Experience in Patent Litigation in the New Member States

Dr. Lukas PfisterMerck Sharp & Dohme

Budapest, September 10th, 2005

“.. if we succeed in developing the potential of our citizens by fostering a creative spirit of adventure, individuals and nations will become rich, even if they are without much capital, labor or natural resources”.

Kim Dae-jung Former President of the Republic of Korea

Outline

The core of IP protection is enforcement Europe‘s competitors Harmonization and Fragmentation in Europe Enforcement Experience in Central and Eastern

Europe Actors in Cooperation Promotion, accessibility and commericialization

of IP protection

Without enforcement - no intellectual property

Directive 2004/48/EC:

„... without effective means of enforcing intellectual property rights, innovation and creativity are discouraged and investment diminished.“

Without property: no value created, no investment, no venture capital, no trade

Enforcement authorities play a key role

Economic Development:The Human Factor Counts Most

Human Capital is the single most important factor for economic growth:

Source: World Bank study quoted by Hanzek, M. (ed.) Human Development Report Slovenia 1999, Institute of Macroeconomic Analysis and Development/UNDP

16%

20%

64%Human Capital

Physical Capital: 16%

Natural Resources: 20%

64%

Economic contribution if IP enforced

scientific research scattered across territories, institutions

economic value numerous ways to commercialize inventions

fund raising from venture capitalist to expand research royalties from licensees milestone payments from partners in joint research trade of inventions investment in neglected inventions

creates jobs, creates business for suppliers, generates income to individuals and tresury

International Patent Applications by Origin

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

EPC States USA Japan Germany Rep. of Korea China All others

Global Research & Development

80% confined to US, Japan and Europe EU is currently losing R&D investment to

other countries changing in favor to China, India & Brazil EU: 7th Framework Program for Research &

Technological Development to attract R&D investment

Competing with the U.S.

EU Strengths great diversity of

societies and cultures well-educated workforce lower employment costs

for researchers leading-edge technology

capabilities world class universities

and research institutes

US Strengths better in commercializing

its basic research early adoption of new

technologies more fluid supply of

venture capital long tradition and culture

of collaboration between universities and business

Competing with Japan:

2002 IP Policy Outline: “Nation built on Intellectual Property”

Growing concern over decline in industrial competitiveness Creation Strategy Protection Strategy Exploitation Strategy Enhancement of Human Foundation to support strategies

Competing with Innovative Singapore

Strategy to attract foreign R&D activities: Agency of Science, Technology & Research

to put in place policies, resources and research and education architecture to build indigenous biomedical science R&D competencies

More than $500 million invested in new research centers with another $1 billion in funding committed through 2006

Economic Development Board promotes investment in early stage dedicated to

biotechnology firms

Singapore: Growth of Pharmaceutical Products Manufacturing

Year Output $mm

No. workers

Value Added $mm

Fixed Asset $mm

Val.Add/ Labor $’000

Val.Add/ Output %

Capital/

Labor $’000

1990 1,020.8 1,664 809.1 Na 486.2 79.3 Na

1995 1,339.0 1,855 1,083.5 583.7 584.1 80.9 314.66

2000 4,839.1 1,928 2,998.4 858.6 1,555.2 62.0 445.31

2001 5,134.2 2,375 2,796.8 2,085.3 1,177.6 54.5 878.01

Average Per Annum Growth Rate (%)

1990-2001 15.8 3.3 11.9 23.61 8.4 18.71

Percentage of Total Manufacturing

1990 1.4 0.5 3.7 Na

2001 3.7 0.7 8.8 4.3

Patent Fragmentation in the Community

National patents EPO patents, but no Community Patent elements of harmonization

Supplementary Protection Certificates Pediatric Indications

National court systems Mostly national procedural rules

IP Harmonization in the Community

Harmonization of enforcement TRIPS – member states and Community bound

Art. 41 – effective enforcement Art. 34 – reversal of the burden of proof Art. 50 – preliminary injunctions

Directive 2004/48/EC On the Enforcement of IPR Council Regulations 1383/2003 and 1891/2004 on

customs measures against goods suspected of infringing certain intellectual property rights counterfeits

Legislative experience: Lowest Common Denominator

Association Agreements: IP protection level similar to the one in the EU by 1997-99

Reality Selective interpretation of “similar level” of IP protection Bolar provision in most CEE patent laws Late introduction of SPC Regulatory data protection: six years and linked to patent TRIPS 39.3 not recognized as mandating regulatory data

protection

Enforcement experience in CEE – institutional weakness

Lack of courts or court units specialized in IP underdeveloped IP capacity in the courts little technical expertise allocated to the courts / scarcity

of expert witness Independence of courts?

refusal to accept foreign experts where most nationals can be linked to one party

low salaries low respect for judiciary young tradition of spirit of court independence from

administration

Enforcement experience in CEE – institutional weakness

Impartiality of courts?

Nullity counterclaim against later process patent of defendant not dealt with by court

Lack of effective deterrents against infringement

Insufficient publications of judgments and their motivation

Medicines: administered prices of patented products undermine market value of patents

Enforcement experience in CEE – weak enforcement practice

Reversal of the Burden of Proof denial on the grounds of “competition of patents” theory

Preliminary Injunctions difficult to obtain difficult to obtain – particularly for preventing infringement official information difficult to obtain before launch of infringing

goods taking defendant‘s interest into account beyond TRIPS 50 showing of irreparable harm even where not ex parte prohibitive amounts of bonds – particularly for SMEs how to enforce preliminary injunctions? – Court bailiffs?

Enforcement experience in CEE – weak enforcement practice

Statute of limitations reducing enforcement possibilities

3 years from first infringement of which aware 3 months for filing for an injunction

Appeals inadequate deadline of as little as 8 days from judgment

Extraordinarily slow proceedings unlimited possibilities to make submissions no resolution until patent expiration 

Why Reluctance to IP Protection in CEE?

Tradition of weak protection of property in CEE good business with lack of IP

Resistance to change survival of pre-existing alliances distortion caused by conflict of interest not eliminated

IP not perceived as opportunity lack of positive experience with IP

Tradition of low economic freedom low tradition of rewarding based on merits low tradition of valuing human capital

Directive 2004/48 on the enforcement of intellectual property rights Contents:

1. Scope (Art 2)2. General obligation (Art 3)3. Entitlement (Art 4)4. Presumption of authorship & ownership (Art 5)5. Evidence (Art 6)6. Measures for preserving evidence (Art 7)7. Right of information (Art 8)8. Provisional and interlocutary measures (Art 9)9. Corrective measures (Art 10)10. Injunctions (Art 11)11. Alternative measures (Art 12)12. Damages (Art 1313. Legal Costs (Art 14)14. Publication of judicial decisions (Art 15)15. Sanctions by member states (Art 16)16. Codes of conduct (Art 17)17. Assessment (Art 18)18. Exchange of information and correspondence (Art 19)19. Implementation (Art 20)

Enforcement Directive (2004/48/EC)

Codification of common EU15 standards

Art. 3 – enforcement measures

not unnecessarily complicated not unnecessarily costly no unreasonable time-limits or unwarranted delays effective, proportionate and dissuasive

Enforcement Directive (2004/48/EC)

Art. 9 – interlocutory injunctions

to prevent any imminent infringement recurring penalties for continued infringement preventative seizure of goods suspected of infringing evidence = the judge‘s „sufficient degree of certainty“

that

applicant is the rightholder applicant‘s right is being infringed

Counterfeit Statistics 2004

Source:http://europa.eu.int/comm/taxation_customs/customs/customs_controls/counterfeit_piracy/statistics/index_en.htm

Counterfeits of Medicines

source: FDA

The costs Europeans bear

Product piracy is responsible for 70.000 working places less each year Damage to the German economy alone: € 20 – 25 bn

each year € 500 bn yearly turnover in fakes (10% of world trade)

Role of Customs Authorities: fight against counterfeiting performing the best possible controls and goods help prevent consumption of unsafe products

Source: Wirtschafts Woche, Nr. 27, June 30.2005

Council Regulation 1383/2003

Customs measures improve enforcement at border against

import, export, re-export of goods infringing certain IPR detention of products suspected of infringement Art. 11: simplified procedure under national law

good abandoned for destruction no need to determine infringement consent from right holder, at right-holder‘s expense

New EU Members Have What It Takes

‘Remarkable scientific potential… especially in the CEEC is not properly mapped’ (2002 Study by ALLEA)

Most of the CEE countries have skill levels comparable to those of countries at the cutting edge of technological innovation (UN-Human Development Report 2001)

Sources: Report presented to the ALLEA General Assembly, March 13-15, 2002 (ALLEA: the Association of All European Academies); UN Human Development Report 2001, Annex 2.1

Medals 2003 & 2004

www.brussels-eureka.be

Medals 2004

Effective IP Enforcement through Cooperation Effective IP enforcement requires

sophisticated interaction between actors Actors

cooperation between legal community, academia and scientists and creators

patent offices to promote IP and facilitate usage venture capitalist, investors and scientists, creators of IP courts, publication and discussion of reasoning enforcement authorities – prosecutors, police, customs

authorities

European Patent Officewww.epo.org

Free access - available in all European languages Events, Seminars European Patent Documents Journal, Bulletin, Databases & News, Events PatLib (Patent Library) Network

301 centres in Europe patent info & related issues (trade marks, design) practical assistance annual events

EU 7th RTD Framework Programme

foster academic infrastructure for basic research ensure proper funding (3% of GDP) ensure maximum exchange of information

ensure that researchers seize IP opportunities legal and business advice - create “investable” property

capitalize on competitive research honor best proposals and promising projects

help attract venture capital make significant innovation in processes, products and

services understood and known help evaluate IP and negotiate investments

endorse harmonized IP protection levels unwaveringly

Turning brain into a competitive advantage

Innovation will occur – but where?

Weak IP enforcement contributes to:

brain drain creation of innovation

elsewhere import of innovative

products delayed access to new

technology potential health risks

Strong IP enforcement contributes to:

attract creators of brain products

broad variety of inward investment

positive contribution to trade balance

early access to technology access to pioneers and

independence

European Research and Competitiveness

“Curiosity and creativity are in our genes. These form the basis of research. And research is the key to change, to innovation.”

Janez Potočnik, European Commissioner for Science and Research