In China, the Patent Reexamination Board (PRB) of the State Intellectual Property

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1 INVALIDITY RATE STUDY: CHINA - Robert B. Furr, Jr. and Sapna W. Palla 1 I. Challenging the validity of patents in China A. Invalidity Proceedings In China, the Patent Reexamination Board (PRB) of the State Intellectual Property Office (SIPO) has sole jurisdiction over patent validity issues, and the validity of a patent is challenged through invalidation proceedings before the PRB. Any person can file a request with the PRB to invalidate a patent. 2 The petitioner can define the scope of the examination, which should cover the statutory grounds for requesting the invalidation of any patents. As a default, the PRB does not perform a comprehensive examination of validity but instead limits its examination to the scope of the request. 3 However, there are numerous exceptions that allow the PRB to perform a review of claims and grounds not raised by the petitioner. 4 Invalidation proceedings are generally heard by a panel of three examiners. Cases involving important and difficult legal issues, cases likely to have significant impact in China or abroad, and cases involving great economic interests are heard by five member panels. 5 Cases heard by five-member panels are extremely rare, and as far as 1 We would like to thank Mr. Wensheng Wang of the CSPTAL firm, Mr. Dajian Wu of Yuhong IP Law Firm (both of Beijing, China) and Mr. Benjamin Bai of Allen & Overy in Shanghai, China, for their invaluable contributions in providing data on invalidity rates in China. 2 The Patent Law of the People s Republic of China (promulgated by the Standing Comm. Nat l People s Cong., March 12,1984, effective April 1, 1985)(amended 2008) at art. 45, [hereinafter Patent Law of China], translated in Patent Law of the People s Republic of China, STATE INTELLECTUAL PROPERTY OFFICE OF THE P.R.C., (last visited June 20, 2012). 3 THE STATE INTELLECTUAL PROPERTY OFFICE OF THE PEOPLE S REPUBLIC OF CHINA, GUIDELINES FOR PATENT EXAMINATION, (2010), pt. IV, ch. 3, 4.1,[hereinafter GUIDELINES] available at 4 Id. 5 The GUIDELINES, supra note 3, at pt. IV, ch. 1, 3.2, at

2 we know, Pfizer s Viagra invalidation case is one of a few cases decided by fivemember panels. 6 Similarly, simple cases may be examined by a single examiner. 7 Decisions by five-member panels, cases in which divided votes occur, and cases which are concluded anew after the previous decisions being overturned by an effective judgement of the court, are all subject to approval by senior members of the PRB. 8 If they disagree with the decision, it can be reversed by a two-thirds majority of the PRB. 9 Parties may request oral hearings before the panel, but they must state reasons why. The panel can also decide on its own initiative to hold oral hearings. 10 Witnesses may be brought to testify at oral hearings. 11 As a matter of fact, oral hearings are held in almost all invalidation cases and in most cases the panels decide on their own initiative to hold oral hearings. In addition, many oral proceedings have already been heard outside Beijing so far. 12 Decisions of the PRB are generally published. 13 The decisions made by the PRB can be appealed to the Beijing No. 1 Intermediate People's Court (first instance). 14 Further appeals are to the Beijing Higher People's Court (second instance). 15 The Beijing No. 1 Intermediate People s Court and the Beijing Higher Court have sole jurisdiction over all the cases appealed from the PRB. The Beijing Higher Court makes the final decisions Telephone interview with Dajian Wu, July 30, The GUIDELINES, supra note 3, at pt. IV, ch. 1, 4, at The GUIDELINES, supra note 3, at pt. IV, ch. 1, 6.1, at Id. 10 Id. at pt. IV, ch. 4, 2, at The GUIDELINES, supra note 3, at Part IV, Chap. 4, 10, at Wu interview, supra note Id. at Part. IV, Chap. 1, 6.3, at Haito Sun, Post-Grant Patent Invalidation in China, Europe, and Japan: A Comparative Study, 15 Fordham Intell. Prop. Media & Ent. L.J. 273, 285 (2004). 15 Id. at Wu interview, supra note

3 During the course of an invalidation proceeding, the patent claims of a utility model patent or an invention patent may be amended. Amendment may not enlarge the scope of the claims or go beyond the scope of the disclosure. 17 Amendments during an invalidation proceeding may only delete claims or a technical solution contained in a claim or, under certain limited circumstances, combine dependant claims. 18 Distinct rules are laid out for the evaluation of design patents. 19 B. Grounds for Invalidity Challenges i. PRB The grounds for filing a request to invalidate a patent with the PRB include, but are not limited to, lack of novelty, obviousness, insufficient written description, and the issuance of a patent claiming non-patentable subject matter. 20 Where an infringement action is ongoing, filing a request for an invalidation trial may lead to a stay of the lawsuit. 21 The judges presiding over the patent litigation have the discretion to stay the litigation pending the outcome of the invalidity proceeding. 22 However, whether they do so depends on the type of patent at issue. If a utility model or a design patent that was not subject to substantive examination by SIPO prior to the issuance is involved, the judges tend to put the court litigation on hold until the validity issue has been resolved by the PRB. When the patent at issue is an invention 17 State Intell. Prop. Office of the P.R.C., Implementing Regulations of the Patent Law of the People's Republic of China, (effective July 1, 2001) [hereinafter Implementing Regulations]. See also GUIDELINES, supra note 3, at pt. IV, ch. 3, 4.6, at The GUIDELINES, supra note 3, at pt. IV, ch. 3, 4.6, at see also GUIDELINES, supra note 3, at pt. IV, ch The Implementing Regulations, supra note 17, at Rule See also Lily Lim & Ningling Wang, Winning Patent Strategies, FINNEGAN (March 2007), 21 Sun, supra note 14, at Id

4 patent that was subject to extensive examination by SIPO, the judges often continue the infringement litigation without waiting for the validity decision from the PRB. 23 ii. Alternative Administrative Proceedings In addition to seeking remedies against an alleged infringer from a court, a patent owner can file a patent infringement case with local Intellectual Property Offices. 24 The local Intellectual Property Offices are not branch offices of the SIPO, and in a sense, they are rather separate or independent. Parties do not directly confront each other as they actually do in court proceedings, and there is a greater emphasis placed on mediation. 25 These proceedings are quicker and less expensive than court challenges. 26 Disadvantages to administrative proceedings are that the local Intellectual Property Offices are not empowered to impose any fines, or the punishments or orders for ceasing infringements might not be sufficiently strong enough to disincentivize infringement. 27 Additionally, there may be increased local protectionism. 28 Furthermore, local officials may not have sufficient technical or legal backgrounds to adequately address certain substantive patent issues. 29 II. Summary of findings Official data on invalidation rates proved difficult to find. Data submitted by the firms acknowledged above showed that both invalidation requests have been increasing since 2001, and (for invention patents and utility models) they have become increasingly successful. Not surprisingly, data showed the invalidation rate for utility models to be about twice that of invention patents. This was to be expected, since the invention patents are more extensively examined before issuance. 23 Id. 24 Patent, EMBASSY OF THE UNITED STATES, BEIJING, CHINA, (last visited June 22, 2012). 25 Lim and Wang, supra note Id. 27 EMBASSY, supra note Id. 29 Lim and Wang, supra note

5 Invalidation Requests Made The total number of invalidation requests made has increased drastically over the past decade. The following table, summarizing data from the CSPTAL firm, shows the total number of invalidation requests made from 2001 to 2010, and the percentage of invalidation requests for each type of patent. From April 1985 through 2000, a total of 5532 requests for invalidation were received by the PRB, and the PRB concluded 4349 cases. Invalidation requests received Invention 5.70% 7.40% 9.40% 11.24% 12.94% 14.42% 16% 17% 19.80% 21.10% Utility model 46% 43.20% 46% 43.49% 44.27% 46.03% 46% 49% 49% 47.60% Design 48.30% 49.40% 44.60% 45.27% 42.79% 39.55% 38% 34% 31.20% 31.30% Invalidation requests concluded

6 Requests for Invalidation of Invention Patents as a Percentage of Total Requests Received 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Requests for Invalidation of Utility Models as a Percentage of Total Requests Received 49% 48% 47% 46% 45% 44% 43% 42% 41% 40%

7 Requests for Invalidation of Design Patents as a Percentage of Total Requests Received 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Invalidation requests are most frequently made on utility models, which account for just shy of half of all requests made. Challenges to invention patents make up an increasing share of the total requests, while the share of requests challenging design patents has dropped respectively. PRB Treatment of Invalidation Requests Comprehensive data on invalidation requests and their treatment by the PRB are not readily available, but some limited data sets are, particularly for utility model patents. Utility Model Data Utility model patents are upheld roughly one-third of the time and entirely invalidated roughly one-third of the time. They are less commonly partially invalidated. Although the total number of requests for invalidation and the total number of requests resolved have varied, the breakdown of how the PRB treats them has been relatively consistent, although the rate at which patents are partially invalidated has increased since a low in

8 Invalidation data for Utility Model Patents from the CSPTAL Firm Percentage Partial Percentage Entire Percentage Request Resolved Maintained (%) Invalidation (%) Invalidation (%) % % % % % % % % % % % % % % % % % % % % % % % % 2008* % % % Total % % % *Data through August only - 8 -

9 Invalidation Data All Patent Types The following table, summarizing data received from YUHONG IP Law Firm, includes the specific numbers of invalidation requests received by the PRB for all types of patents, decisions on the invalidation requests issued by the PRB, patents that have been entirely invalidated by the PRB, patents that have been partially invalidated by the PRB, patents that have been maintained by the PRB, iand nvalidation requests that have been withdrawn of the petitioners own initiative or deemed to have been withdrawn or directly decided without any examination proceedings involved, etc. Year Received Concluded Entirely Invalidated Partially Invalidated Maintained Withdrawn or Others The breakdown of each type of patents decided is shown in the following table: Year Patents Entirely Invalidated Partially Invalidated 2008 Invention Utility model Design Total Invention Utility model Design Total Invention Utility model Design Total Invention Utility model Design Total Maintained - 9 -

10 The CSPTAL firm provided the following data, summarizing results of cases from 1999 to 2001 where a written decision was issued. Year Entire Invalidation Partial Invalidation Validity Upheld % 5.4% 47.9% % 7.9% 53.0% % 9.7% 48.7% The data below, submitted by Benjamin Bai of the Allen & Overy firm, similarly show invalidation requests increasing between 2007 and For utility model patents, about 40% were invalidated, 10% were partially invalidated and 50% were maintained unamended. For invention patents, rate of success for invalidation actions is less than 1/

11 Appeals of PRB Rulings PRB rulings are almost always upheld by the courts. When one party is not satisfied with the decision of Patent Reexamination Board and files an administrative suit with the court, the PRB wins 98.7% of all cases. 30 Summary/Discussion From the above, it can be seen that invalidation requests have increased quite quickly in recent years, and there may be more than 3000 requests in The Supreme Court of China has recently announced that more and more foreign companies and foreign investors have been sued in China over patent disputes. 31 Further, the Supreme Court of China recently issued a series of judicial interpretations, which, as understood by the local practitioners, are aimed at tightening 30 Personal from Mr. Wensheng Wang of the CPSTAL firm, April 18, THE SUPREME PEOPLE S COURT, INTELLECTUAL PROPERTY PROTECTION BY CHINESE COURTS IN 2011, at 33 (2012), available at (For additional information in a Chinese-language publication, see

12 the applicable conditions for infringement under doctrine of equivalents. 32 This may trigger a further increase in invalidation requests. Changes in national law in the past 20 years Since its enactment in 1984, China's Patent Law has been amended three times: first in 1992, then in 2000, and most recently in SIPO has initiated the proceedings of revising China s Patent Law again. It may be expected to intensify the administrative enforcement of intellectual property rights in the near future in China. The first amendment added pharmaceutical compositions to the list of patentable subject matter, and inaugurated China's membership in the Patent Cooperation Treaty. 34 The second amendment was intended to bring the Patent Law into compliance with the Trade-Related Aspects of Intellectual Property Rights Agreement. 35 The third amendment to the Patent Law was passed by the National People's Congress on December 27, 2008, and went into effect on October 1, Some of the changes include adoption of international absolute novelty, restrictions on filing applications for foreign patents on inventions or creations made in China, heightened standards for design patents, limitations on inventions based on genetic resources, 32 Benjamin Bai & Helen Cheng, Chinese Supreme Court Brings about Sea Change for Patent Litigation in China, ALLEN & OVERY (Feb. 13, 2012), Rachel T. Wu, Comment, Awaking the Sleeping Dragon: The Evolving Chinese Patent Laws and its Implications for Pharmaceutical Patents, 34 FORDHAM INT L L.J. 549, 555 (2011). 34 Id. 35 Id. at Patent Law of the People s Republic of China, supra note

13 changes in damages calculation, modifications to the compulsory license system, and compulsory SIPO confidentiality examinations. 37 III. Suggestions for Further Study Three outcomes are possible from an invalidation proceeding: total invalidation, partial invalidation and no change. The difference between total invalidation and partial invalidation is of no consequence to the party bringing the invalidation action as long as the claim amendment removes any risk of infringement. While these data would likely be difficult to gather, it would be instructive to understand the extent to which partial invalidations fully met the needs of the party bringing the action. 37 Id

14 Draft for Patent Invalidity Rates in Japan - Sapna W. Palla and Robert Smyth 1 I. Challenging the validity of patents in Japan The processes and mechanisms for challenging patent validity in Japan have changed significantly over the past decade. Currently, there is a dual track system, with two ways in which the validity of a patent can be challenged. A patent can be challenged before the Japan Patent Office (JPO) in an invalidation trial and be declared invalid, or invalidity can be raised as a defense in an infringement suit that is only binding on the parties to the action. Frequently the paths are pursued concurrently. In both cases, the result of an initial ruling can be appealed to the Intellectual Property High Court ( IP High Court ) and subsequently the Supreme Court. Frequently the two paths are pursued at the same time, which creates complications. A. Invalidity Proceedings i. Invalidation Trials Historically, patent validity could only be raised before the JPO. 2 Although this has changed, JPO invalidation trials are still a commonly used mechanism for challenging patent validity, 3 and they remain the only way that a patent can be formally declared invalid. The modern invalidation trial came into being in 2004, when Japan merged its post-grant opposition proceeding and old invalidation trial to create the new invalidation trials. 4 Invalidation trials 1 We would like to thank TMI Associates for their invaluable contributions in providing data on the invalidity rates in Japan. 2 Haito Sun, Post-Grant Patent Invalidation in China, Europe, and Japan: A Comparative Study, 15 FORDHAM INTELL. PROP. MEDIA & ENT. L.J. 273, 296 (2004). 3 In 2010, there were 237 demands for trial for invalidation made to the JPO. EUR. PATENT OFFICE, JAPAN PATENT OFFICE, KOREAN INTELLECTUAL PROP. OFFICE, U.S. PATENT AND TRADEMARK OFFICE, FOUR OFFICE STATISTICAL REPORT 15 (Japan Patent Office ed., 2010). 4 Id. at

15 (sometimes referred to as invalidity trials ) are administrative proceedings before the Appeals Divisions of the JPO. 5 Under the new law, anyone can challenge the validity of a patent in an invalidation trial, 6 and the challenge can be made at any time, even, in some cases, after the expiration of the patent. 7 The review is inter partes, with opportunities for the requesting party to present evidence and an oral hearing 8 unless the chief examiner determines that documentary proceedings will suffice. 9 After the party seeking to invalidate the patent has filed a demand for an invalidation trial, the patentee can file a response. The response can include amendments to narrow the patent claims. 10 The requesting party can then provide more evidence prior to the oral hearing. 11 The hearing is before a panel of three to five experienced examiners. 12 As of 2008, the process of seeking patent invalidation through an invalidation trial took an average of 9.5 months. 13 Prior to that there was a period of several years that saw the process get successively faster. 14 Decisions of the examiners in the invalidation trial can be appealed by either party, with the opposing party serving as the defendant rather than the JPO serving as the defendant, which 5 JAPAN PATENT OFFICE, ANNUAL REPORT 2011, 192 (2011)[hereinafter ANNUAL REPORT 2011], available at 6 Tokkyo ho [Patent Law], Law No. 121 of 1959, art. 123, para. 2 (Japan)(amended 2006)[hereinafter Patent Law (Japan)], translated at Challenging a patent in a trial has a fee of 49,500 (between $600 and $700) plus 5,500 per claim (around $70). ANNUAL REPORT 2011, supra note 5, at Patent Law (Japan), supra note 6, at art. 123, para Id. at art Id. at art. 145, para Sun, supra note 2, at 299 (2004). 11 Id. 12 Patent Law (Japan), supra note 6, at art. 136 para. 1; Sun, supra note 2, at 299 (There are usually three examiners, each with at least ten years of experience.). 13 John A. Tessensohn & Shusaku Yamamoto, Resolving IP Disputes in Japan: Counting the Costs, WIPO MAGAZINE (World Intellectual Prop. Org., Geneva), Feb. 2010, at 16, 17, available at 14 Id. 2

16 it does in most appeals of its rulings. 15 New evidence of references can be introduced at the appellate stage, but new issues cannot be raised. 16 Appeals were heard by the Intellectual Property Division of the Tokyo High Court until April 2005, when the Intellectual Property High Court was established as a Special Branch of the Tokyo High Court, and all of the judges of the Intellectual Property Division became judges on the new court. 17 Appeals are handled quickly at the IP High Court, with an average time of seven to eight months from commencement of the appeal to disposition. 18 Following a ruling at the IP High Court, parties can appeal to the Supreme Court. 19 Throughout the process, patent owners are given several opportunities to amend their patents to avoid invalidation, starting with their response to the demand for an invalidation trial. Furthermore, a patentee seeking an appeal has the opportunity to narrow the scope of the patent by seeking a trial for correction following the JPO s ruling on validity. If the JPO finds a patent invalid, a patentee may amend the claims after submitting an appeal to the IP High Court. If the JPO accepts the amended claims, the High Court will remand the action to the JPO. 20 ii. Invalidity as a Defense in Infringement Actions Although patent validity was once solely under the jurisdiction of the JPO, since 2000, questions of validity can also be raised during infringement actions before district courts. This is 15 Patent Law (Japan), supra note 6, at art Yoshinari Kishimoto, How to Challenge Patent Validity, MANAGING INTELLECTUAL PROPERTY (2005). 17 Katsumi Shinohara, Outline of the Intellectual Property High Court, AIPPI JOURNAL, May 2005, at 131, 131, available at As a Special Branch rather than a division, the court enjoys greater autonomy and resources. Id. 18 Number of Suit Against Appeal/Trial Decision made by JPO Commenced and Disposed, and Average Time Intervals From Commencement to Disposition (~March Tokyo High Court), INTELLECTUAL PROPERTY HIGH COURT, (last visited June 13, 2012). 19 Masahiro Samejima, Editorial, Is Japan A Hostile Environment for Patents?, INTELLECTUAL ASSET MANAGEMENT, Jan./Feb. 2010, at 88, Shuhei Shiotsuki, Presentation, Invalidation Procedure and Infringement Trials in Japanese Courts and Patent Office, 7 CASRIP SYMPOSIUM PUBLICATION SERIES 87, (2001), available at See also Patent Law (Japan), supra note 6, at art. 126, para. 2. 3

17 a result of the Supreme Court s 2000 ruling in the Kilby case, which held that in infringement action, the court should look at obvious questions of validity before ruling on infringement. 21 In 2004, the Patent Act was amended to incorporate this principle. 22 Infringement actions, like all hard IP civil cases, can only be brought in two of the country s fifty district courts: Tokyo and Osaka, which both have specialized IP divisions. 23 Jurisdiction is divided geographically between the courts. 24 The Tokyo District Court tends to handle significantly more patent cases than the Osaka court. 25 Like the JPO s decisions in invalidation trials, district court rulings are appealable to the IP High Court and then to the Supreme Court. 26 Similarly, the turnaround at the IP High Court is fast, and appeals from district courts were disposed of in an average of 7.5 months in Arguing invalidity as a defense in infringement cases has become increasingly popular since the early 2000s, and invalidity is now asserted in 70-80% of infringement cases. 28 The standard used by the court when finding a patent invalid in an infringement action has changed since Kilby. Under Kilby, to invalidate a patent in an infringement case the district court had to find that the JPO would likely find the patent invalid. 29 While the precise standard 21 Sun, supra note 2, at Samejima, supra note 19, at 91. For the amended statute see Patent Law (Japan), supra note 6, at art SHIOCHI OKUYANA, JAPAN PATENT OFFICE & ASIA-PACIFIC INDUS. PROP. CTR., JIII, PATENT INFRINGEMENT LITIGATION IN JAPAN (2007), available at 24 Samejima, supra note 19, at Michael C. Elmer & Stacy D. Lewis, Where to Win: Patent Friendly Courts Revealed, MANAGING INTELLECTUAL PROPERTY (2010). 26 Samejima, supra note 19, at Number of Intellectual Property Appeal Cases Commenced and Disposed, and Average Time Intervals From Commencement to Disposition Courts of Second Instance: Intellectual Property High Court (~March Tokyo High Court), INTELLECTUAL PROPERTY HIGH COURT, (last visited June 13, 2012). 28 Shigeo Takakura, Review of the Recent Trend in Patent Litigation from the Viewpoint of Innovation, RESEARCH INSTITUTE OF ECONOMY, TRADE & INDUSTRY, IAA (Sept. 3, 2008), 29 Sun, supra note 2, at

18 was unclear, 30 there had to be obvious reasons for invalidity and a high degree of certainty that the JPO would invalidate the patent were an invalidation trial to be brought. 31 However, the obviousness requirement was not incorporated into the amended statute. 32 Similarly, the actions a court takes after finding that a patent should be invalidated have changed. The Kilby case stated that if, during an infringement trial, a court found that a patent should be invalid, the patent owner could not obtain relief (injunctive or monetary). 33 Today, as a result of the 2004 amendments to the Patent Act, 34 the standard practice is that after a finding of invalidity, the court dismisses the claim. 35 It is important to note that under both of these systems, any ruling by the court only applies to the parties to the action, as the patent itself is not truly invalidated. Rather, the court has said that because the patent should not be valid, it will not enforce it, and the power to invalidate the patent remains with the JPO. iii. The Function of the Dual System The dual system has the potential create several problems. These can arise where a patent is simultaneously challenged in an infringement suit and an invalidation trial, which is not uncommon. Although the numbers have varied over the past decade, roughly a quarter to a half of demands for invalidation trials are brought in connection with infringement cases Shiotsuki, supra note 20, at 89 (Japanese law does not make the same distinctions between preponderance of evidence and clear and convincing evidence that American law does, so English translations of the case varied in their treatment of the standard.). 31 Id. 32 Toshiaki Iimura, Intellectual Property Infringement Litigations and Recent Movements toward System Reforms, 29 AIPPI JOURNAL 279 (2004). 33 Shiotsuki, supra note 30, at Patent Law (Japan), supra note 6, at art para. 1 ( Where, in litigation concerning the infringement of a patent right or an exclusive license, the said patent is recognized as one that should be invalidated by a trial for patent invalidation, the rights of the patentee or exclusive licensee may not be exercised against the adverse party. ). 35 Masahiro Samejima, Editorial, Is Japan a Hostil Environment for Patents?, INTELLECTUAL ASSET MANAGEMENT, Jan./Feb. 2010, at 88, 91 (2010). 36 Shinjiro Ono, Recent Status and Problems of Patent Appeals and Trials: Effects of Recent Reforms in the JPO Appeal System and of Recent Judiciary Reforms ( ), Including the Establishment of an IP High Court, WINDS FROM JAPAN (The Licensing Execs. Soc y of Japan), Feb. 2008, at 1, 2. 5

19 Fortunately, most invalidation trials occur before court decisions in infringement suits, 37 and one solution to this problem is that a lawsuit for infringement can be suspended until a decision is reached in a trial for invalidation. 38 Additionally, where an invalidation trial is brought in connection with an infringement lawsuit, the average pendency of the invalidation trial was 9.1 months in 2006, down from 19 months in 2000, 39 and the Appeals Divisions have prioritized these cases, so the infringement trial is not significantly delayed. 40 There have been reports of alleged infringers losing after asserting the defense of invalidity then challenging, the validity at an invalidation trial. 41 Given that 29.1% of invalidation trials brought in connection with infringement suits come after the decision in the infringement suit, this is likely to happen. 42 It has been argued that if the JPO finds the patent invalid, then the alleged infringer should be entitled to a retrial on infringement. 43 Another way the courts have sought to resolve the problems arising from the dual track system is through the use of virtual unification of decisions at the IP High Court. 44 When a decision of invalidation on before the JPO and a decision on validity in a district court are appealed they are heard by the same panel of the IP High Court and a virtual unified decision is made in order to avoid conflicting rulings at that level and uniformly resolve the rulings of lower tribunals Ono, supra note 36, at 3. From April 2000, thorough 2006, 70.8% of invalidation trials brought in connection with infringement suits were brought before a court decision. Id. (calculations made from raw data). 38 Patent Law (Japan), supra note 6, at art. 168 para. 1. See also OKUYANA, supra note Id. 40 Id. at Matso Tanaka, Patent Invalidity Defence in Patent Litigation in Japan, ASIALAW JAPANREVIEW, Oct. 2006, at 10, Ono, supra note 36, at 3 (calculations made from raw data). 43 Tanaka, supra note 41, at Tamotsu Shoji, The Dual-Track System in Japan: Will Conflict Result from Invalidity Decisions Being Made in Both the JPO and the Courts?, INTELLECTUAL PROPERTY HIGH COURT, (last visited June 13, 2012). 45 Id. 6

20 In Kilby, the court stated that the rule that district courts should not enforce patents that would likely be invalidated did not apply in special circumstances. 46 One such special circumstance is where the patent can be corrected to avoid invalidity. Although the 2004 amendment to the Patent Act did not explicitly incorporate this concept, it is generally applied to keep the special circumstances limitation, which greatly complicates the double track system where a patent owner applies for a correction because the alleged infringer can apparently not raise an invalidity defense until the correction is resolved. 47 B. Grounds for Invalidity A patent can be invalidated on a wide variety of grounds laid out in statute. 48 These include the improper granting of the patent to a foreign national whose country does not have reciprocity with Japan; lack of novelty; obviousness; failure to conform with public order, morality or public health; lack of a sufficiently clear explanation of the invention; and failure to follow joint ownership rules. 49 Notably, a patent cannot be held invalid for failure to disclose relevant prior art to the JPO. 50 II. Summary of Findings A. Invalidation Trials The number of demands for invalidation trials has fluctuated over the past twenty years, but the system has also changed significantly during that time. The number of demands 46 Tanaka, supra note 41, at Tanaka, supra note 41, at Patent Law (Japan), supra note 6, at art. 123, para Id. at art. 123, para Article 36, paragraph 4, subparagraph iii of the Patent Act, is not listed in article 123, paragraph 1 as grounds for invalidation. 7

21 increased drastically between 1996 and This was possibly due to the 1996 elimination of pre-grant opposition. Between 2003 and 2004, the number of demands increased dramatically as well, likely due to the elimination of the post-grant opposition proceeding. 52 Interestingly, although there had been almost 3900 post-grant oppositions filed in 2003, the number of demands for invalidation only increased by 104 when the proceeding was eliminated, and in 2006, the number of demands returned to its 2003 levels. 53 Demands for Patent Invalidation and Dispositions of Invalidation Trials 54 Year Demands Final Dispositions in Appeals Department Accepted (Including Partially Invalidated) Not Accepted (Including Dismissal) Withdrawal/abandonment Ratio of Invalidations to New Demands Ratio of Invalidations to Total Number of Demands Ruled on by the JPO JAPAN PATENT OFFICE, ANNUAL REPORT 2005, 91 (2005), [hereinafter ANNUAL REPORT 2005] available at 52 ANNUAL REPORT 2011, supra note 5, at ANNUAL REPORT 2011, supra note 5, at 30; JAPAN PATENT OFFICE, ANNUAL REPORT 2008, 143 (2008), [hereinafter ANNUAL REPORT 2008] available at 54 See ANNUAL REPORT 2011, supra note 5, at 177; ANNUAL REPORT 2008, supra note 53, at 143; and JAPAN PATENT OFFICE, ANNUAL REPORT 2005, supra note 51, at 91. 8

22 Ratio of Patents Invalidated to the Total Number of Demands Ruled on by the JPO Rate of Patent Invalidation in the Appeals Department Year 9

23 Patents Upheld by the Appeals Department / Total Number of Demands Made for Invalidation Ratio of Patents Upheld by the Appeals Department to the Total Number of Demands Made for Invalidation Year Between 2002 and 2010, the rate at which the JPO has found patents invalid has varied between 44.2% in 2010 and 68.8%, which marked a peak in However, where the JPO has upheld the patent, the High Courts have been likely to reverse that ruling. In fact, between 2002 and November 2007, they reversed JPO decisions affirming the validity of patents half the time. 55 However, during the same period, they upheld JPO decision invalidating patents only 10.6% of the time. 56 The Rate of Reversal of Invalidation Trial Decisions 57 Fiscal Year * Overall 39.0% 22.6% 23.9% 22.0% 18.3% 29.4% (41/105) (28/124) (27/113) (18/82) (19/104) (20/68) JPO s Decision 20.0% 12.2% 1.5% 8.3% 11.5% 10.4% 55 Ono, supra note Id. 57 Id. 10

24 Percent of JPO Decisions Reversed Invalidating Patents JPO s Decisions Affirming the Validity of Patents *April-November (11/55) (10/82) (1/65) (4/48) (9/78) (5/48) 60.0% 42.9% 54.2% 41.2% 38.5% 75.0% (30/50) (18/42) (26/48) (14/34) (10/26) (15/20) 80.0% Rate at which JPO Invalidation Decisions are Reversed 70.0% 60.0% 50.0% 40.0% 30.0% Overall JPO s Decision Invalidating Patents JPO s Decisions Affirming the Validity of Patents 20.0% 10.0% 0.0% * Year B. District Court Rulings Patent owners have not been very successful in Japanese district courts, both generally and in terms of patent invalidation. 58 Patentees lose in district courts around 80% of the time, 58 Takakura, supra note

25 and invalidity is increasingly raised as a defense and used by the courts to find for the alleged infringer. 59 District Court Rulings on Patent Infringement Cases 60 Year 2000* Number of Rulings Number of Cases Patentees Defeat rate 82% 78% 79% 85% 83% 83% 87% 70% Number of cases in which defendant asserted patent invalidity Ratio to the total number of cases Number of cases in which a patent was considered invalid Ratio to cases in which defendant asserted patent invalidity Ratio of cases ruled against patentee 22% 60% 59% 68% 80% 71% 83% 80% % 34% 38% 61% 41% 42% 70% 55% 11% 26% 28% 49% 40% 37% 66% 63% *April-December 59 Id. 60 From id. 12

26 Percentage of Infringement Cases 90% Percentage of Infringement Cases in which Patent Invalidity Was Raised as a Defense 80% 70% 60% 50% 40% 30% 20% 10% 0% 2000* Year 13

27 Cases where Patent Was Found Invalid / Cases in Which Invalidity Was Raised 80% Percentage of Successful Challenges to Validity in Infringement Cases 70% 60% 50% 40% 30% 20% 10% 0% 2000* Year III. Changes in National Law the Last 10 Years Understanding recent changes in Japanese patent law requires some historical background. Since 1996, Japanese patent law has undergone a number of substantial changes, resulting from judicial rulings, legislative changes, and changes in the behavior of practitioners. Prior to 1996, patents could be challenged in invalidation trials or through pre-grant opposition. 61 In 1996, pre-grant opposition was eliminated and replaced with a post-grant opposition proceeding, because the old system was seen as causing too many delays and was used to harass patent applicants. 62 In 2003, Japan eliminated its ex partes post-grant review system and modified its trial for invalidation because of difficulties it posed for challengers of patents, who 61 Sun, supra note 2, at Id. 14

28 had to identify the true party in interest and file the opposition within six months of the patent s issuance, and because the post grant proceeding was seen as significantly overlapping with the then existing trial for invalidation. 63 These changes went into effect on January 1, All of these proceedings occurred before the JPO, and for many years the JPO had exclusive jurisdiction over invalidation proceedings. However, in 2000, the Supreme Court ruled in Texas Instruments v. Fujitsu, Ltd. (the Kirby case) that courts should look at invalidation before ruling on infringement, allowing district courts who heard infringement cases to rule on patent validity. 65 In 2004, the Patent Act was amended to codify this principle. 66 A final statutory reform took place in April 2005, when the Intellectual Property High Court was established to hear appeals from District Court rulings on intellectual property and JPO rulings. 67 Before this, all appeals went to Tokyo High Court. Although the Tokyo High Court was a court of general appellate jurisdiction, it had divisions that specialized in intellectual property law. The judges in these divisions became the judges on the new courts. 68 Over recent years, there has been a substantial shift away invalidation trials to finding invalidation in infringement actions, 69 and courts seem to be more willing to exercise that authority. However, invalidation trials before the JPO remain the only way that a patent can be truly invalidated. 63 Id. at Id. at Id. at Samejima, supra note 19 at Shinohara, supra note 17 at Id. 69 Ono, supra note

29 Robert Smyth, Ph.D., is a partner in Morgan Lewis's Intellectual Property Practice. Dr. Smyth's practice focuses on all aspects of biotechnology and pharmaceutical patent prosecution (both domestic and foreign); opinions involving patent infringement, freedom to operate, and validity; pre-litigation analysis; and license agreements. His practice also focuses on intellectual property due diligence analysis associated with venture capital financing and public offerings. Dr. Smyth received his J.D. from Temple University, James E. Beasley School of Law. He also holds a Ph.D. in pharmacology from Temple University School of Medicine and a B.S. in biology from Syracuse University. In addition, Dr. Smyth completed his post-doctoral fellowship in virology at the University of Pennsylvania School of Medicine.

30 Country Report for IPO Invalidity White Paper Republic of Korea I. Patent Enforcement and Invalidity in Korea The Korean patent litigation system is a bifurcated system where questions of infringement are handled by the civil courts and questions of validity are handled by the administrative tribunals in the Korean Intellectual Property office ( KIPO ). The Intellectual Property Tribunal ( IPT ) within KIPO decides whether a patent is valid when there is a formal challenge. Under the bifurcated system in Korea, only the IPT is empowered to decide the validity of a patent but not the civil courts. A civil court is required to treat a patent as valid since there is a presumption that a patent remains valid in Korea unless or until there is a final and conclusive invalidation of the patent through an administrative invalidation action. Korean Court System Supreme Court KIPO Patent Court High Court Intellectual Property Tribunal Examiner - Application - Invalidation Action - Confirmation of Scope Action District Court Infringement - Civil - Criminal Validity Issues Infringement Issues As such, jurisdiction over cases involving intellectual property in Korea is divided DRAFT - June 25, 2012 Kenneth K. Cho 1

31 Country Report for IPO Invalidity White Paper Republic of Korea between civil courts, which have jurisdiction over infringement actions, and the IPT and Patent Court, which are responsible for invalidation, cancellation and confirmation-of-scope trials. a. The Court System In accordance with Chapter V of the Korean Constitution, the Korean court system is comprised of three tiers: the courts of original jurisdiction, which are known as the district courts; the intermediate appellate courts, which are known as the high courts; and the Supreme Court. Both the district courts and the high courts are divided into geographic districts. The district courts are the courts of first instance for both civil and criminal matters, and include the specialized family court and the administrative court. The number of judges on a panel in the district court is based on the population of its jurisdiction. Appeals from decisions of the district courts are taken to the high courts. The high court undertakes a de novo review of the district court s decisions on matters of both law and facts. Therefore, the high court will accept new evidence and arguments in addition to reviewing the record of the district court trial. The high court s panel consists of three judges. Some high courts have panels of judges with expertise in intellectual property matters. Appeals from the high courts are presented to the Supreme Court, which has discretion as to whether to accept an appeal. The panel will generally consist of four judges. The Supreme Court has judicial assistants who specialize in intellectual property matters having a rank equivalent to that of high court judges. It is important to note the Republic of Korea follows the civil law tradition, and thus its judicial system emphasizes statutory interpretation over judicial precedent. As a result, a Supreme Court decision is not necessarily a precedent in subsequent cases of a similar nature, but merely persuasive. However, the interpretation of a law rendered in a particular case by the Supreme Court does have a mandatory binding effect on the lower courts when the case is remanded. DRAFT - June 25, 2012 Kenneth K. Cho 2

32 Country Report for IPO Invalidity White Paper Republic of Korea The most common defenses raised in response to an infringement action are a denial of the infringement, a claim of invalidity, and a request for a negative confirmation of scope trial. b. Administrative Actions Before KIPO i. Invalidation Action An invalidation action is an administrative action, which may be filed with the Intellectual Property Tribunal of KIPO challenging the validity of a Korean patent. It may be initiated by either an interested party or by an examiner of the KIPO at any time, even after a patent has expired. An interested party is defined as any person who is, or is likely to be, affected because he may have the patent in question asserted against him by the patentee. Therefore, any person who is in the business of manufacturing or selling products made by using a patented invention or who is suspected of using a patented invention from the nature of his business, is an interested party for the purpose of an invalidation action. The IPT is an administrative tribunal within KIPO (comparable to the Board of Patent Appeals and Interferences 1 in the U.S.P.T.O.). The IPT is the first ex parte appeal review board for patent prosecution appeals. The IPT is also an inter-partes forum where opposing parties may resolve disputes on the validity and scope of enforceability for a granted patent. For issues on the validity of a patent, the IPT has exclusive subject matter jurisdiction. The patentee, the alleged infringer or any other party in interest may file such administrative patent related actions, either in parallel with or independent of a district court action. It is common for a defendant to initiate a patent invalidation action when accused of infringement. As explained above, invalidation actions are handled by the IPT and the Patent Court, whereas infringement actions are handled by the district courts, but a decision of invalidity by the IPT or the Patent Court will not have a binding effect on a court until it becomes final and can no longer be appealed. Of course, a district court will give close 1 On September 16, 2012 the BPAI will be renamed the Patent Trial and Appeal Board (PTAB) under the America Invents Act. DRAFT - June 25, 2012 Kenneth K. Cho 3

33 Country Report for IPO Invalidity White Paper Republic of Korea consideration to an invalidation decision made by the IPT or the Patent Court, and obtaining relief from patent infringement notwithstanding a decision of invalidity, is difficult. ii. Confirmation of Scope Confirmation of scope trials, which are tried before the IPT and appealed to the Patent Court, are similar to U.S. declaratory judgment actions on non-infringement and focus on whether a product or method falls within the scope of the patent claims. Although courts are not bound by the results of confirmation of scope trials, the ruling of the IPT or the Patent Court in such trials is highly persuasive. c. The Patent Court Jurisdiction for review of IPT decisions lies solely with the Korean Patent Court. The Patent Court was created under the provisions of the Court Organization Act of July 8, 1994, and hears appeals from decisions made by the IPT of KIPO. The Patent Court is an intermediate appeal court similar to the Court of Appeals for the Federal Circuit in the United States (but with more limited jurisdiction i.e., reviews appeals from the KIPO/IPT actions only). It is a judicial court, which reviews IPT administrative decisions, and may be considered the first "Article IIItype" tribunal for review of administrative validity and scope decisions. At the present time, the Patent Court does not review patent infringement-related decisions from the district courts. Further appeals from the Patent Court are reviewed by the Korean Supreme Court. Unlike the other high courts, however, the Patent Court has national jurisdiction. i. Staffing The Patent Court is comprised of three panels, each panel consisting of three judges. These judges are appointed by the Supreme Court from among high court judges who have experience in patent cases or have an academic background in science and/or engineering. In an effort to aid judges in handling patent cases, the Court Organization Act also provided for the appointment of up to fifteen technical examiners. DRAFT - June 25, 2012 Kenneth K. Cho 4

34 Country Report for IPO Invalidity White Paper Republic of Korea ii. Jurisdiction As the only one of its kind in Korea, the Patent Court has national jurisdiction, and can review decisions rendered by the IPT regarding patent applications and the validity of patents de novo. Any appeals before the Patent Court should be brought within thirty days from the date of receiving a certified copy of the decision from the IPT. Since IP rights such as patents and utility models are presumed valid until declared otherwise by KIPO, civil courts may at their discretion decide to stay the infringement proceedings pending a decision by KIPO on the issue of validity. However, the trend appears to be for courts to proceed with litigation parallel to any KIPO actions. II. Civil Courts beginning to consider issues of patent validity when considering issues of Patent infringement Under this dual track system for patent enforcement, the Korean Civil Courts have encountered a rather natural question: whether to grant an injunction or award damages for patent infringement when a patent is likely to be invalidated? Like elsewhere in the world, a defendant is likely to challenge the validity of a patent that is being asserted, and invalidity is a commonly-raised defense by defendants in Korean cases. Traditionally, when a defendant raises a patent invalidity defense and the invalidation decision is still pending, the civil courts can only review the infringement issues or stay the infringement action pending a decision from a patent invalidation action. The Courts, however, recognize certain situations where it would be unfair to enforce a patent or delay the infringement action for a period of time when a patent is likely to be invalidated. In order to resolve this conflict, the Supreme Court allowed the civil court to dismiss the infringement action when the patent lacks novelty (Supreme Court Decision No. 86 Do rendered on DRAFT - June 25, 2012 Kenneth K. Cho 5

35 Country Report for IPO Invalidity White Paper Republic of Korea December 9, 1986). Since this decision, there have been many discussions and disputes about whether the civil courts should be empowered to also review the inventive step issue (i.e., obviousness), or whether this issue remains solely under the realm of KIPO. Some scholars and jurists opined that novelty is a matter of fact while inventive step involves complex legal questions and considerations that should be examined by the administrative tribunal at KIPO. There were some Supreme Court decisions that denied the civil court s review of the inventive step issues. Contrary views also developed arguing that it is not clear how to distinguish between novelty and inventive step issues. a. New holding on the review of the inventive step issue in an infringement action The Korean Supreme Court in an unanimous en banc decision held that Korean civil courts (i.e., the District and High Courts) could dismiss a patent injunction or damages claim for lack of inventive step even before a patent is formally invalidated by the IPT (Korean Supreme Court Decision No Da rendered on January 19, 2012). While patent enforcement in Korea is bifurcated into two forums where questions of infringement are handled by the civil courts, and questions of novelty and inventive step are handled by administrative tribunals, the Courts en banc decision opens the door for civil courts to consider questions of validity when dismissing a patent infringement action thereby opening the door for more fierce battles in civil court actions. After many years of controversy on the issue, the Supreme Court rendered a unanimous en banc decision (i.e., all eleven Supreme Court Justices reviewed and decided this case) in January 2012 that the Korean Civil Courts can review inventive step issues and dismiss an injunction or damages action on the grounds that the patent lacks inventive step. The subject case was a patent infringement action between two Korean companies involving an invention related to a drum washing machine. A patent invalidation action and confirmation of scope action were also pending between the parties. The High Court reviewed the inventive step issue and dismissed the patentee s petition to bar infringement during the appellate trial. The Supreme Court merely affirmed such power, but reached a substantively DRAFT - June 25, 2012 Kenneth K. Cho 6

36 Country Report for IPO Invalidity White Paper Republic of Korea different conclusion and found that the patent did not lack inventive step. remanded back to the High Court. The case was While the specific case details may not be directly relevant to the Supreme Court s new holdings as the High Court already conducted the inventive step review, the Supreme Court put forth various rationales to arrive at its new holding. The Supreme Court especially emphasized the purpose of the patent system and Patent Act (to contribute to the development of industry by protecting the public welfare and the inventor s interests). The Supreme Court reasoned that, if a patent lacks inventive step, the patent does not make any contribution to the development of industry and should be part of the public domain where anyone is free to use it. Accordingly, if an exclusive right is granted to an invention which lacks inventive step, and thus should have been part of the public domain and is erroneously granted a patent without any special restriction, the public interest would be harmed and such a grant would be contrary to the purpose of the patent system. In addition, since a patent is a form of intellectual property right, it should be exercised according to its substantive value in the spirit of justice and fairness. Allowing a patentee of a patented invention which lacks inventive step to obtain an injunction or damages award against a person practicing the invention would give the patentee an unfair advantage and do harm to the person practicing the invention, therefore being an injustice to the parties. b. Possible Future Impact on Korean Patent Practice As many patent practitioners know, challenging the validity of an asserted patent is a very common defense strategy. Furthermore, invalidity challenges are more frequently based on a claim of lack of inventive step rather than lack of novelty. Defendants in past patent infringement actions encountered certain barriers when raising inventive step invalidity defenses. While the lack of inventive step defense was raised in many cases in the past, most court panels were reluctant to hear the arguments and make a determination on these defenses without official guidance from the IPT. The Supreme Court's recent en banc decision now changes the landscape and allows civil courts to hear issues relating DRAFT - June 25, 2012 Kenneth K. Cho 7

37 Country Report for IPO Invalidity White Paper Republic of Korea to infringement, novelty and inventive step much like civil courts in the United States. Korean courts will still maintain the validity of a patent until a final administrative patent invalidation action decision even when the civil court finds the patent invalid. However, as a practical matter, one might expect significant difficulties in bringing another or related infringement action once the previous infringement action is dismissed due to the lack of novelty or inventive step. Before the new Supreme Court holding, when patent validity was challenged based on lack of inventive step and this was the only disputed issue in an enforcement action, a great deal of focus was given to the invalidation action. For some cases, the infringement action simply remained pending without substantive developments for a significant period while parties expended great resources and efforts in the invalidation action. The new Supreme Court decision will help to change the balance between the civil court and invalidation actions. Since the civil courts reviewing the infringement action can now review the inventive step issue, it is expected that disputes regarding patent validity issues will likely be more vigorously argued during infringement actions. Civil courts may even begin to render decisions without waiting for the first instance decision from the patent invalidation action. Also note, civil courts may be more inclined to grant an injunction or damages award by finding inventive step without awaiting a final decision in the invalidation action (as the conclusion by the Supreme Court for the subject case). A patentee who plans to file a patent infringement action will need to be well prepared on all the patent invalidity defense prior to initiating an action, and should review all prior art before filing an infringement action in order to formulate the most effective enforcement strategy. III. Analysis of Invalidity Data Below, is a chart outlining the statistics for the number of invalidation actions filed against patents and utility models in Korea from 2001 to 2011 (an eleven year period): DRAFT - June 25, 2012 Kenneth K. Cho 8

38 Country Report for IPO Invalidity White Paper Republic of Korea Invalidation action (IPT, Patent and Utility Models) Percentage (ratio of invalidatied rights) has been decreasing after the peak, 72.2%, in 2009 Invalid (granted) Valid (affirmed) Total Percentage Source: Intellectual Property Statistics for 2010, KIPO The statistics summarized above are from the Korean Intellectual Property Office. A review of the data shows that there was a significant increase in the number of invalidity actions filed with the IPT when you compare the data from the early 2000's (i.e., ) and the data for the last seven years (i.e., from ). There was a two-fold increase in the number of invalidation actions that were filed in the later years. The data shows that the invalidity rate peaked in 2009 at 72.2% with a steady increasing slope starting from After the peak in 2009, the invalidity rates have been on a steady decline towards the 2006 levels. Also, the total number of invalidity actions was lower in 2009 than in 2005, 2006, 2007, 2008, 2010 and 2011 which also contributes to the higher percentage even though the IPT invalidated about the same number of patents as in DRAFT - June 25, 2012 Kenneth K. Cho 9

39 Country Report for IPO Invalidity White Paper Republic of Korea The data seems to indicate that the invalidity rate of challenged Korean patents is decreasing back toward the levels in the early 2000's. This observation might be compared to a pendulum which swings between extremes. It appeared as if the invalidity rate in 2009 corresponds to one extreme and the statistics are moving back towards the middle ground on the way to the other extreme. DRAFT - June 25, 2012 Kenneth K. Cho 10

40 Kenneth K. Cho is a senior U.S. attorney in the intellectual property practice group of Kim & Chang specializing in patent licensing, litigation and counseling matters. Prior to returning to private practice, Mr. Cho spent 9 years in-house at Philips IP&S, AT&T Corp and Altitude Capital Partners. Mr. Cho was the IP Counseling and Acquisition Manager for the Consumer Electronics product division of Philips and a patent assertion attorney at AT&T Corp. Mr. Cho also spent more than a decade in private practice specializing in patent, trademark and copyright litigation, procurement and counseling in various technology fields before working in-house. Mr. Cho is a member of the Asia Practice Committee of the Intellectual Property Owners Association (IPO); the chairman of the IP Practice in the Far East Committee of the American Intellectual Property Law Association; and a member of the International Association of Korean Lawyers where he currently serves as the chairman of the Board of Directors and is a former past President of the Overseas (U.S.) chapter. Mr. Cho also serves on the Board of Directors for the Korean American Lawyers Association of Greater New York (KALAGNY). Mr. Cho is a trained mediator through the New York State Office of Court Administration. He is admitted to the bars of New York, New Jersey and the District of Columbia, and is also admitted to practice before the U.S. Patent & Trademark office.

41 Robert B. Furr, Jr. is Senior Patent Counsel with INVISTA S. à r. l., in Wilmington, Delaware. Rob earned his undergraduate degree in chemical engineering from Georgia Tech and his law degree from Rutgers. A former chair of the IP section of the Virginia State Bar, Rob also teaches patent law and patent practice at Widener Law School.

42 Sapna W. Palla is Counsel in the Litigation Department in the New York office of Kaye Scholer LLP. Ms. Palla is an experienced litigator representing clients in a variety of litigation matters including intellectual property, related antitrust issues, bankruptcy and complex business and commercial issues. In the intellectual property area, Ms. Palla s practice encompasses an array of technologies including pharmaceuticals, biotechnology and drug delivery systems with a particular focus on Hatch-Waxman patent infringement litigations. Ms. Palla also counsels clients regarding U.S. patent law, by providing them with infringement, validity and enforceability opinions, and conducting patent due diligence. She also has experience in issues related to Asian patent law with a focus on China and India. In the complex business and commercial area, Ms. Palla s practice includes commercial litigation in all phases of federal and state litigation in areas such as securities, fraud and contracts, and adversary proceedings in bankruptcy court. Ms. Palla practices before both state and federal courts, including appeals to the Federal Circuit, and is experienced in alternative dispute resolution such as arbitration and mediation. Ms. Palla is an active participant in the firm serving on the Diversity Committee and the Life Sciences Committee. Ms. Palla is committed to pro bono legal services. In 2008, she was honored by the Pennsylvania Capital Representative Project for extraordinary efforts on behalf of Pennsylvania s death row inmates. In 2001, she received the Legal Aid Society award for Outstanding Pro Bono Representation. Ms. Palla has a J.D, summa cum laude, from the Pace University School of Law and a BBA (International Management with a Pre-Medical Concentration), magna cum laude, from Pace University. She speaks three Indian languages (Hindi, Marathi and Telegu) and is conversant in French.

43 White Paper Report United States Patent Invalidity Study Introduction The U.S. patent laws are predicated on the constitutional goal to promote the progress of science and useful arts, by securing for limited times to inventors the exclusive right to their respective inventions. U.S. Constitution, Art. I, Sec. 8, Cl. 8. An important aspect of this protection is the assurance that only patent applications meeting the statutory requirements become U.S. Patents. The statutory provisions are set forth in the United States Code, primarily in 35 U.S.C , and describe what subject matter may be patentable and the conditions for patentability. In addition to rigorous prosecution of patent applications in the U.S. Patent & Trademark Office, the U.S. system also provides multiple avenues for a party to challenge the validity of an issued U.S. patent. One avenue to challenge patent validity is through the Federal Courts in the United States. Another avenue utilizes ex parte or an inter partes reexamination procedures in the U.S. Patent & Trademark Office ( U.S.P.T.O. ). As the name implies, the ex parte reexamination is conducted between the applicant and the U.S.P.T.O, while the inter partes reexamination includes limited involvement of a third party. In the coming months, additional options for challenging patent validity will become available as the recently enacted America Invents Act is being implemented by the U.S.P.T.O; i.e., a post-grant review and an inter parties review. These new procedures are designed to be quick, less costly and use more technically-trained adjudicators than the U.S. Federal court system. These procedures may provide welcome relief to litigants facing protracted litigation and sky-rocketing discovery expenses. However, potential estoppel issues in the new law may be a deterrent to the use of these new procedures for some litigants. Thus, it remains to be seen whether a significant amount of patent litigation will shift away from the Federal Courts as a result of the new laws. The U.S. Federal Courts are currently the primary means to invalidate a U.S. Patent. Any district court having personal jurisdiction over the defendant may be used by a plaintiff. A centralized appeal system then shuttles all patent cases to the Federal Circuit Court of Appeals. Increasingly, decisions of the Federal Circuit are being reviewed by the U.S. Supreme Court. This article analyzes how the various Federal courts have decided patent cases as it relates to patent invalidity as well as the statistics on the use of patent reexaminations in the U.S.P.T.O.

44 Another forum for enforcing IP rights is in the U.S. International Trade Commission (USITC), under Section 337 of the Tariff Act of 1930, as amended (19 U.S.C.A. 1337). Under Section 337, owners of U.S. patents, trademarks and copyrights can request the USITC investigate allegations of unfair methods of competition and unfair acts involving the importation and sale of certain articles in the U.S. that are considered unlawful under Section Summary of findings from Federal District Courts Methodology for District Court Data Data for this article was compiled by searching for all patent cases on Westlaw and LexisNexis from 2007 to 2011 that were filed in a federal district court where a disposition on the validity of a patent was decided. Two-hundred and eighty-three cases were identified from 2007 to 2011 where the validity of a claim in a patent was challenged. District Court cases were only included in the analysis if a disposition on the validity of the claims was made by the Court. a. Invalidity Rates in Federal District Courts Two-hundred and eighty-three (283) cases were identified where patent validity was determined by a Federal District Court between 2007 and Of the 283 District Court cases identified, only 39 cases were identified where the claims which were challenged in the patent were determined to be valid and enforceable. The table below is a summary of this data by year. Patent Cases in District Courts involving validity by Year Total Cases where claims in patent held invalid Cases where claims in patent held valid Percent where claims in patent held valid 20% 14% 17% 9% 6% 14% Total From the above table it is clear that while the number of cases challenged in District Court where validity of the claims in the patent was at issue remained the same year over year, the outcome did not. Specifically, there appears to be a decreasing percentage in the past two years of cases in District Courts

45 where the claims which were challenged were held to be valid and enforceable. While this may relate more to a propensity not to pursue patent litigation in instances where validity is the primary issue, it may also indicate a trend of the District Courts to side with the infringer and not the patent holder. The impact of a jury verdict in a District Court trial was also assessed in the below table which shows the percentage of cases in which a jury was utilized. There appears to be no clear trend based on this data as the percentage of juries which found claims in a patent to be valid or invalid did not appear to significantly differ % cases with jury trial where claims in patent held invalid 13% 20% 18% 23% 11% % cases with jury trial where claims in patent held valid 33% 12% 18% 20% 33% b. Industry Specific Observations The chart below provides additional insight into the number of patent-related decisions by industry from 1995 through Decisions involving patents were mapped to a particular industry and data is segmented into three time periods to identify trends in decisions by industry. Even when separating the data over the different time periods, the consumer products industry is first in the percentage of decisions in each time segments. This demonstrates that throughout the period, patent cases involving consumer products technology has dominated other industries (see Berry et al. PWC 2011 Patent Litigation Study). Industry 1995 to to to 2010 Cases Rank Cases Rank Cases Rank Total 1 Consumer Products Biotechnology/Pharma Industrial/Construction Medical Devices Computer Hardware/Electronics Business/Consumer Services

46 Industry 1995 to to to 2010 Cases Rank Cases Rank Cases Rank Total 7 Software Chemicals/Synthetic Materials Automotive/Transportation Telecommunications Food/Beverages/Tobacco Clothing/Textiles Metals/Mining Energy Agriculture Financial Institutions/Investment Management/Insurance 17 Internet/Online Services Media Environment/Waste Management Aerospace/Defense Totals Summary of findings from Federal Appeals Court Methodology for Appeals Court Data Data for this section was compiled by searching for all patent cases on Westlaw and LexisNexis from 2002 to May 25, 2012 that were appealed to the Federal Circuit. 1,800 cases were reviewed and sorted based on whether the case was decided on patent invalidity. The charts do not include cases where the Federal Circuit determined that the lower court s finding of patent validity was incorrect but remanded the case.

47 A master case chart was prepared which include sections for case name, holding, disposition of the court, and grounds upon which the court invalidated the patent. Once the data was collected the graphs below were created based on the information in the case chart. Patent Invalidity in the Federal Circuit The following graphs reflect the data that was compiled from the Federal Circuit s cases. We analyzed the over 1800 cases that were decided by the Federal Circuit between 2002 and Chart 1 shows the total number of patent cases appealed to the Federal Circuit between 2002 and 2012 as compared to the number of patent cases where the Federal Circuit invalidated the subject patent. This table provides an overview of the total number of cases appealed to the Federal Circuit on a yearly basis (shown as blue bars). Over the years, the number of cases appealed to the Federal circuit has remained substantially steady averaging 180 cases per year, rising slightly in 2008 and Chart 1 also graphs the number of patents invalidated each year by the Federal Circuit. This data includes Federal Circuit affirmances of a lower court s determination of invalidity during summary judgment or a trial. Interestingly, this number has increased over the 10 years charted (see Chart 1 above, data in red). Particularly, since 2007, the number of patents invalidated by the Federal Circuit has remained consistently higher than in the years prior. Further, in the first six months of 2012, more patents have been invalidated than in any of 2002, 2003 or 2004, suggesting that 2012 will produce an

48 even higher number of invalid patents. As discussed in more detailed below, this new trend by the Federal Circuit may be due to the increased scrutiny of the U.S. Supreme Court into the outcome of patent cases. Chart 2 illustrates this data as a yearly percentage, showing the rate patents have been invalidated by the Federal Circuit between 2002 and Here it becomes even more clear a trend is forming, toward patent invalidation by the Federal Circuit. Chart 3 compares the total number of cases reviewed by the Federal Circuit to number of cases where the challenged patent was held valid by the Federal Circuit or was remanded for further review. The data illustrates most patents are maintained despite the increasing trend seen in charts 1 and 2.

49 Chart 4 illustrates the rate at which the district court invalidates patents as compared to the rate at which the Federal Circuit affirms that lower court s holding of invalidity. The light blue bars illustrate the total yearly number of cases where a lower court held a patent invalid, whereas the dark blue bars represent the cases where the Federal Circuit, upon review, reversed a lower court s decision. As expected only a fraction of cases decided by the district court are considered by the Federal Circuit (compare light blue bars with dark blue bars). The red line graphs compare the rates at which a district court invalidates a patent (light red line) to the affirmance rate by the Federal Circuit where patent validity was the basis for the holding (dark red line). When the Federal Circuit considered a case decided

50 by the district court, it was more likely to affirm the lower court s decision than reverse it. These line graphs show that when the lower court invalidated a patent, the Federal Circuit affirmed that decision more than 70% of the time over the years examined. Chart 5 analyzes the statutory basis for invalidity by the Federal Circuit over the 10 years from 2002 through This chart illustrates that obviousness is most frequently the basis for invalidity by the Federal Circuit, followed by anticipation. Chart 6 analyzes the trends in the bases for patent invalidity by the Federal Circuit over the years. Consistent with the results seen in Chart 5, obviousness (the white portion of each year s bar) represents the largest portion of invalidity decisions during each of the years analyzed. Indeed, there appears to be an increasing trend in the past several years for the Federal Circuit to base its invalidity decision on obviousness. Chart 6 also reveals that in recent years an increasing number of patents have been invalidated under 35 U.S.C. 101 as not directed to patentable subject matter. These cases include several that have reached the U.S. Supreme Court, such as Bilski v. Kappos, 130 S. Ct. 3218, 561 U.S. (2010), and Mayo Collaborative Serv. v. Prometheus Lab., Inc., 130 S. Ct (2010).

51 Chart 7 looks at the subject matter in the cases where the patent invalidity was determined by the Federal Circuit. Patents directed to mechanical devices and pharmaceutical drugs were most susceptible to patent invalidity. Cases categorized as mechanical devices were directed to patents describing devices such as twist drill bits, trampoline safety devices and pre-cast concrete blocks. Cases categorized as pharmaceutical included patents directed to traditional drugs as well as chemical molecules and food supplements. One may speculate that these categories of subject matter are more well-understood areas of technology, therefore leading to their closer scrutiny (and more crowded prior

52 art). However, the table also illustrates that the validity of patents directed to computer processes and business methods are increasingly being challenged. Cases in these categories include patents directed to computer-driven methods of detecting fraud in a credit card transaction, systems for performing money transfers, and computer-aided design of custom orthodontic appliances. These technologies are highly technical and therefore less understood, yet their patentability is also subject to increased scrutiny. In recent years, patents in these categories have been increasingly being challenged as unpatentable under 35 U.S.C Patent Invalidity in the Supreme Court Chart 8 shows the number of patent cases granted certiorari to the Supreme Court between 2002 and The number of patent cases granted certiorari has risen over the years, leading many to speculate that the Supreme Court is becoming more involved in areas of the law generally governed by Federal Circuit. However, as the line graph below shows, the Supreme Court has not become more proactive in invalidating patents per se. The rate of patents being invalidated based on subject matter is much lower than the rate patents are invalidated based on procedural issues. In most cases, the Supreme Court remanded the case to the lower courts to be decided according to the guidelines they provide.

53 5. Patent Invalidity in the International Trade Commission As the USITC is not an Article III court, its determinations on issues such as patent validity and infringement are not binding on district courts or the Federal Circuit. Nonetheless, the USITC has been the forum of choice for many patent disputes between big corporations. A recent article by Bryant Lee provides insightful statistics on how often a patent was determined to be invalid on summary determination in the USITC. 1 The Lee article analyzes the USITC Section 337 investigations from January 1, 1990 to June 30, In that time period, 71 motions for summary determination alleging patent invalidity based upon anticipation were decided. 3 Of the 71 motions, the Administrative Law Judge (ALJ) granted summary determination 14 times or found 19.7% challenged patents invalid. 4 Of those 14 determinations, the Commission upheld the ALJ s decision nine times. 5 Thus, in approximately 12.7% of summary determination challenges, the USITC found the asserted patent(s) to be invalid based upon anticipation. 6 Lee similarly evaluates the number of occurrences where a patent was held invalid based upon obviousness grounds. 7 The study found that of the 28 motions for summary determination, zero were granted by the ALJ, and zero were found by the Commission. 8 As mentioned supra, USITC decisions are not binding on district courts and, arguably, not even persuasive. The Federal District Court decisions in Texas Instruments Inc. v. Cypress Semiconductor Corp 9 and Texas Instruments Inc. v. USITC 10 illustrate this issue. Initially, Texas Instruments filed a 1 See Bryant Lee, The Odds of Winning Summary Determination of Invalidity at the International Trade Commission, 337 REPORTER: THE PAUL J. LUCKERN SUMMER ASSOCIATE EDITION, Volume XXXIV, (Summer 2011). 2 Id. at paragraph bridging pp Id. at p Id. at p Id. at p Id. at p Id. at p Id. 9 See 90 F.3d 1558 (Fed. Cir. 1996). 10 See 988 F.2d 1165 (Fed. Cir. 1993).

54 lawsuit in the U.S. District Court for the Northern District of Texas and simultaneously sought enforcement of its patents under Section 337 at the USITC against several respondents, including Cypress. As is common, the USITC investigation proceeded first. In that investigation, the USITC held at least some of the claims infringed and issued a limited exclusion order. 11 The USITC s determination was affirmed by the Federal Circuit. 12 Subsequently, the district court case resumed wherein, the judge granted judgment as a matter of law of non-infringement of the very same patents. Once again, the Federal Circuit affirmed the court s decision. 13 The Federal Circuit acknowledged the contradiction but stated Congress did not intend decisions of the ITC on patent issues to have preclusive effect. 14 Despite the non-preclusive effect on patent issues, the ITC is unquestionably an important forum for patent owners to utilize in enforcing their IP portfolio. 6. Invalidity Rates from Reexamination Proceedings at U.S. Patent & Trademark Office There are two types of reexamination of issued U.S. patents before the U.S. Patent and Trademark Office: (a) ex parte reexamination, and (b) inter partes reexamination. The chart below displays the number of reexam proceedings held since 2007 along with those that were filed in conjunction with a corresponding patent litigation in a Federal Court. The data disclosed and discussed in this section is based upon a review of the reexam proceedings from 2007 to 2011 which are summarized in the chart below. 11 See In re Certain Plastic Encapsulated Integrated Circuits, ITC Inv. No. 337-TA-315, USITC Pub. No (Nov. 1992), affirmed by Texas Instruments Inc. v. USITC, 988 F.2d 1165 (Fed. Cir. 1993). 12 See Texas Instruments Inc. v. USITC, 988 F.2d 1165 (Fed. Cir. 1993). 13 See 90 F.3d See id. at 1569.

55 a. Inter Parties Reexamination Inter partes reexaminations can be requested by third parties in relation to a patent which issued from an original application that was filed on or after November 29, Unlike ex parte proceedings, third party requestors can participate in the inter partes reexamination process after a request is submitted by filing a reply to each response filed by the patentee. The identity of a third party requestor cannot be kept secret. The Office initially determines if "a substantial new question of patentability" is presented. A third party requestor or the patentee can appeal the result of an inter partes reexamination to the BPAI and subsequently to the CAFC. Much of the outcome of inter parties reexam depends upon whether the patent owner participates in the reexam proceedings. The average pendency of such proceedings was 42 months. Two hundred and fifty Inter Parties reexam proceedings were identified where the patent owner actively participated in the proceeding and the results are summarized below: Where Patent Owner participated (250): 40% (101/250): all claims cancelled or disclaimed 21% (52/250): no claims confirmed; at least one claim amended; other claims cancelled or disclaimed 26% (64/250): at least one claim confirmed; other claims amended, cancelled, or disclaimed 13% (33/250): all claims confirmed. This data can also be compared to Inter Parties reexam proceedings where the patent owner participated in the proceedings and there was also concurrent patent litigation ongoing between the parties involving the same patent. The average pendency of such proceedings was 41 months and did

56 not appear to significantly differ from those where no concurrent litigation was ongoing. The data is summarized below and is based upon analysis of one-hundred and forty-four proceedings. Where Patent Owner participated and concurrent litigation (144): 38% (54/144): all claims cancelled or disclaimed 21% (30/144): no claims confirmed; at least one claim amended; other claims cancelled or disclaimed 28% (40/144): at least one claim confirmed; other claims amended, cancelled, or disclaimed 14% (20/144): all claims confirmed. The recently enacted America Invents Act ( AIA ) changed the threshold standard for initiating inter partes reexamination. The new standard requires a requester to demonstrate that: [T]he information presented in the request shows that there is a reasonable likelihood that the requester would prevail with respect to at least 1 of the claims challenged in the request. America Invents Act - Sec. 6(c)(3)(A)(i)-(ii). Despite the change, early data suggests that the U.S.P.T.O. continues to be granting reexaminations at about the same rate under the new standard as it was under the old substantial new question standard. In 2011, the Office granted 342 inter partes reexamination requests out of 366 total decisions. That accounts for a 93% grant rate under the old standard. Of the 42 orders issued under the new standard, 38 have been granted (at least in part), putting the current grant rate under the new standard at about 90%. 15 The U.S.P.T.O. appears to be granting reexamination requests at about the same rate under the new standard as it had been under the old standard. b. Ex Parte Reexamination Ex parte reexaminations can be requested by the patentee, a third party or the U.S. Patent and Trademark Office. However, once a request is submitted, other than replying to a preliminary statement or a preliminary amendment if filed by the patentee, a third party requestor does not participate in the ex parte reexamination proceedings. Additionally, third party requestors can make submissions anonymously. The request for reexamination must show a substantial new question of patentability. An Examiner decides whether to grant the request for reexamination within three months of filing the request. If a request is not granted, a petition can be made to the Director of the U.S. Patent and 15 Data as of February 2012.

57 Trademark Office. A decision by the Director is final and non-appealable. If a reexamination is ordered, the findings of the examiner can be appealed to the Board of Patent Appeals and Interferences (BPAI) only by the patentee. Decisions reviewed by the BPAI can be appealed to the Court of Appeals for the Federal Circuit (CAFC). The table below summarizes the results of ex parte reexam proceedings from 1981 to The average pendency of the ex parte reexam proceeding was 26 months. All claims confirmed indicates that no amendments to the claims were made during the proceeding while all claims cancelled indicates that no reexamination certificate was issued from the proceeding the patent was withdrawn. Claims amended indicates that amended claims were issued in the reexamination certificate. Owner Third Party USPTO Overall Requested Requested Initiated All claims confirmed 21% 24% 11% 23% All claims cancelled 9% 12% 23% 11% Claims amended 70% 64% 66% 66% As can be seen from the above data, there was a marked difference in positive outcomes for the patent owner when comparing inter parties reexam (40% all claims confirmed) when comparing ex parte reexam (23% all claims confirmed).

58 Dorothy R. Auth Ph.D. Partner Litigation Intellectual Property Health Care One World Financial Center New York, NY Tel Fax Dr. Dorothy Auth has more than 20 years of experience in complex patent litigation, as well as licensing, patent procurement, and intellectual property counseling in the United States and abroad. Her experience spans diverse industries, including biotechnology, pharmaceutical, and medical devices, as well as consumer products, computers, and other mechanical devices. Dorothy litigates in U.S. Federal Courts and in international arbitrations conducted under the WIPO rules. She conducts all aspects of litigation, including motion practice, expert preparation and all aspects of discovery practice. In addition to her litigation experience, Dorothy has experience with intellectual property diligence issues surrounding mergers, acquisitions, and bankruptcies. For example, she assisted the United States Treasury in intellectual property matters related to the restructuring of General Motors; Pfizer in intellectual property matters related to its acquisition of Wyeth; and ishares in intellectual property matters related to its potential sale. Dorothy also coordinates global patent procurement and enforcement strategies for her clients to maximize their patent-protected field. Her international experience includes coordinating patent infringement trials and hearings throughout Europe (including trials seeking preliminary relief and cross-border injunctions), as well as nullity, cancellation, and oppositions proceedings on patent rights in European courts and patent offices. Among the clients Dorothy has represented are Medinol Ltd., DuPont Corporation, Rhone- Poulenc Rohrer, Inc., BioRest Ltd., Oscillon Ltd., Digene Corporation, Osteonics Corporation, Hoffmann-La Roche, and the National Institutes of Health. Dorothy is an Officer, Board Member and Board Liaison for the CLE committee for the New York Intellectual Property Law Association. She is also a member of the American Intellectual Property Association and the Intellectual Property Owner's Association. Dorothy is a frequent speaker on a wide variety of topics including: "Patent Ownership: Is An Assignment Always Needed" "Selecting Forum and Venue for Your Patent Litigation" "Conditional Patent Licensing After the Supreme Court's Decision in Quanta" "Chinese Patent Portfolio: A Solid, Long-Term Investment" "Inter partes re-examination: What lies ahead?" Cadwalader, Wickersham & Taft LLP

59 Dorothy R. Auth Ph.D. 2 Prior to joining Cadwalader, she was a partner with Morgan & Finnegan, an intellectual property specialty firm in New York. Dorothy earned her J.D. from St. John's School of Law, a Ph.D. in biochemistry from Tufts Medical School, and her B.A. from Cook College of Rutgers University. Dorothy is admitted to practice in New York and New Jersey and before the U.S. District Courts for the Southern and Eastern Districts of New York and the District of New Jersey, and the U.S. Courts of Appeals for the Second and Federal Circuits. She is also licensed to practice before the U.S. Patent and Trademark Office. Cadwalader, Wickersham & Taft LLP

60 Paper DRAFT for IPO Validity Issues Panel/White Papers - Mukundan Chakrapani and Beverley Moore 1 1 CHALLENGING THE VALIDITY OF PATENTS IN CANADA 1.1 Challenges in the Patent Office Filing Prior Art in the Patent Office A third party may challenge the patentability of another's patent application by filing with the Patent Office prior art that the third party believes has a bearing on the patentability of any claim in a pending patent application. 2 The prior art must be accompanied by an identification of the claim against which the proponent believes the prior art is relevant and an explanation of its relevance to the pending claim. No fee is required. 3 Under s of the Patent Act, applicable prior art consists of patents, published patent applications, and printed publications. Printed publications may include not only journal articles but also newspaper articles or advertisements for a particular product. Before the 1989 amendments to the Patent Act, prior art was filed against a third-party application as a "protest." Protests could include other documents in addition to patents, published patent applications, and printed publications and routinely included affidavits and declarations of experts. There is no longer a specific provision within the Act for protests; however, the Patent Office will usually accept them. No weight will be given to prior art other than that specifically listed within s In order for the examiner to rely on such prior art, he or she must be able to substantiate the date on which the document was made available to the public. The filing of prior art does not allow a third party to discuss the prior art with the examiner or to make oral representations to the examiner. The examiner has no authority to correspond with anyone other than the agent of record. The examiner is, therefore, not able to discuss the art or its relevancy with the protesting party. The protesting party receives an acknowledgment that the filing of the prior art will become part of the Patent Office file, but will receive no further communication from the Patent Office. The onus is on the protesting party to continue to monitor the patent application file to review any steps taken by an examiner. Once the prior art becomes part of the Patent Office file, the examiner will review it and determine whether the prior art is, in fact, relevant to the claims in the application. If the examiner determines that the prior art is relevant, he or she will issue a further Office Action on that basis. If the examiner determines that the prior art is not relevant, he or she will simply take no further action with respect to it. No further notice is given to the protesting party. The protesting party may file further submissions or additional prior art in response to any 1 Many thanks are given to Ryan Steeves and Anjili Patel, articling students at BLG, and Andrea Pitts and Beatrice Sze, summer students at BLG, who helped compile this data. 2 Patent Act, R.S.C. 1985, c. P-4, as am, s [hereinafter Patent Act]. 3 Ibid.

61 representations made by the applicant, or in response to the examiner's determination that the prior art is not relevant. The limited role of the protesting party can be a significant disadvantage. While the protesting party does not have an opportunity to discuss the prior art with the examiner, the applicant is able to do so. Furthermore, should the protesting party wish to challenge in the Federal Court the validity of any patent that issues from the application, the Court may defer to the consideration given to the prior art by the examiner Re-examination Any member of the public, including the patentee, may request the re-examination of any claim of a patent. 4 Re-examinations may be requested only on patents issuing from applications filed after October 1, Before this date, the "old" Patent Act, which did not contain reexamination provisions, was in effect. A third party may commence re-examination of a patent by the filing of a request for reexamination, along with applicable prior art and the prescribed fee. The request for reexamination must set forth the pertinence of the prior art and explain how the prior art applies to the claim or claims being re-examined. 5 When the re-examination is requested by someone other than the patentee, the Patent Office will send a copy of the request to the patentee. At this point, the requesting party no longer plays an active role in the re-examination. The requesting party does not have an opportunity to make submissions either orally or in writing, nor is the requesting party notified of the decision. The requesting party has no right of appeal. After the request for re-examination is received, the Patent Office will establish a Reexamination Board, consisting of at least three persons, at least two of whom are employees of the Patent Office. 6 Generally, the Board will consist of examiners from the Patent Office who have experience in the art or science to which the invention belongs. The Board has three months to determine whether the request for re-examination raises a substantial new question of patentability. Where the Board determines that no new question of patentability of a claim is raised, it will notify the requesting party of this decision. This decision is final and not subject to appeal or review. 7 Where the Re-examination Board determines that the request for re-examination does raise a substantial new question affecting the patentability of a claim, the Board will notify the patentee of this decision and the reasons for it. The patentee has three months to submit a reply to the Board setting out any submissions it wishes to make on the issue of the patentability of the claim. 8 After receipt of a reply from the patentee or the expiry of the three-month time limit, the Board will proceed to re-examine the claim(s) in issue. The re-examination proceedings must be 4 Patent Act, s. 48.1(1). 5 Patent Act, s Patent Act, s Patent Act, s. 48.2(3). 8 Patent Act, s. 48.2(5).

62 completed within 12 months after the receipt of the reply from the patentee containing submissions on the issue of patentability of the claim(s). In making submissions, the patentee may propose amendments or new claims, but may not enlarge the scope of the claims. 9 On conclusion of a re-examination proceeding, the Re-examination Board will issue a certificate having one of the following effects: 10 a. cancellation of any claim of the patent determined to be unpatentable; b. confirmation that any claim of the patent is patentable; or c. incorporation into the patent of any proposed amendment(s) or new claim(s) determined to be patentable. A certificate issued by the Re-examination Board is attached to the patent and becomes part of it. Where a certificate has been issued, it may: 11 a. cancel any claim but not all claims of the patent, in which case the patent shall be deemed to be issued from the date of grant in the corrected form; b. cancel all claims of the patent, in which case the patent shall be deemed never to have been issued; or c. amend any claim in the patent or incorporate a new claim in the patent, in which case the amended claim or new claim shall be effective from the date of the certificate for the unexpired term of the patent. Any decision by the Re-examination Board set out in the certificate is subject to appeal by the patentee to the Federal Court. An appeal must be taken within three months from the date of the certificate's issuance. A requesting party who is not the patentee has no right of appeal Challenges in the Federal Court Infringement Action In Canada, the main route to challenge a patent is through an impeachment proceeding in the Federal Court of Canada (Federal Court). The Federal Court is not a court of originating jurisdiction, but the Federal Courts Act provides a basis for patent matters to be litigated in the Federal Court. 13 In addition, an infringement judgement from the Federal Court can be enforced across the country and the Federal Court is the only court that can invalidate a patent in rem. 14 Thus, most litigants choose the Federal Court. This data looks only at those cases before the Federal Court. In Canada, patent infringement and validity allegations can, and usually are, heard together by the same court at the same time. There is no requirement to separate them. Validity is a defence to infringement. Furthermore, an interested party can challenge the validity of a patent without 9 Patent Act, s Patent Act, s Patent Act, s. 48.4(3). 12 Patent Act, s. 48.4(5). 13 Federal Courts Act, R.S.C., 1985, c. F-7, s Ibid. s. 20(1).

63 being the subject of infringement allegations. 15 It is also important to note that, in Canada, judges are not specialized. The majority of judges sitting in the Federal Court and FCA do not have a science or technical background. However, the majority of litigants in patent cases hire expert witnesses to explain the technical background necessary to understand the patent and the challenges made against it. Up to five experts are permitted per side, without the need to seek leave of the Court. 16 Parties before the Federal Court have the ability to appeal to the FCA as of right. However, leave is needed in order to appeal further to the Supreme Court of Canada (SCC). The SCC does not hear very many patent cases. Thus, statements from the Federal Court and the FCA are the most common authoritative statements of the law in Canada. These courts also spend a great deal of time interpreting the few cases decided by the Supreme Court Patented Medicines (Notice of Compliance) Regulations If the patent at issue deals with a pharmaceutical product or composition, a generic company usually cannot simply come to market and wait to be sued. Canada has a system set up under the Patented Medicines (Notice of Compliance) Regulations 17 with some similarities to the Hatch Waxman system in the United States. A short procedural discussion will help to situate these specialized proceedings. Companies who market innovative drugs have a limited opportunity to list certain types of patents on a Patent Register. These patents must contain a claim to the medicinal ingredient, the use of the medicinal ingredient, a formulation containing the medicinal ingredient or a dosage form. 18 Any company wishing to market a generic copy of a drug must address these patents before they are permitted to come to market (marketing or regulatory approval is called a Notice of Compliance or NOC). 19 This scheme also applies to biologic drugs and their biosimilar/follow-on biologic/subsequent entry biologic counterparts. Most often, the company seeking to copy the drug provides what is known as a Notice of Allegation and detailed statement (NOA) to the innovator, alleging invalidity or noninfringement of the patents on the Patent Register. 20 The NOA must contain all issues that the generic company wishes to raise against the patent. Thus, these documents often run several hundred pages. The innovator has 45 days upon receipt of the NOA to decide whether to start a proceeding (generally referred to as a NOC proceeding). 21 If a proceeding is started, the Canadian Minister of Health cannot issue a NOC to the generic company while the proceeding is 15 Patent Act, s Canada Evidence Act, R.S.C., 1985, c. C-5, as am, s Patented Medicines (Notice of Compliance) Regulations, SOR 93/133, as am. [hereinafter the NOC Regulations] 18 Ibid., s These patents can either be addressed through the procedure described in the NOC Regulations, discussed in this paper, or the challenger can bring an action to impeach the patent. Such proceedings are incorporated into the data for actions in this paper. The patent is considered addressed, as if it is invalidated, it is removed from the Patent Register. 20 NOC Regulations, s Ibid., s. 6.

64 pending (to a maximum of 2 years). 22 If the innovator is successful, the generic company cannot come to market until the patent expires. If the generic company is successful, it can be issued its NOC as soon as its submission is approved. The two-year period for these proceedings is meant to co-exist with the time that it takes Health Canada to review the generic submission. These NOC Proceedings are considered summary in nature. There is no discovery. All of the evidence is placed before the Court by way of affidavit and cross-examination on affidavits. The lawyers then argue the case before the judge on the basis of this paper record. In addition, the Court only decides the technical issue of whether the generic allegation as to invalidity or noninfringement is justified. This is not considered an in rem determination of validity of the patent. 23 However, for the purposes of this paper, the terms validity and invalidity will also be used when referring to NOC proceedings in order to keep the language clear for international readers. As a result of the lack of an in rem determination of patent validity in NOC proceedings, the unsuccessful party can start a typical patent action to address patent validity or infringement. Furthermore, the result of the NOC proceeding will not be binding on the trial judge in such an action. In the past, patents have been found invalid after being successfully defended in an NOC proceeding, and valid after being unsuccessfully defended in an NOC proceeding. 24 In addition, the innovator bears the burden of proof in these proceedings. The innovator must prove that the generic allegation of invalidity or non-infringement is not justified. 25 This is seen as akin to proving that your patent is valid. Although, the Canadian Patent Act does contain a presumption of validity, 26 this presumption has been held to be rebutted by a generic NOA raising issues of invalidity. 27 Thus, if the evidence is equal at the end of an NOC proceeding, the Court has held that the application should be dismissed and the generic company permitted to come to market. 28 It is important to note that because these proceedings are considered administrative, if the generic company is successful, and obtains its regulatory approval, the innovator loses its right of appeal. The FCA has held that the proceeding becomes moot once there is nothing left to prohibit the Minister of Health from doing. 29 These procedural and burden differences have led us to separate the statistics in this paper that deal with NOC proceedings from those that deal with infringement actions. 22 Ibid., s Novartis v. Apotex, 2002 FCA 440 at para See, for example, Janssen-Ortho v. Novopharm, 2006 FC 1234, aff d 2007 FCA 217 and Ratiopharm v. Pfizer, 2009 FC 711, aff d 2009 FCA Bayer v. Apotex, (2000), 6 C.P.R. (4 th ) 285 (FCA). 26 Patent Act, s Bayer v. Apotex, (2000), 6 C.P.R. (4 th ) 285 (FCA). 28 Abbott v. Sandoz, 2008 FC 1359 at para See for example, Eli Lilly v. Novopharm, 2007 FCA 359.

65 2 SUMMARY OF CHALLENGES AT THE PATENT OFFICE As discussed earlier, pre-grant (filing of prior art) and post-grant (re-examination) challenges at the Canadian Patent Office have a limited role for third parties. Consequently, data surrounding such challenges is sparse. The Patent Office, in its Annual Report, publishes the total number of re-examination requests and disposals. The Patent Office does not provide a break down on whether re-examination requests were third-party initiated or whether they were applicant/owner initiated. The data is also silent on the technology area, owner, etc. of such challenges. Table 1 below summarizes data obtained from the Patent Office Annual Reports for Reexamination requests: Table 1: Re-Examination under Section 48.1 of the Patent Act Filings Disposals Compilation of data pertaining to protests/prior-art filings by third parties is both time and cost prohibitive, as this data is not readily available from the Canadian Patent Office. However, data related to re-examinations have been complied and are summarized below. A total of 43 re-examination requests were received (2002 to the date of compilation of data: July 19, 2012). Of these, 36 have been disposed by the re-examination board. Table 2 below summarizes the outcome of re-examination proceedings based on the nationality of the owner of the patents. Table 2: Rulings from CIPO Patent Re-Examination Board - Parsed by Owner Patent Owner Valid Invalid Partially Valid Currently Pending Did Not Require Amendment By Applicant Required Amendment By Applicant Canadian Foreign Canadian & Foreign (Joint Ownership) Re-Exam. Suspended It is evident that only 2 of the 36 patents have been invalidated by the re-examination board. While both these patents were owned by non-canadian entities, the data is limited to make any definitive inferences with respect to disposition of non-canadian owned patents by the reexamination board. 30 Canadian Intellectual Property Office, Annual Report (Ottawa: CIPIC) at 36. Canadian Intellectual Property Office, Annual Report (Ottawa: CIPIC) at 53. Canadian Intellectual Property Office, Annual Report (Ottawa: CIPIC) at 54.

66 On the other hand, an overwhelming majority of 33 patents have been found to be valid. Of these 34 patents, 16 are owned by Canadian entities; 17 by non-canadian entities; and one jointly owned by Canadian and non-canadian entities. Further analysis of the patents that were found to be valid by the re-examination board indicates that no claim amendments were necessary in 13 patents to successfully withstand the reexamination procedure. Some claim amendments were needed in 19 patents to overcome the issues raised by the re-examination board. In 1 patent, however, some claims were found to be invalid, while others were found to be valid. Re-examination proceedings were suspended in 1 instance following a court order. Table 3 summarizes the outcome of re-examination proceedings based on the subject matter of the patents. Table 3: Rulings from CIPO Patent Re-Examination Board - Parsed by Subject Matter General Subject Matter of Patent Valid Invalid Partially Valid Currently Pending Re-Exam. Suspended Did Not Require Amendment By Applicant Required Amendment By Applicant Pharma Non-Pharma It is interesting to note that the re-examination procedure has been initiated almost exclusively in non-pharmaceutical patents (42 out of 43). Non-use of the re-examination procedures in the pharmaceutical sector may be attributed to the limited role of third parties in this procedure and lack of a right of appeal when the requesting party is not the patentee. The originator of the re-examination procedure also appears to have no effect on the outcome of the process. As mentioned before, only 2 of 36 patents have been declared invalid by the reexamination board. While both these patents underwent re-examination at the behest of third parties, the data is limited to make any definitive inferences with respect to originator of the reexamination procedure and the final disposition by the re-examination board. The following table summarizes the outcome of re-examination proceedings based on the originator of the re-examination procedure. Table: Rulings from CIPO Patent Re-Exam. Board - Parsed by Originator of Request Originator of Re-Exam. Request Valid Invalid Partially Valid Currently Pending Re-Exam. Suspended Did Not Require Amendment By Applicant Required Amendment By Applicant Applicant Third Party

67 Years Years 3 SUMMARY OF FINDINGS FROM FEDERAL COURT The Canadian Federal Court generally issues between 8-20 substantive decisions each year. In all years but 2011, the vast majority of these decisions were in NOC Proceedings As described above NOC 3 Proceedings have a maximum length of 2 years and need a court 2 order in order to last longer. These 1 types of court orders are rare. 0 Thus, the average length of an NOC Action NOC Proceeding from start to decision is under two years. There are no time limits on an action in the Figure 1: Average Proceeding Length Federal Court. Thus, the historical average length of these proceedings from start to decision is close to 5 years. However, this average shows a wide range of times. Figure 1 shows the average lengths for the two types of proceedings. Figure 2 shows the lengths of the individual actions heard by the Federal Court. 14 Anecdotally, several years ago the 12 Federal Court decided to try to speed up its docket. This was 10 communicated to the bar through town hall meetings, and was 8 generally well received. If either 6 of the parties request, the Federal Court has committed to providing 4 them with a trial date within two years of the Statement of Claim in 2 a proceeding. These speedy trials are not overtly evident in these averages because a number of very long proceedings came to a close in Figure 2: Length of Individual Actions 2006, 2008, 2009 and 2010, (lasting 9.3, 10.7, 12.3 and 13.5 years respectively) which act against the short proceedings also decided in those years. However, the Federal Court docket is close to being cleared of these longstanding patent cases, so it is expected that numbers over the next few years will reflect shorter times from start to decision.

68 3.1 Invalidity rate and nationality of patentee When the data is examined for patent cases in Canada, it is difficult to see any differences based on the nationality of the patentee. Both the patentee and any person claiming under them are permitted to start actions under the Patent Act. 31 Thus, it is common for multiple plaintiffs to be involved in proceedings, in order to ensure that everyone who suffered damage due to the alleged infringement can claim compensation for that damage. Furthermore, in NOC proceedings, the NOC Regulations mandate that the first person (the holder of marketing approval in Canada; typically the Canadian subsidiary of a pharmaceutical company) start the proceeding, and that the patentee (typically not the Canadian subsidiary) also be joined as a party to the proceeding. Thus, plaintiffs in patent infringement cases in Canada tend to be multinational. 3.2 Invalidity rate and process chosen to determine validity Figure 3 summarizes the overall validity rates for NOC proceedings and actions in the Federal Court for the last 10 years. For NOC proceedings, at first instance, the validity rates seem to swing. In 2002, all cases were found to be invalid. However, for the next 4 years, the innovator was successful more often. This tide swung back again between 2007 and 2010, with more cases being found invalid. However, in 2011, again, all patents were found valid in NOC proceedings. At this point, we are unsure what could account for this pendulum effect percentage NOC invalid percentage NOC valid percentage action invalid percentage action valid Figure 3: Validity Rates for Proceedings In actions, the data shows that 100% of patents were found valid in 2004, 2006 and The split was even in 2008, and again the majority of patents were found valid in 2009 and This seems to point to a more consistent finding of valid patents in infringement actions than in NOC proceedings. In actions, the burden is on the challenger to prove invalidity of a patent, while the burden is on the patentee in NOC proceedings. Furthermore, in NOC proceedings, with no live witnesses before the judge, it is more difficult for the judges to assess credibility. Thus, where the burden lies appears to an important role in the outcome of the proceeding. 31 Patent Act, s. 55.

69 % Appeals Heard in NOC cases where patent found invalid at first instance % appeals heard in NOC cases where patent found valid at first instance When appeals are examined, again we separated the NOC data from the action data, as with actions, all parties maintain a right of appeal, regardless of the outcome at the trial division. In NOC proceedings, as described above, if the innovator loses, and the generic company receives its market approval, the innovator is not permitted to appeal, as the Courts have held that such an appeal is moot. Figure 4 summarizes this data. % appeals heard in Actions The data shows that the percentage Figure 4: Appeals Heard of appeals heard in NOC Proceedings is quite low when the innovator is unsuccessful. Such appeals can only be heard if there are other impediments to the generic company coming to market. The three main impediments would be: 1) The generic company agreed to wait until the expiry of one of the patents listed on the Patent Register; 2) Health Canada had not approved the generic submission during the pendency of the NOC proceeding; or 3) if there is more than one patent on the Patent Register, and the generic company has not yet addressed all of the patents through sending NOA s. Most often, if the generic company agrees to await patent expiry, it is because the patent will expire sometime within the 2 years following the NOA. Thus, it is usually expired by the time an appeal can be filed, and is not often preventing the generic company from coming to market. Similarly, unless there are problems with the generic company s submission, Health Canada s review takes less time than the completion of a NOC Proceeding. Most often, it is the third reason that is applicable. However, this trend seems to be changing recently, as the percentage of appeals heard when the NOC Proceeding is dismissed has been dropping. One of the reasons this trend may be subsiding may be the recent case law relating to the damages that can be claimed by a generic company who is successful in a NOC Proceeding. In particular, the NOC Regulations contain a provision that allows a successful generic company to claim damages for profits it lost by being kept off the market during the pendency of an unsuccessful NOC Proceeding. 32 However, before these provisions were interpreted, the generic companies were claiming rights to the innovator s profits around the world, not their own lost profits. Thus, there was a potential for windfall to the generic company that could be increased if the relevant time period was extended. However, the Federal Court has now settled that a generic company is only permitted to claim its own damages or lost profits, not those of the innovator. 33 It must be noted that the generic companies are now starting proceedings in provincial courts, which seek the innovators profits through claims for unjust enrichment and damages pursuant to the Trade-Marks Act. 34 None of these proceedings has been decided yet. 32 NOC Regulations, s Merck Frosst v. Apotex, 2009 FCA see, for example, Apotex v. Eli Lilly and Company, 2012 ONSC 3808.

70 When the appeal comes before the FCA, the tendency does appear to be to uphold the validity of the patent. This data is shown in Figure % patents valid on appeal in NOC cases where patent found invalid at first instance % patents valid on appeal in NOC cases where patent found valid at first instance % patents valid on appeal in Actions Figure 5: Validity on Appeal Patents found valid at first instance in NOC proceedings are almost always upheld. Patents found invalid at first instance at NOC proceedings are often found valid on appeal (if the appeal can be heard). Furthermore, in actions, the validity of the patent appears to be maintained more often than not. Thus, the chances of a favourable decision regarding patent validity from the FCA are good, if the case can be brought before them. 3.3 Invalidity rate and industry NOC proceedings deal exclusively with pharmaceutical cases. However, actions can deal with all technologies. For the purposes of this analysis, given the small number of actions in Canada, we broke these statistics into pharmaceutical and nonpharmaceutical cases. This data is summarized in Figure This graph makes it evident that 2 pharmaceutical cases are dominating 0 the Federal Court in Canada each year. However, in recent years, 3-4 non-pharmaceutical cases have been NOC Pharma Ac ons Other Ac ons heard each year. This seems to coincide with the Federal Court s Figure 6: Number of Cases by Industry commitment to bringing parties to trial quickly. Thus, hopefully, this trend will continue and owners of non-pharmaceutical patents will bring more cases before the Federal Court Grounds for invalidity The grounds used to challenge validity of patents in Canada have seen the most changes in the past number of years. In addition to obviousness, which is the most usual reason for a court to

71 find invalidity, Canadian Courts have considered a number of other technical challenges to patent validity in both NOC Proceedings and Actions. 3 Figure 7 summarizes the data for actions in the last 4 years, as this is when the majority of hearings have taken place. As expected, 2 obviousness and anticipation both play a major role. However, there are a surprising number of cases where the patent has been 1 invalidated for a lack of utility or lack of sound prediction of utility. In addition, a few other technical issues relating to fraud on the patent office, double patenting anticipation obviousness double patenting insufficiency lack of utility/sound prediction s. 53/73 invalid disclaimer invalid selection and invalid selection are present. Figure 7: Invalidity Reasons in Actions When it comes to NOC proceedings, again, obviousness and anticipation play a large role in the reason for invalidity. However, lack of utility/lack of sound prediction is again present in large numbers anticipation obviousness double patenting insufficiency lack of utility/sound prediction overbreadth s. 73 abandonment mere discovery invalid selection invalid disclaimer not patentable subject matter Figure 8: Invalidity Reasons in NOC Proceedings

72 The 5 actions before 2012 with this sound prediction issue were all pharmaceutical cases; and there were 13 NOC Proceedings where the patent was invalidated for this reason. It seems strange that the patents on these drugs, all of which had market share worth copying, were found to lack either actual utility or a sound prediction of utility. The the Canadian Courts have developed a test for sound prediction that requires a patentee to have a factual basis for the prediction, a sound line of reasoning from that factual basis to the prediction, and disclosure of both in the specification. 35 However, if a patentee is relying on demonstrated utility, no additional information needs to be in the specification. 36 This issue will be discussed further in the section below regarding changes to the law. Six cases in NOC Proceedings and Actions were invalidated for a being invalid selections patents. However, the Supreme Court held in 2008 that this is not a proper ground upon which a patent can be challenged. 37 Thus, we do not expect to see this ground raised again as a challenge to patent validity. Double patenting is also a present in significant numbers. The Canadian Patent Act provides that a person may receive a patent. 38 Double patenting can be as a result of the claims of the two patents being either coterminous or not patentably distinct over one another. These have been held to be akin to anticipation and obviousness, respectively, in terms of analysis. However, the Court is to compare only the claims. 39 The patentee can take certain steps to mitigate these challenges, however such a discussion is beyond the scope of this paper. There is one NOC Proceeding case where the patent was held to be invalid for abandonment pursuant to s. 73 of the Patent Act. In this case, the Court held, many years after the fact, that an office action had not been properly responded to, and thus, the patent was abandoned. However, the FCA recently held, in an action, that this is not a ground that can be used to challenge patent validity after the patent has issued. 40 Patentable subject matter has also been a hot issue of late. Canada does not permit the patenting of methods of medical treatment. However, uses, formulations and dosage forms are permitted. Several NOC Proceedings have discussed the issue of dosage forms and dosage regimes. 41 However, none of these cases were heard by the FCA. Furthermore, the issue has not been addressed by an action recently. CIPO is developing a practice notice relating to methods of medical treatment and diagnostics, based on the FCA s recent decision regarding Amazon.com s patent application. 42 The first draft of this notice was published and comments received earlier in the year. The revised draft is expected in September. 35 Novopharm v. Eli Lilly, 2010 FC 915 at para. 116, aff d 2011 FCA Novopharm v. Eli Lilly, 2010 FC 915 at para. 117, aff d 2011 FCA Apotex v. Sanofi-Synthlabo, 2008 SCC Patent Act, s Apotex v. Sanofi-Synthlabo, 2008 SCC 61 at paras Corlac v. Weatherford, 2011 FCA See, for example, Merck v. Apotex, 2005 FC 755, Purdue v. Pharmascience, 2009 FC 726, and Axcan v Pharmascience, 2006 FC Canada (Commissioner of Patents) v. Amazon.com, 2011 FCA 328.

73 4 CHANGES IN NATIONAL LAW IN THE PAST 10 YEARS There have not been any substantive changes to the Canadian Patent Act or Rules in the past 10 years, which would affect patent validity rates. However, the Courts have substantially changed how they are approaching certain issues. In particular, issues relating to construction and sound prediction of utility are coming to the forefront and arguably putting Canada out of step with its obligations under TRIPS, NAFTA and the PCT. In particular, judges are now construing the promise of the patent and then determining whether this promise has been met for purposes of assessing utility. In many cases, the promise has been construed to be use of the drug in humans to treat a disease. This use is very rarely demonstrated at the time of patent filing (and arguably is not intended as a promise at filing), thus sound prediction, and its increased disclosure requirements become the issue. As described above, in order to meet the test for a sound prediction, the patentee must have a factual basis for the prediction and a sound line of reasoning from the factual basis to the predicted utility. Finally, both the factual basis and the sound line of reasoning must be disclosed in the patent. This last requirement has been argued to be an increase in disclosure requirements, over and above those required pursuant to Canada s treaty obligations. However, the Courts have dismissed the argument when it is put to them. 43 When patent cases are examined since 2005, there has been a marked increase in the number of patents that have been invalidated on the basis of a lack of sound prediction. This is true in both actions and NOC proceedings. In fact, when one historically looks at the data relating to sound prediction, this argument was rarely even considered by the Courts until the AZT case was decided in Even then, the case law did not start to change for a couple more years. Now, with the Courts construing the so-called promise of the patent to be so detailed, a lack of sound prediction of that promise is a very popular reason to invalidate a patent. Much has been written on these additional disclosure requirements and how they are likely contrary to the PCT and other treaties. 45 Two recent FCA decisions seem to swing the pendulum back towards centre on this issue. 46 In both cases, the promise was construed so stringently, and patent validity was upheld. It is hoped that these cases are a sign of the future in Canada. 43 Eli Lilly Canada Inc. v. Apotex Inc., 2009 FCA 97 at para. 19 [Raloxifene FCA]. 44 Arvie Anderson & Lawrence Welch, The Canadian Patent Promise: A Concern for Pharmaceutical Innovators? IPO COMMITTEE NEWSLETTER (Dec. 2011) available at review=false. at p. 29 [IPO membership required]. 45 See, for example, The Evolution of the Doctrine of Sound Prediction in Canada: Darwin Would Not be Impressed, 10 PLIR 435, 03/30/2012 and The Canadian Doctrine of Sound Prediction: Out of Step with the Rest of the World, 10 PLIR 536, 04/20/ Mylan v. Pfizer, 2012 FCA 103 and Mylan Pharmaceuticals v. AstraZeneca Canada, 2012 FCA 109.

74 5 CONCLUSIONS Overall the data regarding patent challenges at CIPO is very positive. Very few patents have been invalidated by a request for re-examination from a third-party challenger. This bodes well for patentees who may be concerned by the implications of such a summary procedure. The data demonstrate that it is possible to obtain a quick trial date for determination of a patent infringement action in Canada. Furthermore, it is more likely than not that the validity of the patent will be upheld in such an action. In particular, the FCA seems particularly inclined to uphold the validity of patents in proceedings brought before it. The Federal Courts are dominated by pharmaceutical cases. However, increasingly, other technologies are finding their way to trial. This is encouraging for patentees of those technologies. Canada does have some peculiarities to consider when validity challenges are expected. In particular, utility and sound prediction challenges are of concern. Furthermore, the CIPO practice notice on what constitutes patentable subject matter will likely have an impact on future challenges.

75 Decisions in the Courts of Australia Patent Type Validity Nationality of Year Patentee Technology Standard Innovation Valid Invalid 2012 Japan pharmaceuticals Y Y Certain Claims Invalidity Ground 2011 US pharmaceuticals Y Y lack of novelty 2011 AUS medical device Y Y 2011 AUS mechanical engineering Y Y 2011 Germany pharmaceuticals Y Y 2011 Denmark mechanical engineering Y Y 2011 AUS mechanical engineering Y Y 2011 Switzerland chemical Y Y 2011 US pharmaceuticals Y Y false suggestion 2011 US pharmaceuticals Y Y lack of novelty 2010 US medical device Y Y 2010 Germany Pharmaceuticals Y Y 2010 AUS mechanical engineering Y Y s 40, lack of innovative step 2010 US electrical engineering Y Y 2009 Switzerland mechanical engineering Y Y 2009 Ireland electrical engineering Y Y 2009 France pharmaceuticals Y Y lack of novelty and inventive step 2009 AUS mechanical engineering Y Y lack of innovative step 2009 AUS mechanical engineering Y Y 2009 AUS mechanical engineering Y Y 2008 AUS mechanical engineering Y Y lack of novelty 2008 AUS mechanical engineering Y Y 2008 US pharmaceuticals Y Y 2008 US pharmaceuticals Y Y Y false suggestion 2008 Denmark pharmaceuticals Y Y lack of utility 2008 AUS mechanical engineering Y Y not entitled 2007 AUS chemical Y Y 2007 AUS mechanical engineering Y Y lack of inventive step

76 2007 US pharmaceuticals Y Y lack of novelty 2006 AUS mechanical engineering Y Y 2006 Canada pharmaceuticals Y Y 2006 AUS mechanical engineering Y Y not entitled 2006 AUS biotech Y Y 2006 US pharmaceuticals Y Y lack of novelty/inventive step/manner of manufacture 2005 Ireland pharmaceuticals Y Y fair basis 2005 AUS mechanical engineering Y Y 2005 US medical Y Y 2005 AUS mechanical engineering Y Y lack of novelty and inventive step 2004 Switzerland medical device Y Y fair basis 2004 AUS mechanical engineering Y Y lack of novelty 2003 AUS mechanical engineering Y Y 2003 US electrical engineering Y Y 2002 US electrical engineering Y Y lack of clarity and fair basis 2002 US mechanical engineering Y Y 2002 UK chemical Y Y fair basis 2002 AUS mechanical engineering Y Y 2002 AUS chemical Y Y 2002 AUS mechanical engineering Y Y lack of inventive step Year Nationality of Patentee Technology Decisions by the Australian Patent Office Patent Type Validity Standard Innovation Valid Invalid Certain Claim 2012 US medical Y Y 2011 Canada mechanical engineering Y Y Invalidity Ground lack of novelty/inventive step/manner of manufacture 2010 AUS chemical Y Y 2004 AUS mechanical engineering Y Y not a manner of manufacture

77 Mukundan Chakrapani has substantial experience in the drafting and prosecution of patent applications in electronics, communication, software, semiconductor and medical devices. A member of the Intellectual Property and Information Technology Groups at Borden Ladner Gervais LLP (BLG), Mukundan provides strategic patent counselling and international patent portfolio management services to a wide- range of clients, including small and medium-scale enterprises. Prior to joining BLG, Mukundan successfully completed a two-year tenure as a Visiting Fellow at the National Research Council Canada. During his academic years, Mukundan researched a variety of subjects from polymer nano-materials to biological molecules implicated in Alzheimer's disease, and published several peerreviewed articles. Mukundan is fluent in English, Hindi and Tamil. He actively participates in BLG's India initiatives. He routinely travels to India for client and market development.

78 Beverley Moore practises intellectual property litigation at Borden Ladner Gervais LLP (BLG), focusing on patent litigation and applications under the Patented Medicines (Notice of Compliance) Regulations (NOC Regulations). She also advises clients on regulatory issues such as listing patents on the Patent Register, reporting patents to the Patented Medicines Prices Review Board (PMPRB), and the Register of Innovative Drugs as it relates to data protection. Beverley also advises on Access to Information (ATI) requests, in particular those made to Health Canada by pharmaceutical clients. In addition, Beverley advises on patent portfolio management, patentability, validity and freedom-to-operate issues, and aids in the prosecution of patent applications in Canada. Beverley sits on the editorial board of the Canadian Intellectual Property Review, and is a co-editor of Carswell's Consolidated Intellectual Property Statutes and Regulations, and co-author of the book's "Patents - Year in Review article." Beverley and her colleague, Chantal Saunders, publish a weekly IP Bulletin, summarizing recent IP cases and industry news of note. In addition, Beverley is a member of BIOTECanada's Health Advisory Board and Biologic and Regulatory Affairs Group, and has participated in National Advocacy Day, lobbying politicians on biotechnology issues. Beverley's M.Sc. research involved mechanistic studies with Vitamin D analogues.

79 Procedural Background Patent Invalidity in the UK Neil Jenkins, Bird & Bird First Instance Jurisdictions A UK patent can be granted either by the UKIPO (a UK national patent) or the EPO (a European (UK) patent). A UK national patent can only be invalidated by means of a revocation action (or counterclaim). A European (UK) patent can by invalidated either by means of a postgrant Opposition or by means of a revocation action (or counterclaim). A post-grant Opposition can only be commenced within 9 months after the date of grant of the European patent (although in certain circumstances third parties can intervene in a pending Opposition after the 9 month deadline has expired). A postgrant Opposition is filed at and heard by the EPO. A revocation action (or counterclaim) can be commenced in any one of the three jurisdictions which make up the UK namely, England & Wales, Scotland and Northern Ireland as well as the UK Patent Office known as the UKIPO. Although there are rules which govern the allocation of such an action between these three jurisdictions and although a revocation action can be commenced in the UKIPO, in practice the vast majority of revocation actions (or counterclaims) are commenced in the courts of England & Wales. [In the 10 year period of this review, it is believed that only two actions have reached a full trial in Scotland (Arrow v Akzo and Verathon v Aircraft Medical) and only one action has reached a full trial in Northern Ireland (Siemens v Seagate). A revocation action (or counterclaim) can be commenced either in the Patents Court (which is part of the Chancery Division of the High Court) or the Patents County Court. The jurisdiction of the Patents County Court is intended to be used for commercially less important cases. In practice, therefore, the vast majority of patent revocation actions (or counterclaims) are commenced in the Patents Court.

80 Both the Patents Court and the Patents County Court normally sit in London and the Judges who sit in both courts are experienced in patent law and technically qualified. Appeals There is no right of appeal to the Court of Appeal from a final decision of the Patents Court. Permission is often granted by the lower court in patent actions. If permission is refused then the appealing party has the right to apply for permission from the Court of Appeal. There is at least one Judge in the Court of Appeal who is technically qualified and who has had experience in patent matters both as a practising barrister and also a Judge in the Patents Court. Lord Justice Jacob sat in the Court of Appeal from October 2003 to 2011 and Lord Justice Kitchin was appointed in In addition, Lord Neuberger has sat in the Court of Appeal since 2009, having been appointed Mast of the Rolls in that year and Lord Justice Lewison has set in the Court of Appeal since There are two important aspects of an appeal to the Court of Appeal. First, it is not possible to introduce fresh evidence other than in exceptional circumstances. Second, the appeal itself is by way of a review rather than a rehearing. As such, the Court of Appeal is reluctant to interfere with the findings of primary fact made by the first instance Judge on the basis of the oral evidence given at the trial. There is again no right of appeal to the Supreme Court from a decision of the Court of Appeal. Permission is seldom given by the Court of Appeal and permission therefore normally needs to be obtained from the Supreme Court. In practice, permission is rarely given in patent actions. In the 10 year period of this review, only 3 decisions have been handed down in patent infringement and validity actions by the Supreme Court (previously the House of Lords) (Synthon v SKB, Conor v Angiotech and Lilly v HGS). Validity and Infringement Heard Together Unlike Germany, but like most other European countries, if issues of infringement and validity of a patent are raised in a dispute between two parties, those issues will

81 normally be determined by the same Court. The English court does not have a bifurcated infringement and validity patent system. Co-Pending National Revocation Action and EPO Opposition Under the European patent system, the final arbiters of the validity of European patents are the national courts of the countries in which the European patents are validated. In England, unlike in say Germany, a revocation action (or counterclaim) may be commenced at any time after the European (UK) patent has been granted (and validated) including during the 9 month period after grant when an Opposition can be commenced or during a pending Opposition. In England, unlike in some other European countries, the courts are reluctant to stay the national revocation action (or counterclaim) pending the outcome of the Opposition. This fact together with the relative speed with which revocation actions (or counterclaims) are brought to trial needs to be borne in mind when considering the statistics for the English courts and/or comparing them to those for other Europan countries. Settlement Rate It is difficult to obtain precise figures but it is estimated (based on the statistics published by the [Ministry of Justice]) that on average 100 patent actions (involving infringement and/or revocation) are commenced each year in the Patents Court. Although it varies from year to year, on average between 10 and 20 patent actions are tried each year. On average, the settlement rate is therefore approximately 85%. It is believed that this settlement rate is much higher than in most other European countries in particular Germany, France and the Netherlands. Again, this is something to be borne in mind when considering statistics for the English courts and comparing them to those for other European countries. Two differences between litigation in the UK and litigation in most other European countries are not only the fact that in general litigation at first instance is more expensive in the UK (mainly due to the requirement to give disclosure (discovery), the rules on experiments and the need for experts to give oral evidence at the trial) but also the fact that because the general rule is that the winner is entitled to recover

82 his reasonable legal costs, the costs exposure for both parties is significantly higher in the UK. This is generally regarded as one of the reasons for the high settlement rate. NB. It is of interest to note in this regard that the implementation of Article 14 of the IP Enforcement Directive is reducing the impact of this second difference as the courts of other European countries have started to award the winner of a patent action their legal costs more on a compensatory than contributory basis. Case analysis and discussion Tables summarising the important details of all of the decided patent infringement and validity cases at first instance (before the Patents Court and the Patents County Court) and on appeal to the Court of Appeal are attached at annex 1 to this paper. Nationality The data have not been analysed by reference to the nationality of the patentee or the infringer mainly because of the fact that in many instances one or other of the parties is a local subsidiary of a foreign parent who themselves may or may not also be joined to the action. Jurisdiction The data have not been analysed by reference to the route or jurisdiction. For the reasons stated above, the vast majority of revocation actions (and counterclaims) are commenced in the Patents Court in England. In other words, in practice only one route is used to determine invalidity. Industry Each case has been assigned to one of three subject matter headings: (C) - pharmaceutical/chemical; E - electronic; and O other. As there is sometimes more than one patent being litigated in a case, the data has been analysed by patent rather than by case.

83 The overall invalidity rates as well as the invalidity rates for each of these three subject matters by patent both after the first instance decision and then again after any appeal(s) are shown in the tables and also in graphs in annex 2 to this paper. There are several trends which are apparent on the face of the analysis. First, the number of patents being litigated has gone up in recent years. Second, the proportion of pharmaceutical and electronic patents being litigated has also gone up in recent years. Third, for the most part the first instance decisions on validity are upheld on appeal. Fourth, a greater number of patents whose validity is tried are held invalid than valid. Fifth, there does not appear to be a bias in favour of or against the validity of patents in any one of these three technical areas. As mentioned above, when considering and comparing the invalidity rates of the UK courts with those of other European countries, it is important to factor in, amongst other things, the relatively high settlement rate in the UK compared to those other European countries. Grounds of Invalidity The data have not been analysed by reference to the Grounds of invalidity because of the fact that in many instances patents that are not held valid are so held on more than one ground. Changes in National Law There have not been any significant changes in the national patent law which would have resulted in a change in the invalidity rates over the 10 year period of this review

84 Annex 1 Tables of Cases

85 Annex 2 Invalidity rates: overall and between industries

86

87 Patents Court and Patents County Court Judgments on Validity and Infringement for 2002 Date Parties Citation Subject matter Judge Infringed? Valid? Appealed? Type Tickner v Honda [2002] EWHC Stena v Irish Ferries [2002] EWHC 737 [2002] RPC Cairnstores v Hassle [2002] EWHC 309 Engine Jacob J No Yes O Multi-hull vessel Laddie J No Yes Upheld - [2003] EWCA 66, [2003] RPC 36 Pharmaceutical - Omeprazole Stannah v Freelift Lifting apparatus Fysh HHJ (PCC) BASF v SmithKline [2002] EWHC Pharmaceutical Beecham 1373 Paroxetine hydrochloride Ash v Fixing Point Bracket Fysh HHJ (PCC) SEB v De'Longhi [2002] EWHC Storage Computer v Hitachi Data Systems Wesley Jessen v Coopervision Synthon v SmithKline Beecham Memcor Australia v Norit Membran Technology [2002] EWHC 1776 [2003] RPC Contact lenses 20 [2002] EWHC Pharmaceutical 2573 Paroxetine [2003] RPC mesylate 33 [2003] FSR 43 Water filter Membrane testing method Laddie J NA No (x2) obvious Upheld - [2002] EWCA 1504, [2003] FSR 23 Yes No - obvious O Pumfrey J NA Yes (partially) Upheld - [2003] EWCA 872, RPC 49 Yes Yes O Fryers Pumfrey J Yes No obvious Upheld - [2003] EWCA 952 Data Storage Pumfrey J (1) No (2) No (1) No - obvious (2) No - added matter Upheld - [2003] EWCA 1155 Fysh HHJ (PCC) No No anticipated, obvious O Jacob J NA [No anticipated] Reversed - P [2003] EWCA 861, RPC 43 Fysh HH (PCC) Yes No anticipated, obvious O O P P O E

88 Patents Court and Patents County Court Judgments on Validity and Infringement for 2003 Date Parties Citation Subject matter Judge Infringed? Valid? Appealed? Type Teva Pharmaceutical Industries v Instituto Gentili [2003] EWHC 5 [2003] FSR 29 Pharmaceutical - Alendronate NMI v Unwin Tracker device Fysh HHJ (PCC) Kavanagh Balloons v [2004] RPC 5 Balloons Fysh HHJ Cameron Balloons (PCC) Rockwater v [2003] EWHC Pipe laying Coflexip 812 device Daesang v Ajinomoto Koninkijke Philips Electronics v Princo Digital Disc Unilin Beheer v Berry Floor Building Products v Sandtoft Merck v Generics (UK) Apotex Europe v SmithKline Beecham [2003] EWHC 973 [2003] EWHC 1598 Process for purification of Aspartame Jacob J NA (1) No anticipated, obvious (2) No anticipated Upheld - [2003] EWCA 1545, [2004] FSR 16 Yes Yes E Yes Yes (partial) O Laddie J [No] [No anticipated, obvious] Reversed as to both validity and infringement - [2004] EWCA 381, [2004] RPC 46 Laddie J NA Yes P CD boxes Pumfrey J NA Yes O [2004] FSR 14 Laminated floors Fysh HHJ (PCC) [2003] EWHC 2842 [2004] RPC 31 [2003] EWHC 2939 [2004] FSR 26 Roofs Pharmaceutical - Alendronate Pharmaceutical Paroxetine hydrochloride Yes Yes (partially) Upheld - [2004] EWCA 1021 O Yes Yes O Fysh HHJ (PCC) Laddie J No NA P Pumfrey J No [No anticipated, obvious] Reversed as to validity - [2004] EWCA 1568 P O P

89 Patents Court and Patents County Court Judgments on Validity and Infringement for 2004 Date Parties Citation Subject matter Judge Infringed? Valid? Appealed? Type Russell Finex v Telesonic [2004] EWHC 474 [2004] RPC CIPLA v Glaxo [2004] EWHC Machinery Developments v St Merryn Meat Secretary of State for Education and Skills v Frontline Technology Ultraframe (UK) v Eurocell Building Plastics Sandoz v Roche Diagnostics Burnden Group v Ultraframe(UK) Nikken Kosakusho Works v Pioneer Trading Mayne Pharma v Pharmacia Italia [2004] EWHC 1487 [2004] EWHC 1785 [2005] RPC 7 [2004] EWHC 1313 [2004] EWHC 2246 [2005] FSR 2458 [2004] EWHC 2458 Sieving Process Laddie J No NA O Pharmaceutical - Salmeterol / Fluticasone mixture Packaging system Attendance system Pumfrey J NA No obvious P Fysh HHJ (PCC) D Young QC Yes Yes O NA Yes (partially) O Conservatories Lewison J [No] Yes Reversed as to infringement - [2005] EWCA 761, [2006] RPC 36 O Pharmaceutical Patten J NA Yes P Erythropoeitin formulation Conservatories Fysh HHJ (PCC) Held over in part (1) No anticipated, obvious (2) No - obvious Upheld - [2005] EWCA 867 Milling chuck Mann J NA No anticipated, obvious O Pharmaceutical Epirubicin formulation Wyand QC [No] NA Reversed as to infringement - [2005] EWCA 137 O P

90 Date Parties Citation Subject matter Judge Infringed? Valid? Appealed? Type St Gobain PAM v Fusion Provida Abbott Laboratories v Ranbaxy Europe Agilent Technologies Deutschland v Waters [2004] EWHC 2469 [2004] EWHC 2723 [2004] EWHC 2992 Iron pipes Pumfrey J NA Yes Upheld - [2005] EWCA 177 Pharmaceutical - Pumfrey J NA No anticipated, added Clarithromycin matter HPLC pump Pumfrey J No NA Upheld - [2005] EWCA 987 O P E

91 Patents Court and Patents County Court Judgments on Validity and Infringement for 2005 Date Parties Citation Subject matter Judge Infringed? Valid? Appealed? Type E Data v Getty Images Halliburton Energy Services v Smith International (North Sea) Mayne Pharma (US) v Teva UK Ranbaxy UK v Warner-Lambert Schering-Plough v Norbrook Laboratories LG Philips LCD v Tatung (UK) Canady v Erbe Elektromedezin [2005] EWHC 1527 [2005] EWHC 1623 [2006] RPC 2 [2005] EWHC 2141 [2005] EWHC 2142 [2006] FSR 14 [2005] EWHC 2532 [2006] FSR 18 [2005] EWHC 2946 Internet Sales Arnold QC (PCC) No Yes E Drill bits Pumfrey J (1) Yes (1) No insufficient Upheld E (2) No (2) No - insufficient [2006] EWCA 1715 Pharmaceutical - Paclitaxel formulation Pharmaceutical - Atorvastatin Pharmaceutical - mixture Mountings for flat panel display devices Surgical tissue coagulator Pumfrey J Yes No obvious P Pumfrey J (1) Yes (2) NA (1) Yes (2) No anticipated, obvious Upheld - [2006] EWCA 876, [2007] RPC 4 Floyd QC NA Yes (partially) P Fysh HHJ (PCC) No No - obvious Upheld - [2006] EWCA 1774 Pumfrey J No NA P P O

92 Patents Court and Patents County Court Judgments on Validity and Infringement for 2006 Date Parties Citation Subject matter Judge Infringed? Valid? Appealed? Type Tamglass v Luoyang North Glass Technology Research In Motion UK v Inpro Licensing GE Healthcare v PerkinElmer Life Sciences (UK) Ferag v Müller Martini Conor Medsystems v Angiotech Pharmaceuticals Ivax Pharmaceuticals (UK) v Chugai Seiyaku Mayne Pharma v Debiopharm Ivax Pharmaceuticals UK v Akzo Nobel UK [2006] EWHC 65 [2006] EWHC 70 [2006] RPC 20 [2006] EWHC 214 [2006] EWHC 225 [2006] EWHC 260 [2006] RPC 28 [2006] EWHC 756 [2006] EWHC 1123 [2006] EWHC 1089 [2007] RPC Pozzoli v BDMO [2006] EWHC 1398 Glass bending and tempering Mobile telephony Scintillation Proximity Test Cutting/trimming print materials Medical devicedrug impregnated stent Pharmaceutical - Nicorandil Pharmaceutical - Oxaliplatin Pharmaceutical - Tibolone CD & DVD Packaging Mann J Yes Yes O Pumfrey J Yes (but invalid) No anticipated, obvious Upheld - [2007] EWCA 51 Kitchin J NA No obvious P Lewison J [No] [No obvious] Reversed as to both validity and infringement - [2007] EWCA 15 Pumfrey J NA No obvious Upheld - [2007] EWCA 5 Kitchin J NA No obvious P Pumfrey J No NA No obvious No obvious Lewison J NA No obvious P Lewison J No No - obvious Upheld [2007] EWCA 588 E O P P O

93 Vector v Glatt Air Technologies [2006] EWHC 1638 [2007] RPC 12 Fluid bed Lewison J NA Yes Upheld [2007] EWCA 805 O Novartis v Ivax Pharmaceuticals (UK) [2006] EWHC 2506 Pharmaceutical Cyclosporine formulation Pumfrey J No No Yes No - obvious Upheld [2007] EWCA 971 P Merz Pharma v Allergan [2006] EWHC 2686 Pharmaceutical - Botulinum Toxin Kitchin J NA No anticipated, added matter, obvious P

94 Patents Court and Patents County Court Judgments on Validity and Infringement for 2007 Date Parties Citation Subject Matter and Patents Baxter v Abbott [2007] EWHC LB Europe v Smurfit Bag in Box & ors European Central Bank v Document Security System [2007] EWHC 510 [2007] EWHC 600 Pharmaceutical Sevoflurane Judge Infringed? Valid? Appealed? Type Pumfrey J No No I, A, & AM P Tap for wine box Wyand QC No Yes Upheld [2007] EWCA 933 Method of making a document incapable of replication by a scanning type copying device Kitchin J N/A No AM Upheld [2008] EWCA 192 P O Generics & Ors v H Lundbeck A/S [2007] EWHC Actavis v Merck [2007] EWHC Triumph Actuation Systems v Aeroquip- Vickers [2007] EWHC Servier v Apotex [2007] EWHC Handi-Craft & anr v B Free World & ors [2007] EWHC B10 Pharmaceutical Escitalopram Pharmaceutical Finasteride Power Transfer Unit Pharmaceutical Perindropil Kitchin J N/A C6: Yes [C1&3: No I] Reversed [2008] EWCA 311 Warren J N/A [No A] Reversed P [2008] EWCA 444 Pumfrey J Yes No AM O Pumfrey J Yes No A & O Upheld [2008] EWCA 445 Baby bottles Fysh HHJ Yes No O Upheld [2008] EWCA 868 P P O

95 Date Parties Citation Subject Matter and Patents Siemens Schweiz v Thorn Security Monsanto Technology v Cargill International University of Queensland v Siemens Magnet Technology Teva Pharmaceutical Industries v Merrell Pharmaceuticals Wobben v Vestas- Celtic Wind Technology Nokia v Interdigital Technology [2007] EWHC 2242 [2007] EWHC 2257 [2007] EWHC 2258 [2007] EWHC 2276 [2007] EWHC 2636 [2007] EWHC 3077 Coating for printed circuit board Judge Infringed? Valid? Appealed? Type Mann J [Yes] Yes Reversed as to infringement - [2008] EWCA 1161 GM crops Pumfrey J No Yes P MRI Magnets Pumfrey J Yes [in part] No AM & O O Pharmaceutical Fexofenadine Wind Turbine Technology 3G Mobile Phone Technology Warren J NA No as to the 9 claims in issue of the 3 patents in issue 8 A, 9 O Kitchin J No x 2 Abandoned x 1 Pumfrey LJ No x 3 Yes x 1 [as to essentiality] No x 3 AM, O & I as to first; Conceded claim 1 of second invalid but all proposed amendments refused as AM and either O or I; Accepted all except 2 claims of the third conceded, one proposed amendment refused as O but other allowed. NA O P E E

96 Patents Court and Patents County Court Judgments on Validity and Infringement for 2008 Date Parties Citation Subject Matter and Patents 07/02/2008 Qual-Chem Ltd v Corus UK Ltd 28/02/2008 Research in Motion UK Ltd v Visto Corporation 03/03/2008 Qualcomm Incorporated v Nokia Corporation 21/04/2008 Abbott Laboratories Ltd v Eyvisio Medical Devices ULC 21/04/2008 Buhler AG v FP Spomax SA [2008] EWPCC 1 [2008] EWHC 335 [2008] EWHC 329 [2008] EWHC 800 [2008] EWHC 823 Steel making process GB C Telecoms EP B Telecoms EP B EP B Medical devices coronary stents EP B EP B EP B Milling process EP B Judge Infringed? Valid? Appealed? Type HHJ Fysh Yes Yes Yes upheld [2009] EWCA 1177 Floyd J Yes No obvious, and computer program as such Floyd J Yes x 2 No x anticipated and obvious, claims 1, 2, 9 and 11 of 482 obvious and claims 9 and 11 insufficient Kitchin J Yes as to '093 and '084, no as to '094 No x 2 '093 and 804 obvious Yes as to 094 Mann J Admitted No - obvious O O E E P 14/05/2008 Aerotel Ltd v Wavecrest Group Enterprises Ltd 12/06/2008 Alan Nuttall Ltd v Fri-Jado UK Ltd & anr 25/06/2008 Zipher Ltd v Markem Systems Ltd & anr [2008] EWHC B4 [2008] EWHC 1311 [2008] EWHC 1379 Telecoms GB B Hot food display cabinet GB B Tape Drives GB B EP B Yes upheld E as obvious [2009] EWCA 408 Yes Yes O HHJ Fysh Yes No obvious, and business method and computer program as such Prescott QC Floyd J Yes x 2 No x 2 '602 and '375 insufficient O

97 Date Parties Citation Subject Matter and Patents 30/06/2008 Actavis UK Ltd v Janssen Pharmaceutica NV 31/07/2008 Eli Lilly & Company v Human Genome Sciences, Inc 07/10/2008 WL Gore & Associates GmbH v Geoxx SpA 13/10/2008 Dr Reddy s Laboratories (UK) Limited v Eli Lilly & Company 15/10/2008 Generics (UK) Ltd v Daiichi Pharmaceutical Company & anr 21/10/2008 Ancon v ACS Stainless Steel Fixings 14/11/2008 Armour Group plc v Leisuretech Electronics Pty Ltd [2008] EWHC 1422 [2008] EWHC 1903 [2008] EWHC 2311 [2008] EWHC 2345 [2008] EWHC 2413 [2008] EWHC 2489 [2008] EWHC 2797 Pharmaceutical Nebivolol EP B Neutrokine-α polypeptide EP B Shoes EP B EP B Pharmaceutical Olanzapine EP B Pharmaceutical Levofloxacin EP & SPC Steel channel assembly EP B Distributed audio system EP B Judge Infringed? Valid? Appealed? Type Floyd J NA Partially all claims except claim 5 anticipated & obvious Kitchin J NA No - obvious, insufficient and lacks industrial applicability Floyd J Yes as to 270 No as to 183 Yes x 2 Yes upheld as to lack of industrial applicability [2010] EWCA 1903 Yes upheld as to both infringement holdings [2009] EWCA 794 Floyd J NA Yes Yes upheld [2009] EWCA 1362 Kitchin J NA Yes Yes upheld [2009] EWCA 646 Patten J [No] Yes Yes reversed infringed [2009] EWCA 646 O Arnold J Admitted No - obvious E P P O P P

98 Date Parties Citation Subject Matter and Patents 16/12/2008 Ratiopharm GmbH v Napp Pharmaceutical Holdings Ltd Sandoz Ltd v Napp Pharmaceutical Holdings Ltd [2008] EWHC 3070 Pharmaceutical formulation Oxycodone EP B EP B Judge Infringed? Valid? Appealed? Type Floyd J [No x 2] Yes x 2 Yes reversed infringed x 2 [2009] EWCA 252 P

99 Patents Court and Patents County Court Judgments on Validity and Infringement for 2009 Date Parties Citation Subject Matter and Patents 09/01/09 Corevalve Inc v Edwards Lifesciences AG and anr 16/01/09 Actavis UK Ltd v Novartis AG 19/01/09 Schlumberger Holdings Ltd v Electromagnetic Geoservices AS 21/01/09 Virgin Atlantic Airways Ltd v Premium Aircraft Interiors Group Ltd and anr 22/01/09 Dyson Technology Ltd v Samsung Gwangju Electronics Co Ltd 23/01/09 Laboratoires Almirall SA v Boehringer Ingelheim International GmbH [2009] EWHC 0006 [2009] EWHC 0041 [2009] EWHC 0058 [2009] EWHC 0026 [2009] EWHC 0055 [2009] EWHC 0102 Artificial heart valve EP Sustained release fluvastatin formulation EP Oil exploration using controlled source electromagnetism EP EP GB Aircraft Seats EP Vacuum Cleaners GB GB Combination aclidinium and B2 agonists EP GB Judge Infringed? Valid? Appealed? Type Prescott QC No Yes Yes upheld [2010] EWCA 704 Warren J NA No all claims obvious Yes upheld [2010] EWCA 82 Mann J NA [No x 3 all claims obvious] Yes as to 2 patents both held valid on appeal [2010] EWCA 819 Lewison J [No] Yes Yes held infringed on appeal [2009] EWCA 1062 Arnold J NA No x 2 as to all claims in issue, all of which obvious, with some anticipated HHJ Fysh NA No x 2 all claims obvious, claim 20 of 819 invalid as method of medical treatment O P O O O P

100 Date Parties Citation Subject Matter and Patents 12/02/09 Ratiopharm (UK) Ltd v Alza Corp and anr; Alza Corp and anr v Sandoz Ltd 26/02/09 Belvac Production Machinery Inc v Carnaudmetalbox Engineering Ltd 03/03/09 Novartis AG v Dexcel-Pharma 11/03/09 MMI Research Ltd v Cellxion Ltd & ors 27/03/09 Scinopharm Taiwan Ltd v Eli Lilly & Co 01/05/09 Wake Forest University and ors v Smith & Nephew plc and anr 15/05/09 Leo Pharma A/S and anr v Sandoz Limited [2009] EWHC 0123 [2009] EWHC 0292 [2009] EWHC 0336 [2009] EWHC 0418 [2009] EWHC 1938 [2009] EWHC 631 [2009] EWHC 908 [2009] EWHC 996 Trandermal patches for administering fentanyl EP Can processing machinery EP Cyclosporin Formulation GB Method for breaking through GSM network security EP Gemcitabine Process EP Apparatus for promoting wound healing EP Crystalline hydrate of calcipotriol EP Judge Infringed? Valid? Appealed? Type Kitchin J Yes No - all claims anticipated (which could have been overcome by amendment) and obvious Baldwin QC No No all claims obvious O Arnold J Yes NA P Floyd J Yes, but no as to redesign Yes Yes remitted to trial judge in view of new evidence 2 Kitchin J NA Yes P Wyand QC Yes claims 1, 2, 4, 9, 13, 15, 16, 17, 19 [Partially, and subject to amendment claims 1, 2 and 15 anticipated, claims 8, 9, 13 and 17 obvious] Yes all claims held invalid on appeal [2009] EWCA 848 Floyd J Conceded Yes Yes upheld 2009] EWCA 1188 P E P P 1 Same patent as previously in issue in Novartis AG v Ivax Pharmaceuticals UK Ltd [2006] EWHC 2506, [2007] EWCA See MMI Research Ltd v Cellxion Ltd & ors [2011] EWHC 426

101 Date Parties Citation Subject Matter and Patents 09/06/09 Folding Attic Stairs Ltd v The Loft Stairs Company Ltd & anr 12/06/09 Edwards Lifesciences AG v Cook Biotech Inc 15/06/09 FNM Corporation Ltd v Drammock International Ltd and anr 16/06/09 Tate & Lyle Technology Ltd v Roquette Freres 07/07/09 Cranway Ltd v Playtech Ltd & ors 10/07/09 Novartis AG & anr v Johnson & Johnson Medical Limited & anr 29/07/09 Zeno Corporation & ors v BSM-Bionic Solutions Management GmBH & anr 31/07/09 Fabio Perini SPA v LPC Group PLC & ors 31/07/09 Occlutech GmbH v AGA Medical Corp & anr [2009] EWHC 1221 [2009] EWHC 1304 [2009] EWHC 1294 [2009] EWHC 1312 [2009] EWHC 1588 [2009] EWHC 1671 [2009] EWHC 1829 [2009] EWHC 1929 [2009] EWHC 2013 Folding attic stairs GB Artificial Heart Valve EP Cooling spray aerosol EP Use of maltotritol to control the crystal structure of maltitol EP On-line gambling EP Contact lens EP Medical device EP Paper machinery EP EP Stent EP Judge Infringed? Valid? Appealed? Type Prescott QC Yes Yes O Kitchin J No No - all claims obvious Yes upheld [2010] EWCA 718 Arnold J NA No all claims for which independent validity asserted anticipated and obvious Lewison J NA No - only claim to have survived EPO opposition anticipated and to mere discovery Lewison J Yes claim 1 No - claim 1 anticipated, and obvious, claim 3 & 5 obvious, all claims to excluded subject matter Kitchin J Yes claims 8 No all claims insufficient &11 Yes upheld [2010] EWCA 1049 Yes upheld [2010] EWCA 1039 Lewison J No Yes P Floyd J Yes x 2 claims 16 & 17 of 929, claims 1 and 7 of 168 Yes as to 929 No as to obvious Yes upheld [2010] EWCA 525 Mann J No Yes Yes upheld [2010] EWCA 702 O O P O O O O

102 Date Parties Citation Subject Matter and Patents 28/08/09 Mölnlycke Health Care AB v Wake Forest University and anr 29/10/09 Boegli-Gravures SA v Darsail-ASP Ltd and anr 03/11/09 Grimme Landmaschinenfabrik Gmbh & Co. KG v Derek Scott [2009] EWHC 2204 [2009] EWHC 2690 [2009] EWHC /11/09 Teva v Merck [2009] EWHC /11/09 Gemstar-TV Guide International Inc and ors v Virgin Media Limited and anr [2009] EWHC 3068 Apparatus for promoting wound healing EP Apparatus for satinising and embossing metal packaging foils EP Machinery for separating potatoes from weeds, earth, clods, stones and haulm EP Ophthalmic formulations of timolol and dorzolamide for the treatment of glaucoma EP Electronic programming guide EP EP EP Judge Infringed? Valid? Appealed? Type Kitchin J NA No obvious, and protection extended Arnold J Yes Yes O Floyd J Yes as to claim 17 [Partially claim 1 obvious, claims 17 and 24 valid] Yes - upheld although claim 1 also held valid [2010] EWCA 1110 Floyd J NA No - Obvious Yes upheld [2011] EWCA 382 Mann J Yes as to 662 Yes as to 049 Yes as to 066 No as to 662 obvious and excluded subject matter No as to 049 anticipated and excluded subject matter No as to 066 anticipated Yes upheld [2011] EWCA 302 P O P E 3 Same patent as previously in issue in Wake Forest University and ors v Smith & Nephew plc and anr [2009] EWHC 908, [2009] EWCA 848

103 Patents Court and Patents County Court Judgments on Validity and Infringement for 2010 Date Parties Citation Subject Matter and Patents 18/01/2010 Nokia GmbH v IPCom GmbH & Co, KG 20/01/2010 Red Spider Technology v Omega Completions Technology 03/02/2010 Research in Motion UK Ltd v Motorola Inc 23/02/2010 Intervet UK Ltd v Merial and ors 31/03/2010 Shutz (UK) Ltd v Werit UK Ltd and anr 20/04/2010 HTC Corporation v Yozmot 33 Limited 23/06/2010 KCI Licensing Inc and ors v Smith & Nephew plc and ors 12/07/2010 Fosroc International Ltd v WR Grace & Co [2009] EWHC 3482 [2010] EWHC 59 [2010] EWHC 118 [2010] EWHC 294 [2010] EWHC 660 [2010] EWHC 786 [2010] EWHC 1487 [2010] EWHC 1702 Mobile telephony EP EP Water injection valve UK Mobile telephony EP Animal vaccines EP Intermediate bulk containers EP EP Telephone identification calling appararus EP Wound drainage equipment EP EP Cement EP Judge Infringed? Valid? Appealed? Type Floyd Yes x 2 No x obvious, 189 anticipated and obvious Mann No No all claims obvious, and some anticipated Yes upheld [2011] EWCA 6 Arnold No No - obvious E Arnold No No obvious, and anticipated on loss of priority Floyd [No x 2] [Yes x 2] Yes, as to 947 only and reversed as to infringement [2011] EWCA 303 Arnold Yes No as to claims asserted infringed anticipated and obvious Arnold [Yes x 2] Yes x 2 Yes upheld in part [2010] EWCA 1290 O Floyd NA Yes, as amended O E O P O E

104 Date Parties Citation Subject Matter and Patents 12/11/2010 Abbott Laboratories Ltd v Medinol Ltd 30/11/2010 Virgin Atlantic Airways Ltd v Delta Airways, Inc [2010] EWHC 2865 [2010] EWHC 3094 Stents EP EP EP Judge Infringed? Valid? Appealed? Type Arnold No x 3 Yes as to 449 and 902, No as to anticipated Aircraft Seating EP Arnold No, on summary judgment application NA Yes, but only reversed as to being suitable for summary judgment [2011] EWCA 163 O O 4 Previously in issue in Virgin v Premier [2009] EWHC 26, [2009] EWCA 1062, [2009] EWCA 1513

105 Patents Court and Patents County Court Judgments on Validity and Infringement for 2011 Date Parties Citation Subject Matter and Patents 14/01/11 Apimed Medical Honey Ltd v Brightwake Ltd 14/02/11 Datacard Corporation v Eagle Technologies Limited 25/02/11 Mölnlycke Health Care AB v Brightwake Limited (trading as Advancis Medical) 07/03/11 MMI Research Ltd v Cellxion Ltd & ors 17/03/11 Gedeon Richter plc v Bayer Schering Pharma AG [2011] EWPCC 2 [2011] EWHC 244 [2011] EWHC 376 [2011] EWHC 426 [2011] EWHC 583 Wound dressings EP Card printers EP EP Wound dressing EP Method for breaking through GSM network security EP Pharmaceutical combination of ethinylestradiol and drospirenone for use as a contraceptive EP EP Judge Infringed? Valid? Appealed? Type Fysh QC No [No obvious] Yes reversed as to validity [2012] EWCA Civ 5 Arnold J Yes x 2 No x 2 as to claims in issue obvious and AM HHJ Birss QC 530 obvious No [No as to claims in issue obvious] Yes reversed as to validity [2012] EWCA Civ 602 Floyd J NA [Yes] Yes reversed [2012] EWCA 7 Floyd J NA Yes as to 301 when amended Claims 1 and 19 of 069 obvious but claim 6 valid Yes upheld [2012] EWCA 235 P O P E P 5 Same patent as previously in issue between the same parties in MMI Research Ltd v Cellxion Ltd & ors [2009] EWHC 0418 and [2009] EWHC 1938

106 Date Parties Citation Subject Matter and Patents 14/04/11 H. Lundbeck A/S v Norpharma and anr 16/06/11 Nokia OYJ v IPCom GmbH & Co, KG 24/06/11 Cephalon, Inc v Orchid Europe Ltd 05/07/11 Medimmune Limited v Novartis Pharmaceuticals UK Limited & anr 15/07/11 Ranbaxy (UK) Ltd v AstraZeneca AB [2011] EWHC 907 [2011] EWHC 1470 [2011] EWHC 1591 [2011] EWHC 1669 [2011] EWHC 1831 Chemical process for manufacture of a pharmaceutical intermediate EP Mobile telephony EP Pharmaceutical composition of modafinil EP EP EP Antibody production EP EP Pharmaceutical Nexium EP Judge Infringed? Valid? Appealed? Type Floyd J Yes No as to claims in issue obvious Floyd J Yes as to A1 & A2 devices, no as to B-G devices Yes Yes upheld [201 2] EWCA 567 Floyd J No x 3 No x 3 - obvious P Arnold J No x 2 No x 2 as to claims in issue - obvious in view of loss of priority Kitchin J No N/A P P E P 15/07/11 Select Healthcare (UK) Ltd v Cromptons Healthcare Ltd 27/07/11 Convatec Limited & ors v Smith & Nephew Healthcare Limited & anr 30/09/11 Generics (UK) Ltd v Novartis AG [2011] EWHC 1830 [2011] EWHC 2039 [2011] EWHC 2403 Low friction sheets used to transfer patients GB B Wound dressing EP Pharmaceutical - Rivastigmine UK Kitchin J No No - obvious O HHJ Birss QC No Yes, in part Yes upheld [2012] EWCA 520 Floyd J Conceded No - obvious P P

107 Date Parties Citation Subject Matter and Patents 22/11/11 Benker v Comptroller General of Patents 15/12/11 Sandvik Intellectual Property AB v Kennametal Uk Limited & anr [2011] EWHC 3604 [2011] EWHC 3311 Container for measuring a drink s alcohol units Oxide coated cutting tool EP Judge Infringed? Valid? Appealed? Type Morgan J N/A No - obvious O Arnold J Yes, as to some articles only No insufficient, and as to some claims only, obvious O 21/12/11 Omnipharm Ltd v Merial [2011] EWHC 3393 Flea treatments. EP UK Floyd J Conceded that some did not Yes as to 881 as amended No as to insufficient P

108 Patents Court and Patents County Court Judgments on Validity and Infringement for 2012 Date Parties Citation Subject Matter and Patents 20/02/12 Nokia GmbH v IPCom GmbH & Co, KG 22/03/12 Teva UK Ltd and ors v AstraZeneca AB 22/03/12 Regeneron Pharmaceuticals and Bayer Pharma AG v Genentech Inc 18/04/12 Wagner International AG and ors v Earlex Ltd 13/06/12 Smith & Nephew Plc v Convatec Technologies Inc 04/07/12 HTC Europe Co Ltd v Apple Inc [2012] EWHC 225 [2012] EWHC 655 [2012] EWHC 657 [2012]EWHC 984 [2012] EWHC 1602 (Pat) [2012] EWHC 1789 Mobile telephony EP Sustained release formulation of quetiapine EP Use of VEGF antagonists EP Paint spray guns EP Wound dressing EP Mobile telephony EP EP EP EP Judge Infringed? Valid? Appealed? Type Floyd J Claims as amended not essential to standards No anticipated and/or obvious, although certain amendments possible Arnold J NA No - obvious P Floyd J Yes Yes P Floyd J No No obvious, and added matter Judge Birss Q.C. Floyd J N/A Yes (after amendment) P No x 3 obviousness, excluded subject matter, lack of novelty Yes x 1 E O E 11/07/2012 Generics (UK) Ltd (t/a Mylan) v Yeda Research & Development Co Ltd 12/07/12 Schenck Rotec GmbH v Universal Balancing Ltd [2012] EWHC 1848 (Pat) [2012] EWHC 1920 (Pat) Pharmaceutical - Copaxone EP Balancing machine EP Arnold J Yes Yes P Judge Birss Q.C Yes Yes O

109 Court of Appeal Judgments on Validity and Infringement for period 2002 to 2006 Date Case Citation Subject Matter Judge upheld Infringed? Valid? Type Cairnstores v Hassle [2002] EWCA 1504 [2003] FSR Stena Rederi v Irish [2003] EWCA 66 Ferries [2003] RPC Synthon v SmithKline [2003] EWCA 861 Beecham [2003] RPC BASF v SmithKline Beecham [2003] EWCA 872 [2003] RPC 49 Pharmaceutical - Yes NA No - obvious P Omeprazole Multi-hull vessel Yes No NA O Pharmaceutical - Paroxetine mesylate Pharmaceutical - Paroxetine hydrochloride No NA Yes (reversing) (itself reversed in H of L) Yes (albeit on a different construction) NA Yes P SEB v De Longhi [2003] EWCA 952 Fryer Yes Yes No obvious O Storage Computer v [2003] EWCA 1155 Data storage Yes Not decided No obvious E Hitachi Data Systems Teva Pharmaceutical v [2003] EWCA 1545 Pharmaceutical - Yes NA (1) No - anticipated and obvious P Instituto Gentili [2004] FSR 16 Alendronate (2) No - anticipated Rockwater v Technip France (formerly Coflexip) [2004] EWCA 381 [2004] RPC 46 Flexible pipes No Yes (reversing) Yes (reversing) O Unilin Beheer v Berry Floor SmithKline Beecham v Apotex Europe Mayne Pharma v Pharmacia Italia St-Gobain PAM v Fusion Provida Ultraframe (UK) v Eurocell Building Plastics The Burnden Group v Ultraframe (UK) [2004] EWCA 1021 Laminated flooring Yes (on a wider construction) Yes Yes O [2004] EWCA 1568 Pharmaceutical - No No Yes (reversing) P Paroxetine hydrochloride [2005] EWCA 137 Pharmaceutical - No Yes (reversing) NA P Epirubicin [2005] EWCA 177 Steel pipes Yes NA Yes O [2005] EWCA 761 [2005] RPC 36 Conservatories No Yes (reversing) Yes O [2005] EWCA 867 Conservatories Yes (from PCC) NA No anticipated and obvious O P

110 Date Case Citation Subject Matter Judge upheld Infringed? Valid? Type Agilent Technologies Deutschland v Waters Ranbaxy UK v Warner- Lambert Halliburton Energy Services v Smith International (North Sea) LG Philips LCD v Tatung (UK) [2005] EWCA 987 HPLC pump Yes No NA E [2006] EWCA 876 Pharmaceutical - Yes Yes NA P [2007] RPC 4 Atorvastatin NA No - anticipated [2006] EWCA 1715 Oil drilling bits Yes NA No - insufficient O [2006] EWCA 1774 Mountings for flat panel display devices Yes (from PCC) No No - obvious O

111 Court of Appeal Judgments on Validity and Infringement in 2007 Date Parties Citation Subject matter Judge Upheld? Infringed? Valid? Type Conor Medsystems v Angiotech [2007] EWCA 5 Drug coated stents Yes NA No Obvious (itself reversed in Hof L) P Ferag v Miiller [2007] EWCA 15 Cutting/ trimming Martini print materials No Yes, (reversing) Yes (reversing) O Research In Motion [2007] EWCA 51 Mobile Yes NA N o - O bvious E UK v Inpro telephony Licensing Pozzoli v BDMO [2007] EWCA 588 CD & DVD Yes No No - Obvious O Packaging LB Europe v Smurfit Bag in Box & ors [2007] EWCA 933 Tap for wine box Yes No NA O Novartis v Ivax [2007] EWCA 971 Cyclosporin formulation Yes No NA P Vector v Glatt [2007] EWCA 805 Fluid bed Lewison J NA Yes but reversing as to one O Air Technologies claim of proposed amendment which was held to add matter

112 Court of Appeal Judgments on Validity and Infringement in 2008 Date Parties Citation Subject matter Judge Upheld? Infringed? Valid? Type 19/03/08 European Central Bank v Document Security System [2008] EWCA 192 Method of making a document incapable of replication by a scanning type copying device Yes N/A No Added Matter O 14/04/08 Generics & Ors v H Lundbeck A/S [2008] EWCA 311 Pharmaceutical Escitalopram No N/A Yes P 21/05/08 Actavis v Merck [2008] EWCA 444 Pharmaceutical Use Finasteride 09/05/08 Servier v Apotex [2008] EWCA 445 Pharmaceutical Form Perindropil No N/A Yes P Yes N/A No Anticipated P 30/07/08 Handicraft Company & ors v B Free World Ltd & ors [2008] EWCA 868 Baby Bottle Yes N/A No - Obvious O 22/10/08 Thorn Security v Siemens Schweiz [2008] EWCA 1161 Coating for printed circuit board No No, reversing judge Yes but no longer in issue on appeal O 29/10/08 Qual-Chem Ltd v Corus UK Ltd [2008] EWCA 1177 Steel making process GB C Yes Yes Yes O

113 Court of Appeal Judgments on Validity and Infringement in 2009 Date Parties Citation Subject matter Judge Upheld? Infringed? Valid? Type 01/04/09 Napp Pharmaceutical Holdings Ltd v Ratiopharm GmbH Napp Pharmaceutical Holdings Ltd v Sandoz Ltd 20/05/09 Aerotel Ltd v Wavecrest Group Enterprises Ltd & ors 16/06/09 Ancon v ACS Stainless Steel Fixings 02/07/09 Generics (UK) Ltd v Daiichi Pharmaceutical Company & anr 29/07/09 WL Gore & Associates GmbH v Geoxx SpA 31//07/09 Wake Forest University and ors v Smith & Nephew plc and anr 22/10/09 Virgin Atlantic Airways Ltd v Premium Aircraft Interiors Group Ltd and anr [2009] EWCA 252 Pharmaceutical formulation Oxycodone EP B EP B [2009] EWCA 408 Telecoms GB B [2009] EWCA 498 Steel channel assembly EP B [2009] EWCA 646 Pharmaceutical Levofloxacin EP & SPC [2009] EWCA 794 Shoes EP B EP B [2009] EWCA 848 Apparatus for promoting wound healing EP [2009] EWCA 1062 Aircraft Seats EP No Yes x 2, reversing judge Yes x 2 Yes, as obvious NA No E No Yes, reversing judge Yes not in issue on appeal Yes NA Yes P Yes Yes as to 270 No as to 183 Yes as to anticipation of claim 1, no as to obviousness of claims 4, 16 and 19 Yes as to validity, no as to infringement NA Yes x 2 not in issue on appeal No, reversing judge on obviouness Yes, reversing Yes O judge 6 P O O P 6 Later it was conceded that as a result of amendments made in the course of an EPO opposition the patent was no longer infringed see [2011] EWCA 163

114 Date Parties Citation Subject matter Judge Upheld? Infringed? Valid? Type 17/11/09 Leo Pharma A/S and anr v Sandoz Limited 18/12/09 Dr Reddy s Laboratories (UK) Limited v Eli Lilly & Company [2009] EWCA 1188 Crystalline hydrate of calcipotriol EP [2009] EWCA 1362 Pharmaceutical Olanzapine EP B Yes NA Yes P Yes NA Yes P

115 Court of Appeal Judgments on Validity and Infringement in 2010 Date Parties Citation Subject matter Judge Upheld? Infringed? Valid? Type 09/02/10 Eli Lilly & Company v Human Genome Sciences Inc 17/02/10 Actavis UK Ltd v Novartis AG 14/05/10 Fabio Perini v LPC & PCMC 22/06/10 Occlutech v Aga Medical 28/06/10 Cook Biotech Inc v Edwards Lifesciences AG 30/06/10 Medtronic CoreValve LLC v Edwards Lifesciences AG 23/07/10 Schlumberger Holdings Ltd v Electromagnetic Geoservices AS [2010] EWCA 1903 Neutrokine-α polypeptide EP B [2010] EWCA 82 Sustained release fluvastatin formulation EP [2010] EWCA 525 Paper machinery EP EP [2010] EWCA 702 Stent EP [2010] EWCA 718 Artificial Heart Valve EP [2010] EWCA 704 Artificial heart valve EP [2010] EWCA 819 Oil exploration using controlled source electromagnetism EP EP Yes NA No lack of industrial applicability 7 Yes NA No - obvious P Yes Yes x 1 claims 16 & 17 of 929 Yes as to 929 No as to obvious Yes No NA O Yes NA No - all claims obvious O Yes No NA O No NA Yes x 2 8 O P O 7 On appeal to Supreme Court 8 On appeal to Supreme Court

116 Date Parties Citation Subject matter Judge Upheld? Infringed? Valid? Type 29/09/10 Novartis AG et al v Johnson & Johnson Medical et al 15/10/10 Grimme Landmaschinenfabri k Gmbh & Co. KG v Derek Scott 11/10/10 Tate & Lyle Technology Ltd v Roquette Freres 18/11/10 KCI Licensing Inc and ors v Smith & Nephew plc and ors [2010] EWCA 1039 Contact lens EP [2010] EWCA 1110 Machinery for separating potatoes from weeds, earth, clods, stones and haulm EP [2010]EWCA 1049 Use of maltotritol to control the crystal structure of maltitol EP [2010] EWCA 1290 Wound drainage equipment EP EP Yes Conceded No - all claims insufficient O Yes, although holding that claim 1 obvious reversed Yes Yes O Yes NA No P In part No as to 504 as to GO pumps & canisters, reversing Yes as to 950 as to GO canisters, reversing Yes x 2 although claim 7 of 950 obvious O

117 Court of Appeal Judgments on Validity and Infringement in 2011 Date Parties Citation Subject matter Judge Upheld? Infringed? Valid? Type 20/01/11 Nokia GmbH v IPCom GmbH & Co, KG 23/02/11 Virgin Atlantic Airways Ltd v Delta Airways, Inc 29/03/11 Gemstar-TV Guide International Inc and ors v Virgin Media Limited and anr 29/03/11 Shutz (UK) Ltd v Werit (UK) Ltd 08/04/11 Merck Sharp & Dohme Corp v Teva UK Ltd [2011] EWCA 6 Mobile telephony EP EP [2011] EWCA 163 Aircraft Seating EP [2011] EWCA 302 Electronic programming guide EP EP [2011] EWCA 303 Intermediate bulk containers EP [2011] EWCA 382 Ophthalmic formulations of timolol and dorzolamide for the treatment of glaucoma EP Yes Yes x 2 No x obvious, 189 anticipated and obvious, but latter only indirectly challenged by way of amendment, which was refused Not as to summary judgment Possibly, to be determined at full trial Yes NA No x 2- anticipated E Yes as to validity, not as to infringement No Yes O Yes NA No - Obvious P NA E O 9 Same patent as previously in issue in Virgin v Premier [2009] EWHC 26, [2009] EWCA 1062, [2009] EWCA 1513, [2011] EWCA 163

118 Court of Appeal Judgments on Validity and Infringement in 2012 Date Parties Citation Subject matter Judge Upheld? Infringed? Valid? Type 20/01/12 Apimed Medical Honey Ltd v Brightwake Ltd 24/01/12 MMI Research Ltd v Cellxion Ltd & ors 07/03/12 Gedeon Richter plc v Bayer Schering Pharma AG 24/04/12 Mölnlycke Health Care AB v Brightwake Limited 02/05/12 Convatec Limited & ors v Smith & Nephew Healthcare Limited & anr 10/05/12 Nokia OYJ v IPCom GmbH & Co, KG [2012] EWCA Civ 5 Wound dressings EP [2012] EWCA 7 Method for breaking through GSM network security EP [2012] EWCA 235 Pharmaceutical combination of ethinylestradiol and drospirenone for use as a contraceptive EP [2012] EWCA Civ 602 EP Wound dressing EP [2012] EWCA 520 Wound dressing EP [2012] EWCA 567 Mobile telephony EP No NA Yes P No NA No - obvious E Yes NA Yes as to 301 when amended Claims 1 and 19 of 069 obvious but claim 6 valid No NA Yes P Yes No Yes, in part P Yes Yes A2 device Yes E P 10 Same patent as previously in issue between the same parties in MMI Research Ltd v Cellxion Ltd & ors [2009] EWHC 0418 and [2009] EWHC 1938

119 Neil Jenkins is a partner in the Intellectual Property Group based in London. He joined the firm in 1986 and became a partner in His practice is focused on patent, trademark, copyright, design and trade secret litigation. It also encompasses such associated matters as regulatory data exclusivity, supplementary protection certificates, labelling and advertising as well as domain name disputes, brand management and anticounterfeiting. His more high profile cases, before the English Courts and in the CFI include PLG v Ardon (plastic grids), ICI v Montedison (polymer composite), HCC v BP (acetic acid purification), UCC v BP (fluid bed production of polyethylene), Stephenson v Du Pont (entitlement), Hesco v Maccaferri (gabions), Chef Revival v OHIM (Chef mark), Agilent v Waters (HPLC pumps), Teva v Merck (alendronate), Teva v Merck (simvastatin), Lundbeck v Niche (citalopram), Abbott v APS (clarithromycin), Celltech v OHIM (Celltech mark), Actavis v Merck (finasteride), Actavis v Novartis (fluvastatin), Specialty Brands v OHIM (Dog Device), Teva v Merck (timolol/dorzolamide combination) and Generics v Yeda/Teva (Copaxone). Neil speaks regularly at IP conferences and contributes to the leading IP journals on many aspects of IP law and litigation as well as being the editor of International Intellectual Property Litigation (published by Butterworths). He is a member of the IPO international patent law and practice committee, the INTA publications sub-committee and the CIPA litigation sub-committee.

120 CN/MR/EMR Cabinet Plasseraud June 27, 2012 IPO/INVALIDITY STUDY 1 WHITE PAPER for IPO ANNUAL MEETING 2012 INTERNATIONAL PATENTS COMMITTEE STATISTICS & ANALYSIS FOR PATENT VALIDITY IN FRANCE Estelle Marchand, Magali Raugel and Cyra Nargolwalla 1 Cabinet Plasseraud PART I: GENERAL REMARKS & STATISTICS CONCERNING PATENT LITIGATION IN FRANCE In Europe, France is in second place, after Germany, with regard to the number of litigations involving patent matters,. France is also the fourth country worldwide in terms of number of patent litigations (after the US, China, and Germany). In 2009, the Tribunal de Grande Instance de Paris became the sole First Instance court competent to handle all patent-related litigation (infringement, nullity, declaratory judgements, employee inventions, contracts involving patents, etc.). Thus, since 2009 France has a specialized court and judges for all patent-related matters. This has led to a specialization also at the Appeal Court level, since the Cour d Appel de Paris is the competent court for appeals from the Tribunal de Grande Instance de Paris (before 2009, a limited number of French First Instance courts were competent to hear patent matters and hence a limited number of Appeal courts as well). Appeals are a matter of right, and cannot be refused. Questions of patent law may also go up to the Cour de cassation (French Supreme Court), but only if the question is accepted by the Supreme Court (usually when divergent opinions have been rendered by the Appeal Court). Tables 1, 2 and 3 below, show the number of patent related litigations in France at First Instance, Appeal and Supreme Court levels respectively 2. The average number of patent litigations in First Instance is slightly less than 200 per year (193 to be exact) for the period 2002 to The average number of patent litigations per year between 2002 and 2011, counting First Instance, Appeal and Supreme Court is 324. These tables also show the number and percentage of infringement actions and nullity actions. As will be explained in Part II below, an infringement action can give rise to a counter claim for nullity of the patent in suit. 1 Member of IPO s European Patent Practice Committee 2 The data for these tables has been taken from the DARTS IP database.

121 CN/MR/EMR Cabinet Plasseraud June 27, 2012 IPO/INVALIDITY STUDY 2 Type of action Number of decisions "patent" Infringement Infringement Actions + Injunctions + Declaratoy Actions Infringement Actions Nullity Actions Table 1 - First Instance Decisions in Patent Matters % 36% 69% 74% 79% 76% 76% 76% 80% % 28% 50% 50% 46% 54% 51% 50% 53% % 3% 4% 1% 3% 3% 4% 6% 10%

122 CN/MR/EMR Cabinet Plasseraud June 27, 2012 IPO/INVALIDITY STUDY 3 Type of Action Number of decisions «patent» Infringement Infringement Actions + Injunctions + Declaratory Actions Infringement Actions Nullity Actions Table 2 - Appeal Decisions in Patent Matters % 56% 68% 65% 63% 59% 70% 66% 42% % 42% 54% 57% 49% 41% 53% 40% 32% % 2% 6% 3% 2% 3% 0% 2% 7%

123 CN/MR/EMR Cabinet Plasseraud June 27, 2012 IPO/INVALIDITY STUDY 4 Type of Action Number of decisions «patent» Infringement Infringement Actions + Injunctions + Declaratory Actions Infringement Actions Nullity Actions Table 3 - Supreme Court Decisions in Patent Matters % 64% 67% 72% 83% 52% 70% 77% 52% % 55% 50% 56% 75% 52% 63% 68% 43% % 5% 4% 6% 0% 7% 0% 0% 0%

124 CN/MR/EMR Cabinet Plasseraud June 27, 2012 IPO/INVALIDITY STUDY 5 PART II: PATENT VALIDITY CHALLENGES in FRANCE STATISTICS & ANALYSIS In France, the validity of patents may only be challenged before the civil courts; there is no possibility for requesting nullity of a patent at the French National Institute for Industrial Property, and there are no administrative routes possible either. The validity of a patent may either be challenged directly, in a nullity action, or indirectly, as a defence/counterclaim to an infringement action. Nullity and infringement grounds are both heard by the same court at the same time (the two actions are not separated, as for example in Germany). The statistics provided below with respect to invalidity were obtained by first identifying all patent-related infringement and nullity actions for the years 2002 to 2011 (2006 to 2011 for the appeal decisions for the moment) and then analysing each decision individually to identify whether the patent (or patents) was revoked, held partially invalid or upheld. The grounds for invalidity were also noted. The majority of nullity actions in France are brought as a defence to infringement actions via a counterclaim. Of the total number of patent litigations at First Instance in the last ten years, infringement actions represent 48 % of the actions, whereas direct nullity actions represent 4 % (see Table 1 supra). Table 4 shows the number of infringement and/or nullity actions from 2002 to 2011, in First Instance proceedings, in which the validity of a patent was challenged. In 50% of the cases, the patent was found to be valid, both in the case of counter claims for nullity as well as in the total number of cases (whether a counterclaim or direct nullity action). Table 5 shows the number of infringement and/or nullity actions from 2006 to 2011, in Appeal proceedings, in which the validity of a patent was challenged. In 57% of the cases, the patent was found to be valid whether via a counterclaim or direct nullity action.

125 CN/MR/EMR Cabinet Plasseraud June 27, 2012 IPO/INVALIDITY STUDY 6 Nullity action Infringement action Total Valid patents Partial nullity Patents revoked Valid patents Partial nullity Patents revoked Valid patents Partial nullity Patents revoked Table 4 - validity First Instance total average

126 CN/MR/EMR Cabinet Plasseraud June 27, 2012 IPO/INVALIDITY STUDY 7 Nullity action Infringement action Total Valid patents Partial nullity Patents revoked Valid patents Partial nullity Patents revoked Valid patents Partial nullity Patents revoked Table 5 - Validity court of Appeal total average

127 CN/MR/EMR Cabinet Plasseraud June 27, 2012 IPO/INVALIDITY STUDY 8 Grounds for invalidity of patents in France are the same as those of the European Patent Convention: - lack of novelty - obviousness - lack of industrial applicability - added matter - non patentable subject matter Table 6 below shows the relevant statistics with respect to grounds for invalidation. First instance Infringement action Nullity action infringement action + nullity action obviousness lack of novelty lack of disclosure obviousness lack of novelty lack of disclosure obviousness lack of novelty lack of disclosure Court of Appeal Infringement action Nullity action infringement action + nullity action obviousness lack of novelty lack of disclosure obviousness lack of novelty lack of disclosure obviousness lack of novelty lack of disclosure Supreme Court Infringement action Nullity action infringement action + nullity action obviousness lack of novelty lack of disclosure obviousness lack of novelty lack of disclosure obviousness lack of novelty lack of disclosure

128 CN/MR/EMR Cabinet Plasseraud June 27, 2012 IPO/INVALIDITY STUDY 9 The most frequent ground for invalidating patents, both in direct nullity actions as well as in counterclaim to infringement, is obviousness. Novelty is the next most frequent ground. Insufficiency of disclosure is far less often a ground. Added matter objections, lack of industrial applicability, non-patentable subject matter, are rarely, if ever, grounds for invalidity. The statistics of invalidation by technical field are provided in the graph below. Grounds of invalidation and technical field all jurisdictions obviousness novelty lack of disclosure chemistry instrument electrical engineering mechanical engineering These statistics confirm that obviousness is the most common ground for invalidating patents in France, whatever the technical field may be. We were unable to obtain any meaningful statistical results with respect to the nationality of the patent owner in relation to validity.

129 Cyra Nargolwalla has B.Sc. and M.Sc. Degrees in Biochemistry from the University of Toronto, Canada. She obtained her Law degrees from McGill University in Montréal, Canada (LLB and Bachelor of Civil Laws) and then from the Université de Paris II (Maîtrise Private Law & Private International Law). She is regularly at the EPO for Opposition/Appeal Proceedings and regularly handles litigation matters in France, but also has exposure to litigation in other countries. She also deals with contracts/licences and due diligence matters. She speaks at conferences on biotech/pharmacy patent matters as well as on litigationrelated topics.

130 M i c h a l s k i H ü t t e r m a n n P A T E N T A T T O R N E Y S Invalidity Study - EP and Germany General Outline This report includes the invalidity practice for Germany and (since Germany is a member of the European Patent Convention) oppositions before the EPO. In Germany exist two possibilities to invalidate patents, the Opposition procedure and the Nullity action. Opposition procedures are possible for European Patents and for national German Patents. They are handled by the European Patent Office (1 st and 2 nd instance) and the German Patent Office (1 st instance) / German Patent court (2 nd instance), respectively. Therefore this study also includes European Oppositions. Nullity actions are handled by the German Patent Court (1 st instance) and the German High Court (2 nd instance). These are the only competent venues before which patents may be revoked, i.e. there is only one venue for European opposition proceedings, one venue for German opposition proceedings and one for German nullity actions. It is not possible to invalidate patent before the court of litigation during a litigation procedure due to the bifurcation principle in Germany where litigation and invalidation are separated (cf. also 3. and 4. below). You have to file your nullity suit before the Federal Patent Court, regardless where your litigation is held, may it be Düsseldorf or Mannheim.