It is always about the money, isn’t it?
No, not life. But patent litigation? Maybe so.
Today’s lawsuit pits an optician businessman – and inventor – against the major French-based ophthalmic optics group, Essilor.
This inventor filed a French patent application concerning a nose pad invention in April 2013. On January 1, 2014, he assigned his invention to Essilor International. I should add that he was independent from Essilor, so we are not talking about an employee’s invention here.
The litigation between them later arose because the inventor was dissatisfied with the money he made from the assignment.
We thus need to look at the consideration provided in the assignment for the transfer of rights.
Based on the excerpts mentioned in the judgment, a lump sum of 400,000 euros was provided. In addition, a variable price was set, over a period of time of 19 years, according to a sophisticated formula taking into account the number of countries in which patent applications would be filed and patents would be granted, as well as the number of devices incorporating the invention which would be sold.
As far as I understand, only the lump sum was paid. In 2016, the assignor claimed additional money corresponding to the variable part of the deal. Essilor replied that there were difficulties in working the invention, and that prosecution of the patent applications on the invention was still ongoing.
In January 2017, settlement discussions were initiated, in which Essilor offered 85,700 euros as a complementary payment – to no avail. In May 2018, the inventor filed a complaint with the Paris Tribunal de grande instance (TGI), alleged a breach of contract and claimed damages.
The inventor provided several estimates for these damages. His first estimate amounted to more than 3 million euros for the period of 2015-2017, and then more than 2.7 million euros per year from 2018 to 2034. His second, auxiliary estimate was 4 million euros in total. The third, less preferred estimate was 600,000 euros in total.
Essilor fought back and requested that the action be dismissed. They also provided their own calculation for the minimal amounts to be due, as an auxiliary argument, namely 16,666 euros from year 2 to year 10 and 3,333 euros from year 11 to year 20. This corresponds to the amounts due in consideration of the current state of the patent portfolio, and does not take into account any sale.
Turning now to the judges’ decision, the first interesting point relates to the issue of whether the negotiations between the parties were loyal or not.
The inventor claimed that he was not properly assisted during the negotiations, which were uneven and led him to agree to a clause on the variable part of the consideration which was unfavorable to him.
The court looked at various email exchanges between the inventor and Essilor before the agreement was executed and could not find any evidence of unfair or disloyal negotiations. The court made the following comments:
It is thus the content of an oral exchange in a time frame very close to the execution of the agreement which led to the adoption of the proportion of granted and non-refused patents as the adjusting parameter for the “provisional amount” or minimal amount, in the drafting of the agreement. But it cannot be deduced that this criterion was never previously discussed […]. Contrary to the defendant, [the inventor] provides little information on the exchanges prior to the execution of the agreement, which, based on their contents, do not reflect the alleged weakness of the plaintiff but at best his desire to rapidly achieve the execution of the assignment agreement.
[…] Even if it is surprising that the provision relating to the variable part of the price, which is so important […], was significantly modified without any written proposal before the final version, this circumstance is not sufficient to qualify the discussions leading to the execution of the assignment as dishonest. The correspondence filed as evidence […] actually proves the very active part taken by the claimant in the different steps of the negotiation, the stakes of which he always clearly understood.
Next, the inventor blamed Essilor for filing a PCT application based on his first French application.
Indeed, using the PCT route instead of direct national filings results in a delay in the grant proceedings. I would add that this is actually one of the main reasons why applicants file via the PCT in the first place. But in this case, any delay in the grant proceedings leads to less money payable to the inventor – in view of the definition of the variable part of the price.
The court noted that the agreement does not explicitly mention that the patent filings abroad should be done through the PCT route. Nor does it exclude the PCT route. Therefore, the court had to determine the common will of the parties. The court first noted that, according to another clause of the agreement, the assignor explicitly represented that he had not filed any direct or PCT application. The fact that a distinction between PCT and non-PCT was made in this clause (unrelated to future filings), was interpreted by the judges as a pointer to the fact that a future PCT filing should have been explicitly mentioned, in order for it to be allowed.
As a main reason and as a conclusion, the court then held that:
In view of the importance of the patent grant timeline for the general object of the contract, clause 5.2 must be interpreted, despite its lack of precision in this respect, as not allowing Essilor to file an international application. This choice was thus made in violation of the provisions of the [agreement].
So that’s a first rebuke for the assignee.
Then came a second one, relating to the absence of exploitation of the invention.
The court first held that, when the assignment price comprises a royalty which depends on the exploitation of the invention by the assignee, this implies a duty for the assignee to exploit the invention; otherwise the clause would be wholly one-sided.
This obligation concerns the means implemented by the assignee, and not the outcome. In other words the assignee does not have to succeed in implementing the invention, but they have to try. And the assignee has the burden of showing that they have used all appropriate means for exploiting the invention.
In this respect, Essilor referred to two messages evidencing some difficulties in the development of the nose pads of the invention.
The court commented as follows:
These two sole exhibits relating to a time span of almost two years cannot possibly show that there is a technical impossibility of exploiting the invention. They merely reveal that each version at stake turned out to raise different development issues, and that in 2016 only the “tube” version was deemed as being able to be made and marketed.
So, that was held as another fault.
Finally, what is generally the stodgiest part of a judgment (this case being no exception): the assessment of damages.
The court started by holding that the damages should compensate for the loss of opportunity for the inventor to get royalties. Then, they took note of the objections raised by the various patent offices and the amendments made in response which, they implied, lowered the prospects of exploitation of the invention.
The court also took into account:
- the initial estimate of the annual royalty of 100,000 euros which had been made by Essilor during the negotiation phase;
- the defects of one of the versions of the device which led to dropping production launch;
- the fact that the inventor subsequently filed another patent application on a nose pad.
All in all, the court discarded both the claimant’s and the defendant’s estimates, and came up with a global figure of 300,000 euros of damages compensating for the inventor’s loss of opportunity.
There is a very French expression for this approach: “à la louche“, literally “with a ladle“. It means a very rough estimate, close to guesswork. And, à la louche it is in this case, I think.
On the other hand, we cannot really blame the court for this. First, the parties came up with hugely discrepant figures, as is not unusual. Second, loss of opportunity is all about what could have been in an alternate universe, which leaves a lot of room for imagination. Third, the court was not assisted by an expert and had only the partial evidence provided by the parties at hand.
I can’t help but wondering: the parties will continue to be bound by the agreement for many years to come. So, would a settlement not be still the best option for all of those involved?
CASE REFERENCE: Tribunal de grande instance de Paris, 3ème chambre 3ème section, May 25, 2018, Jean-Luc B. v. SA Essilor International, RG No. 17/06753.