Asia IP

Patent invalidation strategies vary greatly across the Asia-Pacific region, with local lawyers being best-placed to know what works best in their jurisdiction. In Australia, for example, there are opposition, re-examination and revocation methods to invalidate patents.

For oppositions, an application may be opposed by any person on any ground of invalidity other than false suggestion. If one of the opposition grounds is made out, the Commissioner can refuse the application. The applicant may be given the opportunity to amend the application, but an amendment to a complete specification which would add new matter (such as a best method or experimental results to support a representation) is not allowed for applications examined after April 15, 2013. Evidence must be filed in writing. There are oral arguments, but ordinarily there is neither discovery nor cross-examination of witnesses. The 2012 Raising the Bar amendments to the Patents Act changed the opposition procedures so that it became more difficult to obtain extensions for procedural deadlines.

Either party may appeal the Commissioner’s decision to the Federal Court, where the appeal is heard de novo, and discovery and cross-examination are usual, says Richard Hamer, a partner at Allens in Melbourne.

For re-examination, an application or granted patent can be re-examined on slightly more limited grounds than an opposition, again at the request of anybody. Again, if the Commissioner is satisfied with a lawful ground of objection, he may refuse to grant the application or may revoke the grant. The patentee may be allowed to amend the specification and to appeal to the Federal Court, says Hamer. 

For revocation, a grant may be revoked by an action initiated by anyone, or as a cross-claim to an infringement proceeding. Revocation is commenced in the Federal Court. A patent can be revoked on a number of grounds including lack of inventive step, novelty and utility; as well as non-compliance with disclosure requirements (sufficiency, best method, fair basis, and clarity), because the invention is not a manner of manufacture, and because the patent was obtained on the basis of fraud, false suggestion or misrepresentation, says Hamer.

In Japan, there are also three processes and one of them is third-party observation, which can be initiated by anybody anonymously at any time. “The process is the most reasonable out of the three,” says Aki Ryuka, president at Ryuka IP in Tokyo. “While res judicata has not been recognized for these decisions, you cannot request an oral hearing, and the grounds for invalidation do not include personal ineligibility, being against public order, inventorship, or invalid correction.”

Another process available in Japan is opposition, which was reintroduced to the patent regime in 2015. Anyone can file an opposition within six months of publication. Generally, one can receive a decision within one year from grant, and res judicata has not been recognized for these decisions. “This process is more reasonable than an invalidation trial,” Ryuka says. “The grounds for invalidation include personal ineligibility and being against public order, but do not include inventorship or invalid correction. You also cannot request an oral hearing.”

Meanwhile, a party can request an invalidation trial while the patent is enforceable. Generally, parties will receive a decision within nine months from the request. The grounds for invalidation trials include include personal ineligibility, being against public order, inventorship and invalid correction. However, res judicata has been recognized for these decisions, says Ryuka.

In the Philippines, a patent may be invalidated by filing a Verified Petition for Cancellation with the Intellectual Property Office of the Philippines (IPOPHL). Also, in an action for infringement filed before the court, the defendant may raise invalidity as a defense; if the court finds the patent invalid, it has the power to cancel the same, says Richmond K. Lee, a partner at ACCRALaw in Manila.

In Singapore, a patent invalidation case may be brought before the High Court. Within the High Court, an IP court has been established with four designated IP judges with substantial expertise and experience. A person may also apply to invalidate a patent through the Singapore Patents Registry at the Intellectual Property Office of Singapore (IPOS). The proprietor must thereafter file a counter-statement form and an optional proposed amendment statement (if intended). There will be stages of evidence presented by both sides, and case management conferences also being held. If both sides are unwilling to come to a compromise, the Registrar will issue a decision and costs will usually be awarded to the winning party, says Amira Budiyano, a senior associate at Gateway Law Corporation in Singapore.

South Korea operates under a bifurcated system, where infringement actions are tried exclusively before the regional district courts, and the validity of a patent is tried before an administrative body, the Korean Intellectual Property Tribunal (KIPT), says Hyeongil Ryoo, a partner at Lee & Ko in Seoul. “As an exception to this general framework, the Supreme Court has held that if a patent is shown to be prima facie invalid, enforcement would result in an abuse of patent. Although such finding of patent abuse results in court’s dismissal of patentee’s infringement allegation, it does not result in the invalidation of the patent itself. In fact, under the patent law, the patent can only be effectively invalidated by way of an invalidation trial before the KIPT. The court’s finding of validity in infringement would only have de facto effect under the principle of res judicata.”

The KIPT’s decision in an invalidation trial can be appealed to the Patent Court, which has exclusive jurisdiction. An appeal of the Patent Court’s decision is to be brought before the Supreme Court. Under this procedural hierarchy, the Patent Court reviews the appeal case de novo. Currently, the petitioner who challenges the validity is allowed to submit any new grounds for invalidation and evidence (including prior art) at the Patent Court stage.

Ryoo says that there are two schools of thought on the pros and cons of this current system:

Grounds/Evidence Submission Should Be Time-Limited. This position is that the grounds for and evidence of invalidity should be submitted to the KIPT proceedings. Unlimited submission could (i) delay trial, and, (ii) if new evidence is submitted at trial at the Patent Court, the KIPT is, in essence, robbed of its opportunity to examine the evidence.

Grounds/Evidence Submission Should Not Be Time-Limited. This position is that the parties should be free to submit any new ground for and evidence of invalidity until the end of the trial. It is argued that the system as currently practiced would actually assist in faster resolution of a case because if any new evidence or ground is found after the KIPT decision, then the petitioner can file the new evidence or ground in the Patent Court stage, instead of filing a new invalidation trial and going through the entire process again. The statistics shows that the average time to a decision in the Patent Court was 5.7 months in 2015.

“As the debate is ongoing, it is not certain how this will change the current review of invalidation issues in KIPT and Patent Court proceedings,” Ryoo says. “However, the Patent Court has maintained its firm position that submission of new ground/evidence should not be limited.”

In Taiwan, a patent invalidation request must be filed by someone in accordance to Article 73 of the Patent Act and substantive reasons or evidence must be provided within 30 days of filing said request. All requests must articulate the reasons and should provide relevant documentation. Upon receiving such request, the Taiwan Intellectual Property Office (TIPO) will request the patentee’s response within 30 days. The proceedings are conducted immediately if the patentee fails to respond in time, unless a request for an extension containing justified reasons is approved. Once proceedings start, the patentee can appear in an oral hearing at TIPO or provide models/samples and conduct necessary testing under permission. TIPO’s representatives may also have an on-site investigation during the course of proceedings, says Paul Chen, a patent attorney at Louis International Patent Office in Taipei.

The invalidation remains imposed until the parties have explained their views and there are no new documents to be filed. TIPO then renders a decision. The revocation may be applied to the entire patent or applied to the patent on a claim-by-claim basis. TIPO may even combine different invalidation actions if they are all initiated against the same patent. Moreover, a patent examiner is assigned by TIPO while conducting invalidation proceedings to render a decision to serve the patentee and the requester. In case of denial by the TIPO decision, the invalidation petitioner can initiate an administrative appeal, and thereafter file an administrative litigation of the invalidation request to the IP Court, says Chen.

In Thailand, one only needs to initiate an invalidation proceeding with the Intellectual Property and International Trade Court – it can be initiated as a standalone action by filing a complaint with the court, be a part of a complaint in the infringement case or be a part of defense in case that the client is claimed on the infringement case, says Panisa Suwanmatajarn, a senior associate at Siam Premier International in Bangkok.

In Pakistan, infringement proceedings must be brought by the patent owner and must be filed at the District Court of the province where the infringement has taken place. During the infringement suit, the alleged infringer may counter-claim for revocation. “Our patent office reveals that no invalidation claim has ever been filed, though,” says Erum Rasheed, a patent attorney at Vellani & Vellani in Karachi.

Matching Needs and Wants

Potential infringers have a range of options in their arsenal. As noted, they can bring opposition, re-examination and invalidity proceedings, or in some cases all three. There is no standing requirement, Hamer says. “Opposition can be used to delay grants. Different options will be appropriate depending on the patent strength, whether grounds of invalidity are amenable to determination on documentary evidence only or would benefit from discovery and oral evidence, whether there are ways to avoid infringement, whether potential grounds of invalidity can be overcome by permitted amendment, and whether the potential infringer is adverse to contingent liability, or the commercial risk associated with foreshadowing commercial intentions that might otherwise be kept quiet.”

Potential infringers may simply enter the market and await the patentee to bring an infringement action – it may be the case that the patentee elects not to enforce the patent, or the infringer may seek some other commercial arrangement after assessing the validity of the patent and the costs of litigation to enforce it, Hamer says. “Such an approach may require indemnification of customers in order to sell the product.”

Patentees can adopt a number of strategies contemplating the risk of infringement. Hamer says that some key issues particular to the Australian system include:

• Patentees are advised to review their patents and get them in order early, because amendment in the context of litigation is costly and difficult;

• If possible, foreign patent holders should ensure an exclusive license is in place with an Australian corporation to avoid having to provide a bank guarantee;

• Divisional applications may be a way to get around delaying oppositions;

• Injunctions restraining a pending infringement trial are available, but must be supported by evidence, and preparation of evidence in anticipation can be useful;

• Care needs to be taken with threatening letters and competition issues relating to settlements, as unjustified threats can give rise to claims for injunctions and damages.

In Thailand, Suwanmatajarn says, initiating invalidation proceedings with the IP Court is “the only way to go, and litigation is very expensive. Therefore, we would advise clients to initiate such only if the winning chance is very high. Otherwise, invalidation as an infringement defense would be recommended.”

Efficiency and Effectiveness of Current Procedures

In Australia, opposition is traditionally ineffective other than in clear cases, due to the heavy onus on the opponent to satisfy the Commissioner that the patent was clearly invalid, Hamer says. In 2013, the onus changed with the passage of the Raising the Bar amendments to the Patents Act.

“The Commissioner now has to be satisfied only on the balance of probabilities that a ground of opposition has been made out,” he says. “These changes raised the standards of application, [and] a number of applications have since been invalidated for obviousness in opposition proceedings, something that rarely occurred before the amendments. Despite the new onus, opposition proceedings do not provide for discovery or crossexamination, so are not well-adapted to cases such as best method, utility or false suggestion where investigative processes are needed or cases where the credibility of conflicting witnesses needs to be weighed.”

Because there is no discovery or oral evidence, however, opposition proceedings are inexpensive in comparison to court proceedings, Hamer says. “Opposition has traditionally been slow. The Raising the Bar changes sought to address the delays by making it more difficult to obtain extensions for evidence.”

Litigation is more efficient, but significantly more expensive, Hamer says, noting that the costs for litigation in Australia are comparable to costs in the United States or the United Kingdom.

“One way to improve would be to allow post-grant opposition proceedings so that they are not used to delay granting whilst providing an alternative to revocation at a relatively lower cost,” Hamer says. “In court proceedings, it would be an improvement to adopt some of the procedural measures in the UK, such as shorter hearings, and lower cost litigation procedures (particularly for less valuable patents) used by the UK’s Intellectual Property Enterprise Court.”

The summary nature of invalidation proceedings in the Philippines has not led to speedy case disposition, and this is partly due to their technical nature. Furthermore, the decisions are subject to a series of appeals, leading all the way to the Supreme Court, which further delays the final disposition, Lee says. “Rather than introducing alternative invalidation proceedings like post-grant opposition or declaratory judgment, it would be more productive to improve examination quality which in turn results to stronger patents. For example, we may impose on the applicant the duty to disclose information that are material to patentability, e.g., prior art cited in a foreign search report of a counterpart application. Our current laws do not impose such a duty.”

Infringement in the Thai IP Court will be adjudicated by a panel of three judges, two professional and one associate. The associate is selected based on experience and/or qualifications that closely match the underlying technology of the patent. “This, however, does not mean that he will be a person of ordinary skill in the art of the relevant underlying technology of the patent and/ or fully understand such technology,” Suwanmatajarn says. “Due to scarce patent litigation, most professional judges have little relevant experience, so Thailand needs more legal professionals who understand patent litigation.”

The Office

According to IP Australia, there are around 130 oppositions filed each year, a number which has been fairly consistent over the last five years. “Anecdotally, and not surprisingly, the 2013 changes to onus appear to have led to an increase in serious oppositions while the crackdown on extensions of time may have discouraged oppositions filed mainly to delay,” Hamer notes.

In Taiwan, the number of the invalidation claims has decreased by 50 percent over the last 10 years. There were 1,294 patent invalidation claims in 2006, but TIPO received only 604 in 2015.

Multiple factors are contributing to the decline in claims. “First, the patent filing rate is declining by 10 percent annually. In addition, procedures for the invalidation are complicated and time-consuming [and can take more than] three years. And, the success rate is unsatisfactory,” says Fu Chu Chen, a patent attorney at Louis International Patent Office in Taipei. “All of these factors may seem minor, but their accumulative effect is causing a significant impact on invalidation in Taiwan.”

Monopoly

Patent revocation can be seen as inherently pro-competitive, Hamer says. “However, in cases where invalidation is commenced to extract an agreement, the result can be anti-competitive. The classic example is where a pay-for-delay arrangement is reached.”

In the US, there is some incentive for branded and generic pharmaceutical companies to enter into pay-for-delay settlements because of the six-month exclusivity period available to the generic which is first to challenge the brand’s patent with respect to a particular pharmaceutical product. Brands often adopt the tactic of launching their own generic product during the six-month period, thereby depriving the generic company of its exclusivity. In those circumstances, there is an incentive to settle on the basis of delayed generic entry in exchange for the generic company keeping its six-month exclusivity, says Hamer.

Such incentive does not exist in Australia, and there is little evidence to suggest that these agreements are being entered into in Australia, Hamer says. “The Productivity Commission inquiry into IP arrangements is investigating this issue, and more information may be available when the final report is released early next year.”

There are certainly companies that would try to invalidate patents as a strategy to minimize competition. Budiyano says. “With increasing competition, patents are integral to a company’s business strategies and development regimes in the long run. Hence, filing for invalidation allows companies (taking a clear stand on enforcement) to fend off unnecessary competition by capturing market share, and to deter similar products/services from surfacing.”

At the same time, she says, IPOS is taking steps to raise grant standards. In February 2014, the ‘positive grant’ system came into effect, where only applications that have fully-positive examination reports can be granted, and the self-assessment system was abolished.

In July 2016, IPOS has announced that the foreign route (i.e. the option of relying on applicable foreign search and examination reports) would be closed with effect from January 1, 2020. This means that application with a date of filing (as well as all divisional applications with a lodgment date) on or after January 1, 2020, will not be allowed to proceed under the foreign route, and will have to undergo local substantive examination.

“It is therefore envisaged that there would be less invalidation (as a form of IP strategy) in Singapore, [particularly] if it appears that the grant in question was wholly meritorious,” says Budiyano.

Sometimes, claiming invalidation is deemed as a preventive action. “If someone is developing a similar technology or wishes to develop one in the future but the competitor already has the patent, the new participant will then be interested in revoking the previous patent,” says Arpita Dutta, a legal consultant at Louis International Patent Office in Taipei. “In the high-tech era, there will be ongoing invalidation worldwide. The big companies continue to monitor if their competitors apply any patent in or close to their scope of interests and then use invalidation to restrict competition.”

As invalidation damages patentees’ reputation, substantive criteria including definite, objective and absolute concepts and facts, such as lack of novelty and inventive step, insufficiency of disclosure and clarity, as well as other prior rights should be standardized to minimize exploitation, adds Dutta.