Costly showdown of a case with a history

Case No. O2012_013 ¦ Order of 29 May 2013 ¦ “Abschreibungsverfügung nach Klagerückzug”

This case pertains to a composition for the treatment of fungal nail infection. The FPC issued a dismissal order after the plaintiff had withdrawn the suit. The allegedly infringing product was a precision applicator available on the market under the brand Excilor®; cf. website screenshot below for illustrative purposes.

http://www.excilor.com/CorporateEN/ (Screenshot 15 June 2013)
http://www.excilor.com/CorporateEN/
(Screenshot 15 June 2013)

The competing product Nailner® is apparently authorized by the plaintiff. The timeline of the case is as follows:

  • On 11 February 2011, the plaintiff had filed the suit (still with the Commercial Court of the canton of Zurich; case HG110024-O). The three defendants provided their answers on 10 May 2011. Reply and rejoinder were filed on 30 August 2011 and 07 November 2011, respectively.
  • On 11 January 2012, the case was transferred to the FPC. A preparatory hearing was conducted on 07 December 2012, and  the parties were provided with the assessment of the reporting judge Dr. Tobias BREMI on 10 December 2012. The parties provided their written comments in due time.
  • Next, the parties were summoned for the main hearing on 25 April 2013.

Nothing out of the ordinary this far. But on 24 April 2013, i.e. only one day prior to the main hearing, the plaintiff had withdrawn the suit. Consequently, the hearing was cancelled (cf. the list of public hearings on this Blog here). Thus, we will not see any decision on the merits anymore. But what about the costs? According to Art. 106 CPC, the costs are charged to the unsuccessful party. If an action is withdrawn, the plaintiff is deemed to be the unsuccessful party. However, the court may diverge from the general principles of allocation and allocate the costs at its own discretion if a party was caused to litigate in good faith (Art. 107 lit. b CPC); or if there are other extraordinary circumstances that would result in an allocation according to the outcome of the case being inequitable (Art. 107 lit. f CPC). Based on these provisions, the plaintiff requested an allocation of costs with a share of 2/3 (plaintiff) to 1/3 (defendants). In brief, the plaintiff argued that prior to the filing of the lawsuit he had not been aware of any issues with respect to the following:

  1. (lack of) right of action;
  2. (lack of) validity of the patent in suit; and
  3. (lack of) infringement of the patent in suit.

The FPC shot this down harshly:

This allegation is against plaintiff’s better knowledge. The defendants had already asserted these issues in prior summary proceedings at the Commercial Court Zurich (HE100006; decided on 11 February 2011). The plaintiff was thus well aware of these issues at that time when the action was brought.

This seems worth being looked at in more detail. The decision of the Commercial Court Zurich in prior summary proceedings was appealed to the Supreme Court; the decision in appeal proceedings is published as 4A_142/2011. Even though the publication number of the patent in suit is not identified in the former decision of the Supreme Court, the wording of the independent claim 1 is literally reproduced. It reads as follows:

Topical application products free of water and film- and lacquer-forming additives for the treatment of onychomycoses and nail care containing
a) one or more active substances
b) one or more C1-C4-alkyl esters of lactic acid, malic acid, tartaric acid or citric acid as carriers and
c) optionally physiologically compatible adjuvants.

A simple Google search of the claim wording reveals the patent in suit: EP 1 143 950 B1. The complete file wrapper is available directly at the EPO. Now, with this information at hand, let’s have a closer look at the three issues (right of action; validity; infringement):

(Lack of) Right of Action

Lack of right of action was not an issue in the decision 4A_142/2011 of the Supreme Court. Apparently, the Commercial Court ZH rejected the request for preliminary injunctive relief already for reasons of lack of prima facie evidence of infringement (see below). However, the issue of lack of right of action may well have been raised by the defendants in summary proceedings as a plea in objection.

BioEqual AG is indicated as patentee in both the European Patent Register and Swissreg. However, from the file wrapper one may well guess that factual ownership might be complicated. BioEqual AG was entered into the European Patent Register as owner with effect as of 22 July 2004; cf. EPO Form 2544 of 12 August 2004. This transfer of ownership was registered on the basis of a declaration of transfer of ownership from IPR-Institute for Pharmaceutical Research AG (in liquidation) to BioEqual AG of 03 June 2004. However, yet another declaration of transfer of ownership is on file which is dated earlier. According to this declaration, IPR-Institute for Pharmaceutical Research AG had already transferred ownership to Dr. Tobias A. THOMMEN by contract of 15 May 2002. Factual ownership of BioEqual AG might thus be doubtful.

(Lack of) Validity of the Patent in Suit

Apparently, a negative limitation (disclaimer) to the wording of claim 1 of the patent in suit was introduced during prosecution, i.e. the feature

free of […] film- and lacquer-forming additives

This amendment was carried out already in the proceedings of international preliminary examination; cf letter of 29 November 2000. Allowability of this initially undisclosed disclaimer might be doubtful in view of the decision G 1/03 of the Enlarged Board of Appeal of the EPO.

(Lack of) Infringement

Apparently, the water content of the allegedly infringing product was already the technical key aspect of the earlier decision 4A_142/2011 of the Supreme Court. Literally, claim 1 of the patent in suit requires the absence of water. Already at that time, it was beyond dispute that the allegedly infringing product contained 2% of water. From the requests of the plaintiff, it becomes clear that the allegedly infringing products still contained water (“not more than 4%”; “with a water content of 2% or 4.7 to 7%, respectively”). These amounts of water might have established the lack of infringement. Moreover, the allegedly infringing composition seemingly comprises a “film-forming agent” (see below) — contrary to the wording of the disclaimer introduced into the independent claim 1 of the patent in suit, as outlined above.

http://www.excilor.com/CorporateEN/styletprecision.html (Partial screenshot 15 June 2013)
http://www.excilor.com/CorporateEN/styletprecision.html
(Partial screenshot 15 June 2013)
The cheque, please …

In view of the foregoing, the FPC did not see any reason to deviate from the general principle of Art. 106 CPC and charged the costs to the plaintiff.

The plaintiff himself had estimated the value in dispute to about CHF 1’700’000,–. Based thereon and in accordance with Art. 1 CostR-PatC, the court fee was fixed to CHF 70’000,–. Court fees of the Commercial Court ZH were fixed to CHF 2’000,–.

All three defendants defended their own case; their costs were compensated independently from each other. In accordance with Art. 3 lit. b in connection with Art. 4 and 5 CostR-PatC, a compensation of about CHF 80’000,– was held reasonable by the FPC. De facto, the costs of defendants (1.) and (3.) were in this range and were fully awarded. Costs of defandant (2.) were much higher, but only CHF 85’000,– were awarded.

Costs for patent attorneys in an advisory capacity were claimed as necessary expenses by defendants (2.) and (3.), according to Art. 3 lit a in connection with Art. 9(2) CostR-PatC. These costs were held reasonable by the FPC and were thus awarded in full.

Including some further, yet minor expenses — this is the bill:

  
  70'000,-- CHF   Court fees of the FPC

   2'000,-- CHF   Court fees of the Commercial Court ZH (HG110024-O)

                  -----------------------------------------------------------

                  Defendant (1.), Doetsch Grether AG:

  81'513,40 CHF   Compensation for legal representation 
                  (incl. fees for 228,95h à CHF 320,--; awarded as requested)

                  -----------------------------------------------------------

                  Defendant (2.), Oystershell NV:

  85'000,-- CHF   Compensation for legal representation
                  (requested: fees for 290h à CHF 700,--; sharply reduced)

  59'830,-- CHF   Compensation for patent attorney
                  (Schaad, Balass, Menzl & Partner AG; awarded as requested)

     418,-- CHF   Expenses (awarded as requested)

   2'095,80 EUR   Expenses (awarded as requested)

                  -----------------------------------------------------------

                  Defendant (3.), JeCare SA:

  78'795,-- CHF   Compensation for legal representation 
                  (incl. fees for 170h à CHF 400,--; awarded as requested)

   4'271,-- CHF   Compensation for patent attorney
                  (E. Blum & Co. AG; awarded as requested)

     940,30 CHF   Expenses (awarded as requested)

   1'653,80 EUR   Expenses (awarded as requested)

 ----------------------------------------------------------------------------

 382'767,70 CHF
+  4'499,52 EUR
 ==============

Reported by Martin WILMING

BIBLIOGRAPHY

Case No. O2012_013 ¦ Order of 29 May 2013 ¦ “Abschreibungsverfügung nach Klagerückzug”

BioEqual AG
./.
(1.) Doetsch Grether AG, CH-4002 Basel
(2.) Oystershell NV, BE-9031 Drongen
(3.) JeCare SA, BE-1420 Braine-l’Alleud

Subject(s):

  • Patent Infringement

Composition of the Board of the FPC:

  • Dr. iur. Dieter BRÄNDLE (President)
  • Lic. iur. Jakob ZELLWEGER (First Court Secretary)

Representative(s) of Plaintiff:

Representative(s) of Defendant:

Full text of the decision right here:

Download (PDF, 98KB)

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