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IP, IP Asset, Patent

The Future Of Patent Licensing In Europe

For the time being, individual countries award patents as legal instruments, protecting property rights through enforcement of that country’s court system.  Efforts to unify the European patent system continue, but the viability of this plan remains uncertain.  In this vein, competition amongst the various patent system remains pertinent. Patents attract increasing investment amounts, and that investment carries the potential to spawn future innovation, creativity and, of course, jobs.  Conversely, that investment also carries the potential to finance the economic future of other countries around the world offering a more attractive proposition.

Consider the comments of Randall Rader, Chief Judge of the Federal Circuit (America’s patent appeals court) when deciding eligibility of Classen’s immunization patents–a case having potential, far-reaching consequences for patent eligibility of software-implemented inventions.  Judge Rader, after lamenting “gamesmanship” resulting from arcane rules about patent eligibility, turned to the idea of patent competition, saying:

By creating obstacles to patent protection, the real-world impact is to frustrate innovation and drive research funding to more hospitable locations. To be direct, if one nation makes patent protection difficult, it will drive research to another, more accommodating, nation. 

Rader then recounts the tale of the European patent system, which he says “became known for subjecting [biotech] inventions to delays in the patent office, challenges in litigation, increases in cost, and uncertainties in the legal landscape.”  Consequently, Rader continues, “investors, corporations, and clinics shifted their research from Europe to the United States.”  Rader then warns that the tide can turn against the United States just as easily.

Against this backdrop, consider one of Judge Rader’s counterparts, Judge Birss of the Patents Court (part of the Chancery Division of England’s High Court of Justice).*  Birss, who also received the thankless task of adjudicating the IP rights of pornography producers earlier this year, heard the appeal of Halliburton after the oilfield services provider’s patent applications were rejected by the UK Intellectual Property Office. Just like the case Rader participated in, Halliburton’s appeal carried implications for patent eligibility of software-implemented inventions.

Halliburton’s claimed invention, in its broadest form, happened entirely “inside” a computer, detailing steps for designing, simulating, and modifying designs for drill bits, along with various “calculations.”  At no point during the recitation of Halliburton’s broadest claims were any physical goods used or procured.  In spite of this fact, Judge Birss–like Judge Rader in Classen’s case–lamented apparent gamesmanship in the drafting of the claim, saying:

This case is by no means unique as an example of a computer implemented invention in which the word “computer” is conspicuous by its absence from the patent claims. I am quite certain that one reason for this is a desire by applicants to try and play down the fact that their inventions are really based almost entirely on computer software. It fools no one and in some cases makes things more complicated than they need to be. 

Nevertheless, Birss looked beyond the mere form of the claim, and considered eligibility under the UK’s more rigid approach (compared to the United States).  UK patent law includes more specific categories of subject matter excluded from patent eligibility, including exclusion of “schemes, rules and methods for performing mental acts, playing games of doing business, and programs for computers.”  Despite providing far more specificity than the US’s exclusion of “abstract ideas,” Birss immediately recognizes a fundamental premise of patent eligibility that seems to elude many Americans:

Thus when confronted by an invention which is implemented in computer software, the mere fact that it works that way does not normally answer the question of patentability. The question is decided by considering what task it is that the program (or the programmed computer) actually performs. A computer programmed to perform a task which makes a contribution to the art which is technical in nature, is a patentable invention and may be claimed as such. Indeed in those circumstances the patentee is perfectly entitled to claim the computer program itself.
(emphasis added) (internal citations removed for clarity)

Another aspect of computer-implemented inventions permissible despite the UK exclusion include inventions improving upon computers themselves, despite the fact that the entirety of the patented process may take place within a computer program:

The task the program is performing is defined in such a way that everything is going on inside the computer. The task being carried out does not represent something specific and external to the computer and so in a sense there is nothing else going on than the running of a computer program. But when the program solves a technical problem relating to the running of computers generally, one can see that there is scope for a patent. Making computers work better is not excluded

Birss also goes through a lengthy explanation of how to apply the “mental acts” exclusion, a doctrine also of contemporary debate between Federal Circuit Judges Dyk and Rader.  Referring to both a “wide” and a “narrow” approach, Birss explains that the difference lies in interpretation of the claims themselves.  The “wide” approach “excludes methods of the type performed mentally regardless of how they are claimed. So a claim to a computer programmed to carry out a method of performing a calculation …  would also be excluded by the mental act exclusion because calculations are the kind of thing which are capable of being performed mentally.”  Meanwhile, the “narrow” construction holds that “a claim to a calculation carried out on a computer could never be caught by the mental act exclusion because the claim does not encompass carrying out the calculation mentally.”  In the American courts, Judge Dyk, in Cybersource v Retail Decisions, has adopted the “wide” approach, while Judge Rader, in Ultramercial v Hulu (and reiterated in Classen), takes the “narrow” approach, striking down a claim whose recitations could literally be met by only mental acts.

After considering the history of English cases on the subject, Judge Birss found that the balance of authority counsels in favor of the “narrow” approach.  In addition, Birss agrees that the narrow approach also makes for better policy, echoing some of the same concerns as Judge Rader:

The wide construction seems to me to be uncertain in scope and I am not aware of any good reason why the exclusion needs to be interpreted widely. On the other hand I can see a logic behind the narrow interpretation, preventing patents being granted which could be infringed by a purely mental process. Allowing for the possibility of patent infringement by thought alone seems to me to be undesirable. 

In the end, Judge Birss agreed with Halliburton, finding its applications eligible for patenting in the UK. In the process, Birss’ logic provides a framework for evaluating patent eligibility in light of the UK’s explicit exclusions.  Unfortunately for the US, given our far less precise exclusion of “abstract ideas,” a clearer and more comprehensive framework is still sorely needed, lest our future inventors and rights holders focus their efforts overseas, where they can more readily count on a fair, objective approach.

As far as the European patent court goes, Joff Wild over at the IAM Blog reports on a Polish proposal for a set of court rules that would treat patent owners fairly and equally, regardless of whether the manufacture their inventions or specialize in licensing.  The proposed Article 37a states that the Court may award the prevailing patent owner an injunction, and enforce its compliance.  Joff’s take:

So, it seems to me that there is nothing in the rules which states that you have to practise on an invention, in the way the Supreme Court set out in eBay v MercExchange, in order to obtain either a preliminary or permanent injunction. …

If that turns out to be the case, from where I am sitting for a certain kind of NPE – one, perhaps, that has acquired its patents from an operating company that does not wish to do the enforcement itself (a patent privateer, if you like) – could find the court a very effective tool. 

This could become problematic for many American inventors who lack the funding and sophistication to seek foreign patent rights.  Many inventors lack the means to commercialize their inventions alone. Instead, they rely on investment from others who recognize the value of, among other things, the patent rights represented by a properly functioning patent system.  If foreign patent systems offer a greater value proposition with less uncertainty, it is entirely conceivable to think that those same investors will concentrate their investment overseas, leaving fewer investment dollars here in the US.

* From the description of the High Court, Judge Birss’ role appears to be more closely related to US District Courts, than to our Court’s of Appeal. However, the existence of the specialized Patents Court puts Judges like Rader and Birss on relatively equal footing when it comes to their experience in intellectual property matters.

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Discussion

3 thoughts on “The Future Of Patent Licensing In Europe

  1. Very interesting post Patrick. Thanks for the update from around the world.

    Posted by dbhalling | October 17, 2011, 11:09 am
  2. Good stuff. I am persuaded that “abstract ideas” is not enough to go on. Ok – perhaps I didn’t need much persuading.

    Posted by Allison Williams Dobson | October 17, 2011, 6:41 pm

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  1. Pingback: How Competition Between Countries for Investment is Affected by Patents | Blog of Dale B. Halling, LLC - Intellectual Property & Patent Innovation, Attorney - Powered by Clvr.Tv - October 17, 2011

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