Philippines: Low Numbers of Filings Expose Key Challenges in Pursuing Litigation

In summary

In the past decade, only a handful of patent litigation cases have been filed in the Philippines despite the increasing number of patent applications. Patent cancellation cases only account for 1 per cent of inter partes cases filed with the Intellectual Property Office of the Philippines while the number of patent infringement cases is less than half of those involving trademarks. In this article, we give an overview of patent litigation in the Philippines and identify the considerations and challenges faced by patent rights holder.

Discussion points

• Patent applications have been steadily increasing, although this increasing trend is not observed in relation to patent litigation cases
• The limited number of patent litigation cases filed annually reflects the challenges faced by rights holders in pursuing patent actions in the Philippines

Referenced in this article

• IPOPHL
• IP Code
• Office of the Prosecutor
• Court of Appeals
• Supreme Court
• Bureau of Customs

Injunctions at a glance

Patent applications in the Philippines have been steadily increasing over the years. Although the outbreak of the covid-19 pandemic in 2020 triggered a drop in patent filings, the growth trajectory has since recovered (see Chart 1);^[1] for 2021 and 2022, the Intellectual Property Office of the Philippines (IPOPHL) has reported year-on-year growth in patent filings of 10 per cent and 9.3 per cent, respectively.^[2]

A similar growth trajectory is present in trademark applications (see Chart 2), which reflects the IPOPHL’s active promotion of IP rights in the Philippines.

This increasing trend, however, is not observed in relation to the number of IP cases filed with the IPOPHL. Despite rising awareness of the necessity of protecting IP rights through registration, filing of litigation cases, which is reflective of the propensity to protect and enforce IP rights, remains limited. In the past decade, patent cancellation and infringement cases filed with the IPOPHL have only numbered around seven and six cases per year, respectively.^[3]

In this article, we will discuss the considerations and challenges facing patent rights holders in pursuing patent litigation in the Philippines.

Overview of patent litigation in the Philippines

In the Philippines, patent litigation includes inter partes cases (ie, cancellation cases) and IPR violation cases (infringement cases).

Patent cancellation cases are filed with the IPOPHL, specifically its Bureau of Legal Affairs (BLA). A patent, or any of its claims or parts of a claim, may be cancelled on any of the following grounds:

• the subject invention is not new or patentable;
• the patent disclosure is not sufficiently clear and complete for it to be carried out by a person skilled in the art; and
• the patent is contrary to public order or morality.

On receipt of a petition for cancellation, the BLA requires the respondent-patentee to file its answer. The case is then referred to a mediation proceeding for the parties to explore the possibility of amicable settlement. If no settlement is reached, the case undergoes a preliminary conference for clarification and simplification of the issues, stipulation of facts, and submission or presentation of documents and other evidence. The parties then submit their respective position papers, and the case is deemed submitted for decision.

Patent infringement cases may be filed with the IPOPHL as an administrative complaint or with the commercial courts as a civil action. The commencement of an administrative complaint with the IPOPHL is independent of and without prejudice to the filing of a civil action with a commercial court; however, resort to both options may amount to forum shopping, which is a ground for dismissal of the case.

The IPOPHL has exclusive original jurisdiction to an administrative complaint for patent infringement, provided that the total damages claimed is not less than 200,000 Philippines pesos. Once the complaint is filed, a summons is issued requiring the respondent to file its answer. The case then undergoes a pretrial conference in which the parties simplify the issues, stipulate the facts and explore the possibility of amicable settlement. The case proceeds to trial, where each party is given eight months to present and offer their witnesses and evidence, and an additional period of two months for their rebuttal and surrebuttal evidence. The parties then submit their respective memoranda, and the case is deemed submitted for decision.

A civil action for patent infringement is filed with the regional trial court designated as a special commercial court (SCC). Similar to the procedures in an administrative complaint, a summons is issued directing the respondent to file its answer. The case undergoes a pretrial conference and mandatory court-annexed mediation. If no settlement is reached, the case proceeds to trial. In some instances, the judge may submit the case immediately for decision upon termination of the pretrial conference or may require clarificatory hearings if necessary. On termination of the pretrial conference, clarificatory hearing or trial, the judge issues a decision on the case.

In a patent infringement case, whether an administrative complaint or civil action, the patent rights holder may recover damages, attorneys’ fees and other litigation expenses and secure a permanent injunction and destruction order. The IPOPHL may impose a fine of 5,000 to 150,000 Philippines pesos in an administrative complaint.

Although unlikely, a criminal action for patent infringement may be pursued if infringement is repeated after a court has found the defendant guilty of a previous infringement. A criminal action is commenced by filing a complaint affidavit with the Office of the Prosecutor for a preliminary investigation. If the prosecutor finds probable cause, an ‘information’ is filed with the court, which then conducts the trial and renders judgment. If found guilty, a penalty of imprisonment from six months to three years and a fine of 100,000 to 300,000 Philippine pesos may be imposed on the defendant.

The decision in a patent cancellation or infringement case rendered by a hearing or adjudication officer of the BLA is appealable to the BLA director, whose decision is further appealable to the director general of the IPOPHL. In turn, the decision of the director general of the IPOPHL, as well as the decision of a commercial court in a civil action for patent infringement, can be appealed to the Court of Appeals and finally to the Supreme Court. In the Philippines, it is quite common for cases to be escalated to the Supreme Court.

While filing the patent infringement action (whether with the IPOPHL or the commercial court), or anytime during the pendency of the case, the patent rights holder may apply for the issuance of a preliminary injunction. To obtain a preliminary injunction, the patent rights holder must establish that:

• it is entitled to the injunction, and the whole or part of the injunction comprises restraining the commission or continuance of the act or acts complained of, or requiring the performance of an act or acts, either for a limited period or perpetually;
• the commission, continuance or non-performance of the act or acts complained of during the litigation is likely to result in injustice to the patent rights holder; or
• a party or any person is doing, threatening, is attempting to do or is procuring the commission of an act or acts that infringe the rights that are the subject of the action or proceeding, rendering the judgment ineffective.

Prior to the resolution of the application for a preliminary injunction, a summons is issued requiring the respondent to file its comment. If granted, the resolution sets the amount of the cash bond to be executed by the applicant. If it is later shown that the applicant is not entitled to a preliminary injunction, the bond will be used to pay for the damages sustained as a result of issuing the injunction.

In matters of urgency, the patent rights holder may apply for a temporary restraining order, which is effective for only 20 days. In matters of extreme urgency, the patent rights holder may apply for a temporary restraining order that is effective only for 72 hours. A certification from the patent holder, the expert or the competent authority that the products are infringing, and if it is determined that continuing access to the products by the public poses a danger and risk to life, health and public safety, may be considered a matter of extreme urgency, with the potential to result in great injustice to the patent rights holder.

In addition to obtaining an injunction order, the patent rights holder may request the Bureau of Customs to monitor and inspect, on its own initiative, suspected imports and to issue an alert or hold order against any imports that are suspected to contain infringing goods.

Statistics of patent cases filed with the IPOPHL

Only an average of seven patent cancellation cases have been filed annually with the IPOPHL in the past decade. As shown in Table 1, they account for only 1 per cent of inter partes cases filed with the IPOPHL.

The average number of patent infringement cases filed with the IPOPHL for the same period is even lower at around six cases per year. In contrast, trademark infringement cases account for more than double this value (see Table 2).

While these data do not include patent infringement cases filed with commercial courts,^[5] it is reflective of the rarity of patent infringement actions in the Philippines. In total, the average number of patent ligation cases (cancellation and infringement cases) filed with the IPOPHL is only around 13 cases per year. The average from 2018 to 2022 is even lower at around 6.8 cases per year. Unlike the increasing trend in patent applications, the number of patent litigation cases has dropped (see Chart 3). Even if the effect of the covid-19 pandemic is taken onto account, the number of cases for the preceding years are still low.

Considerations and challenges in patent litigation

The limited number of patent litigation cases filed annually reflects the challenges faced by rights holders in pursuing patent actions in the Philippines. The cost, length and venue of litigation, as well as the evidence and expertise required, in relation to the profitability of the invention and the remaining term of patent protection are some of the considerations that are taken into account. Quite often, these considerations are seen as deterrents disincentivising rights holders from instituting patent litigation cases in the Philippines.

Cost of litigation versus profitability of invention

One of the primary considerations in deciding whether to pursue a patent litigation case is the costs involved. Litigating in the Philippines can be quite expensive owing to the various proceedings the case must undergo, the evidence and witnesses that must be presented, and the time taken for a decision to be reached.

The attorneys’ fees involved in prosecuting a patent cancellation case may cost over US$10,000, and even over US$20,000 for a patent infringement case. These are conservative estimates, and the costs may go up to as much as twice these values depending on several factors, such as the complexity of the invention; the extent of evidence and the number of witnesses, including experts, that will have to be presented; and the number of respondents. The costs may further increase if the decision, or any order or resolution, is appealed or subjected to a review. As discussed above, there are several stages of appeal, and litigation cases are often elevated to as high as the Supreme Court.

In this regard, prior to instituting a patent litigation case, the patent rights holder usually assesses the profitability of its invention in relation to the cost of litigation. This assessment takes into consideration the profitability of the invention not only at the time of infringement but also by the time a final decision is likely to be made. Although the patent rights holder may eventually win the litigation, by the time a final decision is issued, a new generation of products may have been introduced in the market, thereby diluting the impact of a favourable decision.

Depending on the field of technology to which the invention belongs, the marketability of an invention may rapidly decline over the years. Some fields have witnessed rapid advancements in technology, such as telecommunications, in which new products with better features are constantly introduced in the market; therefore, the profitability of the invention and the costs of litigation are taken inconsideration in instituting a patent action.

Length of litigation versus term of protection

The patent rights holder must also consider the length of litigation. A case normally undergoes various stages of proceedings: from the preparation and filing of the complaint to the preliminary, mediation and pretrial conferences, and to the trial and judgment. Generally, it takes at least two years for a decision to be rendered in a cancellation case, and three years in an infringement case. Since the decision and the orders and resolutions issued during the proceedings are subject to multiple stages of appeal or review, obtaining a final and executory decision may take a considerable length of time. It is quite common for a patent to have already expired before a decision is rendered or becomes final.

Under the IP Code, invention patents have a non-renewable term of 20 years.^[6] If the patent sought to be cancelled has already expired, the cancellation case will likely be dismissed on the ground of mootness since there is no patent to be cancelled or upheld. In that event, the merits of the case will no longer be delved into, the issue on the validity of the patent remains unresolved, and the rights appertaining to it remain unclear.

In contrast, patent infringement cases can survive the expiration of the patent. The IP Code allows the patent rights holder to collect damages within four years of the time the cause of action arose. As long as the patent infringement case is filed within the four-year period, the expiration of the patent should have no effect.

The remaining term of protection and the projected length of litigation are also considered by patent rights holders when deciding whether to pursue a patent litigation case.

Evidence and expertise required

Unlike trademark litigation cases, patent litigation cases require technical evidence and expertise. Whether in a patent cancellation or an infringement case, this technical requirement entails more time and cost.

In trademarks, it is usually sufficient to visually and aurally compare the competing marks to determine confusing similarity. In contrast, mere visual inspection of a product or the claims of a patent is inadequate. Further analysis and testing must be done by an expert person skilled in the art. Accordingly, litigating patent cases necessitates employing technical analysis and expert witnesses. Moreover, because of the technical nature of the evidence, more hours are spent in the preparation and presentation of evidence, which results in further costs.

The technical evidence and expertise required in patent cases means that obtaining a preliminary injunction against a patent-infringing product is not a straightforward matter. In those cases, the judge or hearing officer can be expected to wait for a full trial before deciding whether to issue an injunction.

Venue of litigation

Patent cancellation cases are instituted with the IPOPHL while patent infringement cases may be filed as an administrative complaint with the IPOPHL or as a civil action with commercial courts; however, filing an administrative complaint for patent infringement case with the IPOPHL has certain advantages.

Commercial courts hear and try numerous cases with different causes of action, not limited to IP matters. Often, this results in a full docket and affects the speed at which cases are heard and decided. On the other hand, the IPOPHIL has a significantly lower docket because of its limited and highly specialised jurisdiction; therefore, it is expected to render decisions faster than commercial courts.

Second, patent cases require comprehension of technical matters. Since the hearing officers of the IPOPHL are routinely deciding on technical matters, they have more experience in understanding, analysing and deciding patent infringement cases compared to commercial court judges; therefore, it is usually easier to present evidence and prove infringement before the IPOPHL.

Lastly, the standard of proof required for administrative cases filed with the IPOPHL is substantial evidence, or relevant evidence that a reasonable mind might accept as adequate to support or justify a conclusion. In contrast, civil cases heard by commercial courts involve more technical and strict evidential rules. In civil cases, the standard of proof required is preponderance of the evidence, which means that the evidence as a whole adduced by one side is superior to that of the other. Considering the lower standard of proof required, establishing infringement is easier in administrative cases.

Conclusion

While patent applications with the IPOPHL have witnessed an upwards trend over the years, the same cannot be said for patent litigation. Compared to trademarks, patent cancellation and infringement cases account for only a handful of filings every year.

This is symptomatic of the challenges faced by patent rights holders in pursuing patent litigation actions in the Philippines. The cost, length and venue of litigation; the resources, evidence and expertise required; the profitability of the invention; the impact of the decision on the business; and the remaining term of patent protection are some of the considerations that must be considered to incentivise patent rights holders to be more active in enforcing their rights in the Philippines. By overcoming these challenges, the Philippine patent litigation landscape will become more dynamic and encourage more innovation.

Footnotes