Interruption of the proceedings due to insolvency before the EPO and UPC
Dr. Benedikt Neuburger (DE), European and German Patent Attorney
The initiation of insolvency proceedings gives rise to multiple conflicts related to the overlap between the mechanisms that are specific to patent granting and opposition procedure and those that are specific to bankruptcy law. To coordinate the provisions outlined in both patent law, on the one hand, and bankruptcy law, on the other hand, is not easy and may result in the risk of loss of IP rights if not properly managed. Analysis of the interaction between bankruptcy law and IP rights assists with possibly avoiding the entanglement that may result from disputes between these two legal disciplines.
1. Interruption of the proceedings due to insolvency: Rule 142 (1)(b) EPC
Rule 142 (1)(b) EPC provides for the interruption of the proceedings if the applicant for or proprietor of a European patent, as a result of some action taken against his property, being prevented by legal reasons from continuing the proceedings before the European Patent Office.
The rationale of the Rule is to protect parties who are not able to act in the proceedings for defined legal reasons against a loss of rights which could otherwise occur, until such time as the EPO can resume the proceedings.
As a consequence, "The time limits, other than the time limit for making a request for examination and the time limit for paying the renewal fees, in force as regards the applicant for or proprietor of the patent at the date of interruption of the proceedings shall begin again as from the day on which the proceedings are resumed. If such date is less than two months before the end of the period within which the request for examination must be filed, such a request may be filed up to the end of two months after such date".
Rule 142 (2) also states that, "when (...) the European Patent Office has been informed of the identity of the person authorized to continue the proceedings before the European Patent Office, it shall communicate to such person and to any interested third party that the proceedings shall be resumed as from a date to be fixed by the European Patent Office".
2. Which types of insolvency interrupts the procedure?
Decisions from the Board of Appeal (BoA) constantly reiterate that the decisive criterion for interruption under R. 142(1)(b) EPC is whether the action against the property was such as to make it legally impossible for the applicant to continue with the proceedings.
In decision J 26/95 the BoA held that, in the absence of specific circumstances, proceedings against the applicant under Chapter 11 of the US Bankruptcy Code did not interrupt proceedings before the EPO because it did not constitute a case where, as a result of such action, it was impossible for the debtor to continue the proceedings. On the contrary, it was found that the nature of proceedings under Chapter 11 allowed the debtor to continue conducting his business. The BoA, with similar arguments, reached the same conclusion in J 11/98, in relation to the payment of renewal fees that were due.
The BoA regarded (J 10/94) as being analogous to a case of legal impossibility whereby the applicant, as a consequence of an action against his property, an order via a French Court to freeze the bank accounts, resulted de facto in the insolvency of the applicant since he did not have at his disposal any remaining property by means of which he could have affected the required payment. In such a case, however, it was to be determined whether the actions taken against his property effectively made it impossible for the applicant to continue the proceedings, irrespective of the nature of the action (judicial or contractual).
In J 11/95, the BoA held that the applicant who had been declared bankrupt but still continued the proceedings before the EPO even after that event, was apparently not prevented by legal reasons from continuing other proceedings before the EPO. Therefore, the BoA held that under these circumstances, despite the bankruptcy, it was not legally impossible for the applicant to file also the priority document within the two-month period from the Office´s invitation in that sense.
The BoA reached a similar conclusion in T 1533/07 and declared that, in the event of death or legal incapacity of an opponent, Rule 84(2) EPC cannot be considered as analogous to Rule 142(1)(b) EPC because the insolvency administrator appointed by the Court is entitled to continue the proceedings before the EPO.
Therefore, both the EPC legal framework, and EPO practice, confirm that if the applicant is prevented from acting in relation to the properties affected by the insolvency, the procedure before the EPO will be interrupted, regardless of the definition of such an action, namely bankruptcy, receivership or a Court order prevents de facto the applicant to continue with the patent procedure (J 10/94; J 7/83). Consequently, reorganization procedures such as chapter 11 proceedings in the US, or comparable proceedings according to European national laws, do not cause the interruption of proceedings because they do not legally prevent the applicant from continuing his business.
3. When is the procedure interrupted?
The Guidelines clarify that the interruption in case of insolvency under EPC is, in principle, adopted ex officio by the European Patent Office and the entry in the register has only declarative effect. Therefore, the interruption under R 142 (1)(b) EPC has a retroactive effect from the date of the occurrence of the insolvency event.
For instance, in J 16/05 the BoA also considered that since the intention of the rule is to protect parties who are not able to act in the proceedings for the defined legal reasons against a loss of rights which would otherwise occur, interruption may be declared even though in this case the event occurred two years prior. Keeping the above in mind, the BoA pointed out that due to reason of legal certainty, this can only be applied if the applicant acted in good faith and cooperated in the proceedings by informing the Office when they were aware of facts justifying an interruption.
4. Are there any formal requirements?
According to the Guidelines for examination, the Legal Division is responsible for bearing interruptions and resumptions. In J 9/90 the BoA held that for R 142(1)(b) EPC to be applied, the registered applicant, recorded in the Register of European Patents, and the insolvent person (here a limited company), must be legally identical.
In that regard, in J 16/05, in relation to the interruption and the payment of the renewal fees, the BoA held that a simple change of name of the applicant does not alter the identity of the legal person and is therefore entitled to request the interruption of proceedings pursuant to R 142(1)(b) EPC.
5. What can be interrupted?
It appears that the intention of R 142 (4) EPC is that generally all time limits may be interrupted, including time limits set for filing and paying filing, examination, grant, and appeals fees and annuities. This has been confirmed by various decisions from the BoA, though the Board clarified that for some of those time limits different consequences apply (see point 6). Keeping in mind the general principles of R. 142 (1)(b) EPC, some BoA cases shall be addressed in greater detail:
a) Examples in which the BoA declared the interruption of proceedings under R. 142 (1)(b) EPC
- Examination Fee: In J 7/83 the BoA addressed the issue of interruption of proceedings with regard to the time limit prescribed for payment of the examination fee. In particular, the BoA held that the bankruptcy proceedings where parties had been placed under receivership according to French Law lead to interruption of proceeding pursuant to R142(1)(b) EPC.
- Renewal Fees: In J 902/87 the BoA confirmed that the payment date for renewal fees and the six-month period for paying the renewal fee together with an additional fee referred to in Art. 86 EPC 1973, R. 90(4) EPC 1973, which had fallen due during the period of the representative's or applicant's incapacity, can be affected by interruption.
- National and designation fee: In J 10/94 the BoA held that if the conditions of Rule 142 (1)(b) EPC are satisfied, the time limit for the payment of national fee and designation fees are interrupted and will start to run integrally on the date of resumption of the proceedings.
- Appeals: To date, the possibility to interrupt the time limit for filing the notice of appeal, as well as the petition for review, has not been an object of a decision of the BoA, at least the author has not found any such decision. However, in order to assess whether time limits set for the appeal proceedings may be interrupted or not under R. 142(1)(b), two considerations can be made: firstly, the wording of R. 142 (4) EPC, which refers to "any periods" and, secondly, like oppositions, appeals could derive from "inter partes" proceedings. In light of the former, it could therefore be assumed that the time limits for appeal proceedings may be interrupted for the applicant and the patent proprietor. However, it seems that the time limits of an appeal may not be interrupted if the appeal was filed by an opponent who was declared insolvent (see discussion below about the interruption of the opposition proceedings).
b) Examples in which the BoA denied the interruption of proceedings under R. 142 (1)(b) EPC
- Primarily it should be noted that, whilst the nine-month opposition period is not interrupted, oral proceedings may not start if the applicant is prevented from acting. However, if a receiver has been appointed, proceedings may be continued under its direction.
- Insolvency of the patent holder: in T 0854/12 the BoA held that the interruption of opposition proceedings under the meaning of Rule 142 (1)(b) EPC applies to cases in which the patent holder, whom was not initially limited in the course of the proceedings, is then "prevented from continuing the procedure". In that case, the BoA held that the provision could not be applied because the patent, via the consent of the insolvency administrator, had been transferred to an already restricted patent holder, wherein the insolvency administrator was not limited to his power of authority.
- Insolvency of the opponent: Similarly, if during the opposition period the opponent is prevented from acting as a consequence of an action taken against his property, there is no interruption of the procedure (T 1533/07). Indeed, R. 142 (1)(b) EPC clearly states that the "the applicant for or proprietor of a European patent" is the entitled person to request the interruption of proceedings.
6. What are the consequences?
Pursuant to R 142 (4) EPC, all EPO communications and decisions that have been issued during the interrupted period are deemed null and void and will be notified anew after the resumption of proceedings.
The resumption of time limits begins, in their original length, from the day on which proceedings are resumed. Contrary to that, the time limit for filing the request for examination is only suspended from the date of interruption of the proceedings. Therefore it resumes for the remainder of the time limit or at least for the two-months before the period wherein the request must be filed.
In J 7/83 the BoA held that R142 (4) EPC did not indicated an exception to the general principle that all time limits are interrupted, but only specified how time limits had to be calculated. Thus, in J 7/83 the time limit under Art 94(2) EPC 1973 for payment of the examination fee was suspended from the date on which payments were discontinued by court order, up to the date on which examination proceedings are resumed.
Likewise, in J 902/87 the BoA stated that such an interpretation could not be applied to renewal fees, whereby the EPC did not prescribe a time limit for payment, rather dates on which they fell due. Hence, the only time limit affecting renewal fees that may possibly be suspended is the six-month grace period for paying the renewal fee together with an additional fee referred to in R. 51 EPC. The BoA also clarified that Art. 142 (4) EPC had to be interpreted as deferring, until the date proceedings are resumed, the payment date for renewal fees which had fallen due during the period of the representative's or applicant's incapacity.
The BoA reached a similar conclusion in J 09/94, in relation to the request for examination. In this case, the BoA considered that the deadline to pay the examination fee was suspended and that the period shall begin to run, from the resumption of the procedure, either for the remaining period or for the minimum period of two months provided in Rule 142(4) EPC. The reason for such a conclusion is that the examination request is not deemed to have been filed until the examination fee has been paid. Therefore, in the event the applicant has submitted the examination request but is prevented from acting upon payment of the examination fee, the time limit is suspended.
It may be concluded that in case of interruption, time limits begin, with their original duration, on the day on which proceedings are resumed, whereas, in case of suspension, the time limits are suspended from the date of interruption of the proceedings, and would resume for the remaining time period or, for at least the two-months before prescribed by R 142(4) EPC.
7. Unified Patent Court (UPC)
Irrespective of the present delay with implementation of the new Unitary Patent System, the Author would like to provide a short overview on bankruptcy situations before the UPC. In this context, two aspects should be kept in mind: Firstly, in contrast to the standard situation of EP prosecution of patent applications, a suit in front of the UPC is rather an exceptional situation for most proprietors, alleged infringers or nullity plaintiffs. Secondly, unlike the average duration of a patent grant at the EPO, the Rules of Procedure envisage a timeframe of 12 to 15 months in each instance until a decision is rendered. It remains to be seen whether this timeframe can be adhered to by the UPC, but in any case it seems likely that the issue of interruption of the proceedings before the UPC will have a minor impact as compared to proceedings under the EPC.
Rule 311 of the 18th UPC draft of 15 March 2017 refers to the interruption of the proceedings due to insolvency of the party. According to this Rule, "if a party is declared insolvent under the law applicable to the insolvency proceedings the Court shall stay the proceedings up to three months". As a consequence, "proceedings may be stayed until the competent national authority or person dealing with the insolvency has decided whether to continue the proceedings or not". The Rule also states that "where the competent national authority or person dealing with the insolvency decides not to continue the proceedings, the Court may decide, upon a reasoned request by the other party, that the proceedings should be continued in accordance with the applicable national insolvency law".
Therefore, under the UPC, interruption applies only to insolvency declared under the law applicable to the insolvency proceedings, leaving open the question whether it could be also applicable to cases where the party, as a consequence of an action against its property, would result in de facto insolvency because he does not have any remaining property at his disposal.
Moreover, under the UPC, interruption due to insolvency may be applied to both parties. On the contrary, before the EPO, in decision T 1533/07 the interruption of the proceedings requested by the opponent was denied.
According to Rule 311(2) UPC, "Proceedings may also be stayed at the request of a temporary administrator who has been appointed before a party is declared insolvent". This also seems to differ from the proceedings before the EPO, considering that with decisions T 1533/07 and T 854/12 the BoA denied the interruption of proceedings in the presence of an insolvency administrator appointed by law.
Finally, Rule 311(4) UPC states that "if proceedings are continued, the effect of a decision of the Court as regards the insolvent party in the action shall be determined by the law applicable to the insolvency proceedings".
Rule 311 UPC is, however, silent on the issue concerning calculation of time limits after resumption of the proceedings.
Further, as the UPC has not yet been introduced, there is currently no reference to case law addressing the above-mentioned rule and, due to the likely little impact of interruption in these procedures, it may take some time until a judgement under Rule 311 UPC will be rendered by the UP Court.
In conclusion, interruption of proceedings under R 142(1)(b) EPC applies when the applicant or patent proprietor is prevented to act as a consequence of an action against his property that legally or factually impedes him to continue with the patent proceedings. From this moment, and with few exceptions (i.e. opposition period), all time limits shall be interrupted and they will then begin, with their original length, on the day on which the proceedings are resumed. Due to specific provisions, the time limit to file the request for examination and the renewal fees are only suspended, which implies that from the resumption of the procedure the time limit will begin to run either for the remainder of the time limit or for at least two months. Interruption does not apply in the event of insolvency of an opponent.
Under the UPC rules, both parties can request that the proceedings be interrupted. Interruption could also be granted at the insolvency administrator´s request. In any case, interruption applies only to insolvency declared under the law applicable to the insolvency proceedings and it stays the proceedings up to a maximum of three months.
- EUROPEAN PATENT OFFICE; Travaux Préparatoires EPC 1973, Rule 90.
Available at: http://webserv.epo.org/projects/babylon/tpepc73.nsf/0/486CEA2649C2CBD5C12574490026021F/$File/Rule90eTPEPC1973.pdf
- IMPLEMENTING REGULATION EUROPEAN PATENT CONVENTION, R 84 (2) EPC: "In the event of the death or legal incapacity of an opponent, the opposition proceedings may be continued by the European Patent Office of its own motion, even without the participation of the heirs or legal representatives. The same shall apply where the opposition is withdrawn".
- EUROPEAN PATENT OFFICE, Guidelines for examination, Part. E, VII.
Available at: http://www.epo.org/law-practice/legal-texts/html/guidelines/e/e_vi_1_1.htm
- This statement has been confirmed by Decision J 16/05 of the EPO BoA.
- It should be noted that "event" does not necessarily mean "declaration of bankruptcy". See Decisions J 26/95; J 9 10/94; J 7/83.
- Decision of the President of the EPO of 21 November 2013. OFFICIAL JOURNAL EUROPEAN PATENT OFFICE (OJ EPO), 2013, 600. However in Decision T 0854/12 it was recognized the competence of the Technical BoA to deal with interruption of procedures issues.
- The BoA refers to the previous R.90 (1)(b) EPC, which after the adoption of the amended Implementing Regulations to the EPC 2000 on the 13.12. 2007, remained unchanged but under Rule 142 (1)(b)
- EUROPEAN PATENT OFFICE, Travaux Prépatatoires, BR/60/70; point 61.
Available at: http://webserv.epo.org/projects/babylon/tpepc73.nsf/0/97749182A6C8F2D3C1257BD800277E70/$File/BR%2060%20e%2070.pdf
- UNIFIED PATENT COURT, UPC Rules of procedure 18th Draft.
Available at: https://www.unified-patent-court.org/sites/default/files/upc_rules_of_procedure_18th_draft_15_march_2017_final_clear.pdf