Highlights of recent developments in patent law
As 2022 is upon us, we have taken a moment to reflect on the developments from 2021 in Norwegian and International case law in relation to life sciences companies. In this article we have summarised some of the developments regarding (i) the Norwegian Employee Inventions Act, (ii) interpretation of patent infringement indemnity clauses, (iii) AI as the inventor of patents, (iv) patent settlement agreements and competition law, (v) patentability of computer simulations, and (iv) the US doctrine "assignor estoppel". We have also commented on the entry into force of the Protocol on Provisional Application of the Unified Patent Court ("UPC") Agreement.
The level of compensation according to the Norwegian employee invention act
The Court of Appeal's judgment in case LF-2020-105397 from 18 February 2021 concerned a claim for reasonable compensation from an employee under Section 7 of the Norwegian Employee Invention Act.
The Court of Appeal stated that when determining the amount of the compensation to be granted, the value of the invention, the scope of the right acquired by the employer, the employment agreement's terms, and the significance the employment had for the invention must be considered. The Court of Appeal granted the employee NOK 3,000,000. To our knowledge, this is the highest amount a Norwegian court has ordered an employer to pay to an employee under Section 7 of the Norwegian Employee Invention Act. Previously, an employee could not expect more than approximately the employee's annual salary.
To read more about this subject, see our article "Employee inventions – the employee's right to reasonable remuneration".
Patent infringement indemnity clauses
In its judgement in case LB-2020-52131, the Borgarting Court of Appeal interpreted an indemnification clause for claims caused by patent infringement.
Future Production AS ("Future Production") had sold triggers for an automatic disconnect system ("ADS") for oil rigs. In connection with a sale of Future Production, the buyers were informed by the founders that Future Production had a "gentlemen's agreement" with the holder of patent NO 316331, on which the ADS triggers are based. As the buyers considered the lack of a written agreement to be a risk, an indemnity clause for potential claims due to infringement of patent NO 316331 was included in the share purchase agreement. When the holder of patent NO 316331 discovered the use of Future Production's ADS triggers by four oil rigs, it claimed compensation from the owner of the rigs, who settled the claim and passed the bill down the chain until it ended up with Future Production.
The question for the Court of Appeal was whether the accumulated loss resulting from the unauthorized sale of ADS triggers was covered by the indemnity clause. The Court of Appeal found that the claim was within the scope of the agreed indemnity clause. The Court of Appeal did not comment on the content of the alleged gentlemen's agreement, besides stating that it did not entitle Future Production to royalty free use of the patent. Thus, the Court of Appeal concluded that Future Production's sale of ADS triggers had been unauthorized. The founder was ordered to indemnify the buyer for its losses, including legal costs for the District Court and the Court of Appeal.
Thus, agreeing to and drafting IP indemnity clauses should be subject to careful consideration, as the consequences can be both costly and time consuming. To read more about this judgment, see our article "IP indemnity risk in transactions – the ADS story".
AI as the inventor of a patent?
On 21 December 2021, the Board of Appeal of the European Patent Office dismissed the appeal in cases J 8/20 and J 9/20, refusing two European patent applications in which the artificial intelligence system DABUS were designated as the inventor.
Pursuant to the European Patent Convention Article 81 and 19(1), a European patent applicant must designate the inventor of the invention in question. The question for the Board of Appeal was whether the artificial intelligence system DABUS could be designated as the inventor in a European patent application. The Board of Appeal dismissed the appeals and stated that the inventor of a patented invention under the EPC has to be a person with legal capacity.
Applications designating the DABUS as the inventor have been filed in several jurisdictions, resulting in several court proceedings on this point. In England and Wales, the Court of Appeal stated in its decision on 21 September 2021 stated that a UK patent application cannot name an AI system as the inventor. In the US, the US District Court for the Eastern District of Virginia stated in its decision on 2 September 2021 that an AI machine does not qualify as an inventor under US patent law. Patent applications stating DABUS as the inventor have been granted in South Africa (28 July 2021) and Australia (30 July 2021). However, South Africa is a non-examining country, meaning that patent applications are not examined to verify that the patentability requirements are met. Consequently, the question of whether an AI system can be stated as the inventor was not assessed. Further, the decision of the Federal Court of Australia stated that a non-human artificial intelligence device or system can be named as the inventor, but not as "an applicant for a patent nor a grantee of a patent".
Patent settlement agreements in violation of EU competition law patent law decisions from EU and EPO
In cases C 591/16 P, C 586/16 P, C 588/16 P, C 601/16 P, C 611/16 P and C 614/16 P, the Court of Justice of the European Union ("CJEU") assessed whether settlement agreements entered into between H. Lundbeck A/S and Lundbeck Ltd ("Lundbeck") and several manufacturers of medicines seeking to delay marketing of the generic antidepressant "citalopram", were governed by EU competition rules. Lundbeck and the manufacturers claimed that the EU Commission's decisions under EU Treaty Article 101 to impose fines against Lundbeck and the manufacturers were invalid.
Since late 1970s, Lundbeck has developed and patented an antidepressant medicine. As Lundbeck obtained patents and subsequent secondary patents for the active substance "citalopram", manufacturers of the generic versions of citalopram were prevented from entering the market. In 2002, Lundbeck entered into settlement agreements with parties active in the production or sale of generic medicines, requiring these counterparties not to enter the citalopram market in return for significant payments and purchase of stocks of generic products.
Investigations by the European Commission discovered that the amounts paid by Lundbeck approximately corresponded with the profits the counterparties could have obtained by successfully entering the market. As a result, the Commission concluded that the "pay for delay" settlement agreements restricted the competition by object and infringed the EU Treaty Article 101. Lundbeck was fined EUR 93.7 million and the manufacturers were fined a total of EUR 52.2 million.
The CJEU stated that to establish Lundbeck and these counterparties as potential competitors, mere "existence of coordination" is not sufficient. The coordination must have "a negative and appreciable effect on competition within the internal market". The CJEU found that Lundbeck and these counterparties were potential competitors, and that the settlement agreements violated EU competition law and were thus invalid. Consequently, the CJEU dissed all the appeals.
Patentability of computer simulations
In case C 1/19, EPO's Enlarged Board of Appeal assessed whether data-implemented simulations of the movement of autonomous vehicles had inventive step and thus met the patentability requirements. Firstly, the Board of Appeal held that computer implemented inventions cannot in general be excluded from patent protection. Further, it stated that "[l]ike any other computer implemented method, a simulation without output having a direct link with physical reality may still solve a technical problem". Consequently, data implemented simulations may have inventive step under EU patent law.
Decision from the US Supreme Court on assignor estoppel
The US Supreme Court's decision on 29 June 2021 concerned the doctrine of assignor estoppel, which prevents the inventor of a patent from claiming that the patent is invalid after assigning the rights to the patent. The question for the Supreme Court was whether the doctrine prevented the inventor of the patent of the "NovaSure System" from claiming invalidity.
The Supreme Court stated that assignor estoppel "applies only when an inventor says one thing (explicitly or implicitly) in assigning a patent and the opposite in litigating against the patent’s owner". However, the Supreme Court stated that the remuneration and other circumstances relating to the assignment must be taken into account. The Supreme Court appears to have limited the scope of application of the doctrine as it set aside the Federal Circuit's judgment rejecting the claim of invalidity due to circumstances following the assignment.
18 January 2022: The Protocol on Provisional Application of the UPC Agreement has entered into force
Lastly, we had to mention the Protocol on Provisional Application of the UPC Agreement, which entered into force on 18 January 2022. The UPC is intended for all EU member states and will try cases relating to infringement and revocation of both national patents and European unitary patents. For the time being, it is uncertain what specific consequences the UPC may have for Norway and Norwegian companies. As an EEA state, and due to constitutional limitations, Norway cannot participate in an arrangement of European unitary patents. Thus, the UPC will have limited consequences for Norway as a country. However, the arrangement may still be relevant for Norwegian companies. In particular, the arrangement will make it easier and cheaper for Norwegian companies to obtain patents in the relevant EU member states. Regardless of how this may turn out, the UPC is an exciting establishment for the European patent law harmonization, and we look forward to following its development.