Be Wary of Patent Trolls in European Medtech

Patent trolls aren't only a U.S. phenomenon. Two legal experts discuss why nonpracticing entities have impacted medical device companies doing business in Europe and ways to defend against such lawsuits.

That patent trolls have discovered the medtech industry is no secret. The trend of nonpracticing entities (NPEs) filing lawsuits against medtech companies is well-known in the United States (see MD+DI's February 2014 piece, "Patent Trolls Invade Medtech").

While the practice started in the United States, it certainly isn't limited to domestic shores. That can be seen from high profile cases like MedTech Development Deutschland GmbH vs. Stryker GmbH & Co. KG.

Patent law experts Martin Fähndrich, PhD, and Miriam Gundt, LL.M., both partners in Hogan Lovells's Dusseldorf office, recently discussed the topic of NPEs with MD+DI. They explained why the use of patent troll lawsuits is expanding in Europe's medtech industry and how companies can protect themselves.

Expansion into Europe

Originally seen in the computer science and telecommunications industries, patent trolls have expanded into the medical device industry for a number of reasons. Fähndrich said that because medical devices now often contain computer-based and communication technology, they can be exposed to troll threats. Of course, NPEs are also moving into the device arena with patents targeting certain surgical equipment technology, he said. 

In addition, NPEs, which until recently often held mainly U.S. patents due to the expense of additional applications, now have the equivalent patents in Europe, Fähndrich said.

How NPE Lawsuits in Europe Differ

Then too, the court system in Europe can sometimes make it easier for patent trolls to win an injunction against a practicing company. In the United States, courts apply a four-factor test, sometimes colloquially called the "eBay test" because it was invoked in an influential 2006 Supreme Court ruling, to determine if an injunction should be granted. The four factors the plaintiff must show--the NPE, in these lawsuits--are evidence of an irreversible injury, that other measures like financial damages are not enough, that the plaintiff suffered more hardship than the defendant, and that an injunction would not hurt the public interest.  

Instead, Fähndrich pointed out, courts in patent owner-friendly countries like Germany and the Netherlands don't employ such a test before determining injunctive relief. "Injunctive relief is the standard remedy in case the court finds patent infringement . . . It's easier to advance and it's easier to get the practicing entity into a very difficult situation which typically has the result that the practicing entity . . . [pays] a lot of money rather than [be] out of the market."

Gundt added that the bifurcation system in Germany means that the issue of patent infringement and the issue of patent validity are looked at by different courts. This set-up means a German court can reach a decision on patent infringement very quickly. "You can basically get to an infringement decision with 9-12 months without the court having actually looked at or decided on validity. It's a very sharp weapon to file an action in Germany, and very dangerous for the practicing entity," Gundt said.

There are natural limitations in the patent examination process, Fähndrich explained. "The killer piece of prior art which takes away the novelty from a patent may be in Japanese and the U.S. examiner doesn't understand Japanese. Or it is in Spanish and the European Patent Office examiner doesn't understand Spanish and therefore doesn't find this piece of prior art and thinks that the patent is novel, although it in fact is not," he said.

Having different courts examine infringement and validity at different speeds means efforts at a patent invalidity attack by a defendant might not help prevent a quicker infringement decision that may lead to injunctive relief against the defendant. 

Any Changes on the Horizon?

While politicians often propose legislation to combat patent trolls here in the United States, Gundt noted that the issue is not as politicized in Europe. "We do recognize and realize the problem that R&D companies and practicing entities have, but it's not so high on the political agenda . . . I think there is not really a big political interest in this, at least not on the level we see in the U.S.," she said.

There has been some debate over whether the proposed Unified Patent Court (UPC) for all of the European Union will impact the landscape for patent trolls once it goes into effect. Two main differences are that a case filed under the UPC would not automatically use the bifurcation system and a win for an NPE (or a defendant) in the UPC would hold throughout all the EU countries.

"I wouldn't say [UPC is] a paradise for trolls nor is it more difficult for trolls," Gundt said.

Ways to Fight Back

What can medtech companies doing business in Europe do to protect their patents and products? Fähndrich and Gundt highlighted a few strategies, though of course there are plenty more:

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