The Mystery of the Euro Bank Note: A Strange Case of Patent Infringement

A US firm of security printers called Document Security Systems, Inc. (“DSS”) owns a European patent for a method of making a document which cannot be replicated by a scanning type copying device. The European patent designates various countries in Europe, including the UK, Germany and Luxembourg. DSS believes that Euro bank notes use its patented technology. In 2004, it therefore sued the European Central Bank (“ECB”) for patent infringement. The ECB denies that it has infringed the patent. The case is still pending. In 2006, the ECB applied to revoke the patent. So far, a fairly typical patent infringement action.

There are however some curious features to this case, which illustrate well some topical issues in European patent law.

First, which Court should hear the infringement action? A European patent - once granted - takes effect as a national patent in each of the states designated by the patentee. As a general rule, this means that the owner of a European patent brings an action for infringement before the national court(s) of the designated state(s) in which the allegedly infringing acts occurred. However, in this case, DSS did not sue the ECB before a national court. Instead, it brought proceedings before the Court of First Instance of the European Communities in Luxembourg (“CFI”). DSS claims that it was obliged to do so by the EC Treaty, which requires a person claiming compensation from an EC institution to bring his action before the CFI. Certainly, another claim for compensation relating to Euro bank notes was heard by the CFI (The claim was brought by Travelex against the European Commission in 2002. Travelex alleged that the design of the Euro symbol infringed Travelex’ trade marks).

Interestingly, the ECB does not agree that the CFI is the appropriate forum. It has asked the CFI to dismiss the case as inadmissible. The case is still pending. If it goes ahead, it will be the first patent action to be heard by the CFI. This will pose significant practical problems for the parties, as the usual procedures of the CFI are not well suited to patent litigation and its judges are unfamiliar with patent law.

Secondly, which Court should hear the revocation action? The ECB has brought parallel claims for revocation before the national courts in each country designated in the European patent. This is consistent with the ECB’s view that the CFI does not have jurisdiction over either infringement or validity of a European patent. However, it creates a situation in which the validity of the patent will be considered by a number of national courts, whilst infringement of the same patent will be considered by another court (i.e. the CFI). Different courts hearing differing aspects of a patent case is normal practice in Germany. However, in the UK, the same court considers issues of infringement and validity at the same time. This is generally thought (at least in the UK) to be desirable, as it prevents the patentee from making inconsistent arguments in the two Courts. In fact, in this case, the English Court complained that exactly this problem had arisen. In its view, DSS had taken different positions on the same issue before the CFI and the English Court.

Thirdly, the English Court refused to follow a decision of the Technical Board of Appeal of the European Patent Office on the validity of the patent. This is a senior appeal body that oversees the grant of European patents by the European Patent Office. Its decisions are not binding on the English courts. However, the House of Lords has ruled that English courts should treat its decisions with deference and should try not to reach inconsistent decisions, if at all possible.

Fourthly, the various national Courts have disagreed with each other over the validity of the European patent. The English Court decided that the UK part of the European patent was invalid on the grounds of “added matter” and revoked it. On the following day, the German Federal Patent Court upheld the validity of the German part of the same European patent (even though it had identical wording to the UK part of the European patent). The decision of the English Court is under appeal.

This risk of inconsistent decisions between national courts on the same European patent is well known. It is inherent in the current jurisdictional arrangements for litigation involving European patents. Various proposals have been made over the last 30 years to address this problem, including:

preparation of a draft European patent litigation agreement (which would give jurisdiction over all parts of a European patent to a single Court); and
the creation of a Community Patent (which would create a single patent covering the whole EC, again subject to the jurisdiction of a single Court).

So far, it has not been possible to gather the necessary political support to move either of these proposals forward. The European Commission announced in April this year that it would have one last go at trying to resolve the impasse. It has published a proposal that combines aspects of both the draft European patent litigation agreement and the draft Community Patent. It remains to be seen whether there will be sufficient support for the proposal to be implemented.

So, the outcome of the central issue in the DSS case (whether there has been an infringement of a valid patent belonging to DSS) remains unclear.

Contact our Commercial and technology group on 0118 952 7247 for any questions on patents or other IP issues.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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