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Friday, 17 November 2017

Birss J in Accord v Research Corporation Technologies attempts to cut the red tape on the right to claim priority

The AmeriKat reaching for an earlier priority date
Oh, priority.  You very important, but often (very) dull beauty.  For patent litigators, we (and our experts) step back in time to the priority date - often the filing date of the application - to assess validity.  However, applicants can claim an earlier priority date than the date of filing.  This is called the "right of priority".  To do so, certain conditions have to be satisfied, but if you meet them you can claim an earlier priority date, with the benefit that you kick out a bunch of often unhelpful later dated prior art. So if you can maintain priority - great - but if you lose it - hold on tight.  The Patents Court has been wrestling with priority in judgments, seemingly more frequently lately (although, it may be that we are just paying more attention).  Tristan Sherliker (Bird & Bird) reports on a recent decision of Mr Justice Birss in Accord Healthcare Ltd v Research Corporation Technologies Inc [2017] EWHC 2711 on the issue.  Over to Tristan:

"Despite the formal processes behind it, IP is a pretty forgiving area of law. The English Chancery courts have existed for centuries specifically to avoid the bureaucracy and inequity found in other parts of the judicial system and, true to form today, they are not known for letting red tape get in the way of a good monopoly right. So what then of the forgotten child of patent law, the right to claim priority? A mere formality, it risks undermining the validity of an entire patent or patent family. So can we cut the red tape and make it good in equity? Finally we have an answer.

The problem

The position following Edwards v Cook [2009] FSR 27 is this: When an applicant claims priority from a patent filed by a third party they must, at the time of their patent filing, own the substantive right to make that priority claim. The red tape comes in partly because nobody except patent lawyers cares about this right, but significantly also because there’s no takesy backsies: you can’t make good on it afterwards by subsequently acquiring the rights. Either you have the substantive right at the relevant date, or you’ve lost the priority claim.

Since inventors rarely sit silently for a year after their initial filing, loss of priority claim normally brings in a wealth of new prior art leading to the patent’s invalidity. This bites most often (but not always) when an employer is claiming rights from the invention of their employee, where the employee was the original applicant. It is especially common where the priority document is a patent filing (or provisional filing) in the USA, where the practice was a baited trap for priority applicants: it used to be that only the inventors themselves could apply for patents.

It’s a quick fix to clear the problem:  it is now well understood by those who care about it that a short assignment document recording a transfer of rights is a good plan, complying with any additional national laws that apply.  Unfortunately, though, patent law is retrospective and this whole issue wasn’t really on anyone’s radar until 2010 when Edwards v Cook was confirmed on appeal. I also understand that US practice continued baiting the same trap until 2012. So bearing in mind the duration of patent protection, the issue is likely to keep popping up for another decade or more before we clear the backlog and may still continue in future.

In the balance between red tape and equity, who will win out?

Cliffhanger: Gilead

The Court of Appeal left us a cliffhanger on this point last year in Idenix v Gilead [2016] EWCA Civ 1089 (see IPKat post here) where it was alleged that a patent was invalid over its own priority document, for anticipation. The reason? That’s right – it was argued that there was a mistake when assigning the substantive priority right.

It was discussed obiter whether the assignment had to be made good in formal law, or whether a simple equitable transfer could be implied to cure the red tape. This was not immediately clear because the point arises from the Paris Convention, which may or may not permit of equity. Answering the points argued, Kitchin LJ (who sat at first instance in Edwards v Cook) gave a “provisional view” that the equity was good enough; and that the Paris Convention leaves the mechanism for transfer of title to the relevant national law. However, he stopped short of making any finding of substance on this, saying:
“nevertheless, it emerged during argument that there may be other materials and decisions which bear on this issue and to which our attention has not been drawn. Accordingly… it seems to me that it is better left to be decided in another case.”
After that cliffhanger, the next instalment is now here, and the questions can be resolved.

The resolution?

For the patent in suit in Accord Healthcare Ltd v Research Corporation Technologies Inc , there was a valid assignment of the relevant rights in 1997, the month before the claim to priority was made. On its face therefore, the rights were assigned.

Normally the right to claim priority analysis would stop there, but an interesting argument was run by the claimant, Accord. They said that the document was limited to an assignment of the bare legal right; and that the equitable right to the invention was owned by another entity – in this case, the University of Houston. The “substantive” right, Accord said, was the equitable right and not the mere legal title. The patent was therefore invalid over its own priority document, which of course disclosed the same invention.

Breaking down not one but two formalistic barriers, Birrs J both agreed and disagreed with Accord. He held that the term “substantive title” in the case law did indeed refer to the division between legal and equitable title, saying:
“When the cases refer to the applicant holding the substantive right and title to the invention, they are referring to this legal/equitable distinction.  
“In my judgment Accord is right in law that following from those principles, a person who at the relevant time and under the relevant applicable law, acquired only the bare legal title to an invention and not the equitable title, when the equitable title is held by another, does not then hold the substantive right and title to the claim to priority.” 
However, on the facts he found that the problem had been overcome: under the US laws governing the rights of a bona fide purchaser for value (35 USC §261) and taking into account the circumstances at the time, on those facts the title had passed and the priority claim was still valid.

Leaving it open for a sequel

True to type, the (Chancery) judge found a way to make things right and avoid the red tape. He was however unsatisfied with the way of things, and said as much, giving two suggestions as to how the higher courts might address the matter:
1. Institute a sui generis law for priority rights in Paris Convention countries equally, regardless of whether those states recognise a legal/equitable distinction. In this proposal, flaws in the title still could not be fixed retrospectively. However, the judge acknowledged that this suggestion does not sit happily with the equitable/legal distinctions made in the later cases following Edwards v Cook
    2. Alternatively, another suggestion was to apply the same approach and the same applicable law to the priority claim as applies to ownership of the invention and the right to the patent. In a case in which there is some doubt about the claimant’s title to the patent itself, the suggestion is that title has to be perfected by the judgment of the court – for example, ensuring that the legal owner must be joined to the proceedings (see Baxter v NPB [1998] RPC 250). For this suggestion, the judge commented that "[t]he moment the title to the patent matters is judgment. In this case the moment the priority claim matters could be said to be the judgment." It therefore seems that this suggestion may permit the patentee to repair a position after the event if to do so would be equitable, so long as done before judgment.  
    The judge offered these proposals as mere suggestions - he was clear that in coming to his decision he applied the law as already settled (albeit with some new explanation of matters not previously explicit). Yet given his dissatisfaction, perhaps things are not quite so settled yet, and we might find more interesting developments if this goes through to an appeal."

    23 comments:

    Transfer of priority = source of concern said...

    The problem whether a right of priority has been validly transferred has also crept up before the EPO.

    A look at various decisions, some of them quite recent, shows how difficult this might be at times. However one thing is clear, the transfer of priority has to be done before claiming the priority for a later filing. What is the law then applicable?

    See T 508/13, T 1201/14, T 577/11, T 205/14 and T 517/14(same parties in both), T 2462/10, T 160/13.

    T 1201/14 was commented upon in this blog:
    http://ipkitten.blogspot.de/2017/10/t-120114-epcs-substantive-requirements.html

    I cannot remember if it was here or on another blog, but it has brought about a suggestion from a well known lawyer, but I cannot find his comment quickly. He sugggested that the question of ownership of priority should be left to national courts, as for any dispute relating to the property of an application. According to this opinion, the EPO should just verify identity of the invention. If this is the case, then the right of priority should not be challenged by the EPO. The problem is: what would be the legal basis allowing the EPO checking only identity of the invention?

    This topic, although not so frequent, will keep us busy for a long time. The reason is simple: the problem may not only come up at the EPO, but in any member state of the Paris Convention in which priority from an earlier filing is claimed.

    Priority interested said...

    Why has my comment relating to recent case re entitlement of priority at the EPO not been accepted?

    Is it because I mentioned the plea of a well known specialist about the fact that the EPO should only looking whether there is identity of invention?

    I considered my comment as showing that the problem is not a specific one of British courts. No more, no less.

    Censorship is never good.

    Peter said...

    The first commenter refers to the argument brought up in the preliminary opinion of the Board (and later letter of Prof. Strauss) about to what extent the EPO should examine the formal aspects of priority. It is the appeal case in EP1591122, no written decision yet, but the patent was revoked for lack of inventive step over other documents for which the priority date was not relevant. The weblog is http://patentmyfrench.com/clarifying-priority/

    Sean said...

    Thanks for the interesting analysis of this case.

    The summary describes that in Gilead "it was alleged that a patent was invalid over its own priority application" and in the present case it was alleged that "the patent was invalid over its own priority document".

    Unless I've misunderstood, I don't think this is quite right. In both cases, it wasn't the priority document itself that would have become novelty destroying prior art. In Gilead, Gilead alleged that Idenix's patent was anticipated by Gilead's own PCT application (which only became prior art if the PCT application itself was entitled to priority). In the present case, according to the judgement (see point 3), it is a paper by the inventor that would become novelty-destroying prior art if the priority claim was not valid.

    MaxDrei said...

    Readers, please forgive, if my thought below is nonsense. I haven't read the decision or the discussion yet.

    There is a good reason why, under the EPC, issues of derivation, wrong ownership, can only be challenged by the party asserting that it is the one deprived of its rights.

    Yet in these priority disputes, it seems to be "open season" for any Tom Dick or Harry to put ownership in dispute in order to defeat a claim to benefit of priority under Paris.

    Prima facie, who else but the owner is in a position, at the end of the Paris year, to claim the benefit of somebody else's priority application. Why then put Applicant to the burden of strict proof. That seems to me overly formalistic.

    And in those rare cases where two (or more) parties think they are the rightful owner, let them slug it out against each other, while the rest of the world watches.

    Bast said...

    @MaxDrei - I would argue the reverse. If the priority application was filed in a first name, and the priority-claiming application in a second, it seems to be quite reasonable to ask the patentee to demonstrate how he owns the monopoly he claims to have the right to assert.

    The UK courts cut patentees quite a lot of slack in demonstrating that they are successors in title in equity, so it's hardly an excessively formalistic problem if there's genuine entitlement.

    Anonymous said...

    Is, or is not.

    Why limit who may ask on the notion of who the rightful recipient may be?

    The question being asked is not asked to ONLY put the item to the rightful recipient, and the legal notion of an incorrect recipient is every bit as important as the recipient being correct - especially when viewed from the perspective of the rest of the world, against whom the item may be applied against.

    Rather than "any Tom Dick or Harry," being cast as a disparaging remark on the person challenging proper ownership, should not the disparagement be aimed at the similar "any Tom Dick or Harry" that is claiming (perhaps without more) to be that rightful owner?

    In other words, the post by MaxDrei seems ill-aimed.

    Kant said...

    Max, I thjnk it may be a cultural thing. In the UK, it is generally a case of "I am who I say I am until you can show otherwise" but the more continental way is to demand proof at all times, hence the demands of the EPO to demonstrate the right of a signatory to bind the company or, here, the chain of transfer of ownership. If both the original applicant and the new applicant are happy with the situation, where is the problem?

    MaxDrei said...

    Nice to have two answers.

    When they wrote the EPC in 1973,they excluded lack of clarity (indefiniteness) under Art 84 EPC as a ground of revocation. Why that? Good reasons. Let anybody object to that and everybody will object. However spurious the grounds. Not helpful to the administration of justice. Every patent that any Patent Office ever granted is indefinite (lacks clarity) to some extent. Admit that as a ground to dispute validity and no duly issued patent is ever safe.

    For equally good reasons, the EPC shuts out disputes about ownership. Except if you happen to be the rightful owner.

    Anonymous said...

    I struggle to equate the two very different items you present MaxDrei.

    For reasons provided upstring, ownership does not, nor should it, get any type of free pass.

    Ownership is clearly NOT at the same level - in any sense - of the ambiguities that may be inherent in language and clarity.

    Quite the opposite, in fact.

    Your attempt then proves the opposite of the point that you want to stress.

    Peter said...

    @MaxDrei Last time I checked, in Italy any person can invoke the ground of invalidity that the patentee was not entitled to obtain the patent. I have no source stating it explicitly at hand, but at least the text of Article 76 of the Code does not give any indication of a restriction to only non-entiled parties. See https://www.bugnion.eu/legislazione_italia_dett.php?id=1. I am quite sure the EPC says nothing about who can invoke the ground of revocation under Article 138 EPC.

    Ex-examiner said...

    I have had entitlement raised in opposition proceedings in a different context.

    It was a case where we had received instructions at a very late stage in the opposition proceedings, so hadn't gone into its genesis. While on the face of it, all was in order, it transpired from opponent's submission that, in the intervening period (as evidenced by extracts from the company register in the priority country) the original applicant had gone bankrupt. Its assets had then been acquired by another company which had then changed its name to the same name as the original applicant. Thus, although the names were identical, they were different legal entities.

    A complicating factor was that, as the original applicant had become legally incapacitated by its bankruptcy, the EP proceedings were technically suspended with effect from the actual date of incapacity. This was automatic and not reliant on notice being given to the EPO. Prima facie, the consequence was that all proceedings on the EP application, including the opposition proceedings and its procedural deadlines, were without effect, meaning that prima facie there was still an opportunity to rectify the chain of entitlement. No decision was actually made on the entitlement point or the suspension of proceedings. The applicant decided to drop the case due to the expense.

    Mr Blobby-Obvious said...

    1. Priority is not dull.

    2. This has been on the radar of those in the know long before 2010, hence the established practice of taking assignment of US provisional application prior to claiming priority. Obviously, those not in the know made mistakes.

    3."Despite the formal processes behind it, IP is a pretty forgiving area of law" Is it? Really? I disagree. it is very unforgiving hence the high proportion of revocations of important patents.

    4. "...there was a valid assignment of the relevant rights in 1997, the month before the claim to priority was made. On its face therefore, the rights were assigned." Not quite as the issue is whether there was a valid assignment. Birss said "There is on the face of it a properly executed assignment". Not the same thing at all.

    5. "The patent was therefore invalid over its own priority document..." Someone hasn't read this case.

    6. "True to type, the (Chancery) judge found a way to make things right..." must admit it looked like Birss was looking for a way to fix things for the patentee with his comments in para 77, but in the end his decision sits very well on the facts. The question is who had the equitable right to claim priority, and that was determined to be the patentee. This isn't a patent law point.

    Mr Blobby-Obvious said...

    Max, it is a question of validity that stems from ownership, and validity affects all.

    Also, note the following, which relates to ANY person in the UK Patents Act:

    72.-(1) Subject to the following provisions of this Act, the court or the comptroller may by order revoke a patent for an invention on the application of any person (including the proprietor of the patent) on (but only on) any of the following grounds, that is to say -

    (b) that the patent was granted to a person who was not entitled to be granted that patent;

    MaxDrei said...

    To Blobby: I'm grateful you quoted PA 1978, Section 72 (1). Has S 72(2) caught your eye yet? That was the provision that I had in mind when writing above. What do you make of that, I wonder.

    At the back of my mind also was the presumption under EPC Art 60(3) that the Applicant is the one entitled to the patent. To put the burden of proof on Applicant, that it is indeed the owner of the right to claim priority under the Paris Convention from the earlier application, strikes me as unduly formalistic.

    I want that patent law commands respect from business people, politicians and opinion leaders. Without such respect, the patent system will lose whatever reputation it ever had. Every time some detail of patent law gets unduly formalistic, and a vital patent goes down "on a technicality", damage is done. As you say, the public suffers, every time a bad patent is used as blackmail, and survives a petition for its extinction. But striking down good patents on a technicality is also indirectly damaging to wider society.

    Mr Blobby-Obvious said...

    Max, I apologise. It has been a while since I had the total patent act in my head and not a section I apply day to day.

    To save face, I must repeat the issue is still one of validity which affects all.

    Rancour said...

    This would have been a fascinating case had Houston and RCT fallen out with each other and both had filed PCT's claiming the same priority. Birss would presumably then have had to rule that an equitable right overrules a legal one, which presumably would have meant UK law on priority would differ from EPO law.

    MaxDrei said...

    Rancour, Blobby, imagines each of the parties involved during the Paris year becoming sufficiently sceptical of the other that each file their own PCT application claiming priority from the earlier filing.

    Not hard to imagine. I have seen it happen, several times in recent years, in real cases on my real desk.

    It's different, where a third party is simply trying to defeat priority and so puts in issue the right to claim priority. None of us likes fishing expeditions, do we?

    Mr Blobby-Obvious said...

    Hi Max. No, I don't like fishing expeditions and no court/patent office should allow them. I don't now what raised this case above the level of a fishing expedition, but maybe evidence cropped up during the discovery process. I can't see the issue succeeding at the EPO for example.

    The issue raised over the falling out and both parties attempting to claim priority is certainly a realistic possibility and certainly an interesting problem. Same rules apply to both parties filing independent applications irrespective of priority. Such issues are likely responsible for Birss recommending new rules.

    I am interested in understanding the position in Europe on this issue where this so-called beneficial right apparently does not exist. If legal title rests with one party, but the are contractually obliged to assign the legal title to another party, are there cases where priority was lost? Usually this issue arises with US first filings so the position is different, but presumably there must be some case law?

    Kant said...

    The position of the EPO Boards seems to be, however, that if the right to priority is challenged (due to the applicants being different), it is up to the proprietor to demonstrate that they acquired the right to priority in advance of the second filing.

    Kant said...

    The EP1591122 case referred to by Peter above is the BoA matter T0239/16 referred to by Tobias Bremi in his talk at the EPO yesterday. Shame that it looks like no decision relating to the competence of the EPO to determine the validity of an assignment of a priority right will be made.

    maxdrei said...

    Mr Blobby asks me if there is national caselaw in Germany. I don't know.

    But bear in mind how different civil law is to English law. With no doctrine of Binding Precedent, civil law courts are free to decide each case on its merits. Legal certainty evolves in Darwinian way, with the best legal logic eventually dominating. Now, at the EPO, with topics like novelty and obviousness, the fittest legal logic emerges relatively speedily, given the sheer number of cases adjudicated each year. But with fights over entitlement to the priority right, it might take considerably longer, if only a handful of cases are litigated every decade.

    Mr Blobby-Obvious said...

    Some more thoughts:

    1. Some of these UK cases must have been thought in other European countries too? Wouldn't it make sense to a party challenging validity on a lack of entitlement to priority to take their case anywhere other than the UK?

    2. Paris Convention refers to "successor in title", not person entitled to equitable benefit. Have our judges (UK) been getting it completely wrong? Title means 'legal title'?

    3. PC also refers to validity of a 'filing'. Does this means the only time the assessment is to be made is at the time of filing? Therefore, national law applies to national filing, PCT applies to PCT's, and EPC to EP's? US and UK free to apply equitable benefit to nationals, but strict legal-title transfer compliance applies everywhere else.

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