Experience in Patent Litigation in the New Member States

1. Experience in Patent Litigation in the New Member States Dr. Lukas Pfister Merck Sharp & Dohme Budapest, September 10th, 2005

2. “.. 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

3. 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

4. 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

5. Economic Development:The Human Factor Counts Most Human Capital is the single most important factor for economic growth: Physical Capital: 16% Natural Resources: 20% HumanCapital 64% Source: World Bank study quoted by Hanzek, M. (ed.) Human Development Report Slovenia 1999, Institute of Macroeconomic Analysis and Development/UNDP

6. 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

7. International Patent Applications by Origin

8. 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

9. 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 the U.S.

10. 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

11. 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

12. Singapore: Growth of Pharmaceutical Products Manufacturing

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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?

19. 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 

20. 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

21. Directive 2004/48 on the enforcement of intellectual property rights • Contents: • Scope (Art 2) • General obligation (Art 3) • Entitlement (Art 4) • Presumption of authorship & ownership (Art 5) • Evidence (Art 6) • Measures for preserving evidence (Art 7) • Right of information (Art 8) • Provisional and interlocutary measures (Art 9) • Corrective measures (Art 10) • Injunctions (Art 11) • Alternative measures (Art 12) • Damages (Art 13 • Legal Costs (Art 14) • Publication of judicial decisions (Art 15) • Sanctions by member states (Art 16) • Codes of conduct (Art 17) • Assessment (Art 18) • Exchange of information and correspondence (Art 19) • Implementation (Art 20)

22. 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

23. 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

24. Counterfeit Statistics 2004 Source:http://europa.eu.int/comm/taxation_customs/customs/customs_controls/counterfeit_piracy/statistics/index_en.htm

25. Counterfeits of Medicines source: FDA

26. 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

27. 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

28. 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 comparableto 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

29. Medals 2003 & 2004 www.brussels-eureka.be

30. Medals 2004

31. 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

32. 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

33. EU 7th RTD Framework Programme

35. Turning brain into a competitive advantage • 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

36. 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 Innovation will occur – but where?

37. 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