Competence? Competence!

When international private law meets patent law, things never fail to get interestingly complex.

Today’s case pits a German plaintiff, TerraNova Energy GmbH & Co. against a French defendant, Suez International SAS, and the litigation involves a number of patents and patent applications worldwide.

The background of the case is the following (according to the summary provided by the judge in the order to be discussed).

TerraNova developed a technology for recycling organic waste recovered from sewage sludge. Suez International, originally Degrémont, is now part of the Suez group, a major actor in the water and waste treatment industry.

Between April 2011 and October 2012, TerraNova presented its so-called “Ultra” technology to Suez in a demo plant in Germany. A non-disclosure agreement (NDA) was signed in November 2012. Both companies continued to cooperate, which led to the execution of a second, partnership agreement in April 2013. According to this partnership agreement, Suez had an exclusive right to the Ultra technology in France, and had a preemption right on the technology in other countries.

In 2013 and 2014, the Ultra technology was implemented in a sewage treatment plant in Compiègne, France and then in another facility in Maribor, Slovenia. In May 2014, the parties began negotiating a license agreement. November 2014 is the point in time when things started going south, as Suez informed TerraNova that they wanted to improve the Ultra technology, and to work on this new process in China. Then, they announced that they no longer intended to get a license, having developed their own improved process.

In January 2015, Suez offered to pay royalties for the ongoing Chinese project and for a potential second one, and requested exclusive rights in China. TerraNova refused. In October 2015, Suez opened a renegotiation of the 2013 partnership agreement and mentioned the development of its own, distinct technology. TerraNova then realized that Suez had filed three PCT applications, based on three French priority applications filed respectively in May 2013, July 2013 and November 2014. A number of granted patents and pending applications were later filed from these PCT applications, in Europe, China, the U.S., Canada, Australia and Brazil.

TerraNova was of the opinion that the patent applications disclosed confidential information communicated to Suez under the 2012 NDA. They filed a complaint with the Paris Tribunal de grande instance (TGI) in October 2016, claiming damages as well as the transfer of the various patents / applications.

Patent law meets international law.

As a legal defense, Suez argued that the Paris TGI lacked jurisdiction over this dispute. As an auxiliary argument, they said that the court lacked jurisdiction at least regarding the requested transfer of patent rights deriving from Suez’ PCT applications.

This legal defense was debated in front of the case management judge, which gave rise to the order discussed today. The merits of the case are not addressed in this order.

Let’s first deal with Suez’ general argument of lack of jurisdiction. The difficulty here is that the parties were bound by two successive agreements: the 2012 NDA and the 2013 partnership agreement.

Now, the NDA contained a jurisdiction clause, per which any dispute in connection with the agreement should be tried by the Paris courts. But the partnership agreement contained an arbitration clause, per which any dispute in connection with the agreement should be brought to the Swiss Chambers’ Arbitration Institution.

Suez claimed that, according to the competence-competence principle, only the arbitral tribunal had jurisdiction to decide on which forum had jurisdiction.

The court referred to article 1448 of the Code de procédure civile. According to this provision, if a lawsuit subjected to an arbitration agreement is filed in front of a national court, the court must decline jurisdiction unless (1) the case has not yet been brought to an arbitral tribunal, and (2) the arbitration agreement is manifestly null or inapplicable. These conditions (1) and (2) are cumulative.

In this case, condition (1) was fulfilled, as the case had not been brought to an arbitral tribunal. As to to condition (2), the court came to the conclusion that it was also fulfilled. The arbitration clause of the partnership agreement was manifestly inapplicable to the dispute, said the court. If there was the slightest doubt as to whether the arbitration clause was applicable, my understanding is that the judge had no other choice but to decline jurisdiction. Yet, in this situation, there was apparently no doubt at all.

Indeed:

  • It was clear that the parties to the NDA intended to subject this agreement to the jurisdiction of the Paris court.
  • The later partnership agreement did not state (be it implicitly or explicitly) that this jurisdiction clause in the NDA was no longer applicable.
  • The NDA contained a mention that the agreement would expire 3 years after the execution date, except some provisions which would still apply for 5 years after the end of the agreement. The jurisdiction clause was not cited among the surviving provisions. But the judge held that a jurisdiction clause was autonomous with respect to the rest of the agreement and necessarily continued to apply to disputes arising from the agreement.
  • Finally, the complaint did relate to an alleged breach of the non-disclosure provisions of the NDA, and not to an alleged breach of the partnership agreement.

Therefore, the overarching competence-competence principle in this particular instance did not apply, and the judge refused to decline jurisdiction.

This leads us to the second (auxiliary) part of Suez’ legal defense, i.e. that the judge should decline jurisdiction at least over the requested transfer of patent rights stemming from Suez’ PCT applications.

Indeed, the applications were filed after the execution of the partnership agreement, so that only this later agreement was applicable to TerraNova’s claim for ownership.

It is not perfectly clear to me when reading the order whether Suez also argued that the TGI had no jurisdiction over disputes regarding the ownership of foreign patent rights (as opposed to French patent rights) as a matter of principle. Anyway, in the past, French courts did not hesitate to rule on ownership claims regarding foreign patent rights, and the trend was not reversed in this case.

It is interesting to note, though, that TerraNova did not request that the foreign patent rights should be transferred to them by the court, but rather that the court should order Suez to perform the transfer of these patent rights to their benefit. The formulation of this claim probably makes it easier to avoid any potential argument that the French courts would encroach upon the prerogatives of foreign states.

As to the merits of Suez’ argument, the judge held that TerraNova’s transfer claim was analyzed as a remedy pertaining to the alleged breach of the NDA, so that the TGI did have jurisdiction also over this aspect of the case.

To summarize, Suez’ legal defense was rejected, and the proceedings will continue on the merits.


CASE REFERENCE: Tribunal de grande instance de Paris, 3ème chambre 1ère section, ordonnance du juge de la mise en état, April 5, 2018, TerraNova Energy GmbH & Co v. Suez International SAS, RG No.16/16334.

Getting ready

Little by little, everything seems to finally come into place for the kick off of the UPC – pending the outcome of the constitutional complaint in Germany.

A major step has now been taken in France, with a modification of the Code de la propriété intellectuelle (CPI) to make national law ready for the UPC, by way of an executive order dated May 9.

And one of the most important amendments thus introduced… well in fact has little do with the UPC, and everything to do with this very French debate on the statute of limitations applicable to patent nullity actions.

Indeed, a new article L. 615-8-1 is introduced, per which the statute of imitations is simply not applicable to patent nullity actions. So, back to the situation that everyone took for granted ten years ago, and back into line with the practice of other European countries. Very good news indeed.

But, there is a but, or actually two.

First, this new provision will only come into force when the UPC agreement comes into force – since the overall purpose of the order is the application of the UPC agreement. Second, the new provision will not be applicable to nullity actions which are already time-barred at the time the provision comes into force.

So you can still expect a lot of discussion for a few more years on how the statute of limitations should be applied and how the limitation period should be computed, before this really becomes history.

Waiting for the entry into force.

Now, back to the other, truly UPC-related provisions. One important aspect is how double protection by a French patent and a European patent for the same invention is handled.

The current situation is that, when a French patent and a European patent granted to the same inventor or successor in title cover the same invention and have the same priority date, the French patent ceases to be in force at the expiry of the 9-month European opposition period (if no opposition is filed) or when the opposition proceedings are closed, the patent being “maintained” (either in amended form or as granted).

Under the new version of article L 614-13 CPI, this remains the case, but only for European patents that have been opted out from the exclusive competence of the UPC (under article 83 of the Agreement). For non-opted out European patents (including of course unitary patents) on the contrary, there will no longer be any such so-called substitution. Thus, applicants will be able to secure both a national patent, enforceable in front of our national courts, and a European patent enforceable in front of the UPC, for the same invention. This is of course primarily of interest for French applicants who do their first filings at the INPI and then file at the EPO. But of course foreign applicants could also use this tool, for super-important inventions, by filing at the EPO and then in France, or simultaneously at the EPO and in France.

Now, what happens if a European patent is opted out at a late stage, for instance after the 9-month opposition period? The answer provided in the new law is that double protection then ends at the time of the opt out, i.e. the French patent ceases to be in force on the date of the opt out.

By the way, any substitution is irreversible. If a European patent is invalidated or lapses or if the opt out is withdrawn after a substitution has taken place, the corresponding French patent does not come back to life.

Another amendment relates to the prohibition to transfer, or to grant rights on, a French patent or application independently from a European patent or application, for the same invention, having the same priority date, and filed by the same inventor or successor in title.

This prohibition remains in place for all non-opted out European patents (including unitary patents), as well as opted out European patents (before the substitution takes place). In addition, the recordal of a transfer at the French national patent register is only effective if a parallel recordal has taken place at the European national patent register.

Next topic, a particular procedural rule in connection with patent litigation.

Currently, if a French patent is asserted and there is a corresponding European patent or application, the court stays the proceedings as of right until the substitution takes place, or until the European patent or application disappears (by way of a withdrawal, refusal, revocation, etc.) before any substitution takes place. This rule will remain in place but solely for opted out European patents. When a non-opted out European patent / application is present, an action based on the French patent will be able to proceed independently of the fate of the European patent / application. It remains to be seen how this will play out in practice. The court will still have the possibility to order a stay anyway, under the general rules of civil procedure, if they deem that a stay is appropriate for a good administration of justice.

On a few other aspects, French law has been harmonized with the UPC Agreement.

This is especially the case regarding the wording used to define the acts of infringement and exhaustion of rights. Besides, non-exclusive licensees will now be allowed to assert a patent if this is expressly authorized by the license agreement, and provided that the patent proprietor is given prior notice. This is a new possibility under French law, which mirrors article 47(3) of the UPC Agreement.

The limitation period for infringement damages remains five years but the starting point will now be the date on which the applicant became aware, or had reasonable grounds to become aware, of the last fact justifying the action, in keeping with article 72 of the Agreement. In the current version of article L. 615-8 CPI, the starting point is “the facts” on which the action is based. The effect of this significant modification will be twofold: right holders will in some cases be able to claim more damages; and more complex debates regarding the determination of the starting point of the limitation period can be expected, as the new definition is more fuzzy than the traditional one.

Last but not least, new article L. 615-18 CPI clarifies that the UPC shall have exclusive jurisdiction over unitary patents and non-opted out traditional European patents.

So, now that the rules of the game are known, all readers can start looking for potential loopholes or ambiguities, and imagining unusual scenarios. Isn’t this what new laws are primarily for?

Protocol not recognized

Another week, another issue of international jurisdiction. Last week’s post was about a case of declaration of non-infringement. This week’s post is about a case of ownership claim. But I think this time the decision issued by a French judge has a greater potential for arousing controversy.

In short: the judge decided that the Protocol on Recognition should be discarded in the determination of jurisdiction in the case at hand. The “Protocol on Recognition” is short for “Protocol on Jurisdiction and the Recognition of Decisions in respect of the Right to the Grant of a European Patent“. The object of the Protocol is to define which courts of the EPC contracting states shall have jurisdiction to decide claims, against the applicant, to the right to the grant of a European patent.

Pursuant to Article 164(1) EPC, the Protocol is considered as an “integral part” of the EPC, and therefore is part of an international agreement. So, I think the decision by the judge not to apply the Protocol is a pretty big deal.

Let’s turn to the specifics of the case. This is a dispute between a British company, NCAM Technologies Ltd. and a French company, Solidanim, both active in the field of motion picture technology. Both hold IP on similar technologies, respectively called NCAM Live and SolidTrack.

Solidanim filed a French patent application in December 2011, followed by a European patent application in December 2012, claiming the priority of the French application. The French patent was granted, and the European application is still pending.

NCAM Technologies Ltd. filed a British patent application in May 2012, followed by another British patent application and a PCT application in May 2013, claiming the priority of the initial 2012 filing. The PCT application entered regional phase at the EPO.

Filing date 1918 – the early days of cartoon technology.

Apparently, Solidanim told clients that NCAM had stolen its SolidTrack technology. NCAM did not like that and sued Solidanim in front of the Paris Tribunal de grande instance (TGI) in October 2015. NCAM requested that Solidanim’s French patent be held invalid, and that Solidanim be declared guilty of unfair competition due to disparagement.

In March 2016, Solidanim counterclaimed for infringement of its French patent and of its European patent application and for unfair competition.

Even more importantly for the present post, Solidanim claimed ownership of NCAM’s British patent, PCT application and resulting European application.

In June 2016, NCAM retaliated by presenting the case management judge with a number of procedural requests:

  • that the proceedings should be stayed with respect to Solidanim’s infringement claims;
  • that the proceedings should continue with respect to NCAM’s nullity claim; and
  • that the court should acknowledge its lack of jurisdiction with respect to Solidanim’s ownership claim.

This leads us to the order issued by the case management judge in November 2016. The first request was quite easily granted. Indeed, infringement proceedings based on a pending European patent application are stayed as of right (article L. 615-4 Code de la propriété intellectuelle). Furthermore, infringement proceedings based on a French patent are also stayed as of right if there is a parallel European patent application which is still pending (article L. 614-15 Code de la propriété intellectuelle). This is because the French patent is bound to totally or partially disappear after the grant of the European patent (more specifically, at the end of the opposition time limit or at the end of the opposition proceedings, if any).

Turning to the second request, there was no mandatory rule for the judge to follow. He had discretion whether to proceed further or to stay. He decided to stay, “for a good administration of justice“, according to the ritual phrase, due to the parallel European patent application still being examined at the EPO, and since the fate of the French patent is closely tied to that of the European application.

But the big prize was the third request. NCAM based its request on the Protocol on Recognition, and more specifically article 2:

Subject to Articles 4 and 5, if an applicant for a European patent has his residence or principal place of business within one of the Contracting States, proceedings shall be brought against him in the courts of that Contracting State.

Articles 4 and 5 are irrelevant here, as they relate to employees’ inventions and cases in which there is a preexisting agreement with a jurisdiction clause in place between the parties.

So, this is quite straightforward. According to article 2 of the Protocol, the British courts should have exclusive jurisdiction to rule on Solidanim’s claim for ownership of NCAM’s European application, since NCAM has its principal place of business in the UK.

However, Solidanim relied on the Brussels I regulation, namely regulation (EU) No. 1215/2012, already discussed last week. More specifically, Solidanim relied on article 8(3) of the regulation, per which:

A person domiciled in a Member State may also be sued: […] (3) on a counter-claim arising from the same contract or facts on which the original claim was based, in the court in which the original claim is pending.

Claims were already pending in the Paris TGI due to NCAM’s original complaint. Solidanim’s case was that their ownership counterclaim arose from the same facts on which the original nullity and unfair competition claims were based. As a result, the French court also had jurisdiction under the Brussels I regulation.

The judge thus had to address two questions:

  • First, as a matter of fact, did Solidanim’s ownership counterclaim indeed arise from the same facts on which the original claims were based?
  • Second, as a matter of law, which provisions should prevail: those of the Protocol on Recognition or those of the Brussels I regulation?

As to the first point, the judge agreed with Solidanim that the conditions of article 8(3) of the regulation were met:

[…] The latter claims are closely related to the circumstances of fact and relations between the parties, which need to be assessed so as to determine whether the filings made by NCAM did or did not violate Solidanim’s rights on the FR’057 patent, the validity of which is challenged in front of the Parisian court. 

I am not sure I fully understand why a nullity claim concerning one patent is necessarily closely related to an ownership claim concerning other, later applications by another party – apart from the general background of the case. On the other hand, it seems quite clear that NCAM’s unfair competition / disparagement original claim was closely related to Solidanim’s ownership counterclaim. In both cases, the issue, to put it bluntly, was whether or not NCAM had “stolen” Solidanim’s technology.

But the legal issue is certainly the most interesting one. Both the Protocol and the regulation contain some general provisions on how they should be articulated with other legal instruments.

On the one hand, according to article 11(1) of the Protocol:

In relations between any Contracting States the provisions of this Protocol shall prevail over any conflicting provisions of other agreements on jurisdiction or the recognition of judgments.

So the Protocol proclaims itself to be superior to any other agreement. But the regulation is not an agreement. It is a piece of EU law.

On the other hand, the regulation contains an entire chapter (articles 67 to 73) on its relationship with other instruments. This chapter contains general guidance and some specific provisions, but no specific provisions regarding the Protocol on Recognition.

So the judge turned to a CJEU decision relevant for this issue, namely C-533/08 (TNT Express Nederland BV v. AXA Versicherung AG) of May 4, 2010. This decision deals with the articulation between regulation (EC) No. 44/2001, which was the previous version of the Brussels I regulation, and an international agreement, namely the Convention on the Contract for the International Carriage of Goods by Road, signed in Geneva in 1956.

The court interpreted article 71 of regulation 44/2001 as meaning that:

in a case such as the main proceedings, the rules governing jurisdiction, recognition and enforcement that are laid down by a convention on a particular matter […] apply provided that they are highly predictable, facilitate the sound administration of justice and enable the risk of concurrent proceedings to be minimised and that they ensure, under conditions at least as favourable as those provided for by the regulation, the free movement of judgments in civil and commercial matters and mutual trust in the administration of justice in the European Union (favor executionis).

Article 71 of regulation 1215/2012 is similar to article 71 of regulation 44/2001. Therefore, the judge applied the criteria set by the supreme court of the EU, based on the premise that the same criteria should apply whatever the international agreement at stake is.

The judge acknowledged that the Protocol on Recognition affords a high degree of predictability.

However, turning to the objectives of sound administration of justice and of minimizing the risk of concurrent proceedings, the judge noted that the claims and counterclaims at stake were so closely related that the sound administration of justice and the minimization of the risk of concurrent proceedings were better served if all claims and counterclaims were handled by the same court.

The judge noted that

On the one hand, the [NCAM] patents relate to a system similar to the one claimed by Solidanim in its FR’057 patent, in that they deal with real-time merging or composing of computer-generated 3D objects and a video stream from a video camera. And on the other hand, the ownership claims rely on the same factual circumstances relating to the relationships between the parties and their employees, which lead them both to claim a primacy on the inventions provided in these different patents or applications and to consider that the statements made by the parties against each other constitute acts of unfair competition. 

Consequently, said the judge, the Protocol for Recognition did not pass the test set in C-533/08 in the present circumstances, and it should thus simply be ignored, to the benefit of the Brussels I regulation.

Let’s see how this case further develops. It could even be a matter for further reference to the CJEU down the road, could it not?

As a side note, in a few years’ time, I assume that the Brussels I regulation will no longer apply to the UK, so that a similar situation will have to be handled completely differently.


CASE REFERENCE: Tribunal de grande instance, 3ème chambre 2ème section, ordonnance du juge de la mise en état, November 24, 2016, NCAM Technologies Ltd. v. Solidanim, RG No. 15/15648.

Groundhog case

Okay, campers, rise and shine and don’t forget your booties ’cause it’s cold out there today!

I don’t know if this sentence will ring a bell to some readers, but it is my favorite quote from the classic comedy Groundhog Day, in which poor Bill Murray cannot get out of a day he keeps re-living.

The movie came to my mind when reading about the latest development in the Nergeco v. Maviflex case. I don’t know if this patent litigation has broken a record or not, but it sure looks like the judicial equivalent of a groundhog day that never ends.

Here is the extraordinary timeline of the case:

  • At the end of the nineties, Nergeco (patentee) and Nergeco France (licensee) sued two companies, Mavil (now Gewiss France) and Maviflex, for infringement of a European patent.
  • On December 21, 2000, the Lyon Tribunal de grande instance (TGI) held that the plaintiffs’ claims were admissible but ill-founded. The plaintiffs appealed.
  • On October 2, 2003, the Lyon Cour d’appel set aside the first instance judgment and concluded that the patent was infringed. The court ordered an expertise to assess damages.
  • On October 15, 2005, the Cour d’appel issued a second judgment further to the expertise. The amount of damages was set to 60,000 euros to the patentee (Nergeco) and 1,563,214 euros to the licensee (Nergeco France). The defendants then filed an appeal on points of law.
  • On July 10, 2007, the Cour de cassation partly set aside the 2005 judgment regarding the damages to be paid to the licensee. The reason for the reversal was that the Cour d’appel had not addressed the argument that the license agreement had been registered in the patent register only in 1998, so that it was not enforceable against third parties before that date. The case was thus remitted to a different Cour d’appel, in Paris this time.
  • On June 2, 2010, the Paris Cour d’appel held that all claims against Mavil (now Gewiss France) were in fact inadmissible as Mavil no longer existed when they were initially sued; and reduced the amount of damages to be paid by the second defendant Maviflex to the licensee Nergeco France by approximately half (taking into account the date at which the license agreement was registered and became enforceable against third parties). Both sides filed another appeal on points of law.
  • On September 20, 2011, the Cour de cassation set aside the 2010 judgment. First, because the Cour d’appel should have ruled on an argument of invalidity of the license agreement (there was no res judicata on this issue, as it was not addressed in the 2003 and 2005 judgments). Second, because the argument that the claims against Mavil were inadmissible should not have been given any consideration, as Mavil / Gewiss France acted in the proceedings as if their designation in the initial complaint was correct. In fact, this part of the decision became very famous since it is one of the few illustrations of an estoppel principle in this country.  The case was again remitted to the Paris Cour d’appel.
  • On June 21, 2013, in a new judgment by the Cour d’appel, the case was reexamined pursuant to the instructions of the Cour de cassation. But the actual outcome was pretty much the same as in the previous judgment. In particular, the damages award to Nergeco France was similar to the one ordered in 2010. The defendants filed a third appeal on points of law.
  • On December 16, 2014, the Cour de cassation set aside the 2013 judgment. Once again, the supreme court ruled that the appeal judges should have ruled on some arguments relating to the inadmissibility of Nergeco France’s claims.

And this finally leads us to the latest decision in the series, issued by the Paris Cour d’appel on October 28, 2016, and which addresses the inadmissibility arguments that the Cour de cassation held needed to be addressed.

What an incredible mess… This lawsuit has now been pending for almost two decades, and the Cour de cassation set aside appeal judgments three times. It may not even be over yet. For all I know, the losing parties may have referred a fourth appeal on points of law to the Cour de cassation.

Fortunately, this is a very exceptional situation due to the fact that (1) the Cour d’appel repeatedly failed to address arguments that the supreme court believes should have been addressed; and (2) the supreme court repeatedly remitted the case to the appeal stage instead of putting an end to the lawsuit.

Groundhog day and Goodbye Lenin: very different but both fun to watch.

While the context of the case is by itself fascinating, the content of the October 28, 2016 decision is also quite interesting, as it notably addresses the issue of the coexistence of French and European patents.

As a recap, the issue at stake was whether Nergeco France’s claims in the lawsuit were admissible. The court held that they were not, because the agreement containing the license provision was invalid.

Remarkably, the court found not one but two independent reasons why the agreement was invalid.

The first reason was one of contractual law. The agreement between Nergeco and Nergeco France was executed on December 6, 1990. At that time, Nergeco France was not yet registered in the commerce register. It is possible for a company to enter into an agreement before its incorporation, but special formalities need to be observed. This was not the case here. The agreement even mentioned that Nergeco France was registered in the commerce register of the good town of Le Puy, under a certain number – which was untrue, as the registration only took place on February 2, 1991.

The agreement was thus executed by a company with no legal capacity.

The second reason was more specific to patent law. Article 8 of the agreement recites that

if necessary, Nergeco will be in charge of obtaining and maintaining patents. Nergeco Fance will ipso facto be a licensee of the patents for France. 

An annex to the agreement, dated January 31, 1991, specifies that, by application of article 8, a license is granted by Nergeco to Nergeco France on a number of patents, among which the European patent in suit.

However, the agreement and its annex are silent as to the French patents to which the European patent in suit claims priority.

Because of this silence, the Nergeco companies fell into the trap of article L. 614-14 Code de la propriété intellectuelle:

A French patent application or a French patent and a European patent application or a European patent having the same filing date or the same priority date, protecting the same invention and belonging to the same inventor or successor in title cannot, for the parts in common, be independently subjected to a transfer, security, pledge or authorization of exploitation rights, subject to invalidity. 

This provision is one of the tools for preventing some forms of double patenting in this country.

In the present case, the European patent was licensed to Nergeco France, but not the French priority patents. As a result, the license was invalid.

The plaintiffs tried to escape the L. 614-14 trap by presenting several interesting arguments.

A first defense was that the general sentence “Nergeco Fance will ipso facto be a licensee of the patents for France” in article 8 of the agreement meant that the French patents were also concerned. The court replied that the licensed patents were necessarily expressly mentioned in the agreement – and the French patents were not.

A second defense was based on article L. 614-3 Code de la propriété intellectuelle, according to which a French patent covering the same invention as a European patent granted to the same inventor or successor in title ceases to be in force at the end of the European opposition period (or at the end of the opposition proceedings, if an opposition is filed).

The opposition period ended on July 13, 1994. Nergeco argued that the two French patents ceased to be in force on that date. Therefore, the ground for invalidity related to the absence of mention of the French patents in the agreement no longer existed from that date. The court rejected the argument, as this ground for invalidity must be appraised on the day the agreement was executed. It cannot be cured afterwards.

For the same reason, the court did not take into account subsequent actions (such as the renewal of the agreement, later amendments to the agreement, etc.).

And so, after all this time, the licensee was finally found not to be an actual licensee.

Nergeco France saw this coming, and therefore tried to convert its claims as a licensee into claims based on unfair competition. But these were new claims and were thus held inadmissible at this stage of the lawsuit.

As a final word (for now?) on this story, things seem to have gotten very nasty between the claimants and defendants. The judgment briefly mentions a number of parallel proceedings, including criminal ones.

It also seems that Gewiss France and Maviflex argued that the agreement between Nergeco and Nergeco France was forged. The court did not take sides on this. I wonder if the alleged forgery relates to the date of the agreement. From an outsider’s perspective, the fact that the agreement makes reference to a company having a registration number although the registration had not yet been performed at the time is indeed troubling. Could it be that the court was troubled as well, leading them to being quite strict on formal invalidity issues?

One can only speculate, not having access to the file wrapper.


CASE REFERENCE: Cour d’appel de Paris, pôle 5 chambre 1, October 28, 2016, Nergeco SA & Nergeco France SAS v. Gewiss France SAS & Maviflex SAS, RG No. 2015/01298.

Of employees and drugs

No, this is not a post about employees who do drugs. In fact, contrary to what the title suggests, there is nothing in common between employees and drugs in my mind, except that I would like to briefly report on two different subjects and that it is somewhat more convenient to group both in a single article.

Drugs first, with a follow-up on the sofosbuvir case which was reported on earlier on this blog.

As readers may remember, an opposition division of the EPO maintained Gilead’s patent EP 2203462 on a blockbuster drug for the treatment of HCV infection further to the oral proceedings which took place on October 4-5, 2016. Several granted claims were deleted in the amended version of the patent due to extension of subject-matter, including a claim specifically directed to sofosbuvir. One remaining claim recited a generic formula which could be interpreted either as covering both sofosbuvir and its stereoisomer, or as covering only the mixture of sofosbuvir and its stereoisomer. This left a number of observers wondering what the amended patent is really about, and more importantly whether it sill protects Gilead’s drug.

The update is that the written decision of the opposition division was issued on October 31, 2016. It can of course be downloaded from the online register.

In this decision it seems quite clear that the opposition division has chosen the second interpretation. In other terms, they believe that the main remaining claim covers a mixture of sofosbuvir and its stereoisomer. Indeed, the term “racemate” is repeatedly used in the decision when referring to the subject-matter of the claim.

This is especially clear in the section of the decision which deals with the ground of opposition of insufficiency of disclosure. It was alleged by one of the opponents that the patent did not contain enough information to make the individual stereoisomers. The opposition division rejected the objection with the following statement:

The OD considers that claim 1 is directed to a racemate i.e. a mixture of the enantiomers and not the pure enantiomers. As indicated by the Patentee it is not contested that the racemate of claim 1 can be produced. This interpretation of claim 1 means that it is not necessary to come to a decision as to whether or not the patent in suit sufficiently discloses how to isolate and characterise the enantiomers. This issue is not relevant to claim 1. The OD considers that the auxiliary request 1 meets the requirements of Art. 83 EPC.

So, if one follows the opposition division’s interpretation, it seems that the amended patent may no longer cover Gilead’s drug, which is as far as I understand a pure isomer and not a mixture. But here is the catch: national courts are not bound by the interpretation put forward by the EPO. As regards French courts, many illustrations of this have already been provided in previous posts. So, the conundrum is still there. Also, it is all but certain that multiple appeals will be filed. So, in 2 to 5 years we will be able to read the Board’s take on this issue.

But we will not have to wait that long to comment on the case again, as new interesting developments still keep coming up. In a letter dated November 3, 2016, the proprietor’s representative requested a correction of the minutes of the oral proceedings, as well as of the decision. She stated that the minutes and decision misrepresent the patentee’s position regarding the scope of claim 1.

Indeed, the opposition division reported that the patentee had stressed that claim 1 “does not embrace individual stereoisomers“; whereas in fact, says the representative’s letter, the patentee always expressed the view that individual stereoisomers are “within the scope of claim 1” but that claim 1 “does not particularize individual stereoisomers“.

Even if the opposition division were to correct the decision and the minutes as requested by the patentee (which could be a long shot), the opposition division’s own assessment of the scope of claim 1 would remain unaltered. But the patentee’s actual statements during the oral proceedings might possibly be of relevance in front of a judge, which is the reason for this pre-appeal move.

Interestingly, the representative asked for new oral proceedings if the request for correction were to be rejected. So, make sure to grab your bucket of popcorn and to watch the comments section below for any update on this matter – all the more so that one of the opponents also made a (different) request for correction. The opposition division’s job is certainly not an easy one in such a high profile case.

As a side note, the decision of the opposition division contains a number of other interesting aspects. Entitlement to priority was challenged, which gave rise to a review of U.S. law in relation to assignments. There is also a long discussion on the public availability of a document D5 which is a university thesis. The opposition division came to the conclusion that the document was not part of the prior art because, on the balance of probabilities, there seems to have been a bar on access to the document at the relevant period of time.

The inventive step section is also noteworthy. Several starting points were taken into consideration by the opposition division, and the surviving claims were found inventive over all starting points, the technical problem being the provision of alternative HCV inhibitors.

Now, here comes the “employees” part of the post which, as I warned, is truly unrelated to the first part.

A device for employees' drug screening
A device for employees’ drug screening

The French patent and trademark office (INPI) has recently released an extensive study on compensation policy for employees’ inventions.

According to French law, all inventions made by employees in the context of a task assigned to them by their employer (be it a general task assigned in the employment agreement or a specific task assigned during the course of employment) belong to the employer. But the employer must pay a bonus to the employees – or “rémunération supplémentaire“.

The core of the INPI’s study is a survey on how businesses deal with this legal requirement. This is quite enlightening as the statute does not provide many details and leaves it open how the compensation should be calculated and when it should be paid. Case law on this topic has provided some guidelines without however setting any generally applicable rules.

There are many interesting questions in the survey, but I picked a few ones which I found particularly blog worthy:

First, the form of the compensation. 60.5% of companies offer a lump sum-only compensation. Only 1.2% provide a compensation which is entirely dependent on whether/how the invention is exploited. The rest of the surveyed rely on a combination of both. Lump sum-only systems are certainly easier to implement (and potentially cheaper). But compensation systems which somehow take into account the exploitation of the invention might be more resistant to a court challenge.

Second, the points in time at which the compensation is paid. There are many different possibilities here, and in some companies several installments are paid over time. Thus, bonuses are typically paid when the initial patent application is filed (76.5% of respondents); when patent applications are filed abroad (33.3%); when a patent is granted at the EPO or abroad (34.6%); during exploitation of the invention (33.3%); etc. Interestingly, 8.6% of the surveyed said an installment is paid as soon as the employer becomes aware of the invention.

Third, the amount of the compensation. This is of course a key aspect. The study makes a distinction between lump sum-only compensation systems and mixed compensation systems (wherein the exploitation of the invention is partly taken into account):

  • In lump sum-only systems, the median value of the minimum awarded bonus is 500 €, while the median value of the maximum awarded bonus is 2,000 €. The maximum amount reported in the entire survey is 11,000 €.
  • In mixed systems, the median value of the minimum awarded bonus is 400 €, while the median value of the maximum awarded bonus is 15,000 €. The maximum amount reported in the entire survey is 105,000 €.

In summary, the span is broader in mixed systems, with a shift towards higher compensations. I assume that the higher bonuses must be rare: they must correspond to exceptionally valuable inventions.

The study also contains a breakdown of lump sum installments, depending on the point of time at which they are paid. For instance, in the majority of cases, the bonus for the initial patent application filing is between 500 and 1,000 €. But foreign filing bonuses and patent grant bonuses are somewhat higher, with a majority of cases between 1,000 € and 2,500 €.

Fourth, the frequency of disputes between an employer and its inventors. Fortunately, 67.2% of those surveyed reported no dispute. In 10.1% of cases, the employer received at least one complaint from an inventor. In 10.1% of cases, a dispute had to be handled by the national conciliation commission (CNIS, Commission nationale des inventions de salariés). In 6.3% of cases, a dispute went as far as a lawsuit in front of the Tribunal de grande instance (TGI).

If we add the CNIS and TGI cases, this is 16.4%, which seems to me like a relatively high dispute rate.

The study contains a number of other interesting data. It offers a comparison with a similar study performed in 2008. It provides practical examples of compensation systems set up by a number of companies, such as Air Liquide. This should be most useful for those businesses which still need to set up their own compensation system. In this respect, 7.4% of those surveyed still do not have a compensation system in place, although this is required by the law. My guess is that among those not surveyed, including many IP-unaware SMEs, the proportion could be significantly higher.

The study also provides a comparison of the French legal framework with other systems abroad.

Some of the annexes are also useful. One of them provides a list of bonuses awarded by the CNIS between 2011 and 2015. The amount awarded by invention ranges from 333 € to 50,000 €, with a total amount (for all inventions in dispute) ranging from 1,000 € to 300,000 €. This broad range certainly corresponds to a large variety of inventions, from useless ones to extremely profitable ones.

Another annex provides a list of damages awarded to employees by courts of law (as a compensation for unpaid invention bonuses) in the past few years. Again, the span is broad. However, the highest amount on the table (more than 1,000,000 € for two inventions) was in fact in a case where the inventions were not made in the context of a task assigned to the employee and therefore pertained to a different legal regime – one where the employer has a right on the invention but must buy the invention from the employee.

In summary, this is a must-read in particular for in-house patent attorneys and more generally for all involved in employees’ inventions in this country.