Happy birthday

Happy birthday, blog. On October 17, 2015, this blog’s first post was published. I am looking forward to another year of blogging and I do hope to be able to publish a second birthday post – although no promises are made.

Thank you very much Lionel Vial and Aujain Eghbali for your contributions up to now. You are welcome back on this blog any time. Other contributors are also welcome, even for a short message. Anonymous contributions may also be accepted.

A few stats for those who are interested. At this point the blog has a little bit more than 70 email subscribers. Thank you all. The link for subscribing is at the bottom of the left banner. The blog has had approximately 13,500 page views so far. The best score ever was 628 views in a single day when Laurent Teyssèdre kindly mentioned the blog in a post of his own famous blog. Thank you so much for this huge publicity.

The home page and some permanent pages are the most viewed ones. Other than that, the most popular post ever was the April fools’ joke on the UPC. Makes me think that I should quit reading case law decisions and start a career in hoaxes. Then, the next most popular ones are generally in the pharma field, this one being the winner.

Unfortunately, the vast majority of search queries which led visitors to this blog remain unknown to the blogmaster, but a tiny minority are known (this all depends on which search engine is used as far as I understand), and it makes you realize that sometimes the search results must have been quite disappointing for the searchers.

For instance, someone looking for a “patent for poison” was led to this post on poisonous divisionals; another person wanting to translate “the remedy may be worse than the disease” into French landed on a report by Lionel Vial on Merck v. Actavis; last but not least, a reader interested in “nice models” ended up on another (gorgeous) report by Lionel Vial, this time on disease models and their importance for the appraisal of sufficiency of disclosure.

This may also be a good time to ask readers about their thoughts on the blog and their opinion on how it could be improved:

  • Would you like to read more about EPO case law? Or to read only about French case law?
  • Should the posts be more succinct?
  • Should I switch to French because no foreign reader can possibly have any interest in what is discussed here?
  • Are there topics which have not been addressed yet and which should?
  • What about posting frequency?
  • Should my sentences be shorter and contain less passive voice as the blog editor keeps telling me?

Comments and private messages are welcome.

Enough celebrated. Let's extinguish the candles right now.
Enough celebrated. Let’s extinguish the candles right now.

Damage control

Sometimes, a case is not over even after it is lost. This is especially true when a defendant is found guilty of patent infringement but the amount of damages is not yet determined in the infringement ruling. It is then still time to continue fighting for damage control. And this can pay off, like in the present case, where the total damages award amounted to approximately 7% of what the plaintiffs requested. That is, if my math is correct because the ruling contains so many figures that it is quite easy to lose track.

An example of not-too-bad damage control.
An example of not-too-bad damage control.

The story started a while ago, more precisely in June 2005, when Hutchinson, owner of European patent No. EP 0691481 (on a connecting rod for vehicles), together with its subsidiary and licensee Paulstra, sued two companies, CF Gomma Barre Thomas and Paul Robert Industrie, for infringement of the patent. CF Gomma Barre Thomas entered insolvency proceedings later in the same year, so that the infringement proceedings continued against the court-appointed receiver. In 2007, after another infringement seizure, a third company was added as a defendant, namely Société des Polymères Barre Thomas (later renamed as Cooper-Standard France).

In June 2009, the Paris Tribunal de grande instance (TGI) declared the patent valid but rejected all infringement claims. Hutchinson and Paulstra appealed.

In October 2011, the Cour d’appel confirmed that the patent was valid but set aside the first instance judgment as far as infringement is concerned: claims 1, 2, 4 and 5 of the patent were held to be infringed. The appeal ruling appointed an expert for determining the amount of damages.

A cassation appeal was lodged, and the supreme court judges partly canceled the 2011 judgment, because the finding of infringement of dependent claims 2, 4 and 5 was not sufficiently reasoned. However, this partial cancellation left intact the main findings of the 2011 judgment – in terms of validity of the patent and infringement of the main claim.

This leads us to the second ruling by the Paris Cour d’appel in 2016, after the expertise, on the assessment of damages.

Not exactly a fun read – unless you are an accountant, that is. But an important one, as this is the point at which the lawsuit finally has an actual impact on the various companies’ finances.

The guidelines for the assessment of damages are set forth in article L. 615-7 of the Code de la propriété intellectuelle:

In order to assess damages, the court shall separately take into account: 

1. Negative economic consequences of infringement, including lost profits and actual losses incurred by the harmed party. 

2. Moral prejudice. 

3. Profits made by the infringer, including intellectual, material and marketing investment savings deriving from the infringement. 

However, the court can alternatively, upon request of the harmed party, award a lump sum as damages. This lump sum is greater than the amount of royalties which would have been due if the infringer had asked for the permission to use the right that it infringed. This lump sum can be in addition to the indemnification of the moral prejudice.

A first issue raised by the defendants was whether the above (current) provision was applicable or not, given that it was modified in 2014. In particular the notion of “intellectual, material and marketing investment savings deriving from the infringement” was not recited in the earlier version of the law.

The court replied that the current provision is indeed applicable since the 2014 modification in fact did not change anything and did not add a new damages count; it is simply more explicit than the previous one.

A second issue was the definition of the perimeter of the infringing goods. Four models of connecting rods were mentioned in the infringement seizure reports of 2005 and 2007. These models were clearly to be taken into account in the assessment of damages. But the plaintiffs contended that six further models were also infringing and should also be taken into account.

The court disagreed. Indeed, the 2011 appeal judgment held that the first four models were infringing. Whether the six other models are also infringing or not was not decided upon. The 2011 ruling also contained an order not to make, market, and the like, any connecting rods identical or similar to the ones found to be infringing. However, this could not be seen as a basis for including the additional six models in the assessment:

This injunction, which guarantees that the monopoly right is restored to its state before the infringement, concerns the future and makes it possible if necessary to start further legal proceedings against an infringer who is then aware of the infringement. 

I have of course no idea whether the six additional models of connecting rods were similar or identical to the first four ones. But I think it is really a pity that the court did not find a way to rule on the additional infringement claim in this ruling (be it to hold that the new models infringe, do not infringe, or that there is not enough evidence of infringement). Telling the plaintiffs that they can start a new action does not seem satisfactory on the standpoint of efficiency, especially in view of the overall duration of the present proceedings.

The rest of the decision is concerned with the actual computation of damages, plaintiff by plaintiff, defendant by defendant, and period of time by period of time.

For the most part, the expert’s report was approved by the court.

By way of example, the plaintiffs contended that some accessories, such as fixation means, should also be included in the calculation, in view of the well-known doctrine of the “tout commercial” (which could be translated as the doctrine of the commercial package). The court rejected the contention, because there was no evidence that the accessories were sold as a consequence of the sale of the infringing connecting rods.

Paulstra claimed that it has suffered lost profits because they would have been able to make and sell all the connecting rods according to the invention marketed by the defendants. This point was accepted by the expert and the court.

However, the margin to be applied to the lost sales in order to compute loss profits was hotly debated.

Paulstra successively announced three different margins: 3%, 5.6% and finally 9.7%. They said the first two figures were erroneous: the first one concerned another equipment, and the second one concerned all connecting rods in general and not specifically those protected by the patent.

The court was (understandably) irritated by this flip-flopping and was not convinced that the initial figure was erroneous:

[The defendants] rightly stigmatize the behavior of Hutchinson and Paulstra, by emphasizing the contradictions in their successive statements, their inconsistency, and their lack of credibility, stating that this is due to their decision to prevent any control over Paulstra’s claims […]. The error alleged by Paulstra when the first rate of 3% was mentioned is indeed not credible, in view of the time that they took before replying to the expert, and of the importance of its “connecting rods” business. They necessarily knew what it was worth […].

Furthermore, the final figure of 9.7% was only supported by a statement by the company’s accounting director; and by a late-filed communication from an external auditor. The former was criticized by the expert as being a non-certified statement. The latter was disregarded by the court as it was too vague and imprecise, and not explicit enough.

As a result, the court applied a margin rate of 3% to Paulstra’s lost sales, also noting in passing that it is “the rate generally used in this type of product in the automobile industry“.

The moral prejudice suffered by the licensee Paulstra was calculated by the expert to be 125,000 euros. But the judges reduced this amount to zero. They held that there was no evidence that the defendants’ actions had harmed Paulstra’s reputation, as was alleged.

Turning to the patentee, Hutchinson first claimed lost profits due to Paulstra’s lost sales, because the patent was licensed to the subsidiary. Here, again, the court refused to take such lost profits into account:

It cannot be denied that a patent proprietor that does not exploit the invention but grants a license for its exploitation has the right to be awarded the profits it did not make because of the infringement. But it has to show that the alleged lost profits are real. 

In this respect, even if it is demonstrated that Hutchinson and its subsidiary Paulstra were bound by a lease management agreement, Hutchinson does not provide any evidence as to the profits earned owing to the license. […]

[…] [Hutchinson] relied on trade secret as the reason why no information was provided in this respect. But, during the expertise proceedings, they stated: “[…] these damages should no be calculated based on the contractual royalty that Paulstra would pay to Hutchinson. Indeed, Paulstra is only a subsidiary of Hutchinson, and it is not conventional, at least in terms of patentee-licensee relationships, to have such contractual royalty be paid between companies of a same group” […]. 

Since the very existence of the royalty was not demonstrated, the corresponding claim cannot succeed. 

Again, the claimants’ ambiguous statements certainly played against them. Half-admitting that there was no license royalties between Hutchinson and Paulstra while relying on trade secret not to say more was not a successful strategy for convincing the court that there were indeed lost profits to be recovered. Would the outcome have been different if Hutchinson had claimed the lump sum provided for in the last paragraph of article L. 615-7, which cannot be less than the royalties the infringer would have paid? I tend to think so.

Hutchinson was nevertheless awarded 60,000 euros (as estimated by the expert) in terms of moral prejudice. It is indeed generally accepted that patent infringement necessarily causes moral prejudice to the patent proprietor because the invention is depreciated.

On the other hand, Hutchinson lost again when they claimed the profits due to the infringers’ investment savings. They estimated such profits to be equal to 5% of the defendants’ connecting rod turnover. But the court held that the profits made by the defendants had already been taken into account in Paulstra’s damages; and that the claimed percentage, allegedly based on Hutchinson’s own spending, was not credibly substantiated, since it seemed to include other activities than those related to the patented invention.

In summary the total damages award for Hutchinson and Paulstra is 652,003 euros. Was the so far 11-year long litigation worth it? Of course the damages award is only part of the answer, as the claimants did get a permanent injunction which after all is the actual weapon of mass destruction in a patent war.

Anyway, the case strikingly illustrates that damages assessment is an endeavor of its own, sometimes underestimated by litigants. Just like for the assessment of validity and infringement, the court wants to see convincing evidence of whatever is asserted by the parties and will not satisfy itself with unsupported statements, let alone ambiguous ones.

CASE REFERENCE: Cour d’appel de Paris, Pôle 5, chambre 2, February 12, 2016, Hutchinson & Paulstra v. CF Gomma Barre Thomas et al., RG No. 09/13793.

Patent gone quiet

AstraZeneca holds European patent No. EP 0907364 directed to a sustained release formulation of the drug quetiapine, which is useful in the treatment of schizophrenia. This patent has been litigated for years in a number of EPC contracting states. As far as I understand, in the majority of (but not all) cases, the patent was found invalid by national courts (see by way of example relevant blog posts here and there).

With a ruling issued on July 1, 2016, France has just joined the list of countries in which the quetiapine patent has gone quiet.

U.S.-based generics company Mylan filed a nullity complaint in front of the Paris Tribunal de grande instance (TGI) on April 28, 2015, requesting revocation of the EP’364 patent. This was part of Mylan’s preparation for the launch at risk of their generic version of AstraZeneca’s patented drug, Xeroquel LP. The first boxes of generic quetiapine were marketed during the week of September 14, 2015. By that time, AstraZeneca had already counterclaimed for infringement of the patent.

On October 6, 2015, AstraZeneca boldly requested a preliminary injunction (PI) in front of a different court, namely the Lyon Tribunal de commerce, on unfair competition grounds. They were initially successful. The injunction was in place for a little bit more than one month, before being lifted by the Cour d’appel. This interesting aspect of the litigation was already discussed in detail in a previous post.

Finally (at least for now), in a judgment handed down on July 1, 2016, the Paris TGI revoked the French part of EP’364 for lack of inventive step. This is 14 months after the filing of the complaint, which from a timing standpoint is a great outcome.

Another great outcome is that, whether you agree with it or not, the court’s inventive step reasoning is very thorough and well argued.

Quetiapine as a drug for treating schizophrenia was known from the prior art, and in particular from an earlier AstraZeneca patent EP 0240228. Mylan’s case was that it was obvious for the skilled person starting from this earlier EP’228 patent to come up with a sustained release formulation of the drug, in view of the well-known advantages of this type of formulation, such as a more controlled diffusion of the active and a reduction in the number of daily doses to be taken.

AstraZeneca developed a number of arguments as a defense. First off, they said the court should apply the problem-and-solution approach. Accordingly, the closest prior art was not the EP’228 patent but rather a scientific paper by Hirsch & Casey describing clinical trials conducted with an immediate release formulation of quetiapine. As a result, the objective technical problem was not the provision of a sustained release version of quetiapine, but more broadly the provision of an efficient anti-psychotic drug treatment.

This did not fly with the court:

However, the problem-and-solution approach is only one method of reasoning which can be used, but not the only one, to assess the validity of a patent with respect to the inventive step requirement. In the present case, the reformulation of the technical problem suggested by the defendants relates to an artificial approach, the purpose of which, by broadening the scope of the technical problem, is to make the patent’s choice to look at a sustained release quetiapine formulation appear inventive. 

The court’s statement on the problem-and-solution approach is a reminder as a matter of principle that French courts are not bound by the EPO guidelines and case law. That being said, in practice, most judgments issued nowadays draw inspiration from the problem-and-solution approach: a starting point and a technical problem are defined, and the question of obviousness is analyzed through the lens of this technical problem – which is the very framework of the problem-and-solution approach. The present case is no exception.

It is well known that the formulation of the technical problem is critical in the assessment of inventive step. AstraZeneca proposed to get rid of the notion of sustained release in the formulation of the technical problem. To some extent, this makes sense as we are not supposed to include any pointer to the solution in the formulated problem.

But the issue was that the patent at stake itself formulated the technical problem as providing a sustained release formulation of quetiapine. The reformulation proposed by AstraZeneca was thus considered self-serving and ex post by the court. To put it otherwise, by arguing that the closest prior art should be a document concerned with an immediate release quetiapine formulation, the patent proprietor attempted to focus on a starting point suggesting a different direction from the one chosen in the patent, and therefore one that would almost necessarily lead to a finding of inventive step.

The court did not agree. First, an “efficient anti-psychotic drug treatment” (i.e. the problem offered by AstraZeneca) already existed at the priority date. Second, a press release by the patentee before the priority date implicitly suggested that sustained release formulations of quetiapine were being investigated.

Therefore, the realistic technical problem was the one originally mentioned in the patent, namely the provision of a sustained release formulation of quetiapine.

With that in mind, the prior art was replete with descriptions of sustained release formulations of other drugs similar to the sustained release formulation of the EP’364 patent.

Nevertheless, the proprietor argued that clinical studies at the priority date rather oriented the skilled person towards a regimen of one or two daily doses of an immediate release formulation, possibly with an increase in dosage. They added that the skilled person was not in a position to predict:

  • Whether satisfactory bioavailability could be achieved with a sustained release formulation.
  • Whether the size of a sustained release quetiapine tablet or pill would be acceptable or too large, leading to improper absorption and travel through the gastrointestinal tract.

Based on a report authored by two pharmacology experts, AstraZeneca more specifically argued that

the travel of a sustained release drug through the gastrointestinal tract is very different since the extended delivery time results in the delivery taking place in downstream areas of the digestive system, with different pH, metabolic and bacterial environment conditions, which has an impact on the release of the active substance, its metabolism, and the permeation of the active substance through the intestinal wall. 

Sometimes things can get messy in the GI tract.
Sometimes things can get messy in the GI tract.

All of these arguments were rejected by the court, either because they were not substantiated by evidence, or because they were contradicted by some of the documents on the record:

  • The necessity to increase the dose of quetiapine when switching from an immediate release formulation to a sustained release formulation was not proven. In fact the opposite was generally true based on pharmacology textbooks. Even if a larger size tablet had to be achieved, it was also possible to divide a single dose into two doses to be taken simultaneously.
  • The half-life of quetiapine was already documented at the priority date and was compatible with a sustained release formulation.
  • The undesired effect of pH on the release of the active substance was only shown in a post published document (which would not have been taken into account by the skilled person). The extent of the undesired effect was debatable in view of the declarations of the patentee’s own expert in the British litigation. And it was known by the skilled person how to thwart this pH effect by adjusting the drug formulation.
  • The prior art taught that quetiapine bioavailability increased linearly with an immediate release formulation. It could be concluded from this finding that the disruptive effect of first pass metabolism emphasized in AstraZeneca’s submissions was at best limited and was not an obstacle to a sustained release formulation.

In other terms, there was no prejudice against a sustained release formulation of quetiapine, which the skilled person was able to achieve with routine testing. It can be derived from the judgment that the court at least partly based its findings on the British litigation, and in particular on the statements of an expert who took part in that lawsuit.

One last argument dealt with in the judgment is that clinical trials performed after the patent grant showed an improved bioavailability and broader therapeutic indications with the sustained release formulation than with the immediate release formulation. But the court held that the improved bioavailability resulted from routine optimization and was not surprising; and that the broader therapeutic indications could not be relied on as they were not addressed in the patent.

The take home message is probably that if inventive step rests on obstacles or prejudices, those have to be very fully and convincingly demonstrated. The burden of proof lies on the patentee and based on the decision at stake it is a relatively heavy one.

There are two interesting side issues in the judgment.

First, Mylan claimed that AstraZeneca was guilty of unfair competition because they had warned customers about risks of infringement related to the generic version of Xeroquel LP. The court rejected the claim because AstraZeneca’s communication was deliberate and objective.

Here are some interesting comments by the court which seem to be generally applicable to similar situations in the pharmaceutical field:

When it comes to competition between an original drug and a generic one, infringement can hardly be challenged. It disappears if the patent is held invalid, but until the invalidity judgment, it is legitimate for the patent proprietor to defend its patent monopoly. Besides, the circular letter sent to stakeholders mentioned the existence of a validity challenge in objective terms. 

A generic drug manufacturer that decides to launch its product at risk before the patent on the original drug expires or is invalidated cannot blame the patent proprietor for defending its monopoly with its customers. Besides, the fact that the patent was finally revoked in other European countries does not result in a lesser legal scope for the French part of the patent as long as it is valid. 

The second point of interest relates to the PI obtained and enforced by AstraZeneca during approximately one month. Mylan claimed and obtained damages in relation with the PI, pursuant to article L. 110-10 of the Code des procédures civiles d’exécution.

The damages award amounted to approximately 200,000 euros – which was however much less than Mylan had requested.

Part of the award was calculated based on an evaluation of lost sales, to which a margin of 30% was applied.

The other part corresponded to a loss of opportunity in relation with a public tender from which Mylan had been excluded due to the PI.

On the other hand, the court did not take into account the alleged harm suffered in terms of sales of other products or in terms of image injury, in the absence of convincing supporting evidence.

Finally, reimbursement of 300,000 euros of attorney’s fees were requested by Mylan. The court granted half of it.

It remains to be seen whether there will be an appeal decision, given that it may prove difficult for AstraZeneca to obtain it before the expiry of the patent on May 27, 2017 (no SPC was filed, as the judgment tells us).

CASE REFERENCE : Tribunal de grande instance de Paris, 3ème chambre 3ème section, July 1, 2016, Mylan v. AstraZeneca, RG No. 15/05880.

Open Sesame! (part 2)

This is the second part of Aujain Eghbali’s walk-through post on the Sesame decision on business methods.

In the first part, Aujain demonstrated that the Paris Cour d’appel confirmed the refusal of Sesame’s application by applying the same general principles as those relied upon by the EPO.

As he is a man of paradox, he will now show us that the French judges did in fact not use an EPO-compliant approach in their ruling.

Here is to him.

First, a few words on the EPO-compliant approach.

The EPO nowadays almost systematically rejects business method software claims on the ground of a lack of inventive step.

Art. 52 EPC provides:

(1) European patents shall be granted for any inventions, in all fields of technology, provided that they are new, involve an inventive step and are susceptible of industrial application.

(2) The following in particular shall not be regarded as inventions within the meaning of paragraph 1:(…)(c) schemes, rules and methods for performing mental acts, playing games or doing business, and programs for computers;(…).

(3) Paragraph 2 shall exclude the patentability of the subject-matter or activities referred to therein only to the extent to which a European patent application or European patent relates to such subject-matter or activities as such.

The Boards of appeal wanted to clear all debates on the interpretation of the expression “as such” in the Convention. Furthermore, they departed from the so-called “contribution approach”, and came to consider that the exclusion of subject-matter under Art. 52(2) EPC had to be determined without any knowledge of the prior art. As a result, the established case law is now that any tangible element or tangible action in a claim qualifies as a technical feature and allows the claimed subject-matter to pass the hurdle of Art. 52(2) EPC.

Any patentability issues related to the non-technical aspects of a claimed subject-matter are then addressed within the assessment of inventive step.

This is explained in landmark decision T 258/03 (Auction method/HITACHI):

4.6. The Board is aware that its comparatively broad interpretation of the term “invention” in Article 52(1) EPC will include activities which are so familiar that their technical character tends to be overlooked, such as the act of writing using pen and paper. Needless to say, however, this does not imply that all methods involving the use of technical means are patentable. They still have to be new, represent a non-obvious technical solution to a technical problem, and be susceptible of industrial application.

Another landmark decision T 641/00 (Two identities/COMVIK) established the framework for assessing inventive step of a claimed subject-matter consisting of a mixture of technical and non-technical features (“mixed-type claims”): all features which contribute to said technical character should be taken into account, whereas features making no such contribution cannot support the presence of an inventive step.

The reasoning is basically a three-step process:

a. What is the technical character?

b. Which features contribute to the technical character?

c. Do these features (and these features only) form a non-obvious technical solution to a technical problem with respect to the prior art?

When the EPO believes that a claim relates to a mere automation of a business method, as the Cour d’appel considered in Sesame, the answers to these three questions are the following:

a. Automation of human and business activities (in this case related to haulage).

b. A system with hardware and data structuring and communication capabilities.

c. No, because the hardware and the data structuring and communication capabilities are conventional. (This last assertion can possibly be held merely on the basis of common knowledge.)

Thus, the reasoning leads to a finding of lack of inventive step for business method software claims.

It seems that French judges do not want to bother with such theoretical and complex legal reasoning. For instance, as already reported on this blog, the Paris Tribunal de grande instance recently held that a claim directed to a “storage medium storing [a computer program]” fell under the exclusion of computer programs as such – although the EPO would have given weight to the presence of the “storage medium” feature in the claim.

The Cour d’appel de Paris confirmed this stance in Sesame. It was held that, although a computer system is recited in the claims, the subject-matter was excluded from the scope of patentability under Art. L.611-10-2° of the Code de la propriété intellectuelle (that is, the equivalent of Art. 52(2) EPC). Said the Court:

The legislator was not concerned with the phrasing of the claims.

The spirit of the statutes is to exclude patentability of solutions that are not at a technical level but at a business level.

The director of the INPI should thus appreciate the existence of an invention without being bound by the wording used in the claims.

By proceeding in this way, he did not alienate the claims. 

It even seems that the judges did not consider the different invalidity grounds to be exclusive from one another. Indeed, the court additionally found that the claims were manifestly not novel:

It obviously results from [the fact that the invention is directed to a mere automation of a business method] that the claims do not call for any search as they manifestly lack novelty.

Sesame is also the name of a famous street.

Sesame is also the name of a famous street.

But there is certainly another (procedural) reason for the Court’s approach in the present case.

Under French law, the INPI does not assess inventive step in examination proceedings. The grounds under which the director of the INPI may refuse a patent application are listed in Art. L. 612-12 and lack of inventive step is not one of them. Lack of inventive step is only a ground for patent invalidation in an inter partes trial.

As a direct consequence, the INPI cannot, from a legal standpoint, follow the Comvik approach to refuse an application directed to a business method, when the claims incorporate tangible features. Such an application can only be refused under Art. L. 612-12 if:

  • it relates to subject-matter which can manifestly not be considered as an invention (exclusion from the scope of patentability), or
  • it has not been amended, after an invitation to do so, although the lack of novelty manifestly results from the search report.

In the Sesame case, the INPI retained the first solution and did not even conduct a prior art search, declaring that no relevant comparison with the prior art could be performed, as no technical features were claimed except for a very conventional computing system.

The Court not only approved but also considered that the explanations of the director of the INPI regarding the impossibility to establish a search report were “unnecessary”, as the actual ground for refusing the application was not the lack of novelty but the exclusion from the scope of patentability.

So, it is true that the INPI reached the same conclusion that the EPO probably would have reached, i.e. the invalidity of the haulage platform claims. But by relying on the ground of ineligibility, the INPI totally discarded the raison d’être of the Comvik approach.

In fact, the patentability assessment of mixed-type claims is often a complex question. This is probably why the EPO established the sophisticated Comvik approach.

This Comvik approach starts by determining the claim’s technical character and those features that contribute to said technical character. But the EPO is well-aware that these first steps of the reasoning are not always easy to conduct (see T 1749/06).

Therefore, one often has to perform the first steps with some knowledge of the prior art. The Comvik approach provides exactly for that, because non-technical aspects are assessed within the inventive step analysis.

This is explained in the EPO Guidelines for examination (G-VII, 5.1):

Determination of the features contributing to the technical character of the invention should be performed for all claim features in step (i) (T172/03, T154/04). However, in practice, due to the complexity of this task, the examiner can normally perform the determination in step (i) on a prima facie basis only and perform the analysis at the beginning of step (iii) in a more detailed manner. In step (iii), the technical effects achieved by the differences over the selected closest prior art are determined. The extent to which the differences contribute to the technical character of the invention is analysed in relation to these technical effects. This analysis, limited to the differences, can be performed in a more detailed manner and on a more concrete basis than the one performed at step (i). It may therefore reveal that some features considered in step (i) prima facie as not contributing to the technical character of the invention do, on closer inspection, make such a contribution. The reverse situation is also possible. In such cases, the selection of the closest prior art in step (ii) might need to be revised.

When performing the analysis in steps (i) and (iii) above, care should be taken to avoid missing any features that might contribute to the technical character of the claimed subject-matter, in particular if the examiner reproduces his understanding of the subject-matter of the claim in his own words during the analysis (T 756/06).

For that reason, EPO examiners nowadays often conduct a prior art search anyway, even when they are to refuse the application for a lack of any other technical contribution than a mere automation of a non-technical method. This is however not how the EPO examiner who was in charge of conducting the search on behalf of the INPI behaved in Sesame. Indeed, the EPO examiner did not issue a search report but rather declared that no meaningful search could be performed.

By allowing the INPI not to conduct any prior art search in such a case, the Sesame decision could be broadly construed as authorizing examiners to directly refuse applications when they are faced with mixed-type claims, based on their sole interpretation of the application.

Examiners could do so even in cases in which it is not so clear which features contribute to a technical character and which ones do not.

In the present case, the Cour d’appel held that both the absence of an invention and the lack of novelty were clear. However, looking at the decision in detail, it seems that a significant reasoning actually had to be conducted in order to reach such a conclusion.

Why is the INPI not entitled to refuse an application on the ground of lack of inventive step but only on the ground of the manifest absence of an invention or a manifest lack of novelty? One explanation is that the INPI is not supposed to rely on a subjective analysis to refuse an application. The law reserves the exercice of such subjectivity to litigation.

But the question of whether a business method software invention only relates to mere automation or implies further technical considerations is usually not an easy one which can be answered without any subjectivity. Even experts in that field cannot give an answer in a straightforward manner.

It is thus questionable that the INPI should suddenly be entitled to do so. The only explanation would be that granting a patent which is invalid because it merely relates to a business method is somehow worse than granting a patent which is invalid because it relates to a solution made obvious by a combination of two prior art teachings – for example from the standpoint of legal certainty. But the decision does not provide any hint in this respect.

We thus have to wait and see how INPI examiners will behave. It will notably be interesting to monitor if they rely on Sesame to refuse mixed-type claims on a regular basis. Also, it will be interesting to see how they behave in case the EPO conducts the search (instead of declaring it meaningless) and accompanies the search report with a written opinion where the ground of invalidity is… a lack of inventive step. Will the INPI bypass the reasoning of the EPO examiner and merely refer to Sesame?

Many thanks, Aujain. So, we are left with the question of whether Sesame has planted a seed at the INPI. If readers have any intel on this, comments are welcome as usual.

CASE REFERENCE: Cour d’appel de Paris, pôle 5 chambre 2, February 26, 2016, Sesame Active System v. Directeur général de l’INPI, RG No. 15/01962.

Open Sesame! (part 1)

I have always thought of case law decisions as well as experts’ commentaries on the patentability (or rather the unpatentability) of business methods as a tough read.

Fortunately for many bloggers and authors around the world, the name of one of the most significant recent U.S. decisions in this respect, namely Alice Corp. v. CLS Bank International, has elicited a mass of enjoyable headings and extended metaphors (most of them involving Wonderland one way or another) making the read somewhat more fun.

We in France did have a relatively significant recent decision on this topic as well.

And fortunately for us French bloggers and authors, the decision’s designation, Sesame Active System v. Directeur général de l’INPI, also makes a number of (bad) puns possible.

Even more fortunately for me, my partner and friend Aujain Eghbali agreed to comment on the case, in a two-part post. He does the hard work, I make the bad puns, teamwork at its best.

So thanks to Aujain, the Sesame ruling will now open up for us.

In the case at hand, Sesame Active System filed a patent application before the INPI (French patent and trademark office) in 2012 to protect a communication platform dedicated to light commercial vehicle goods transportation or haulage. The platform receives and compares information related to charterers’ offers and carriers’ capacities and constraints, so as to send most relevant offers to carriers who can thereby optimize their load. The platform has a specific architecture and specific software, and it processes data concrete and specific to vehicle loading. The platform optimizes such vehicle loading and thereby offers many advantages including global traffic reduction.

In 2013, the INPI sent a communication declaring that no search report could be established and that a rejection was to be expected, as the application related to subject-matter excluded from the scope of patentability. As far as we can tell based on the facts set forth in the judgment, it seems that this communication was sent to the applicant after the INPI itself received a similar declaration from the EPO. Indeed, French patent applications which do not claim a foreign priority are sent to the EPO which is in charge of establishing the search report, owing to an agreement between the two offices.

A few letters were exchanged between the patent office and Sesame’s representative, who attempted to resolve the situation with claim amendments and arguments.

But finally, the director of the INPI refused the application on the ground that it was directed to subject-matter excluded from the scope of patentability (in other words, to ineligible subject-matter), as it related to a method for performing mental acts or doing business as such, and the mere fact that it was automated owing to generic computing means was not sufficient to change its nature.

In addition, the director of the INPI considered that no search report could be issued: the only technical elements of the claim were those of a very generic and well-known computing system which was manifestly not novel, without a need to perform any prior art search; and no relevant comparison with the state of the art could be made as there were no technical features.

In 2015, the applicant lodged an appeal before the Cour d’appel de Paris, which led to the decision at stake.

Unsurprisingly for European practitioners familiar with this field of innovation, the Cour d’appel de Paris confirmed that the claimed system may not be patented. The court relied on general principles similar to those usually relied on by the EPO in similar cases; but on the other hand, the court also departed from the EPO’s well-established methodology set in particular by the famous Comvik decision T 641/00.

The key to the Sesame ruling.
The key to the Sesame ruling.

It should first be noted that the grounds on which the INPI can refuse a patent application are listed in Art. L. 612-12 of the Code de la propriété intellectuelle, which notably provides:

Any patent application will, wholly or partly, be refused: (…) 5° If its subject-matter can manifestly not be considered as an invention in the meaning of Article L.611-10, second paragraph;

Art. L. 611-10 which is referred to recites almost exactly the same provisions as Art. 52 EPC, and its second paragraph thus excludes from the scope of patentability methods for performing mental acts or doing business, and programs for computers.

Now, relying on these statutory provisions, the Cour d’appel de Paris held the following:

Even though this exclusion relates to “methods”, it does not follow that the mere definition of the claims with the terms “system” and “process” necessarily leads to patentability […].

The legislator was not concerned with the phrasing of the claims.

The spirit of the statute is to exclude patentability of solutions that are not at a technical level but at a business level.

The Court thus followed the general principle that, in order to get a valid patent, there needs to be a solution of a technical nature (rather than of a business nature) to a technical problem. As such, this is in line with well-established EPO case law: refusal of applications directed to business schemes is regularly approved by the boards of appeal, regardless of the incorporation of the schemes into claims involving computer hardware – such as a computer system claim or a computer-implemented method claim.

After having recalled this general principle, the Cour d’appel de Paris then held that it was not met by the invention at stake:

The claimed “system” is thus characterized by the fact that it comprises sets and subsets of data of a business nature related to deliveries to be performed for charterers (type, delivery place and date) and to haulage offers (capacity and positioning of the vehicle) as well as a CPU which compares this data.

The data “registers” are not characterized on a technical level (format, compression, etc) but only by the type (business-related) of data they contain.

The mere fact that this data is grouped into three sets (type of loading/time/space) of two subsets (charterers/carriers) relates to a mere information organization which does not bring about any technical character as such.

No technical indication is provided on the CPU, which is only characterized by the fact that it performs comparisons, that is, operations of an intellectual nature that consist in putting data in relation one with another.

Therefore, similarly to the EPO in T 172/03 (Order management/RICOH) and T 696/06 (Freight exchange/ELGRABLY), the French judges did not see any technical considerations in the data structures and data processes involved in the method of claim 1, as they were of a business and intellectual nature.

By way of comparison, T 172/03 was concerned with “an improved office system suitable to select, out of a plurality of suppliers, a supplier of expendable supplies of items needed by a section of the office“, while T 696/06 was directed to “a data processing system (x) adapted to confront an offer (o) and a demand (d) in the field of transporting travelers or goods“.

The Court further established that the automation of such data processing of a non-technical nature did not remedy the above deficiencies:

The solution thus relies on a computer system that allows its automation.

Such a system is commonly used in human activities and notably business and thus does not bring about any specific configuration.

It is not characterized at a technical level and is only defined by reference to data gathering and comparison operations that it allows to perform.

This is also in line with EPO case law which consistently holds that the mere automation of a non-technical process cannot be awarded a patent, when conventional systems are at use. See the above-cited decision T 172/03 (Order management/RICOH) and also landmark decision T 258/03 (Auction method/Hitachi).

More surprisingly, although the reasoning would have appeared sufficient with the above considerations, the French judges went a step further by adding the following subsidiary statement:

In addition, the problem raised is not solved by this data processing since the carrier is then only put in front of possible choices that could optimize his profitability.

Although very succinct and arguably not necessary for the court’s demonstration, this consideration is quite something of its own.

It clearly reminds us of the so-called “broken technical chain fallacy” concept laid out by the boards of appeal in T 1741/08 (GUI layout/SAP) and T 1670/07 (Shopping with mobile device/NOKIA). According to this concept, the need for the intervention of a user to solve an alleged technical problem breaks the technical chain and makes the whole chain non-technical.

In summary, the Sesame decision shows that, when the EPO does not grant patents for software for implementing business or administrative methods, applicants probably do not have much more to expect from French courts.

Actually, the accuracy with which the Cour d’appel applied principles also in use at the EPO in this field is remarkable. It is sometimes believed that courts in France tend to set out a “loose” reasoning. But the decision at hand shows that, even in the complex field of business method software patentability, the Cour d’appel de Paris can reach the same general conclusion as the EPO in a precise and well-reasoned manner.

That said, the Cour d’appel de Paris did not follow the exact same approach as the EPO.

Specifically, under European case law, the application should probably have been refused on the ground of lack of inventive step; whereas the Cour d’appel approved the director of the INPI for refusing the application on the ground that it was directed to subject-matter excluded from patentability. Discrepancies of this kind are not a surprise for French practitioners. Usually, such discrepancies between French practice and European practice are apparent at the litigation stage only. But in the present case, there could be consequences on prosecution before the INPI as well.

Thank you Aujain for the detailed account as well as the final cliffhanger. I am looking forward for the second part.

CASE REFERENCE: Cour d’appel de Paris, pôle 5 chambre 2, February 26, 2016, Sesame Active System v. Directeur général de l’INPI, RG No. 15/01962.