen from persons whose independence is beyond doubt and who possess the ability required for appointment to judicial office. They shall be appointed by the Council, acting unanimously.|
|The judicial panels shall establish their Rules of Procedure in agreement with the Court of Justice. Those Rules shall require the approval of the Council, acting by a qualified majority.||The specialised courts shall establish their Rules of Procedure in agreement with the Court of Justice of the European Union. Those Rules shall require the approval of the Council.|
|Unless the decision establishing the judicial panel provides otherwise, the provisions of this Treaty relating to the Court of Justice and the provisions of the Statute of the Court of Justice shall apply to the judicial panels.||Unless the regulation establishing the specialised court provides otherwise, the provisions of the Treaties relating to the Court of Justice of the European Union and the provisions of the Statute of the Court of Justice of the European Union shall apply to the specialised courts. Title I of the Statute and Article 64 thereof shall in any case apply to the specialised courts.|
- Is the phrasing "at first instance" compatible with the EU-EPLA proposal with two instances?
- Only Lisbon would provide "specialised courts". Nice "judicial panels" of the ECJ seem to be not wanted by EU-EPLA. The Lisbon treaty needs to come into force first. That would imply a procedure which gives Parliament more say. The current EU-EPLA proposal does not reflect the demands from the European Parliament (12 Oct 2006).
- The ECJ has to agree with the EU-EPLA proposal.
- The independence of patent professionals as "technical judges" is doubtful.
- The Treaties mandate legal judges: patent professionals usually do not "possess the ability required for appointment to judicial office".
- Article 225a has already been used for the creation of the European Union Civil Service Tribunal. See also EU law blog: Civil Service Tribunal goes live ! for more details about the function of this court.
|Nice art 229a||Lisbon art 229a (amendments emphasised)|
|Without prejudice to the other provisions of this Treaty, the Council, acting unanimously on a proposal from the Commission and after consulting the European Parliament, may adopt provisions to confer jurisdiction, to the extent that it shall determine, on the Court of Justice in disputes relating to the application of acts adopted on the basis of this Treaty which create Community industrial property rights. The Council shall recommend those provisions to the Member States for adoption in accordance with their respective constitutional requirements.||Without prejudice to the other provisions of this Treaty, the Council, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament, may adopt provisions to confer jurisdiction, to the extent that it shall determine, on the Court of Justice of the European Union in disputes relating to the application of acts adopted on the basis of this Treaty which create European intellectual property rights. These provisions shall enter into force after their approval by the Member States in accordance with their respective constitutional requirements.|
- Art 229a enables competence shifts to the ECJ only. Specialized courts created in Nice Art 225 might not be part of the ECJ (needs confirmation).
- EPO patents are not European intellectual property rights as there is no community substantive patent legislation. The EU would need to codify the relevant EPC provisions ("add the house to the roof").
- Community patents become European intellectual property rights once adopted.
- Lisbon would imply a procedure which gives Parliament more say. The current EU-EPLA proposal does not reflect the demands from the European Parliament (12 Oct 2006).
- Nice Art229a might not be needed to create a Community jurisdiction for European patents, since Art 225a might be enough: "The decision establishing a judicial panel shall lay down the rules on the organisation of the court and the extent of the jurisdiction conferred upon it"
- What constitutional difficulties would arise esp. with regard to languages?
EU-EPLA is not about patent litigation
The general public argument for the Court is that it would unify divergent court interpretations of a patent in different member states and reduce the costs for multiple litigation. But the figures show that multinational litigation is of minor importance. We find few cases of trinational litigation. The only showcase of divergent litigation interpretation on national grounds Epilady is ancient. The new court is also advocated as a path to the community patent and an anti-Torpedo-measure8. In reality EU-EPLA drives the entry cost barriers for litigation up and is a solution for rare cases of large companies that can afford patent litigation and professional patent litigation companies ("patent trolls"). The current patent litigation system strongly discriminates against small and medium enterprises which primary business is not patent enforcement. A more expensive system for cross-border litigation would not improve this situation.
EU-EPLA is about validating EPO practice
The new central court is staged to approve expansive reforms on subject-matter by case law such as the illegitimate granting of software patents by the European Patent Office (EPO). The new court is tailored to be as independent as the EPOs infamous Technical Boards of Appeal. The new Court also minimizes the political risk of influence from national governments and strongly centralizes powers. The Portuguese EU-EPLA is all about validation of Software and Business Method Patents. It attempts to overcome discomfort of national judges about the abusive legal interpretations of the European Patent Convention, Art 52, by the European Patent Organization including teaching such as the infamous "further technical effects".
The Council discusses a patent court that reflects the interests of patent technocrats and patent attorneys, but not European businesses and inventors. Member States are recommended to assess the compatibility of the current model with the EU Treaties (including the new revision agreed in Lisbon recently) to include centralized jurisdiction for European and community patents. The EU-EPLA requires prior EU harmonization of national substantive patent law or will run into delicate legal difficulties. The German model of separation of litigation and validation drives costs up and favors patent holders. An important matter is the role of technical judges as part of the court. Legal judges would guarantee for judicial independence and legal quality of rulings.
On a longterm perspective the parallel governance of the European patent system means that one institution needs to give way. Sooner or later it will be necessary to dismantle the European Patent Organization and let an European Union Innovation agency and parliamentarian institutions overtake its role. EU-EPLA blocks the transformation process and strengthens the institutional influence of the European Patent Organization that is not part of the Union and governed by technocrats cushioned against business reality.
EU-EPLA is staged to validate software patents without parliamentarian deliberations that take account of a diversity of political views, stakeholders and economic impact assessments which simply cannot be addressed in courts proceedings. Democratic decisions add legitimacy. It would be appropriate to stress that unclarity in substantive law calls for a legislative clarification first. Divergent national court practices are not bad per se as they hint to European legislative harmonization needs. Cynically spoken it seems patent institutions lost confidence in politics and now want their own trusted court. It is worth to examine the political economics of the October EU-EPLA in terms of trusted judges, technical experts and validity decision-making.
In the field of software the European Commission refuses to propose a new directive that would keep the software service sector safe so that software authors can trade their copyrighted works without any risks of EPO software patents. Parliament has no right of proposal but made very clear in the past debates that it seeks changes to the status quo. This example illustrates the 'constitutional' inability of the legislator to stop institutional malpractice and its reliance on the Commission. Thus also in other matters of substantive patent law the European legislator would yield influence over substantive patent law while it further remains to be prejudiced by patent technocracy. Given the lack of compromise, procedural trickery and deceptive drafting during the software patent debate the EU-EPLA court is a potential threat to parliamentarian democracy, on the national and the European level.
The US Court of Appeals of the Federal Circuit
The USA has experimented with a central patent court. In 1982, the US Congress put all patent litigation into a single court called the Court of Appeals of the Federal Circuit (CAFC). This is how the US CCIA (Computer & Communications Industry Association) described the effects of CAFC9:
The Federal Circuit has:
* Lowered the threshold standard of patentability
* Encouraged extortionate demands and settlements
* Eliminated virtually all limits on patentable subject matter
* Endowed issued patents with an unjustifiably high presumption of validity
[CAFC] has made patents more potent, easy to get, easy to assert, and available for a virtually unlimited range of subject matter. As shown in the 2002 joint Department of Justice/Federal Trade Commission (FTC) hearings, this has led to over-patenting, portfolio racing, opportunism, extortionate settlements, and failure of the public disclosure function. As the final FTC report, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy, makes clear, the ill effects have been borne disproportionately by the ICT sector.
ECJ outside of patent law
Hartmut Pilch (FFII e.V.) was saying last 2 May 2007:
"I don't think EU joining EPC would automatically mean that ECJ can intervene on substantive patent law questions.
If there is a ECJ above the EPJ, then probably only for very special questions relating to areas outside patent law, such as EU treaties, and it would not be accessible to the litigating parties but only to the EPJ itself or maybe to the Commission, member states and the European Parliament."
The Portuguese Presidency did not explain the mechanisms by which the ECJ will be able to interpret substantive patent law. In fact, its move to push for an EU litigation system is like putting the horse before the car: current EU law is silent about substantive patent law, expect for the biotech directive. The question of substantive patent law has to be clarified before any discussion on litigation can happen.
ECJ is not accessible for private parties to defend themselves, as it is not competent for disputes between private parties.
The Portuguese proposal mentions that only the Advocate general can request the ECJ on points of law. Compared to the american CAFC-SCOTUS mechanism, it denies the right of a party to appeal to the ECJ. It also carries the risk that if the Advocate General is dependent of the patent system, it can deny a request to appeal for important questions such as limits of patentability. Parties in the United States has the right to petition the Supreme Court independently of the mind of captive patent judges. This appeal mechanism has recently been used by the Supreme Court to correct some low-patentability-requirements thresholds created by the captive court of CAFC.
This attitude of those patent captive courts is mentioned here:
Dear Mr. Josefsson,
You are absolutely correct: The EBA is the highest law-making body within the EPO system, and all basic questions should be referred to it. This is in Art. 112 EPC. Contrary decisions of a Swedish court and a TBA of the EPO must be referred to the EBA. However, in practice this does not happen. This is so because the EBA rarely confirms the decision below, and the judges of the TBAs think this reflects badly on their work. We have exactly the same problem in Germany where the Senates of the Federal Patent Court should refer basic questions to the BGH but do not do this. You might read a commentary on Art. 112 EPC.
With kind regards,
Parliament resolution on Future European Patent Policy
The European Parliament resolution on European Future Patent Policy (12 Oct 2006) set a clear agenda for future talks about a patent judiciary:
whereas there has been growing concerns about undesirable patents in various fields and about a lack of democratic control over the process by which such patents are granted, validated and enforced.
…as regards the EPLA, considers that the proposed text needs significant improvements, which address concerns about democratic control, judicial independence and litigation costs.
It also demanded
that all legislative proposals should be accompanied by an in-depth impact analysis related to patent quality, governance of the patent system, judicial independence and litigation costs.
Dr. Langfinger (Business Europe): consent as legal base
Als Rechtsgrundlage kämen je nach Konstruktion unterschiedliche Vorschriften des EG-Vertrages in Betracht. Zu verweisen sei auf die Artikel 225 a, 229 a, 308 EG-Vertrag. Letztlich sei dies jedoch nicht die entscheidende Frage. Wenn zwischen den Mitgliedsstaaten Einigkeit über die Schaffung einer europäischen Patentgerichtsbarkeit erzielt werde, sei nicht zweifelhaft, dass auch eine Realisierung unter dem EG-Vertrag möglich sei.
Depending on the design requirements different provisions of the EC Treaty come into consideration. We refer to the articles 225, 229 a, 308 EC Treaty. Ultimately, however, this is not the crucial issue. If the member States get mutual consent on the establishment of a European patent judiciary, it is without doubt that a implementation under the Treaty provision would be made possible.
Danger of Democratic interference
Responses from David Rosenberg and Tim Frain focussed on shared concerns, their primary worry being that politics would obstruct the quality of decisions made under the new system.
Source: L. Mathias report from AIPPI conference, Dec 510
"The main topic was the EPLA. Almost everyone there declared in favour of the EPLA and we were told that the judges were uniformly in favour. The villains were seen as the politicians."
Source: PATENTEPI report, "The Future of the Patent Jurisdiction in Europe" Munich, 25th and 26th June 200711)
Froehlinger (COM) explains the regional central court
Dr Froehlinger addressed whether the proposed Community patent jurisdiction required seats in all member states. She said that the Commission intends through financial incentives to encourage regional chambers. The need for physical proximity could be reduced by video conferencing and chambers could be peripatetic. She added that judges in the UK have confirmed that the UK, Ireland and the Benelux countries are discussing plans for a regional chamber. She countered criticism that local chambers inevitably lack experience, relying on training and the use of a multinational pool of judges.
Lastly Dr Froehlinger addressed the controversial issue of bifurcation. The Commission’s aim is to introduce choice and flexibility into the system and she insisted that there would be no imposed bifurcation of validity and infringement proceedings.
Source: L. Mathias report from AIPPI conference, Dec 512
Patent litigation: empirical data
Today patents are litigated in very few EU member states. Multinational litigation hardly occurs.