02 September 2009

Will the ACIP proposals really speed up patent enforcement?

ACIP (Advisory Council on Intellectual Property) has just released an Interim Report on "Post-Grant Enforcement Strategies". The 65 page document is available here.

As most of my readers will know, enforcing a patent is very expensive. There are a number of reasons for this that are canvassed in the report. In my experience, there are four main reasons:

1. Professional Charges

Hourly rates for legal professionals engaged in a court case are generally over $400. That may be reasonable depending on the actual tasks performed. But many professionals charge that rate for time spent attending to tasks more suited to paralegals. Firms that set billing targets encourage this sort of behaviour.

Patent cases are complex and time-consuming. But professionals need to be mindful of the danger of wasting time by pursuing and charging for ill thought-out options.

Unfortunately, there's a mindset amongst many professionals that if a client has the money to litigate, that client shouldn't worry too much about receiving invoices. This attitude feeds the perception that litigation is expensive.

2. Delay

I realise that there are often good reasons for delay, particularly in complex matters. For example, many patent cases require witnesses representative of the nominal skilled person as at a particular date. Where the effective date of the patent is many years ago, such a person can be difficult to find.

But long delays result in the parties having to have more correspondence and meetings to make sure that they all have a good understanding of the matter. Unfortunately, there is no way around this. Patent cases are generally just too complex for parties to maintain an understanding even after a few months' interruption. All that extra time costs money.

3. The requirement that three professionals are usually required to represent each party

These professionals would include a barrister who has the right of appearance in the Federal Court, the solicitor who runs the case and the patent attorney who provides most of the substantive legal advice. The problem with this arrangement is not so much that more than one party is required by law, but rather that the nature of patent cases requires three parties.

Patent cases usually require three levels of expertise. These include the ability to present oral argument and to have a good understanding of the various rules of court. The barrister and solicitor together should be able to deliver. An experienced patent attorney should have the necessary understanding of patent law.

4. Financial leverage

A principal of mine once told me that initiating legal action is like grabbing hold of a tiger’s tail. You can win if you stay the distance, but if you let go, the tiger is likely to turn around and eat you. Sadly, litigants often have to withdraw from litigation because of a shortage of funds. As a result, cases are often settled irrespective of the merits. This means that the system does favour those litigants with financial resources.

The ACIP Paper

The paper lists 11 proposals but I won’t discuss them all. However, a number of them involve the establishment of an IP dispute resolution centre that I will consider briefly.

Broadly, it is proposed that IP Australia establishes an IP dispute resolution centre along the lines of WIPO’s Arbitration and Mediation Center, which in the first instance focuses on patent disputes. Funding for the centre should be on a “user pays” basis. The centre will be able to provide a validity and infringement service, a register of independent experts for alternative dispute resolution by way of expert appraisals, mediation or a patent tribunal. Another proposal is that the centre provides support services for alternative dispute resolution in the form of accommodation, training and guidelines.

It is important to bear in mind that a patent is a proprietary right. It follows that revocation of a patent or narrowing patent rights effectively divests ownership. This is no mean action. I’m not sure that it’s appropriate for any non-judicial body to have such authority. In any event, any decision by a non-judicial body is usually readily appealable.

Following on from that, it is important to distinguish revocation of a patent from an opposition proceeding. An opposition proceeding is run to determine whether or not an applicant should be granted a patent. A revocation is the removal of ownership. It is appropriate for the former to be handled by IP Australia. However, in my experience, oppositions can be interminably slow and quite expensive, which doesn’t bode well for a dispute resolution centre.

Clearly, the centre will really only be effective if the parties agree to abide by its ruling. One must then ask the question that if that’s the case, would the parties not have settled the matter anyway, on the opinion of their respective counsels? I cannot see how such a centre will prevent a litigant who is not prepared to settle from simply appealing the matter into the court system anyway.

So in my view, adding such a layer has the distinct danger of increasing the complexity of patent disputes. Complexity means expense and delay.

Some of the proposals relate to raising the level of awareness of IP amongst the public. This is commendable. I’ve come to realise that while it is improving, there is generally a low level of public understanding of IP. However, it’s not clear how that would address the reasons for the high costs I’ve identified.

The solution

Our Patents Act is poorly drafted – to put it bluntly.

Many litigants are forced into the court system because the Act simply does not provide sufficient guidance. For example, in my post of 13 July 2009, I commented on the interpretation of “effective filing date” for divisional applications. I’m not privy to what the litigants paid, but I’m reasonably sure that it was significant. All that expense could have been saved if the Act had been clearer.

Another simple example is the determination of novelty. It is necessary to consider no less than two sections and one definition to understand how we decide whether or not an invention is novel.

Cases are won or lost depending on the interpretation of the Patents Act. It stands to reason that cleaning it up would save time and money for litigants.

Speed things up

Delay is a major factor in creating expense. While I am not intimately involved with the court system, I can clearly see that some work is required to get things moving along.

Perhaps stricter cost penalties should be considered for parties who consistently require extensions. It’s not uncommon for busy practitioners to be heard explaining that a missed deadline is no problem because they’ll just get an extension.

Consistent judgements

Litigants are often forced into the court system because of inconsistent precedents. Unfortunately, there are only a handful of judges that can be considered patent experts. Judges that are tasked with hearing matters have a duty to ensure that they draw on the expertise of others that have developed a reputation as specialists in this area.

Professional Fees

Litigants need to ensure that they understand how their money is being spent. Professionals can help by ensuring that cases are run efficiently and tasks are allocated to the appropriate personnel at the appropriate rate. Firms could go a long way to help by looking at alternatives to blindly setting billing targets.

Conclusion

There is no reason to create even more bureaucracy. The goal should be to reduce bureaucracy by cleaning up the Act, getting consistent judgements and making a concerted effort to speed things up. Unfortunately, patent law is complex. That creates expense and delay. But we practitioners should also consider ways in which we can save our clients money by becoming more efficient and charging appropriately.

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