Crunching numbers

In a previous post, I reported on the article that I recently co-authored with Lionel Vial and Laura Barona in Propriété industrielle, on the latest figures of French patent litigation. The focus of the post was on the validity stats, which are of course of paramount importance. But it turns out the article contained more interesting stats. Here are thus some further highlights from this work.

Basically, the further questions that the article purported to answer are the following:

  • Who is involved in patent litigation in France?
  • What patents are litigated in France?
  • What is the interplay between patent litigation and other post-grant proceedings?
  • What is the infringement conviction rate?

Once again, the methodology that we used is summarized at the end of the post.

That’s Laura, Lionel and I tallying up patents on our hexadecimal abacus.

First, who is involved in patent litigation.

We looked into this both in terms of type of parties, and in terms of geographical origin of the parties – claimants and defendants alike.

Typically, patent litigants are legal entities. Only 10% are natural persons. Among these legal entities, the vast majority are private companies. Within our sample, there are almost no universities or research institutes involved. Then, among those private companies, 68% are SMEs, 24% are large entities (or subsidiaries thereof), and only 7% are medium-sized businesses.

69% of all parties involved are French, and only 31% are foreign. Among the subgroup of foreign parties, more than a quarter are our German neighbors. Chinese and South Korean parties come in second and third (at 10% each). U.S. parties only rank fourth among foreign parties (7%). This ranking is somewhat surprising, especially if we compare it to the top nationalities of applicants for European patent applications. According to the annual report recently released by the EPO, 22% of all European patent applications filed in 2017 originated from the U.S., 18% from Japan, 16% from China, 11% from Germany and 6% from South Korea.

It should be noted that, in the sample that we studied, almost all Chinese parties were defendants in infringement suits, whereas the relatively high ranking of South Korean parties was mainly due to only two very active right holders, namely Sehyang Industrial Co. and Dae Sung Hi Tech Co.

Second, what patents are litigated.

We conducted a very rough classification of all litigated patents into three main technical fields: chemistry/biology/health sciences; electronics/IT; and mechanical engineering/construction. We realized that there is a strong imbalance here, since 81% of litigated patents relate to the latter field of mechanical engineering/construction. The other patents are almost equally distributed between chemistry/biology/health sciences and electronics/IT.

There is one area though in which biochem prevails over other fields, namely nullity actions. This is in keeping with the common practice of generic drug manufacturers to clear the way by trying to invalidate some patents before putting their products on the market.

37% of all litigated patents are French (national) patents, and 63% are European patents. French patents used to outnumber European ones, but the trend changed in 2009 as shown by Pierre Véron in his study and it has apparently remained relatively steady since then.

We also looked at how old the patents are by the time legal proceedings are initiated. The average age is 13.5 year old. Thus, mainly mature inventions give rise to litigation. Clearly, a substantial amount of time is required before a technology develops to the extent that it attracts significant infringement – or that it becomes worth it for a third party to attempt to get rid of a patent.

This is one of the reasons why our current local debate on the statute of limitations in connection with nullity claims is so sensitive.

Third, the interplay between patent litigation and other post-grant proceedings.

By post-grant proceedings is meant two different scenarios: opposition at the EPO and limitation (either at the EPO or locally at the INPI).

The rate is the same in both cases: approximately 19% of European patents litigated in France are/were subjected to opposition proceedings, and approximately 19% of litigated patents (both French and European ones) were subjected to limitation proceedings.

By way of comparison, the overall opposition rate is less than 4%, and the overall limitation rate is probably much, much lower. Of course it is no surprise that more important / valuable patents are more opposed than others. I often like to think in terms of the dog that did not bark, and in this respect it is probably more remarkable that as much as 81% of European patents litigated in France are granted unopposed. This is certainly related to the above remark that most patents are already fairly old by the time they are worth being litigated.

The limitation rate of 19% shows how popular this tool has proven as a defense against nullity claims or counterclaims since its introduction into French law in 2008. In fact, the proportion of limited patents goes up to 27% if we consider only appeal decisions.

On the other hand, on a validity standpoint, we have not noted a better survival rate of limited patents relative to non-limited patents in our sample.

Fourth and last, the infringement conviction rate.

Here, the magic number is 35%. That is, 35% of infringement claims are successful (which means that the patent at stake is not found invalid, and is found to be infringed).

And now a few take-away messages.

There are of course some high profile patent lawsuits in this country, for instance in the pharma field. However, most typically, patent litigation in France involves domestic SMEs and concerns mechanical engineering.

This is a sign that French patent litigation might be underrated and overlooked among a number of stakeholders, and first and foremost foreign companies.

There are many possible reasons for this.

Admittedly, many patents are invalidated by French courts, as regularly illustrated on this blog. However, this trend does not seem any worse than in other major European markets, such as the U.K., where courts are well-known to be quite strict on a validity standpoint, but also Germany, as explained in my previous post. Besides, the infringement conviction rate of 35% seems reasonably high (bearing in mind that the large number of cases which are settled before a written decision is issued are not taken into account in any statistical study).

Perhaps the main reason is thus more cultural than anything else. Multinational companies tend to eye towards the U.K., for linguistic reasons and also because of the perception that local judges are extremely skilled; and towards Germany, as it is renowned for its quick decisions, its patentee-friendly bifurcated system and its Demogorgon – I mean, the much envied and much dreaded injunction gap.

But why not also eye towards France:

  • because of the saisie-contrefaçon, which is a powerful tool in the hands of right holders to gather evidence of infringement;
  • because, overall, the likelihood of success seems to be similar here to neighboring countries;
  • because it can be relatively cheap (no expensive disclosure, expert testimony and lengthy hearings like in the U.K., no court fees like in Germany);
  • because we have a large pool of good practitioners, both attorneys at law and patent attorneys, who are fully proficient in English.

And I have not even yet begun to tell you about the food and those beautiful farmhouses in the Luberon waiting to be bought and renovated.

METHODOLOGY: the study was based on a review of all judgments on the merits issued between January 1, 2016 and July 31, 2017, both at first instance and on appeal, in which at least one issue of patent validity or patent infringement was decided upon. The sample of judgments was obtained from the Darts-ip database. They were manually analyzed by us. Interim orders as well as orders from a case management judge were excluded. Judgments from the Cour de cassation, as well as judgments concerned with other issues (computation of damages, employees’ inventions, etc.) were also excluded. The final sample contained 100 decisions, representing a total of 118 litigated patents.

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