A warning against warnings

Today is April 3. Too late for an April fools’ post this year, sorry. My enthusiasm for pranks may have somewhat dwindled lately – maybe a side effect of the overdose of the “fake news” debate that has been going on lately.

As a result, this post will be as unfunny as can possibly be. In fact, the main topic of today – warning letters –  ranks second only to computation of damages, in terms of starkness. You have been warned.

In the case at hand, UK-based Becton Ltd. was the owner of European patent No. EP 1836111 directed to an “apparatus for storing and for independent dispensing of a plurality of packages, in fact a robot for the dispensing of drugs in a pharmacy.

A pharmacy robot training for dispensing drugs.

Back in 2011, Becton sued three French companies, Mekapharm, Phi-Concept and Automatic Logistic, for infringement of the French part of the EP’111 patent, after two initial saisies-contrefaçon (infringement seizures). This was in fact before the patent was even granted, in 2012.

Mekapharm filed an opposition against the patent at the EPO, and requested a stay of the infringement proceedings together with the two other defendants, in view of the opposition. The case was withdrawn from the court’s records in 2013 – probably because Becton did not reply to the request for stay. In February 2014, the opposition division revoked the EP’111 patent. The patent proprietor appealed. In 2015, Becton filed submissions in front of the Tribunal de grande instance (TGI) in order to reinstate the case. They did so on the last possible day before the proceedings would definitively expire.

This also turned out to take place just a few weeks before the oral proceedings in front of the Board of appeal. Unfortunately for the plaintiff, the revocation of the patent was confirmed by the Board. This led Mekapharm and its co-defendants to file a number of counterclaims in front of the TGI.

The first counterclaim concerned the validity of the infringement seizures, and was easily dealt with: due to the retroactive revocation of the patent, the infringement seizures were necessarily invalid and the seized evidence had to be returned to the defendants.

As a second counterclaim, the defendants requested damages because Becton had sent warning letters to their customers. The warning letters were sent by Becton’s patent attorney a few weeks after the infringement seizures. The recipients of the warning letters were the customers identified in Mekapharm’s database, that Becton had had access to owing to one of the seizures.

The court issued its judgment on January 13, 2017. It started by reminding that, pursuant to article L. 615-1 Code de la propriété intellectuelle, infringement acts committed by someone else than a manufacturer of the claimed product only give rise to liability if the infringer is aware of the infringement. This is the usual justification for allowing warning letters in French practice.

On the other hand the court also made it clear that the sender of a warning letter can be held liable if the letter “is sent in a wrongful manner, notably in case of bad faith or obvious abuse“.

Here is now the court’s analysis of the patent proprietor’s behavior:

[…] Further to the infringement seizure conducted on July 22, 2011 at the headquarters of Mekapharm, Becton Ltd. seized Mekapharm’s customer database and sent a […] letter to all of them on September 19, 2011, […] mentioning in particular [the EP’111 application]. The French translation of the claims was enclosed. The recipients’ attention was drawn to article L.615-1 Code de la propriété intellectuelle, the letter being a warning letter under this article. The letter was concluded by an invitation to check whether the equipment of the recipients’ establishment did not infringe the patent rights defined by the apparatus and method claims based on which the EPO intended to grant a European patent. 

The wording of the letter is objective and moderate and therefore does not by itself entail any wrongdoing. However, the premature sending of the letter before the grant of the patent […] and the systematic sending to all of Mekapharm’s customers, whose addresses were obtained a little bit more than one month before, owing to the seizure (these customers being asked to check if the equipment that they acquired from Mekapharm infringed a not yet granted patent) are two circumstances which constitute a dishonest behavior towards Mekapharm, its main competitor on this segment, or at least wrongful negligence

Among the two incriminating circumstances mentioned by the court, one is certainly much more serious than the other. In fact, the sending of warning letters based on a patent application should probably not be considered as misconduct by itself. Indeed, rights can be derived from a patent application: this is called provisional protection; as a result, it should be lawful to make non-manufacturing infringers aware of such protection, in particular so that damages can start accruing.

On the other hand, the use of the seized customer database for the sending of warning letters was clearly questionable. More generally, it is probably fair to say that any use of seized evidence for any purpose other than what is strictly necessary for the demonstration of infringement raises a risk of abuse.

Mekapharm claimed 1,386,000 euros of damages of lost profits, and its co-defendant Phi-Concept claimed 277,000 euros.

The amounts awarded by the TGI were much lower, but certainly not insignificant: 335,000 euros to Mekapharm and 72,600 euros to Phi-Concept.

Mekapharm filed three affidavits from different pharmacies proving that their owners had given up on buying Mekapharm’s robots further to Becton’s warning campaign. The court was therefore convinced that Mekapharm suffered a loss because of the warning letters.

The court also relied on an analysis of sales between 2009 and 2016, showing that Mekapharm’s sales decreased in 2013 and 2014. The judges came to the conclusion that those were lost sales. As the sales picked up again in the following years, no further lost sales were acknowledged.

The figure of 335,000 euros was computed based on Mekapharm’s margin applied to the turnover that should have been generated by the lost sales. Phi-Concept on the other had was the company in charge of marketing Mekapharm’s robots. Its lost profits corresponded to the percentage of the lost sales’ turnover which was specified in the agreement between the two companies.

As a complement, Mekapharm was awarded 20,000 euros for the harm done to its image. On the other hand no abuse of proceedings was acknowledged by the court.

All in all, this judgment is probably a warning letter of its own to patent proprietors, who should always be very careful when they exercise their rights.

CASE REFERENCE: Tribunal de grande instance de Paris, 3ème chambre 2ème section, January 13, 2017, Becton Dickinson Dispensing UK Ltd. v. Mekapharm et al., RG No. 15/03165.

Take the long way home

Some critics of IP French courts sometimes complain that judges have a tendency to take shortcuts and to always look for the easy way out of a case instead of dealing with all difficult questions. Today’s case may prove them wrong, as the court took the long way home instead of the short one, by combining three pieces of prior art in order to arrive at a finding of lack of inventive step – although two or even one would probably have been sufficient.

Italian company Imball Center Srl sued two subsidiaries from the same group ITM Entreprises (hereafter collectively referred to as ITM) for infringement of the French part of European patent EP 1885622 (EP’622). The patent relates to a thermal bag for food, and ITM was accused of providing infringing bags to French retailer Intermarché.

ITM filed a nullity counterclaim on the grounds of lack of novelty and lack of inventive step.

Claim 1 of the patent reads as follows:

A thermal bag made of thermally insulating composite material folded to form a bottom and welded along lateral borders to form a body of the bag with a mouth at the level of which a handle is applied, said handle having a closing device for said mouth, said composite material defining a bottom folded in an accordion-like fashion opposite the mouth of the bag, and said handle having a shorter length than the length of said mouth when the bag is in the flattened position; characterized in that a laminar stiffening element of the accordion-like bottom is disposed inside the bag. 

The lack of novelty argument was based on four thermal bags on sale before the priority date of the patent, respectively called the Intermarché orange bag, the Intermarché red bag, the Carrefour bag and the Thiriet bag.

The court accepted that all bags were prior art, relying on a variety of evidence: catalogues, affidavits, orders, etc. Interestingly, indirect evidence was also relied on in order to prove the date of some bags, such as the presence of an old logo on a bag, or the presence of a phone number in a format no longer in use for years.

However, the court held that the thermal bags in question did not have a bottom folded in an accordion-like fashion, as required by the main claim of the patent. Since the judgment is relatively concise on this aspect, it is not entirely clear whether the prior art bags clearly had a different type of bottom, or whether there was simply not enough evidence that the prior art bags had a bottom as claimed. Anyway, as already explained in a previous post, providing a perfect demonstration in the context of a public prior use is often extremely challenging.

Concerning inventive step – which turned out to be the patent’s killer – the court first noted that the parties agreed on the fact that a so-called Link patent was the closest prior art.

The claimed invention seems to differ from the Link patent due to (i) the bottom folded in an accordion-like fashion, as well as (ii) the presence of the laminar stiffening element.

The court then turned to another reference, called the Moravek patent, which disclosed distinguishing feature (ii), i.e. the laminar stiffening element. The court used a problem and solution-type of reasoning as regards the combination of Link and Moravek:

[…] Although the invention of the Moravek patent differs from the one proposed by the EP’622 patent in that it does not disclose an insulated bag made of a thermally insulating composite material and does not disclose a bottom folded in an accordion-like fashion […], the skilled person, confronted with the technical difficulty of improving the convenience of the insulated bag, would be enticed to refer to the Moravek patent, the objective of which is precisely to allow the support of the bag’s opening during the introduction of produce into the bag on a sales counter, with a strengthening panel mounted on a pivot which is lowered when the bag is opened owing to air pressure. 

OK, and what about the accordion-like bottom? Well the court said the skilled person would turn to the bags on sale before the priority date, and it particular to the Intermarché red bag. But wait a minute, didn’t the court previously state that these bags did not disclose the accordion-like folded bottom? Yes indeed, but at this point the court added that the Intermarché red bag had a folded bottom which was strictly equivalent to an accordion-like one:

[…] It is a fact that the Intermarché red bag comprises folds at the bottom, in order to form this bottom, although the configuration of the folds is not strictly identical to that provided in EP’622. However, although this difference results in the novelty of the invention as stated above, it is not sufficient in itself to characterize an inventive step for the skilled person whereas the purpose of the feature is identical and it provides the same effects. 

[…] It should be noted that the red Intermarché bag, as it is designed, can perfectly be folded into an accordion shape, so that this feature, although it is the result of an additional manual operation as set out by Imball, is reproduced by the bag. Therefore, the skilled person reading the prior art, with common general knowledge, was able to achieve this result without any inventive step by simply looking at and handling products on the market. 

I started this post by saying that the court had taken the long way rather than the short one. Actually, it seems to me that it would have been much easier to start from the Intermarché red bag as the closest prior art, and to simply state that the sole distinguishing feature of the claimed invention was the shape of the folds at the bottom of the bag, which was obvious to achieve for the skilled person using his or her basic skills and common general knowledge. The way I understand the case, Link and Moravek were not necessary for the reasoning.

As a reminder, French courts are strictly bound by the submissions of the parties, and may not really come up with a reasoning of their own. In this case, it seems that the Link patent was considered as the closest prior art by both parties. So it may well be the defendant who actually took the long way – maybe out of fear of contradicting their novelty challenge, but I am just speculating.

The shortest way?
The shortest way?

Now, two other notable points in this judgment.

First, the court also revoked a number of dependent claims, also for lack of inventive step. For most of those, it seems that the Intermarché prior use already disclosed the claimed features – although the court also referred to further prior art references such as a Martineau patent or a Pakzad patent, in a superfluous manner.

Second, although the patent infringement claim obviously failed due to the revocation of the patent, the court did however find the defendant guilty of unfair competition and awarded 500,000 euros of damages to Imball.

The facts were the following: until February 2012, Imball supplied insulated bags according to the EP’622 patent to ITM. Then ITM stopped the business relationship with Imball and started buying bags from a Malaysian company, L&A Packaging. The Malaysian bags marketed in France by ITM were very similar to Imball’s own patented bags. The court also noted that ITM had the complete specifications of Imball’s bags in its hands and had even asked Imball for samples a few months before the end of the supply relationship, for evaluation and testing purposes – which, in retrospect, may look a little bit like a smoking gun.

The court held:

Therefore the defendant had all the information on the characteristics of the bags made by Imball, and decided, simultaneously with the end of the business relationship with Imball, to get supplies from L&A Packaging so as to market bags at a lower cost. They were aware that said bags were a quasi-literal reproduction of the bags produced by Imball. The manufacturer was necessarily able to benefit from Imball’s know how. This characterizes a disloyal attitude, because it led to knowlingly put a large quantity of quasi-identical products on the market resulting in an obvious confusion with Imball’s products. 

In this respect, the mere fact that the bags sold by the defendants have an Intermarché logo is not enough to avoid the risk of confusion. The risk of confusion must be assessed, on the one hand, from the perspective of the public at stake, i.e. in this case professionals in the field, such as those purchasing bags to market them in their distribution network, and not consumers; and on the other hand in view of the technical similarity of the products, which is established in this case, independently of the logo with which they are effectively marketed. 

Most patent infringement complaints comprise an ancillary unfair competition claim. The latter very often fails if the main infringement claim is successful, as the facts underlying both claims are generally similar, whereas case law demands different facts. Nevertheless, an unfair competition claim can be a valuable fallback claim if the infringement claim fails, and if some actual copying has taken place.

Interestingly, in today’s case the evidence for the acts of unfair competition was obtained during a patent infringement seizure. I am always somewhat surprised that this procedure, which is supposed to be exceptional and therefore strictly limited by its purpose (the demonstration of an alleged patent infringement), can be later used to support a different claim.

CASE REFERENCE: Tribunal de grande instance de Paris, 3ème chambre, 2ème section, March 11, 2016, Imball Center v. Consommables Et Matériels & ITM Alimentaire International, RG No. 13/12818.