THEME: Mediation and Commercial Law
This article was authored by Sanya Rizvi and Manas Dhagat from West Bengal National University of Juridical Sciences, Kolkata.
Abstract
The core function of the judiciary is providing legal remedies against the infringement of rights relating to property and persons. The effectiveness of the intellectual property rights is dependent on the speed with which they are enforced by the judiciary. Such enforcement is based upon maintaining the monopoly of the patent holder over the market relating to a particular product or innovation to gain competitive advantage over other competitors. There it becomes a fundamental economic right to protect the right holder against such violations. The World Trade Organization agreement is a contractual framework between the countries which are signatories to the Marrakesh agreement. Taking in account the large number of member countries and the number of agreement in WTO, the WTO codifies the rights and obligations available in international trade and provisions for the settlement of disputes. Legislation alone cannot suffice for the effective enforcement of intellectual property as a catalytic medium of development. The judicial system thus becomes indispensable for the effective enforcement of the intellectual property rights. The Dispute settlement mechanism of the World Trade Organization is its integral part and applies to all the agreement and is binding on the signatories of the Marrakesh agreement. However, there is a need to review this mechanism when the complexity of the case increases due to the technological principles underlying the dispute. The cost of solving these disputes increases particularly in case of patents when such complexities arise in the issues. This paper will deal with the various kinds of problems faced during litigating patent matters. These problems are related to judicial economy, lost opportunities, increased costs, interim injunctions, unfair advantage and uneducated verdicts. The paper then proposes how mediation can be used effectively to tackle these problems.
Introduction
Mediation, in its core essence relates to a procedure to facilitate voluntary a settlement between the parties to the dispute, wherein the decision is not mandatory or binding to the parties.[1] The mediator directly communicates to the parties in the case and may also allow parties to directly talk to each other.[2] In addition to this, the mediator may caucus with the parties privately. The mediator is not in the position of passing a judgement but instead facilitates the parties towards the better understanding of the fact scenario to identify the points of differences between the parties.[3] The mediator then uses this information to come up with the solution or help the parties to come up with an amicable solution for the dispute. Mediation is voluntary in nature and mediator in no way can bind the parties to a particular solution. The process of mediation is based on compromise as well as cooperation, making the role of a mediator highly skilled.[4]
The system for resolution of Intellectual property disputes in India has been mostly through the process of litigation.[5] In particular, the patent disputes are highly difficult to adjudicate due to the complex technological principles underlying such disputes. Furthermore, there is a need to quickly adjudicate such disputes due to high advancement or the patent or the technology embodying such patent would turn obsolete. Therefore, it becomes highly necessary that such disputes are dealt with most effectively and promptly by the judicial system. However, the present system of adjudicating is very slow due to various procedural requirements and lackadaisical behaviour of the courts. Furthermore, there are humongous costs involved in such processes such as cost of discovery, cost of educating the attorney and the judges of the legal complexities. All these factors contribute towards the shortcomings of patent litigation.
This paper will first give the background of patent litigation in India. It will then go on to identify the different problems related to patent litigation. Problems relating to judicial economy, lost opportunities, cost of litigation, mechanical grant of interim injunctions, unfair advantages and uneducated verdicts will be addressed through the approach of mediation. Finally, it will suggest possible solutions to help the scenario of patent disputes.
Background of Patent Dispute Resolution
The national legislation of a country that is a part of the World Trade organization has to be accordance with the Agreement on Trade-Related Aspects of Intellectual Property Rights (‘TRIPS’).[6] The TRIPS agreement lays down domestic procedure as well as remedies for the enforcement of intellectual property rights.[7] Furthermore, it lays down provision as well as civil and administrative procedure and remedies in addition to special requirement related to border measures and criminal procedures. The laws relating to the intellectual property rights have to be notified to the Council of TRIPS in order to help the council to review the operation of patent regime. The members are bound to make availaible the judicial procedure relating to the enforcement of intellectual property rights under the national legislation regarding patents.[8]
The mechanism for settlement of disputes related to patents is already at par with the international standards and the norms laid down in the TRIPS agreement. The Indian Patent Act, 1970 provides for an independent judicial and administrative setup. The patent owner has exclusive rights in relation to the patent to commercial exploitation of the invention.[9] The patentee has the right to make, import, sell or use the patented products. Infringement takes place when any person other than the patent holder commits any of these acts. In cases of patented process, the infringement takes place when a person uses the patented product.[10] Chapter XVIII of the act deals with suits for infringement. The term ‘suit’ denotes that the Act provides for a civil procedure. The defendant in the suit for infringement may plead various defences including the entitlement and the validity of the patent itself. The determination of infringement is made through the language of the claim of the patent. If the product of the defendant does not fall within the language of the claim of the patent then there is no infringement per se. Section 64 of the Patents Act gives the grounds for defending a patent suit.
TRIPS provides that the member countries of the World Trade Organization provide for two kinds of remedies in case of patent infringement. The first remedy in cases of patent infringement is providing of injunction where the judicial authority detests the infringer from further continuing with the infringement of the patent. In addition to this the infringer may also be liable to pay damages for such infringement. In addition to these two remedies, the Indian Patent Act of 1970 also provides remedy in form of accounts of profit. The plaintiff can either opt for damages or accounts of profit. Lastly, the second amendment to the act in 2002 allows for seizure, forfeiture, or destruction of goods which are found to be infringing the patent. If the plaintiff is successful he can either opt for damages or the profit that is made by the person infringing the patent. Concerning the damages, the plaintiff is entitled to exact compensation for pecuniary damages incurred that can be fairly attributed to the infringement. However, there are various problem related to litigation that arise in patent disputes. These problems are mostly related to the unique nature of patent dispute. These problems are discussed further combined with an effective solution to tackle these problems through mediation.
Judicial Economy
In the first decade of the TRIPS, i.e. 2005 to 2015, 143 patent suits were filed before the four prominent high courts of Bombay, Delhi, Madras and Calcutta.[11] Out of these only 5 judgements were delivered for such suits.[12] Intellectual property rights depend on the speed of enforcement for their effectiveness. The delay in enforcing these rights would render them useless. The reason for such delays can be attributed to various factors. Complexity of patent law and scientific principles associated with various products and processes makes it harder to adjudicate, as there is lack of scientific and technological grounding possessed by the judges deciding such disputes. There is also an underlying ignorance of the patent law, which is vast and complex.[13] The Supreme Court of the United States stated that the issues in patent litigation could be so complex that legal minds without appropriate knowledge of Science and Technology would find it difficult in adjudicating these disputes.[14] In a highly competitive market, the useful life of a patent is as long as the time taken by a competitor to patent an improvement of the innovation and demand cross-licensing.[15] Thus in such markets where the life of a patent is short, effective and quick enforcement of the rights becomes necessary.
Mediation as an alternative to patent litigation can help in speedy resolution of these disputes. The reliance on expert testimony does not exist in mediation as both the parties cooperate towards finding the solution, both being well equipped with the knowledge of the innovation. Furthermore, a mediator who is an expert in such technology or understands the principles behind it, can help either parties to come up with better and innovative solutions for speedy redressal. As the issues in such patent disputes are highly complex, mediation can offer itself as the best alternative towards resolution. The parties in such mediation are not bound by the procedure as mediation provides flexibility in finding solution. Since the process of mediation is based on cooperation, the relations between the parties are kept intact in case of future business opportunities. Thus, complex cases such as patent disputes are well suited for resolution through mediation.
Lost opportunities
The cost of lost opportunities is very high in patent disputes. Patentees gain value by virtue of the edge gained over others in a particular technology or a patented process. Thus there is a constant need of innovating to retain the edge over the others in a particular field. Litigation can be time-consuming for such patentees as the time taken to deliver judgement over such issues is very high. This can also lead to discouragement for further working on the innovation even though the current patent might be continued to be used by the innovators. Uncertainty, due to the lack of information to the court, towards the outcome of litigation can further discourage a party to market the invention,[16] The party to the dispute may also be discouraged as the reputation of the company is at stake in such disputes. Such delays can be especially high in economic environments where the number of patent disputes is large. As the useful life of patent is, practically only limited till the next improvement to the innovation, prompt redressal of the patent disputes is essential.
The time taken to solve any dispute through mediation is significantly lower than the time taken to solve it through litigation. The parties can come to quick and flexible solutions relating to such disputes and the time that would otherwise have been spent on litigation can be used for developing the product or the process. Prompt redressal of such clashes would not discourage the patentee as the patentee would not be spending humongous amount of one’s time on litigating the matter before the court. Mediation also brings with itself a level of certainty as the parties to the dispute as well as the mediator are well equipped with the knowledge that is required to understand the complex issues and the scientific principles on which such invention is based. Furthermore, the process of mediation shows the intention of the parties to amicably solve the dispute, thus bringing a level of certainty towards a solution that would help the parties. Furthermore, the process of mediation through confidentiality helps towards keeping the reputations of the parties intact. Therefore the problem of lost opportunities that arise due to parties in litigation can be solved by adopting mediation as a mechanism to adjudicate patent disputes.
Cost of litigation
Patent litigation is highly expensive and costlier than other forms of litigation.[17] This can be attributed to various costs that are incurred in such type of litigation. Firstly, the cost of discovery, entailing the gathering and developing of the facts underlying the patent dispute, is significantly high. In the United States, average cost of a patent dispute is half a million dollars.[18] Around 80 percent of this fees is spent on the process of discovery by the patent attorneys.[19] Secondly, patent disputes requires expert fees. As mentioned above, patent disputes are highly complex in nature and require a sound understanding of scientific principles and technology related to the invention. The understanding of these principles is gained through experts, thus increasing the cost incurred in such kind of litigation. Thirdly, the court fees in patent dispute becomes really high as it is dependent on the value of the suit. As the value of patent suits is really high, the court fees piles on accordingly. Lastly, the fees of attorney is generally higher in comparison to other litigation. There is an underlying ignorance of patent law as it is vast and complex.[20] Furthermore, the attorney in patent disputes has to spend a significant time learning the underlying technical aspects of the patent, thus increasing the fees charged in such litigations.
In India, section 104A of the patent act was introduced by a way of amendment in 2002 in compliance with Article 34 of the TRIPS. The subject matter of the amendment is the process for obtaining a new product.[21] The burden of proof in such matters lies with the defendant. The defendant has to prove its innocence rather than plaintiff proving the defendant’s guilt. Large multi-national corporations hold most of the patents in India.[22] In case of disputes relating to such matters, small and medium sized industries would have to face such large corporations which are beyond their competence. This can lead to increased costs of litigation due to long drawn-out battles combined with the onus of proof.
Mediation can significantly alleviate the potential cost that might be incurred by the parties in dispute. As mentioned above, there is no expense to be paid to the experts as the parties to the dispute and the mediator are well aware of the scientific principles related to the invention. Furthermore, as the mediation process is an out-of-court settlement, the court fees also does not exist. As mediation is quicker way to solve disputes, the fees paid to the mediator is lesser in comparison to that paid to the attorney in a long-drawn court battle. Lastly, small and medium sized industries would not be affected and discouraged in this process as compared to litigation where the resources of such industries might run out. Therefore, mediation can be an effective way to solve disputes without incurring humongous costs.
Mechanical grant of interim injunctions.
Patent disputes entail complicated issues relating to the scope and validity of the claims. These issues are related to underlying principles of the invention and therefore it becomes difficult to make a prima facie case assessment. In many cases it is not possible to make even a decent prima facie assessment for granting of injunctions.[23] However, there are cases where such ex parte injunctions are granted. One of the prominent examples of such interim injunction was the case where Matrix Labs was restrained by the Madras High Court by way of such interim injunction. Such injunction can harm the potential infringer highly if the correct assessment is not made. A wrong assessment in such cases can lead to high cost of lost opportunities as litigation in patent disputes is time consuming. As the number of disputes is high and the technical expertise low, such assessment can greatly harm the innovators in the market. It has also been argued that such interim injunctions should be done away with in cases of complicated patent disputes before the court.[24]
Resorting to mediation before filing for an interim injunction can significantly change the outcome of the interim injunction. Mediation is such cases can provide for a reasoned discussion between the parties to the dispute before the court can grant such injunction. The defendant can learn about the intention of the plaintiff in such cases. The injunction can thus be based on a better assessment before the court as the defendant would have sufficient knowledge as to the reasons and motives of the plaintiff to ask for an interim injunction is provided. Therefore, mediation can help in solving the highly problematic interim injunction provided by the courts in patent disputes.
Unfair Advantage
Delays in litigating patent disputes may place incomparable burdens on the parties as there will be different impacts of the uncertainties faced in litigating the dispute. There might be a case wherein a case involving the validity of a patent might be delayed by the patent holder as an incentive. The patent holder might be hurt due to deferral and postponement but there is no subsequent harm conferred by the patent holder in such case. Similarly in cases where the patent holder files a suit against the alleged infringer, the litigation arising out of such dispute might discourage the alleged infringer from further innovation or development of the product due to lost opportunities. Another instance can be when one party imposes monetary loses to the other party by tactically stalling techniques. Such possibility to be affected by the intentional delay is inefficient and unfair.
Mediation in such cases can help the parties in the dispute as the time taken to solve disputes through mediation is fairly less. If the parties are referred to mandatory mediation in such cases, the patent holder may nor be able to use the nature of litigation as an advantage to further his cause. The parties can thus spend more time on innovation rather than litigating the disputes. If parties in such cases are diverted towards mediation the opponent party may not be kept at hold. Even if one of the parties has an intention of stalling the other, the intention of such party would be realized through the mediation process which can effectively change the outcome of interim injunctions provided in such cases.
Uneducated Verdicts
One of the major problems of the patent dispute can be the complex technology and scientific principles underlined in patent disputes. The judge or the fact finder in such cases faces difficulty in understanding the basic principles of technology behind the dispute. For example, if the end result reached by the manufacturers is completely the same, however different processes are used to reach that end result, there is no patent infringement. In such cases if the judge or the fact finder is not able to clearly analyse the differences involved due to technological complexity, the verdict reached in such cases may not be satisfactory. Such differences might not be understood even by highly skilled attorneys. Even if the attorney spends time and understands such principles, explaining these principles to the fact finder or the judges may not be an easy task. Furthermore, it is unreasonable to assume that the judges would be well versed with the principle behind these complex technologies.[25] To appropriately adjudicate such matters, the judge is expected to not only retain such information but also apply them appropriately in the fact scenario of the case. Thus it becomes even more unrealistic for a judge with zero or basic knowledge of the principles behind the technology to adjudicate the disputes in a proper manner.
Mediation can help greatly to solve the problem relating to uneducated verdict. The mediator is appointed on the basis of knowledge of the technological and scientific principles underlying the innovation. Furthermore, the parties in the dispute are already aware of such complex issues in the dispute. Therefore, the settlements in such cases in facilitated by people who are already aware of the complexity and nuances of the patent dispute.
Solution
For reasons entailed above, mediation can act as an innovative way of adjudicating the disputes. Therefore, mandatory mediation can act as an effective solution to solve the existing problems in patent litigation. The participation of the parties in mediation should be kept mandatory, though the result would not be binding. Cost relating to mediation as an addition hurdle also do not exist. This is because once the process of mediation commences and there does not exist any possibility of settlement, the mediator in such cases would be able to figure out this fact at the initial stage itself. The parties in such cases can leave the process with investing just minimum resources. Furthermore, mediation will act as a better alternative than any other Alternative Dispute Resolution mechanism for the parties as there is a flexibility in reaching a settlement between the parties. The parties resorting to mediation would also end up with preserved business relations in comparison to litigation or arbitration.[26] There might also be cases in which the mediator might be able to bring two parties, which are world apart together. A mediator might be able to decipher the fact that the positions of the parties may not be as divergent as initially thought by them or the mediator may come up with an effective and creative solution to deal with such divergence between the parties. Having mandatory mediation for patent disputes might lead to some additional costs if the parties decide to resort to litigation post mediation. However, there will be an overall benefit considering the bigger picture in mind. There will be an increased number of settlements between the parties at dispute if the professional mediator is utilized by making the parties seriously consider the option of settlement. The problem of time taking resolution and high costs can be dealt with effectively if such settlement is considered by the parties. The cost incurred by the society due to the increased delays of the technology due to the long-drawn battles will also be reduced if mediation is utilized effectively. Mediation can also lead to a better perception by the parties participating in the mediation proceedings of the court systems.
Conclusion
Patent litigation consists of many different characteristics that makes different in various ways from other civil disputes before the court. The complex characteristics of a patent dispute lead to high level of costs, expenditures in time, cost of experts and a very high potential due to its vast nature and complexity. In such a scenario, mediation provides for an attractive alternative. Through mediation, parties to the dispute can significantly save their time and money.They can further preserve their business relations with the other party to the dispute. Mediation can help in the preservation of the judicial economy through speedy disposal of cases as through its flexible nature. It can further help in preserving the lost opportunities that the party faces due to long drawn out battles. When a party opts for mediation they reach a common ground through settlement without spending humongous times in courts. Further, mediation can help in reducing the high potential costs that might be incurred if the parties go for litigation. These costs are mostly incurred due to cost of discovery, cost to experts and high fees charged by the attorneys. All of these are nullified when the parties opt for mediation. Furthermore, mediation would go in a long way to help the small and medium industries in India who have to compete large multi-national corporation in addition to the onus of proof in cases of patent infringement due to section 104A of the Patents Act. Mediation can also help in solving the problems of mechanical grant of interim injunctions in patent disputes. The defendant can know the intention of the plaintiff through which would help in the granting of such injunction as the complexity of the patent disputes makes it difficult to make a prima facie assessment. Mediation also has an additional advantage of restraining either of the parties to get an unfair advantage over the others as litigation provides an opportunity to stall the dispute to gain more time. Lastly, mediation can help in doing away with uneducated verdicts given by the courts due to the complexity of the technological principles and scientific principles underlying theses disputes. As the parties as well as the mediator are well versed with such principles, the solution is reached by people who understand the complexities of the issues at hand. The paper proposes mandatory mediation in cases of patent disputes as all of these problem can be tackled efficiently by using this method of dispute resolution.
[1] David W. Plant, Overview of ADR Procedures, in ALTERNATIVE DISPUTE RESOLUTION GUIDE
[2] Id.
[3] Id.
[4] Id.
[5] https://spicyip.com/2017/06/143-patent-infringement-lawsuits-between-2005-and-2015-only-5-judgments.html
[6] Shahid, Alikhan, (1992) then Dy. Director General of WIPO at WIPO ASIAN Regional Colloquium on the Judiciary and Intellectual Property System New Delhi Sep. 9-11 1992. WIPO Geneva pp8.
[7] Id.
[8] Art. 63(2) Agreement on Trade Related Aspects of Intellectual Property Rights. Hereinafter called TRIPs (1994).
[9] K R. Singh, Patent Infringement Law in India.
[10] Chapter VIII, Indian Patent Act.
[11]https://spicyip.com/2017/06/143-patent-infringement-lawsuits-between-2005-and-2015-only-5-judgments.html.
[12] Justice R. K. Abichandani, Role of Judiciary in the Effective Protection of Intellectual Property Right Available at http://gujarathighcourt.nic.in/Articles/roleofjudicary.htm last accessed on 29′ September 2008.
[13] See Tom Arnold, Alternative Dispute Resolution in Intellectual Property Cases, in PATENT LITIGATION 1992, at 667, 672 (PLI/Pat Series No. G-350).
[14] Blonder-Tongue Lab. Inc. v. University of Ill. Found., 402 U.S. 313, 331 (1971).
[15] Lecture by Adjunct Professor Bnmsvold at the George Washington University National Law Center, in Washington. D.C., January 17, 1991.
[16] William F. Heinze, Patent Mediation: The Forgotten Alternative in Dispute Resolution, 18 AIPLA Q.J. 333, 344 (1991).
[17] Gregg A. Paradise, Arbitration of Patent Infringement Disputes: Encouraging the Use of Arbitration Through Evidence Rules Reform, 64 FORDHAM L. REV. 247, 251-252 (1995). 18.
[18] Tom Arnold, Fundamentals of Alternative Dispute Resolution: Why Prefer ADR, in Patent Litigation 655-56 (1993).
[19] Michele Galen, Guilty!, Bus 60-64. (Apr. 13, 1992)
[20] Tom Arnold, Alternative Dispute Resolution in Intellectual Property Cases, in PATENT LITIGATION 667-72 (1992).
[21] 104A(2), Indian Patents Act, 1970.
[22] https://shodhganga.inflibnet.ac.in/bitstream/10603/128146/18/09_chapter%204.pdf.
[23] Shamnad Basheer, Eliminating interim IP injunctions, Spicy IP, (Jan. 26, 2020, 10:04 AM), https://spicyip.com/2010/10/eliminating-interim-ip-injunctions.html.
[24] Shamnad Basheer, Pharmaceutical patent enforcement in India: Some thoughts for reform, Law Kyush, http://www.law.kyushu-u.ac.jp/programsinenglish/conference2010/draft10.pdf.
[25] Tire & Rubber Co. v. Jefferson Chem. Co., Inc., 497 F.2d 1283, 1284 (1974).
[26] Thomas L. Creel, Factors in Deciding Whether to Use ADR in Patent Disputes, in ALTERNATIVE DISPUTE RESOLUTION GUIDE.
