OPINION
Yesterday will go down in history as the day on which the High Court of Justice for England & Wales (EWHC) and the courts above it lost the largest part of the relevance they used to have in the global patent litigation arena. It took only two orders authored by German judges, both of which we were first to analyze and one of which we were even first to make public:
- The Unified Patent Court’s (UPC) first-ever UK injunction in Fujifilm v. Kodak.
- The Landgericht München I’s (Munich I Regional Court) FRAND guidance in ZTE v. Samsung, the most important part of which will now dissuade implementers from even trying to obtain an interim license declaration in the UK.
The future for UK patent litigators is to practice in the UPC, sometimes just in a supporting role when a complaint seeks UK remedies (which is now going to be part and parcel of UPC actions) and the parties discuss UK statutory law with the UPC, which grew almost 30% year-on-year in the first calendar half-year.
The future for UK patent judges? Trademarks and copyrights.
Seriously, why would anyone still sue over patents in the UK after those two court orders? Why go to such a costly jurisdiction, and why wait so long? Well, it’s not like there’s no reason left, but the market potential is very limited now:
- You can’t enforce national UK patents in the UPC (though you could in the national courts of EU member states if BSH applies).
- There is more flexibility in the UK for contingency fee arrangements.
- You may not want to put all eggs in one basket. If you have an EP that is valid in, say, Germany, the UK and France, and you need leverage in only one market but you are unsure of how strong your case is, then maybe you file two or three separate national cases.
- Some defendants may be susceptible only to UK litigation for lack of a suitable UPCland-based anchor defendant within their corporate groups. But it’s rather doubtful that such small players are even worth suing.
- You may have obtained favorable UK decisions over a given patent and consider it safer to “play it again” than to hope for a new forum adopting the same stance.
- You want to bully the defendant by driving up litigation costs.
For those reasons and possibly others, UK patent litigation won’t die completely, but new filings will slow down to a trickle fairly soon. And pressure on UK patent litigation firms to accept full-contingency arrangements will foreseeably rise as clients will be ever less prepared to pay sky-high fees when the alternative is to just include the UK in a UPC action.
The visionaries in the UK patent litigation community who, undeterred by Brexit, went all in on the UPC were right. Please rest assured that we will be happy to talk about more UPC success stories of UK firms over time, as we know and truly respect a number of them. Only because it’s the most recent development of this kind, we’d like to mention Powell Gilbert’s expansion to Germany. “PG” set up an Irish office to practice in the UPC, and now they have Andreas Kramer in Dusseldorf, whom many (myself included) regard as very competent. It’s a safe guess that there’ll be more of that, though some are now way ahead in the UPC game and others will scramble to catch up.
For UK patent judges, the UPC is not an option unless they go back to private practice, which would be unusual, in Europe even more so than in the U.S., but can work.
I wish the UK patent judiciary had made some smarter moves in recent years. In light of all that came out yesterday, it’s clear that Birss J (as he then was), Kitchin LJ (as he then was) and Arnold LJ (as he still is) went in precisely the wrong direction on SEPs:
- They mistakenly thought that the right strategy for the UK — sure, they’ll deny that they had an agenda other than resolving disputes, but it was all too obvious that they were acting like activists and lobbyists — was to become the global FRAND forum. In the first wave with Unwired (a terrible decision in every respect; the UKSC ruling did not even correctly describe the procedural history), to get SEP holders to sue in the UK. In the second wave, to attract implementers.
- Arnold LJ also made the mistake to believe that the European Telecommunications Standards Institute (ETSI) is in any way responsible for the fact that SEP holders sue and implementers don’t always take a license without being sued. Maybe he should have gone to Sophia Antipolis, met with ETSI, and discussed his (unworkable) ideas with them. Maybe he’d have learned that it’s simply not ETSI’s job to set FRAND rates.
- In retrospect, the opposite of judicial imperialism would have served the UK patent litigation system far better. But it’s not just about wising after the event. To me it was always clear, and it’s actually as clear as straightforward cases in game theory.
- The UK courts could have taken the very opposite stance and vehemently opposed any interference with UK patent enforcement. They should have done the equivalent of what the smart judges in Munich, first Judge Dr. Hubertus Schacht (as Acting Presiding Judge at the time), then Presiding Judge Konrad Retzer (of the Munich appeals court) and finally Presiding Judge Dr. Matthias Zigann (with his pre-emptive AASI doctrine) did: to protect their turf.
- A principled approach would have been to say: if you use your patents to force someone through injunctions in another country to grant or take a license involving UK patents, you’ll regret it. As a result, any company susceptible to UK sanctions would have had to leave out the UK from any global SEP licensing demands (whether as a SEP holder or as an implementer) or rate-setting proceedings aiming at a forcible license.
- The judges wouldn’t have had to do it sua sponte. They made a lot of effort defending crazy stuff like Unwired (case in point, I listened to Lord Kitchin in 2019 when he came to Munich for no other purpose than advocating Unwired), and it would have been much easier to encourage parties (such as through webinar presentations) to go to the UK to combat extraterritorial overreach. And if that had been the law of the land in the UK, it would even apply to BSH now.
- From a game theory point of view, there are strategies that work out unilaterally no matter what the other party does, and there are strategies that may work out for a limited period of time, but are doomed to fail once the other party adjusts. Turf protection works unilaterally, provided that you act consistently. Imperialism only works until someone else thwarts it.
Turf protection would also have been a much more logical strategy post-Brexit. The UK isn’t powerful enough to make imperialism work. There’s this old Spanish proverb according to which the pitcher goes to the well until it breaks (“tanto va el cántaro a la fuente que al final se rompe”). The interim license pitcher has been smashed.
I’d like the UK to do well. In 2005-2007 I had several good meetings with UK Independence Party (UKIP) politicians and aides in the Europan Parliament. They supported me on patent as well as sports policy, but we talked about a lot of other topics, sometimes using Nigel Farage’s spacious office in Brussels for a meeting room. One of the most treasured emails I still have in my Gmail archive, and which I’ve proudly shown to a few people, is from 2007. It came from Nigel’s official “EuroParl” account and was authored by one of his aides, calling me a “brother”.
I agreed with UKIP that the EU was fundamentally flawed and that the UK could do better on its own (just that the opportunity has since been wasted by multiple governments, with the current one appearing more reasonable than its predecessors in some areas but totally misguided in others). Even though my UKIP buddies denied it, there was also going to be a downside. Not being able to join the UPC is an example.