IP Litigation after Brexit

Jane Lambert

A few days ago I was consulted on a possible infringement of a registered Community design. That is an intellectual property right that may have ceased to exist by the time any action that is brought in respect of the alleged infringement comes to trial. That is because art 50 (3) of the Treaty on European Union provides that the EU treaties and any laws made under them shall cease to apply to a state that notifies its intention of withdrawing from the EU from the date of entry into force of any withdrawal agreement that may have been made with the remaining states or, failing that, two years after the notification of withdrawal under art 50 (2). Of course, it won't be quite as stark as that. Rights of action that have already accrued may still be sued upon and HM government has announced its plans to incorporate EU legislation into our national laws by the promised Great Repeal Act (see Legislating for the United Kingdom’s withdrawal from the European Union 30 March 2017). But it is not too early to think about the legal landscape after we leave the European Union.

On 25 March 2017, I gave a talk entitled IP Litigation after Brexit to the Merseyside meeting of the Chartered institute of Patent Attorneys. In it I discussed three topics:
In contrast to our attitude to many others, one project upon which our government has always been commendably communautaire has been the EU patent and a European patent court. We were one of the few nations to ratify the Community Patent Convention and when that was abandoned we supported other initiatives such as the proposal for an optional litigation protocol to the European Patent Convention,

The reason for out enthusiasm is not hard to see. Though we were the first country to industrialize and host many of the world's best research universities we trail not just countries like Germany and France with similar populations and GDP in the number of European patent applications but also countries like Switzerland with one eighth of our population and the Netherlands with one third not to mention the USA, Japan, China and South Korea.

There is at least anecdotal evidence of a link between the number of patent applications and the cost of enforcement.

According to the Intellectual Property Advisory Committee, the cost of a patent infringement action in the Patents Court was £1 million in 2003 and between £150,000 and £250,000 in the Patents County Court compared to €30,000 to  €50,000 in France, €25,000 to €50,000 in Germany and between €10,000 and €20,000 for summary proceedings in the Netherlands and €40,000 for a simple action (see the table on page 50 of the Intellectual Property Advisory Committee The Enforcement of Patent Rights 2003). Taylor Wessing has published a Patent Map - European Patent Litigation Guide. Taylor Wessing report that it now costs between £200.000 and £1 million to bring a patent infringement action in England, €200,000 to €800,000 to bring one in France, between €100,000 and €200,000 for an infringement claim in Germany and a similar amount for a determination of validity and  between €75,000 and €200,000 in the Netherlands though only €5,000 and €15,000 in Lithuania.

Although the difference in costs appears to have narrowed in the last decade, England and Wales remains the most expensive jurisdiction in which to bring a patent action. The Unified Patent Court ("the UPC") would put British industry on a level playing field with its continental competitors. The prospect of lower enforcement costs may well have encouraged more businesses in the United Kingdom to seek patent protection for their technology and hence invest more in research and development.

Had the public voted for the UK to remain in the EU the UPC may well have been up and running by now. Immediately after the referendum there was a fear on both sides of the channel that Brexit would scupper the initiative. Happily, that has not happened. Lady Neville Rolfe indicated that the UK would ratify the UPC Agreement on 28 Nov 2016 (see UK signals green light to Unified Patent Court Agreement) and an early day motion tabled by Mr David Carswell MP (formerly of UKIP) to block ratification of the Protocol on Privileges and Immunities of the Unified Patent Court has garnered no support whatsoever. Twelve countries have already ratified the UPC Agreement including France according to the Council. The Agreement comes into effect after 13 member states including the France, Germany and the UK have ratified it. Legislation to enable Germany to ratify has recently been passed by both houses of the German parliament.

The chances are that the UPC which has part of its Central Division in London will open its doors towards the end of this year or the beginning of next. Whether the UK can remain in the UPC after we leave the EU is less certain. At first blush, it would seem that we cannot as the UPC Agreement is open to signature only by EU member states and the legislation creating the unitary patent is an EU regulation. Richard Gordon QC and Thomas Pascoe have advised the CIPA and other organizations that it may be possible to negotiate a special agreement with the remaining member states to allow the UK to stay in the court after Brexit. Such an agreement may well form part of the forthcoming withdrawal negotiations. However, as proposals for an optional protocol to the European Patent Convention that would have established a patent court outside the EU were held to be incompatible with EU law, it is hard to see how such a special agreement would be compatible with Union law etither.

Having said that single patents court and a single European patent for the territories of most of the countries of the EU is clearly in the interests of businesses everywhere including the UK and not just those in the participating states. HM government is, therefore, right to ratify the UPC Agreement regardless of whether the UK has to withdraw from it on 28 March 2019 or not.

On the assumption that we shall have to leave the UPC it will be more important than ever to reduce the cost of IP litigation within the UK. One of the ways that we could do that is by making better use of IPEC, particularly the small claims track. Nearly all the work I did between 1980 and 2010 was to advise and represent parties to passing off, trade mark, copyright and design right infringement and breach of confidence cases that had been issued out of the Leeds, Liverpool, Manchester and Preston District Registries. Nearly all those cases settled after an interim injunction had been granted. Very few of those cases went to trial and even fewer to an account or an inquiry. Sometimes a contribution was made towards the more successful party's damages or costs but such contribution rarely exceeded £10,000.

It follows that most of the cases that I did during those years can now be handled by the district judges of IPEC's small claims track but at much less risk and much lower costs. The main advantages of litigating in the small claims track are as follows:-
  • Issue fees for the small claims track have been frozen while those for the multitrack and fast track have increased. They start at £35 for a £300 claim and are £455 for claims between £5,000 and £10,000.
  • The procedure is simplified as far as possible dispensing with case management conferences, disclosure, interim injunction applications and separate hearings for determining liability and quantum (the amount payable by one party to another either by way of damages or accountable profits).
  • A case can usually be listed for final hearing within months of the issue of the claim form.
  • The district judge can grant injunctions as well as award damages after a final hearing.
  • The losing party's liability for costs is limited to ta few hundred pounds.
Although the procedure has been simplified the substantive law has not. For those reasons, it may still be necessary to instruct specialist lawyers to draft a letter before claim or response, settle particulars of claim or defence and witness statements and appear at any hearings that may be ordered. However, these costs should not be more than £2,000 in any eventuality and, in many cases, they should be far less.

Yet another consequence of Brexit is that businesses will be looking for new markets outside the EU where IP laws may be very different and not enforced as strictly as in Europe. In  Bilateral Investment Treaties - A Remedy for SME? [2013] EIPR 759 and Bilateral Investment Treaties: Claiming Compensation from Foreign Governments under Bilateral Investment Treaties for failing to provide adequate IP Protection 27 July 2013.2013 I argued that HMG's BITs with 117 governments around the world might provide some redress for businesses whose intellectual assets are inadequately protected. The crux of my argument is that IP is usually included within the definition of investment which is protected from expropriation by those treaties. If assets are expropriated the investor can claim compensation from the expropriating government through arbitration. I argue that failure to enforce IP adequately is tantamount to expropriation which could give rise to a claim.

When I wrote those articles the tobacco company Philip Morris had claimed compensation from the Australian government for plain paper packaging of cigarettes which was alleged to diminish the value of its trade marks in Australia and the pharmaceutical company Eli Lilly claimed compensation from Canada for a string of cases that resulted in the revocation of two of its patents. Philip Morris's claim was thrown out on the ground that its Hong Kong subsidiary had acquired its Australian subsidiaries primarily to bring a claim under a BIT between the Hong Kong and Australian governments (see the arbitrators' award on jurisdiction and admissibility of 17 Dec 2015). Eli Lilly's failed because a gradual change in the case law between the grant of the patents and their revocation could not be regarded as expropriation which was by definition a sudden and dramatic act (see the final award in Eli Lilly & Co v Canada of 16 March 2017). In Falling to BITs: the Eli Lilly and Philip Morris Cases 8 April 2017 I considered whether the failure of the claims in those cases meant that IP owners can no longer obtain redress through BITs and concluded that it did not. On the contrary, I expect to see rather more such claims as our manufacturers and service providers seek new markets overseas.

Should anyone wish to discuss any part of this article or any of those topics generally, he or she should call me on +44 during 020 7404 5252 during office hours or send me a message through my contact form.