Monday, 14 July 2014

Nigeria, beware of "patents trolls": A case study

That patent litigation (reported here, here, and here) was meant to be continued, and Nigeria’s civil justice system must not encourage “patent trolls”, reports Afro-IP’s friend, Chukwuyere Izuogu, solicitor at Streamsowers & KöhnThanks, Chukwuyere, for sharing this thought-provoking piece.


Nigerian patent troll
Source: here
On Tuesday, 28 January 2014, the court, in the case of Bedding Holding Limited v. INEC & others, found the Independent National Electoral Commission (INEC) liable for infringing the patents belonging to Bedding Holding Limited (BHL). [Afro Leo couldn't find a website for this patent holder] The patents, granted under the Patent and Designs Act of 1971 (the Act), relate to the process and application of Direct Data Capture (DDC) machines for the compilation and collection of various biometric information.

Background and facts
BHL sued INEC and five others at the Federal High Court (the Court) alleging infringement of Patent No. RP16642 (relating to Electronic Collapsible Transparent Ballot Boxes) and Patent No. RP NG/P/2010/202 (in respect of Proof of Address System/Scheme) (PASS). Both patents will be collectively referred to as the “patents”.

Harry Potter patent troll
Source: here
The court held that the defendants infringed the patents and consequently made a declaration inter alia that BHL is entitled to 50% of the total contract sums, amounting to N17, 258, 820, 000. 00 (Seventeen Billion, Two Hundred and Fifty Eight Million, Eight Hundred and Twenty Thousand Naira Only) as the minimum reasonable royalty accruable for the infringement committed by INEC and the other defendants. [Folks, that’s around $106 million, if Afro Leo’s calculator is right. Says Afro Leo: Good luck with enforcement! And, what sort of healthcare or education can that buy?]

In this article, I will set out why I do not agree with this decision. I conclude that it will encourage patent trolls, which will negatively impact on Nigeria’s nascent tech-ecosystem. [To read about some developments in the ecosystem, see here, here, and here]

1.         BHL did not identify the particular claims contained in the patents that were allegedly infringed

Whether or not a patent is infringed depends on the identification of the claims contained in the patent, in accordance with Section 6 (2) of the Act. Section 6 (2) of the Act provides that: The scope of the protection conferred by a patent shall be determined by the terms of the claims; and the description (and the plans and drawings, if any) included in the patent shall be used to interpret the claims, accordingly the question of patent infringement will ultimately depend on the identification of these claims.

According to Lord Russell in Electric & Musical Industries Ltd v Lissen Ltd (1939) 56 RPC 23, “the function of the claims is to define clearly and with precision the monopoly claimed so that others may know the exact boundaries of the area in which, if they venture therein, they will be trespassers”. In Codex Corporation v Racal-Milgo Ltd [1983] RPC 369 at page 381, the Court of Appeal held that one should not look only to the essence or principle of a patent in suit to find an infringement merely because the essence or principle has been made use of by the alleged infringer.

The importance of the claims in patent infringement proceedings has also been reaffirmed by the Nigerian case of James Oitomen Agboronto v. Grain Haulage [1997-2003] 4 I.P.L.R 177, where the court stated that a plaintiff who desires to succeed in a patent claim has to show inter alia that the act of the infringement has been covered by a valid claim of the plaintiff’s patent (underlined for emphasis).

My review of the decision indicates that BHL did not identify the particular claim(s) contained in the patents that were allegedly infringed. It is my view that the failure to identify the particular claims allegedly infringed makes it impossible to determine the exact scope of the protection granted by the patents, not to mention of reaching a definite legal conclusion that the said patents were actually infringed. 

2.         BHL did not make a clear showing that the allegedly infringing DDC machines applies the same process protected by his patents

BHL averred in paragraph 19 of its statement of claim that it is “not claiming to have a patent over the voter’s register per se or the DDC Machines, but the process of the application of the said DDC machines...and application of the said products to produce the Voter’s Register”.

Further, at paragraph 20 of its statement of claim, that: ...inasmuch as the end result is to provide the names, age, sex, photographs, address, unit, ward, town, local government, state etc of voters, the process and the combined application of the means of achieving this, serious infringes on the said process and application of the Plaintiff’s patents for the compilation and production of the Voter’s Register.

These averments by BHL brings the patent infringement allegations against the defendants within the scope of the first part of Section 6 (1) (b) of the Act which states that: A patent confers upon the patentee the right to preclude any other person from doing any of the following acts where the patent has been granted in respect of a process, the act of applying the process. In other words, in this case, the process patents owned by BHL can only be infringed by the act of applying the process.

Beyond the “formulaic recital” of the basic elements of infringing a process patent under the Act, BHL did not show by material facts supported by “clear and convincing” evidence on how the defendants’ applied the patented process in the deployment of the DCC machines for the election process, or how the defendants’ conduct in deploying the DCC machines for the election process is identical to the patented process. Thus, BHL failed to plead the infringement of his patented process with sufficient detail. 

The Court of Appeal in the case of Arewa Textiles Plc & Others v. Finetex Limited (2003) 7 NWLR 322 at 351 – 352, had this to say concerning the infringement of a process patent: The claim herein being one of process or method and not one of product, it is incumbent on the [plaintiff] to adduce evidence showing that the first [defendant] adopted a process similar to its own...

In the absence of such material facts backed by evidence in this regard, I do not see how the court could have rightly held that: The plaintiff has established by overwhelming evidence that his patents rights have been infringed on.
3.       The Court misconstrued the meaning of “new” or “novelty” in the Act

The 1st, 2nd and 4th defendants, in their respective statements of defence, set out facts challenging the novelty of the patents. They also adduced evidence of prior art and canvassed legal arguments to sustain this challenge. Accordingly, the novelty of the patents was thrown up for determination before the court.

Section 1 (2) (a) of the Act states that an invention is new if it does not form part of the state of the art. Section 1 (3) defines the “art” to mean the art or field of knowledge to which an invention relates and “the state of the art” means everything concerning that art or field of knowledge which has been made available to the public anywhere and at any time whatever (by means of a written or oral description, by use or in any other way) before the date of the filing of the patent application relating to the invention... Therefore, novelty is really a question of whether the invention is “new” or has been “anticipated” for example, by a previous patent, or by publication or use.

In resolving this issue, the court, in my humble opinion, wrongly proceeded to affirm the novelty (validity) of the patents because BHL was able to establish that it owns the patents, whereas the defendants failed to prove otherwise. In this regard, the court misconstrues novelty to mean proof of existence (or ownership) of a patent rather than whether the invention (or process) protected by the patent is new, or is anticipated by prior art.

The precedent set by this decision, if not challenged, will give rise to a new breed of patent trolls (Wikipedia defines a patent troll as “…a person or company who enforces patent rights against accused infringers in an attempt to collect licensing fees….) who will apply to patent just about anything patentable under the sun in other to claim ownership to the invention, rather than proving novelty. This is particularly possible because the Act does not require patent examiners to conduct substantive examination as to whether the invention (contained in the patent application) is in fact patentable. [Yes, also South Africa, not so in Kenya for petty patents] This gives patent trolls the ability to “game” the patent system in Nigeria. Such scenario occurring in Nigeria is likely to retard innovation. 

On this basis and for the reasons stated above, it is necessary that the decision of the court is reviewed by a higher court and that the Act is urgently reformed to support innovation and protect the nascent tech-ecosystem in Nigeria.


Leos' questions and commentary 

First, is the continent, generally, ready for substantive patent examination? And, is it a good idea in its current stage of development?

What is the difference, if any, between a “patent troll” and a non-practicing entity (NPE)? Do you consider them to be a Friend or a Foe? Do they really matter? [This is funny: Afro Leo thinks they do matter because there is a law module at Stanford Law School on ‘patent troll litigation’. On a more serious note, he points at a recent study which suggests they’re “killing start-ups” and/or slowing innovation]

However, this Leo doesn't quite feel that “patent trolls” will be springing up or flooding into Nigeria anytime soon. To his mind, South Africa, where he understands that third party litigation funding is pretty decent, seems to be the place for hunt. So, good luck to any “patent troll” thinking of making easy money or gaining other strategic advantage from litigating patents under the current civil justice system in Nigeria.  [Afro Leo understands that a reform is overdue – not least, at the Federal High Court level, where IP disputes are litigated]

More importantly, it’s time for Nigeria to emulate South Africa, with a specialist profession. This would create a pool of specialist lawyers to pick from when appointing the IP judges of the future. If that happens, then the next step could see the creation of a specialist court for resolving IP disputes. Again, Nigeria might wish to copy Thailand (also here) or even the UK. Anyway, that’s food for thought for a future civil justice reform in Nigeria. [Afro Leo is wondering whether there is enough IP work around to warrant such a move. He suggests reviewing Nigeria's law school curriculum/system to ensure that IP law and practice is studied well]

Lastly, this Leo just found out, by himself, that Chukwuyere will be speaking at this year’s NigeriaCom conference scheduled for 17 – 18 September. You can also pursue Chukwuyere on Twitter  @NairaSolicitor.

Readers, over to you.

Afro-IP references:
10 States passed "anti-patent troll" laws here but U.S. Senate fails here
EU folks’ view on “patent trolls” here; but are they really in Europe?
A “patent troll” is hit with legal costs here
Tools to stop “patent trolls” are here
What others can learn from America’s “patent troll” experience here
How Nigeria can beat “patent trolls” using the EU formula found here
Wondering why "patent trolls" go to Texas? Answer is here
US tech giants are scared of “patent trolls” here, here, here and here

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