Obstacles to Patent Invalidity Decisions

published on 27 Jul 2015

Patent invalidity can be raised as a defense in civil proceedings. If a civil court invalidates the patent at issue, the patentee loses the ground against the opposing party at that very civil proceeding. However, such a patent invalidation issued by the civil court only applies to each particular case. The patent at issue is still valid unless it is invalidated in a separate action by the Taiwan Intellectual Property Office (TIPO) or, in an appeal, by the administrative court. A patent invalidated by the administrative court will be cancelled and be deemed as ‘non-existent from the beginning.’ This is the so-called "bifurcated system" of patent invalidation.

Such a system creates a potential conflict between civil and administrative judgments, especially when the administrative court invalidates a patent after a final civil judgment has rendered that the patent has been infringed. If the civil court has already rendered its final judgment on infringement and awarded damages, it must be determined whether the defendant can request for a retrial based on the administrative court’s final and binding judgment of patent invalidity.

IP Court’s opinion

For the first time in a recent retrial judgment, the IP Court rejected a petition for retrial after administrative invalidation of patent. IP Court has reasoned that: “The civil final judgment is rendered based on the supporting evidence available in the first instance at the discretion of the civil court empowered by the Intellectual Property Case Adjudication Act (IPCAA). Granting a retrial based on an altered opinion of a subsequent administrative judgment on the validity of the patent at issue will compromise the stability of the law. Moreover, regarding foreign example(s) such as Japan, retrial is not granted in such circumstances. If the defendant did not raise the patent invalidity defense in prior proceedings, the defendant will then lose the right to challenge the final judgment based on patent invalidity.

To support its last rationale, the Court referred to Article 447 of the Code of Civil Procedure that, to serve the purpose of avoiding litigation laches, the parties in the second instance cannot raise new claims or defenses that could have been raised in the first instance. Thus, if the patent invalidity defense is not raised during the first instance civil of litigation, the defendant shall not file for a retrial challenging the enforceability of the civil judgment based on the later issued invalidation judgment.

Supreme Court’s opinion

After appeal, on March 12 2015, the Supreme Court revoked the judgment and remanded the case to IP Court.

The Supreme Court reiterated the grounds for retrial that: “a retrial action may be initiated to request a review of a final judgment if the referenced administrative disposition, based on which the judgment is entered, is altered by a subsequent final decision or administrative disposition.”[1] Since patent infringement is determined based on the validity of the patent, patent validity should be the grounds on which the civil final judgment is entered. If the patent is later declared to be invalid by the administrative court, the administrative judgment/disposition of granting the patent to the patentee will be revoked and the patent will be deemed as non-existent from the beginning. The grounds of the final judgement have therefore been altered.

The Supreme Court found that the defendant’s raise of a patent invalidity challenge in the second instance was immediately dismissed by IP Court without substantive review simply because the same challenge was absent in the first instance. The Supreme Court held that IP Court’s holding that ‘the Court determined the patent validity at its own discretion rather than relying on the administrative disposition of patent grant’ is in error.

Commentary

Article 447 only prohibits the parties in second instances from raising new claims or defenses that could have been raised in the first instance. However, there are at least two exceptions to Article 447 limitation: (i) where the party was unable to present such additional means of challenge or defense due to reasons not imputable to themselves; and, (ii) where it would be manifestly unfair to prevent the party from presenting such additional means of challenge or defense. Preventing the defendant from requesting a retrial is manifestly unjustifiable because the defendant was unable to present an invalidity defense since the administrative disposition was made after the civil final judgment. Plus, evidence collection for a patent invalidation action is time consuming. Requiring a defendant to take consequence of failing to timely uncover any effectual evidence on patent invalidity during the first instance civil trial is not reasonable.

The Supreme Court’s decision becomes more persuasive when it is rendered on the basic idea that there will not be any infringement if the patent at issue is not valid. Request for a retrial under such circumstances is firmly based on[2] “a retrial action may be initiated to request a review of a final judgment if the referenced administrative disposition, based on which the judgment is entered, is altered by a subsequent final decision or administrative disposition.” Concerning public interest, if a patent is later declared to be invalid, it is more justifiable to demand the patentee to return awarded damages which were gained owing to the previous enforcement of such an invalid patent. The Supreme Court’s opinion is consistent with the idea of the bifurcated system in that a civil court’s declaration of patent invalidity is merely binding on the particular patent infringement case. The validity of a patent right should be subject to the jurisdiction of TIPO, or, if applicable, the administrative court.