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Response to the Patent Office's Invitation for Comments on its Consultation Paper on the Proposed Patents Act (Amendment) Bill John Lambert 13 Jan 2003 1. Executive Summary
This paper introduces the Chartered Institute of Arbitrators ("the
CIArb") and mentions its collaboration with the World Intellectual
Property Organization ("WIPO") and the Patents County
Court. It describes arbitration and alternative dispute resolution
("ADR") procedures. It indicates how those procedures
may help to resolve intellectual property disputes. It emphasizes
that there are policy interests in patents that sometimes make arbitration
unsuitable for resolving such disputes. It explores the proposals
in outline. The paper concludes that the proposed amendments to
the Patents Act 1977 appear to give effect to the changes necessitated
by revision of the European Patent Convention ("EPC").
It welcomes the proposals for related changes as well as provisions
for modernizing the Act. The CIArb supports proposals to change
some of the provisions relating to employees' compensation and the
removal of the need for consent to refer infringement disputes to
the Comptroller-General of Patents, Designs and Trade Marks ("the
comptroller"). However, it sees no grounds for not increasing
her powers. The CIArb opposes any substantial change to s.70 believing
that this remedy is more necessary than ever with the development
of e-commerce and other types of distance selling. In supporting
removal of references to the Community Patent Convention ("CPC")
from the Act, the paper suggests that the impact of the proposed
Community patent regulation be considered. 2. The Institute
The CIArb is a registered charity with over 10,000 members that
promotes and facilitates the resolution of disputes by arbitration
and ADR. It provides training in arbitration, mediation and other
types of ADR. It maintains panels of arbitrators, mediators and
neutrals. It operates a number of commercial and consumer dispute
resolution services in this country and around the world. The CIArb
has taken an interest in intellectual property for several years.
It worked closely with the WIPO when that organization set up its
Arbitration and Mediation Centre in 1994. It also collaborated with
His Honour Judge Ford in establishing an arbitration and mediation
service for the Patents County Court in 1996 though, unfortunately,
that service never got off the ground. 3. Arbitration
Arbitration is a procedure by which an independent and neutral tribunal
known as an arbitrator is chosen by the parties or appointed by
a process to which they subscribe to hear and consider the merits
of a dispute and make a decision known as an award. Arbitration
is well known to the law and governed by statute. The principal
legislation in England and Wales is the Arbitration Act 1996. That
statute is founded on the principles that:
"(a) the object of arbitration is to obtain the fair resolution
of disputes by an impartial tribunal without unnecessary delay or
expense;
(b) the parties should be free to agree how their disputes are resolved,
subject only to such safeguards as are necessary in the public interest;
(c) in matters governed by [that legislation] the court should not
intervene except as provided by [such legislation]. Arbitration is similar to litigation in that it involves adjudication.
Arbitrators often apply much the same procedure as the courts. Judges
are sometimes appointed as arbitrators. Arbitration can be at least
as expensive as litigation and is sometimes even more expensive
because the parties have to pay for the venue and arbitrator fee
as well as the costs of representation. On the other hand, the procedure
may be more appropriate for the dispute, the arbitrator may have
greater or more relevant experience of the matters in dispute than
would a judge, the case does not have to wait its turn in the lists
and the proceedings and award are confidential. 4. ADR
4.1. This term covers a variety of procedures, some of which like
arbitration and litigation are adjudicative, and others, like mediation,
are consensual. The most common forms of ADR are mediation, expert
determination, early neutral evaluation and mini-trial.
4.2. Mediation can be described as "chaired negotiation".
A trusted third party, known as a "mediator", explores
the dispute with the parties and tries to help them negotiate a
settlement. Very high success rates are claimed by the CIArb and
other mediation service providers . There are undoubtedly cases
that are resolved quickly and cheaply by mediation that they would
never be resolves by negotiation alone. There are probably two reasons
for that. The first is that the mediator is one stage removed from
the parties and can therefore see a dispute in the round with fresh
eyes. He or she can therefore spot a solution that may not have
been obvious to the parties. The second reason is that a mediator
probes aspects of a dispute in private discussions with each of
the parties known as caucuses. Through those discussions, he or
she may discover factors underlying the dispute that would never
be communicated to, or guessed by, the other side. With such knowledge
a skilful mediator may construct a solution with which both parties
can live and coax them towards it.
4.3. Mediation will only work where there is a measure of commitment
by the parties. It is certainly not suitable for all cases. Claims
for its success are probably exaggerated. On the other hand, so
long as the parties are prepared to talk and act reasonably, time
and money spent on mediation is rarely wasted. Mediation narrows
the issues and removes some that would otherwise require to be adjudicated.
It can therefore shorten substantially a hearing and thus reduce
costs.
4.4. Expert determination is essentially consulting an expert. Provisions
for surveyors to determine service charges are often found in leases.
Similar provisions sometimes appear in other commercial contracts
such as software development agreements. The difference between
arbitration and expert determination is that the expert decides
the question by reference to his or her specialist knowledge and
experience. Though he or she may take account of evidence and arguments
of the parties, the expert does not adjudicate. A form of expert
determination with a direct bearing on intellectual property is
the determination of certain generic and country code top level
domain name disputes by expert panels. This procedure is very close
to arbitration, and some would argue that it is in fact a form of
arbitration. The crucial difference is that decisions of expert
panels are always subject to unfettered and independent determination
by the courts. Indeed, submission to the jurisdiction of at least
one legal system is a condition of bringing a complaint under the
Uniform Domain Name Dispute Resolution Policy ("UDRP").
4.5. Early neutral evaluation is a procedure by which a serving
or retired judge, counsel, solicitor or other referee gives the
parties his or her view of the likely outcome of a dispute on the
evidence so far available. The Commercial Court provides a facility
for a "without prejudice", non-binding evaluation of a
dispute by a commercial judge. The procedure for such evaluation
is set out at Part G2 of the Commercial Court Guide.
4.6. A mini-trial is a non-binding determination by a tribunal consisting
of representatives or appointees of the parties to the dispute who
are not personally involved chaired by a legally qualified neutral.
This procedure is said to be popular in the USA but is rarely encountered
in England. 5. Resolution of Patent Disputes
5.1. There are a number of different kinds of disputes that can
arise out of or in relation to a patent or patent application. Examples
include disputes over the right to apply for a patent, challenges
to decisions of examiners, claims by patentees for relief in respect
of alleged infringement of their patents, applications by third
parties for revocation of patents, complaints by persons aggrieved
by threats of infringement proceedings and controversies over patent
licences to catalogue just a few. The tribunals before which patent
disputes may be brought include the comptroller (or perhaps, more
accurately, hearing officers appointed by her), the Patents Court
and the Patents County Court.
5.2. Within the European Patent Office ("the EPO") in
Munich there are also Boards of Appeal to hear appeals from decisions
of its Divisions. Particularly worth mentioning is the Opposition
Division which considers objections to the grant of a patent (known
as an "opposition") brought within 9 months of publication
of mention of the grant. Although called "opposition"
this procedure is effectively an application for revocation. If
successful, the revocation takes effect in all the states for which
the patent has effect.
5.3. Two potentially important developments for the future are the
possible adoption of a Community patent regulation which would set
up a new centralized, Community Intellectual Property Court and
an optional protocol to the EPC providing for a European patent
litigation system. Article 229a of the Nice Treaty already empowers
the Council to confer Community patent jurisdiction on the European
Court of Justice. The Commission has already circulated a Working
Document on the planned Community patent jurisdiction. As for the
optional protocol, an intergovernmental conference of the European
Patent Organization set up a working party on litigation which has
already drafted a protocol for the settlement of patent disputes
together with a draft agreement on the establishment of a European
patent litigation system and a draft statute for a European patent
court. The documents of this working party are posted on the Swiss
Federal Institute of Intellectual Property. 6. Arbitration and ADR in Patent Disputes
6.1. Arbitration has always had a limited role in the determination
of patent disputes. One reason for that is that a patent confers
a monopoly which may affect the public interest which makes it desirable
for such as the validity and extent of the monopoly to be determined
by the Patent Office or judiciary. Another reason is that arbitration
requires the parties' consent which in turn requires a measure of
trust. Almost by definition, a party seeking an injunction does
not trust the other side. Yet another reason is that there is already
a procedure under s.61 (3) of the Patents Act 1977 for parties to
an infringement dispute to refer it to the comptroller so long as
an injunction or delivery up is not sought.
6.2. The only type of dispute in which arbitration is common is
one in which the parties are already bound by an arbitration clause.
Such provisions are most likely to be found in licences, particularly
where the parties carry on business in different countries.
6.3. Because it is founded on negotiation, mediation is different.
Mediation can work whenever parties are prepared to talk. CPR 1.3
requires parties to help the court to further the overriding objective
which the court is supposed to promote by active case management.
Active case management connotes encouraging the parties to co-operate
with each other in the conduct of proceedings, identifying issues
at an early stage, encouraging the parties to use ADR where appropriate,
facilitating the use of such procedure, and helping the parties
to settle the whole or part of their case. The CPR provide for ADR
in the pre-action protocols, after allocation, during case management
and on appeal. The Chancery Guide, which governs Patent Court procedure,
requires parties to consider ADR.
6.4. It has to be stressed that arbitration and ADR are not substitute
for litigation but complement it. Sometimes these tools can dispose
of cases fairly and cheaply at an early stage. It is acknowledged
that arbitration and ADR may be grasped by the unmeritorious to
put off the day of reckoning but there are mechanisms to prevent
that from happening. 7. The Proposed Bill
According to paragraph 2 of Annexe A to the Patent Office's consultation
document, the proposed amendments to the Patents Act 1977 cover
the following topics:
· proposals to take account of amendments to the EPC agreed
at the diplomatic conference in Munich in November 2000;
· proposals that relate closely to those amendments but are
not formally required for implementation;
· proposals relating to enforcement and post-grant issues;
and
· proposals relating to modernization of the Patent Act 1977.
These comments are confined to matters that bear directly on the
work of the CIArb. 8. Proposals to take account of Amendments to the EPC
These appear to cover principally matters of substantive law, namely:
· conditions for patentability;
· exceptions to patentability
· novelty;
· further medical use;
· limitation;
· protocol on interpretation;
· designations; and
· various miscellaneous provisions.
The CIArb understands the need to amend the Patents Act 1977 to
give effect to the changes necessitated by the revision of the EPC.
It believes that those proposals fulfil that obligation. 9. Proposals for related Amendments
These cover confidentiality of inventor details, discretion to amend
post-grant, opposition to amendments and corrections and designation
of Patent Co-operation Treaty applications. The only amendments
relating to dispute resolution are those on amendment. There is
no obvious scope for arbitration or ADR here. Amendment of a patent
affects the public at large and not just the parties to the application
to amend. It is therefore best left to the courts or Patent Office.
The first and last of the proposals mentioned above are matters
of practice. The proposals seem sensible but do not relate to the
CIArb's work. 10. Proposals for Enforcement and Post-Grant Issues
10.1. These are the proposals of most interest to the CIArb. It
agrees with the Patent Office that there is no need for changes
to the 1977 Act to facilitate resolution of disputes by arbitration
or ADR.
10.2. Because employers and employees are already contractually
bound there may be scope for resolution of compensation claims by
arbitration and expert determination where it is cheaper than proceeding
through the court or Patent Office. One reason for the paucity of
claims may be the expense of mounting a claim. There is merit in
the proposal that the benefit of an invention should be analysed
in relation to the economic unit in which the inventor works rather
than the employer's business as a whole. The proposal is supported
not only for the reasons expressed in paragraph 76 but also for
the sake of fairness between SME and large scale businesses. While
it is unlikely that s.40 operates as a disincentive to an SME to
employing talented individuals the greater likelihood of paying
compensation to an inventor is certainly no encouragement. As to
whether outstanding benefit should be derived from the patent or
from the invention, I prefer the option that the measure should
be based on the benefit from the invention rather than just the
patent.
10.3. The CIArb welcomes the proposal to remove the requirement
of consent for references to the comptroller under s. 61 (3) though
it wonders what work will be left for the Patents County Court if
greater use is made of that procedure. If the object of extending
the comptroller's jurisdiction is to assist an SME to enforce their
patents, they are more likely to apply to the comptroller if she
can grant injunctions and order delivery up.
10.4. The CIArb believes that the right to restrain groundless threats
is useful. That is no doubt why the remedy has been extended recently
to national unregistered design rights and trade marks. With the
development of electronic commerce the damages resulting from the
loss of a distributor as a result of a threat may be substantial.
The Court of Appeal's decision in Unilever v Procter & Gamble
[2000] FSR 344 removes any inhibition to bona fide settlement negotiations
while Pumfrey J's decision in Kooltrade v XTS Ltd, [2001] FSR 158
makes clear that a "without prejudice" heading can never
be used to veil a threat. The only point that might be reconsidered
is the liability of legal and other professional advisors. S.202
of the Australian Copyright Act 1968, which provides a remedy for
groundless threats of copyright actions, excludes from liability
barristers or solicitors who in their professional capacity on behalf
of their client. There is a case for a similar exclusion here.
10.5. Although not directly relevant to the CIArb's work the CIArb
welcomes the proposal to allow for amendment under s.75 during any
proceedings in which validity may be put in issue. It also supports
the suggestion that a proprietor should remain unable to amend under
section 27 while such proceedings continue.
10.6. The CIArb also supports the proposal for post-grant examination
of a patent by the comptroller and agrees that anyone should be
able to ask her to re-examine an existing patent without showing
an interest in having the patent re-examined or revoked. 11. Proposals relating to Modernization
Save for the deletion from the Act of references to the CPC, these
proposals cover such things as entitlement, renewal fees, PCT applications,
hours of business, forms and so forth. These are administrative
matters for the Patent Office upon which it would be impertinent
for the CIArb to express a view. The CIArb agreed that references
to the CPC should be deleted from the Act but believe it would be
prudent to provide for the Community patent. Some of its provisions
will certainly impact on national law. For instance, article 54
of the regulation would prohibit simultaneous protection under national
and Community law. Also, national courts would have some jurisdiction
in relation to Community patents under article 46. Civil servants
at the Commission believe that the Council could adopt the regulation
as early as this year.
12. Other Matters
12.1. The CIArb is aware of and welcomes all the developments that
appear on the Patent Office's enforcement web page. It would also
draw the meeting's attention to the recent WIPO survey "Intellectual
Property on the Internet: A Survey of Issues" and, in particular,
Chapter IV on the role of private international law and ADR, which
it commends.
12.2. The CIArb believes that considerable savings can be achieved
in intellectual property litigation by better co-ordination of the
available methods of dispute resolution. One of the barriers to
such co-ordination is insufficient understanding on the part of
parties and their professional advisors of the potential and uses
of arbitration and ADR. Training in dispute resolution techniques
can help and that is something that the CIArb does well.
12.3. The CIArb's panels of trained and experienced arbitrators,
mediators and neutrals are a valuable and under-used resource of
the courts and the Patent Office. The CIArb notes that hearing officers
in some proceedings now remind parties of the availability of ADR
. It would be glad to supply further information perhaps in the
form of information packs that may be sent out to parties, presentations
that may be downloaded from the web or links to its panel members.
12.4. Finally, the success of the UDRP and Nominet DRS shows the
appeal of on-line dispute resolution services. The CIArb, as an
innovator in the online dispute resolution field, wonders whether
there is scope for extending the technique to other types of intellectual
property dispute.
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