Disputes Yearbook 2024:
Intellectual property disputes

An AI neural network is excluded from patentability as a computer programme by Court of Appeal

In July, the Court of Appeal (England and Wales) set out a helpful analysis of the application of well-established software patentability rules to new and innovative AI inventions in its decision in Comptroller-General of Patents, Designs and Trade Marks -v- Emotional Perception AI (19 July 2024).

In a departure from the High Court's ruling, the Court of Appeal held that an artificial neural network (ANN) is a "computer" within the meaning of the Patents Act 1977 and that the weights and biases generated during AI training processes are "computer programmes". Having done so, the Court of Appeal proceeded to apply the software patentability exclusion to the ANN implemented invention in question, finding that the invention fell within the exclusion and was not patentable.

The Court of Appeal's decision highlights that while AI inventions, such as artificial neural networks, can exhibit complex functionalities, they must demonstrate a tangible technical effect as opposed to an effect that is merely cognitive, subjective or aesthetic in nature to fall outside the software exclusion and qualify for patent protection.

Peter Dalton, a partner in the HSF London IP and Cyber team, comments: "The decision does not mean that AI inventions are unpatentable in the UK as a rule, and the Court recognised that "very many computer implemented inventions" are patentable. However, going forward (and subject to any further appeal), AI developers will need to consider and identify a technical effect arising from their invention if they wish to secure patent protection in the UK."

FRAND in the UK – Updates from the Court of Appeal

The Court of Appeal has handed down two significant decisions on FRAND litigation (disputes over the fair, reasonable and non-discriminatory terms of the licence of a standard-essential patent (SEP)) this year.

• In the case of Panasonic Holdings Corporation v Xiaomi Technology UK Limited [2024] EWCA Civ 1143 the Court of Appeal, led by Lord Justice Arnold, overturned the first instance judgment and ruled in favour of Xiaomi, granting them the first ever "interim" FRAND licence.
• The case of Motorola Mobility LLC & Lenovo (United States) Inc v Ericsson Limited [2024] EWCA Civ 1100, decided a few days before Panasonic by the same Court of Appeal panel, also related to an SEP dispute. In this case Lenovo's appeal was rejected and the Court of Appeal upheld an earlier decision not to order a preliminary injunction Lenovo had sought in relation to its SEPs.

The Panasonic decision demonstrates that the UK courts can and will step in to address perceived unfair behaviour on the part of SEPs holders where they seek to circumvent a UK court determined FRAND licence by putting in place an interim licensing arrangement. Of particular significance in this case was that Panasonic had provided an undertaking to the court to be bound by a licence determined by the UK court and the Court of Appeal felt that it was seeking to get around this promise through parallel German and UPC proceedings (although there was no suggestion it had breached its undertaking).

Balanced against this, the Lenovo decision makes clear that parties must formulate the relief they are seeking within the existing English law framework – the courts will not make an exception simply on the basis that the case involves FRAND issues. Arnold recognised that there remains an open question as to how to regulate parties' behaviour between beginning of proceedings and a court determining FRAND terms and that there "may be a role for the court in addressing that question". However, he was clear that "Lenovo’s present application does not invoke any relevant jurisdiction on the part of the court" that would allow the UK courts to resolve the issue in this case. In other words, preliminary injunctions remain off the table in UK FRAND disputes.

The UK remains a key jurisdiction for determining FRAND disputes and these latest decisions from the Court of Appeal demonstrate that the tug of war between parties over the preferred venue for their global licensing disputes to be determined remains hard fought.

Read more about these Court of Appeal decisions and other FRAND/SEPs developments worldwide on our IP Notes blog

The Unified Patent Court proceeds apace

Now at almost 18 months into the new patent litigation system for European patents, its popularity and efficiency are becoming clear. The figures from the Unified Patent Court (UPC) itself on its case load from start date 1 June 2023 to the end of October 2024 show that there have been 206 patent infringement actions filed and 50 stand-alone revocation actions. In October 2024, Herbert Smith Freehills was recognised as leading in the number of patentees represented across all UPC cases to date.

Proceedings are increasingly being commenced in English (or converted to English at a later stage) with the UPC's own statistics released at the end of October 2024 showing that 165 cases so far have/have had English as the language or proceedings with 130 in German, 10 in French, five in Italian, four in Dutch and three in Danish. Many of the actions involve UK-based parties.

Initially the UPC courts of first instance were dealing primarily with procedural matters and preliminary measures but now that the court has been hearing cases for a longer period, there have been some full first instance decisions – decisions on the merits, often referred to by the UPC as "main action decisions" – a total of 21 (15 infringement actions and six standalone revocation actions) by 22 November 2024. Patentees have had mixed success in these actions, with nine sets of proceedings ending in revocation of a patent. In several cases it was the amended version of the patent, put forward during the proceedings, that survived the revocation counterclaim challenges, but then not always leading to a finding of infringement. Nevertheless, eight actions have ended in a finding of infringement. Interestingly, in one case, there was a finding of infringement with no revocation counterclaim brought by the defendant and in another where there was no response from the defendant to the action brought against it, judgment was given in default.

Preliminary injunction (PI) applications have continued to be popular, with a total of 23 PI applications having been decided in the UPC's short lifetime (to 22 November 2024). Very few have been ex parte applications (without notice to the other parties) and one of those that was, was deemed inappropriate and heard as inter partes instead. The overall grant rate for PIs is just under 50% (although one of those was overturned on appeal).

The Court of Appeal has also been very active with procedural appeals and appeals against preliminary measures including preliminary injunctions, but no appeals of main action decisions as yet.

One aspect that has become apparent as a priority for the new court system is speed. Requests for extensions of time to file pleadings or stays of first instance decisions pending appeals are regularly being refused. The UPC has taken its mandate for getting cases to trial within a year (set out in the legislation that created it) to heart and most cases are achieving 12-14 months from filing to full hearings.

For more information on the UPC see our dedicated UPC and unitary patent hub and our UPC updates on our IP Notes Blog.