FCJ and priority rights: Is this the end of formal priority challenges?

FCJ and priority rights: Is this the end of formal priority challenges?

In its judgment Sorafenib-Tosylat of 28 November 2023 (X ZR 83/21), the Federal Court of Justice (FCJ) ruled that there is generally a rebuttable but strong presumption that the applicant of a patent can claim the underlying priority right. With this decision, the FCJ agrees with the most recent decision of the Enlarged Board of Appeal of the European Patent Office (EPO) of 10 October 2023 (G 1/22 and G 2/22) on the transfer of priority rights (Art 87 (1) EPC).

Background

The proceedings originated in nullity proceedings before the Federal Patent Court. The defendant held a European patent. The patent arose out of a second-generation divisional application. And the parent application was filed in 2002, claiming priority of a US provisional application from 2001.

Doubts around claiming the priority arose because the defendant couldn’t submit transfer agreements for all of the 18 applicants of the US priority. Only some could be presented in the case. There was not always a conclusive track record of written assignments of the underlying US priority to the application of the European patent.  

A common fact underlying both decisions (Enlarged Board and FCJ) was that the patent application (a PCT application in both instances) that leads to the European patent respectively, was jointly filed by the applicants of the US provisional application and the alleged assignee of the underlying priority right.

Key aspects of the decisions

The FCJ found that the patent owner could validly and formally claim the priority right. In line with the decisions of the Enlarged Board (G 1/22 and G 2/22), the FCJ concluded that there was a rebuttable but strong presumption of entitlement to claim priority under Art. 87 (1) of the European Patent Convention (EPC). The fact that the FCJ – contrary to the Enlarged Board – needed to rely on the German Civil Procedure Law with respect to the burden of proof did not lead to a diverging conclusion.

In the Enlarged Board’s underlying decision, this rebuttable presumption was primarily derived from the fact that it would, from a pure practical point of view, not be possible for the applicant of the subsequent application to formally claim the priority of the priority application without the cooperation of the applicant of the priority application.

The applicant of the subsequent application wouldn’t even know about the existing priority right and wouldn’t be able to file the priority application within the applicable periods without the cooperation of the applicant of the priority application as the priority application is normally not yet published at this point in time.

Moreover, any party transferring the application to a subsequent application would want the subsequent applicant to be able to claim the priority right. Especially, at the case at hand that the Enlarged Board needed to decide, there was a string factual presumption with respect to the consent of the priority applicant to claim the priority since the subsequent PCT application was filed by the applicants of the US priority application and the alleged assignee jointly.

In line with the Enlarged Board’s findings, the FCJ held that concrete circumstances would need to be shown which give rise to serious doubts as to the priority right entitlement of the later applicant. In the case, the doubts were not justified by the fact that the defendant had only submitted assignment agreements for some of the 18 applicants of the earlier US application. This would not rule out that informal or implicit assignment agreements exists for the other applicants.

In addition, the entitlement to claim priority was also implied by the fact that the 18 applicants of the earlier application were joint applicants (for the US) of the PCT application from which the European patent arose.

The FCJ once again pointed out that in German nullity proceedings, the burden of presentation and proof – including with respect to priority entitlement – lies with the nullity plaintiff. If there’s no way to prove any circumstances from which it may be inferred that a transfer of the priority right is invalid, this would be to its detriment.

Strictly applying the burden of proof is not inappropriate. The nullity plaintiff can always reach out to the applicant of the underlying priority application to clarify the situation. If the applicant doesn’t provide any information, this typically indicates that there’s consent with respect to priority entitlement.

Effects on practice

Interestingly, the Enlarged Board acknowledged in its decision that the existence of such strong presumption will substantially limit the possibility to successfully challenge priority entitlement. We cannot disagree with this conclusion.

While it’s certainly true that in most cases the party transferring rights on a prior application also wants the priority right to be transferred, there could be cases where a transfer of the priority right fails or is not intended.

For US provisional applications, which is certainly the main use case for which priority challenges could arise, it is true that many of these applications are not continued in the US, which is why often no assignment agreements exist for such applications.

It seems at the very least questionable whether, in such cases, there can exist a similar strong presumption that the priority right is assigned to the later applicant. While it’s certainly beyond doubt that the priority right can be transferred isolated, it seems implausible that the applicant of a prior US application would have intended to implicitly assign any priority right if the US provisional was just abandoned. It rather seems more plausible that the applicant of the priority application didn’t think of the potential priority right in these circumstances. At least in this scenario, the lack of any assignment of the underlying priority application should to some extent rebut the presumption that the priority right was nonetheless transferred.

While it’s certainly possible to try to reach out to the applicant of the priority application to get more information on the underlying intention, the practical hurdle is enormous. One can already think of various reasons, eg non-disclosure agreements or lack of documentation after all those years, why the applicant cannot be of any help. If the third party does not provide any information, this not only factually exhausts the options of the nullity plaintiff to gain access to information on the transfer process, but the view of the FCJ even indicates that the third party agreed to the claiming of the priority right.

The question is to what extent both decisions were driven by the specific circumstances that the PCT application was made jointly by the applicants of the priority application and the applicant of the subsequent one.

While it may not be entirely illusory to conclude that the applicants of the priority application agreed that the subsequent applicant claims the respective priority, the situation and therefore threshold might be different if no joint application exists.

Further cases need to demonstrate under which circumstances it will be possible for an opponent or nullity plaintiff to rebut this presumption and maybe require the patent owner to substantiate that a valid transfer of the priority right took place. What’s not entirely clear in that regard, at least for German proceedings, is the question of the legal basis for the strong but rebuttable presumption. While one could conclude in view of the FCJ’s statement that the presumption follows from the EPC directly that it’s a statutory presumption with the result that secondary burden of presentation would not be applicable at all. But it seems questionable whether the FCJ wanted to take such a strict position.

When looking at the underlying decision of the Enlarged Board, it rather seems that the presumption has its basis in prima facie evidence which would mean that, at least under certain circumstances, the secondary burden of presentation may still shift to the patent owner. In any event, the uncertainties in that regard most likely don’t help the person who wants to attack the validity of a patent but will substantially limit the possibility to successfully challenge priority entitlement.

The more interesting question will be how the Unified Patent Court (UPC) will position itself on the issue. As the decisions materially deal with what are in essence procedural issues concerning the burden of proof, and the UPC is governed by its own legal framework (UPCA and Rules of Procedure of the UPC), different principles may apply.

In particular, R. 171.2 of the Rules of Procedure contains a provision comparable to Sec. 138 (3) of the German Code of Civil Procedure stipulating that any facts submitted by one party and not specifically contested by the other party are to be held as true. In contrast to German law, this rule also applies in nullity proceedings before the UPC and could influence the applicable standard when the nullity defendant has to make a factual submission regarding the transfer of the priority right.