Tag Archives: Patents

PACTE bill: How will it impact IP?

The adoption of the PACTE bill on 11 April 2019 will soon lead to a number of changes with regard to patents in France

PACTE bill

The draft bill on the growth and transformation of businesses (PACTE bill), adopted by the National Assembly on 11 April 2019, covers issues relating to patents in Articles 118 and 121 to 124, namely:

  • the modernisation of the utility certificate, the duration of which is increasing from 6 to 10 years, and the possibility of converting a utility certificate application into a patent application;
  • the forthcoming introduction of an opposition procedure against French patents;
  • the forthcoming introduction of the examination of the inventive step for French patent applications;
  • the removal of the limitation for patent invalidity actions; and
  • the modification of the event generating the limitation period for acts of infringement.

Here is a presentation of these important changes that will take place with regard to patents.

The modernisation of the utility certificate

A utility certificate will now have a duration of 10 years from when it is filed (L. 611-2 2° CPI), compared with 6 years previously. In this respect, France is making the duration of its utility certificate consistent with that of this type of industrial property in foreign countries, for example the “Gebrauchsmuster” in Germany or the utility model in China.

In addition, it will not only be possible, as before, to transform a patent application into a utility certificate application, but also to convert a utility certificate application into a patent application.

This last provision reintroduces de facto the possibility of postponing the establishment of the preliminary search report for a patent application, which had been introduced by the law of 1968 and then abandoned in 2008. This will make it possible to simply file an application for a utility certificate, and then later transform this into a patent application. In this regard, it is certain that article R.612-5 CPI relating to the payment of fees will be amended to allow the payment of the search report fee when the utility certificate application is transformed into a patent application, which will have to take place before the deadline provided for by the regulation has passed. This deadline will probably be less than or equal to eighteen months from the filing or priority date, to allow for the correct publication of the application, in the interests of third parties.

In addition, this option of bilateral transformation will make it easier to correct the type of industrial property title applied for in the event of an error of the type of title made at the time of filing.

Finally, the relevance of such a transformation will have to be considered, in view of the preliminary search report and the new rejection criteria attributed to the INPI, particularly the lack of inventive step (see below). If there is any doubt therefore about the novelty or the inventive step of an invention, it may be appropriate to transform its patent application into a utility certificate application, in order to avoid the rejection of its patent application and obtain the issuance of a utility certificate, whose duration would be shorter (10 years for a utility certificate compared with 20 years for a patent), but which would however be correct.

Forthcoming introduction of an opposition procedure against patents issued by INPI

The law provides for the possibility of creating a right of opposition, in order to allow third parties to obtain the modification or the revocation of a patent before the INPI. The legislator has also provided for the possibility of ensuring that improper proceedings are prevented. It is thus reasonable to assume that only third parties with an interest in bringing proceedings will have the opportunity to oppose a patent, which would actually be prejudicial to their interests (for example, freedom of operation or prior patents).

The details are not yet known, but it is to be hoped that these will take place in the interests of European harmonisation, particularly with regard to the time limits (9 months from the date of issue) and substantive aspects applicable to opposition to European patents.

The advantage of such an administrative opposition procedure is therefore to enable a favourable decision to be obtained within a reasonable time and at a lower cost, compared to legal proceedings for a ruling of invalidity. The judiciary, in particular the Paris Court of Appeal, will certainly be called upon in appeals against decisions made by the INPI in the context of this opposition procedure, in a similar way to the decisions undergoing examination. The INPI undoubtedly has the capacity to put in place the human and material resources necessary to achieve this objective.

Forthcoming introduction of a substantive examination by the INPI

The main change brought by the bill for patent applicants in France is: the consideration, among other things, of the inventive step during the examination.

The INPI will now have the option of rejecting a patent application, pursuant to Article L.612-12 1st paragraph 7° CPI, “whose subject matter is not patentable under the terms of 1 of Article L.611-10”.

This is the main point resulting from the changes made in Article L.612-12 CPI dealing with the grounds for rejection by the INPI, which deem the examination undertaken by the INPI as a substantive examination, in relation most notably to the three patentability criteria of novelty, inventive step and industrial application:

  • In terms of novelty, the legislator removes the notion of “manifest” absence of novelty. This extends the jurisdiction of the INPI, previously limited to the rejection of patent applications whose purpose was fully disclosed in a precedence, consideredstricto sensu. The INPI may therefore proceed to the rejection of patent applications whose purpose would not be original, according to a necessarily broader interpretation, which will certainly be closer to the interpretation resulting from French or European case law.
  • Concerning the inventive step and this is the point that draws our attention, the INPI will have the power to reject a patent application whose purpose does not involve an inventive step. Here again, it is to be hoped that European harmonisation will play its part, and that the INPI’s review of inventive activity will be carried out mainly on the basis of a problem-solution approach, similar to European patent applications examined at the European Patent Office (EPO). As the examination of the inventive step requires more time than a mere examination of novelty, the INPI will certainly have to adapt its workforce accordingly, otherwise the length of the procedure will be increased. However, the INPI will probably be able to rely on the EPO’s experience in this area to avoid this pitfall, which may have been encountered by other States, Brazil being the most recent example.
  • The reintroduction of the rejection criterion for a lack of industrial application, which had been abandoned in 2008 (former L.612-12 1st paragraph 5°), may facilitate the work of the INPI examiners in rejecting patent applications for “perpetual motion”. However, it will have only a very limited practical impact on other applications. In addition, it is likely that Article L.612-12 1stParagraph 7° does not apply to applications for a utility certificate, which is regrettable with regard to the criterion of industrial application. Indeed, inventors of “perpetual motion” will probably try to adapt to the INPI’s procedure to avoid a rejection for this reason by filing a utility certificate application.

In addition, vigilance of the regulatory provisions that will govern the examination procedure of applications by the INPI will be required. Indeed, the removal of the research report notion and formal notice of the wording of Article L.612-12 1st paragraph 7° broadens the possibilities for examination considerably. For example, the INPI would in theory have the capacity to reject a request before preparing the preliminary search report for lack of novelty or inventive step, for example citing a relevant document in an examination notice. More generally, the INPI could reject a patent application for lack of novelty and/or inventive step with regard to one or more documents not cited in the preliminary search report.

Critics of the substantive examination by the INPI mentioned the potential additional cost to patent applicants, resulting from the defence of these new patentability criteria. In this regard, it will be possible to consider, upon receipt of the preliminary search report and according to the relevance of any precedences cited, a transformation of the patent application into a utility certificate application, to which the rejection criterion in accordance with article L.612-12 1stparagraph 7° will not apply. Therefore, a title can always be obtained inexpensively in France, via the utility certificate. The increase in the duration of the latter to ten years makes this possibility much more feasible, because the average time for which patents are held in France is less than ten years1.

Finally, it should be noted that these provisions will only enter into force one year after the promulgation of the law, to patent applications filed on or after that date. For patent applications already filed or filed before that date, the examination by the INPI will remain unchanged (notably, rejection for manifest lack of novelty).

No limitation for patent invalidity actions

In the opinion of numerous experts, the application of a limitation period for patent invalidity actions was questionable, in insofar as Article 2224 of the Civil Code should not apply in this case. However, French case law did not seem to support this interpretation, even though the starting point of the limitation period was not fixed2.

The introduction of Article L.615-8-1 CPI by the legislator makes it possible to remove any doubt about the option to initiate, at any time, a patent invalidity action. Thus, according to this article, “The patent invalidity action is not subject to any period of limitation”.

Moreover, the introduction of such an article had already been provided for in Ordinance No. 2018-341 of 9 May 2018, but its date of entry into force was subject to the date of entry into force of the agreement of the Unified Patent Court (UPC). This could take place in 2019, if the complaint filed before the German Federal Constitutional Court (Karlsruhe) against the agreement relating to the JUB, whose examination is scheduled this year, is rejected. The legislator, rightly, it would seem to us, has opted not to wait for a hypothetical favourable decision from a German court to decide this delicate point of the limitation of the patent invalidity action.

The question relating to the effect of a limitation already acquired is certain to arise. In this regard, in the aforementioned Ordinance (Articles 13 and 23 point II.), the legislator provided that the absence of a limitation applies to actions for which, on the date of its entry into force, the limitation period would not yet have expired. However, it is not certain that case law converges with the intentions of the legislator on this point, which will undoubtedly be raised by a patent holder in an action to render their patent invalid. Something to keep an eye on!

Modification of the event generating the limitation period for infringement actions

Pursuant to Article L.615-8 CPI in its current form, “The infringement actions provided for in this chapter have a limitation period of five years from the events giving rise to them. ». This then posed the problem of late knowledge, by the holder of a right, of any facts relating to the infringement.

The legislator wished to strengthen the possibility for the holder of a right to obtain compensation for damages, even for old acts, considering as a starting point of the limitation period, no longer the commission of an act of infringement, but its knowledge (actual or assumed) by the holder of the right.This means that under the new article L.615-8 CPI, “Infringement actions […] have a limitation period of five years from the day on which the holder of a right had knowledge or should have had knowledge of the last fact allowing them to exercise it”.

In this, the legislator wanted firstly, to protect the holder of a patent from the concealment of counterfeit acts by an infringer (such as the manufacturing for example, which could be concealed by the subsequent transport and storage in a territory not covered by the law, pending the expiry of the right). Secondly, the legislator wanted to protect third parties of a holder who might voluntarily “close his eyes” to the commission of acts of infringement, and discover them “by surprise”, well beyond a period of five years, so as to deliberately increase the duration of the infringement, and to do this to obtain compensation for the damage beyond the limitation period.

Provisional patent application: a welcome abandonment

Finally, we must applaud the abandonment – at least temporarily3 – of the creation of a provisional patent application, which would have brought no practical benefit at all. Indeed, a right of priority arises when a filing date is assigned, with neither the payment of taxes nor the presence of claims being mandatory for obtaining a filing date.

This means that the filing of a patent application by an identified applicant, even a minimal one (for example containing only a description of the invention) and at the smallest cost (without paying the fees due to the INPI) may still give rise to a right of priority. This can be used not only abroad by application of the Paris Convention (177 States), but also in France through the so-called “internal priority” mechanism (L.612-3 CPI). For this reason, the creation of a provisional application as originally provided for in the PACTE bill would have been useless.

1 Baudry M., Dumont B. (2018), “Les brevets : Incitation ou frein à l’innovation” [Patents: Incitement or an impediment to innovation?] Volume 13, page 35, quote 35, February 2018.

2 Ifame J. (2018), “Prescription de l’action en nullité de brevet: du nouveau mais toujours pas de solution?“, [Limitation of patent invalidity action: new but still not a solution?], in French.

3 The creation of the provisional application now seems to be envisaged by decree, following the opinion of the Council of State of 14 June 2018 on the PACTE bill, point 64, according to which “no legislative provision is necessary to implement the proposed reform”.

 

logo_LLRArticle written by Jean-Nicolas Héraud from LLR

« For they have sown the wind, and they shall reap the whirlwind. »

Old Testament, Hosea 8, 7.

foreign lost profits
Photo by Claire Anderson on Unsplash

On 22 June 2018 an interesting decision was issued by the US Supreme Court (USSC) relating to an award of damages in WESTERNGECO LLC v. ION GEOPHYSICAL CORP.  Reversing the decision of the Federal District Court, the USSC decided to award damages for loss of profits which occurred outside the US. This was a reversal of the previous position held by US Courts where lost foreign sales were generally considered not recoverable through enforcement of a US patent.  In order not to over, or under, interpret this decision and its consequences, the facts of the case are important.  Here is the Supreme Court’s own summary:

Petitioner WesternGeco LLC owns four patents relating to a system that it developed for surveying the ocean floor. The system uses lateral-steering technology to produce higher quality data than previous survey systems. WesternGeco does not sell its technology or license it to competitors. Instead, it uses the technology itself, performing surveys for oil and gas companies. For several years, WesternGeco was the only surveyor that used such lateral-steering technology.

In late 2007 respondent ION Geophysical Corporation began selling a competing system. It manufactured the components for its competing system in the United States and then shipped them to companies abroad. Those com­panies combined the components to create a surveying system indistinguishable from WesternGeco’s and used the system to compete with WesternGeco.

WesternGeco sued for patent infringement under §§271(f)(1) and (f)(2). At trial, WesternGeco proved that it had lost 10 specific survey contracts due to ION’s in­fringement. The jury found ION liable and awarded WesternGeco damages of $12.5 million in royalties and $93.4 million in lost profits.” (Emphasis added).

§ 271(f)(1) of the U.S. Title 35 (Patents) addresses the act of exporting a substantial portion of an invention’s components from the US to a foreign destination. §271(f)(2) addresses the act of exporting components that are specially adapted for an invention, once again, from the US to a foreign destination.

ION filed an appeal and the Federal circuit reversed the decision regarding the lost profits award on the basis that lost foreign profits are not recoverable, in principle. Based on the 22 June 2018 decision of the USSC, this principle does not hold anymore: foreign lost profits ARE now recoverable, at least under specific conditions.

In a nutshell, the USSC decided that once domestic infringement is established, the overriding principle of award is to provide a remedy which is commensurate with the harm caused by the infringement. The fact that the lost profits arose from the loss of foreign contracts was not relevant to assess damages.

At first, anyone can see the fairness principle underlying this decision. The action of the infringer enabled the purchaser to dispense with the surveying services of the patentee.  The loss caused could have threatened the very existence of the company.

However, among the five Supreme Court judges, two dissented with this approach. One of the dissenting judges, Judge Gorsuch J, raised the issue that the infringer becomes suddenly liable for acts beyond its control and that it has no power to stop. Hence, once the supply of the components necessary to manufacture the surveying devices is carried out, the infringer cannot retract it.  It becomes thus potentially liable for all future “lost contracts” that can be established as being the direct consequence of the supply forbidden by §271(f)(1) and §271 (f)(2) (cf. supra).  Although such a proof is usually difficult to establish, this was one of the cases where it was successfully argued, because there were no other competing players in this specialised market than the litigants themselves.

If the acts of using the invention had been carried out in the US, the purchaser in this case would have become an infringer and could have been stopped. This is not the case if the purchaser is in fact using the invention outside of the US.  The liability of the US supplier/infringer mushrooms suddenly without clear limits.

However the USSC balanced this potential unknown liability with the principle that the patentee has to be commensurately compensated, and decided in favour of the latter.

This decision now stands as a strengthening of patent rights.  This will be pleasing to the owners of US patents and increase the value of their US portfolio.  However to be applicable the patentee had not only to establish a domestic infringing act of exporting abroad but also a clear and direct consequential link between the act and the loss of profits. In this case this was possible due to the combination of :

  • a particular business model where the patentee kept its patented technology for itself and offered only its services; and
  • a market where only one competitor existed, said competitor being the infringer.

This particular combination of facts is not likely to be very frequent. Nonetheless, there is no doubt that U.S. exporters as well as U.S. patentees will be keeping this decision very much in mind as a biblical warning against unforeseen consequences of unlawful conduct.

 

Article written by Sophie McDade from LLRLLR logo