Bifurcated Pitfalls

In a recent decision the Austrian Supreme Court had to decide on the professional liability of an attorney-at-law due to malpractice in a utility model infringement action.

The claimant argued that due to miscounselling of the defendant the claimant failed to initiate proceedings for invalidation of the utility model in suit at the Austrian Patent Office. According to the Austrian Patent and Utility Model Act in case that nullity of the IP right in suit is argued in the infringement proceedings, infringement proceedings must be stayed in case the infringement court considers nullity to be likely. Thus, Austria has a so-called bifurcated litigation system. For initiating invalidation proceedings a term of one month is set by the infringement court. In case the defendant fails to prove initiation of an invalidation action within the term set, the infringement court has to decide the case without taking into account any objection relating to the invalidity of the utility model in suit.

Rather than counselling for filing an invalidation action the attorney advised the subsequent claimant to take a licence of a European patent having a better priority than the utility model in suit. Due to this advice of their attorney the one-month term for filing the invalidation action lapsed, and the infringement court decided the case without taking into account any objections regarding the invalidity of the utility model. With regard to the objection based on having a licence of an EP patent being of better priority, a court expert appointed by the infringement court found that the subject matter of the EP patent and of the utility model was the same. Accordingly - if an invalidity action would have been filed by the claimant - such a claim would have been successful. As the infringement court found that the defendant was not successful in proving that it had a licence, the infringement court found against the defendant/now claimant in the indemnity proceedings.

In the indemnity proceedings based on malpractice of the attorney the Supreme Court found that it is part of the attorney's liability to replace the damage caused by the breach of duty. If the breach of duty lies in an omission to initiate an action, an omission actually causes damages, in case it can be proven by the claimant that the performance of a particular course of action would have prevented the occurrence of the damage and this action would have been possible. However, causality is to be denied if the same disadvantage would have occurred even when all dutiful actions would have been taken. Thus, if the clients would have lost for other reasons, there is no causal link between the breach and the lost proceedings. In the present case it was - in view of the Supreme Court - not sufficiently clear on the basis of the facts determined by the 1st instance court whether the claimant would have lost the infringement proceedings anyway in view of an alleged out-of-court settlement. Accordingly, the case was sent back to the 1st instance court.

Actions for malpractice of an attorney are extremely rare in Austria. However, this decision highlights that in patent and utility model disputes clients are well advised to mandate an attorney-and-law and a patent attorney as the bifurcated litigation system has many (procedural) pitfalls into which attorneys not specialised in IP may easily fall into.

Dr. Rainer Beetz, LL.M.