UPC Report 11|24

Managing director liability

According to the Munich Local Division, members of the management of a patent infringing company are generally considered “intermediaries” within the meaning of Article 63(1), sentence 2 UPCA against whom an injunction can be issued (order of 13 September 2024 – UPC_CFI_390/2023). In our October 2024 UPC Report, we questioned whether this legal assessment was correct. The Court of Appeal disagreed with the Munich Local Division’s view (order of 29 October 2024 – UPC_CoA_549/2024), instead finding that because the managing director of a patent infringing company represents that company, the company cannot be a “third party” in relation to this managing director within the meaning of Article 63 UPCA and Article 11 of the Enforcement Directive. Merely holding the position of managing director of a patent infringing company is therefore not sufficient to trigger liability as an “intermediary” under Article 63(1), sentence 2 UPCA. The Court of Appeal left open whether the managing director of a patent infringing company might be liable for the patent infringement on the basis other legal considerations. The question of managing director liability remains unresolved for the time being.

Urgency in preliminary injunction proceedings

An urgency requirement applies in preliminary injunction proceedings before the UPC. The Düsseldorf Local Division has relinquished its view that an application for a preliminary injunction must be filed within one month (order of 30 April 2024 – UPC_CFI_463/2023). It is now of the opinion that there is no fixed deadline (order of 31 October 2024 – UPC_CFI_347/2024). Whether the applicant’s conduct as a whole justifies the conclusion that the enforcement of its rights is not urgent must be assessed on a case-by-case basis, it holds. In the case of an application that had been filed six and a half weeks after the purchase of the infringing product, the Düsseldorf Local Division considered the urgency requirement to have been met. The Local Division thus sides with the approach of the UPC Court of Appeal regarding the urgency requirement (order of 25 September 2024 – UPC_CoA_182/2024)

In contrast, the Lisbon Local Division found that an application for an injunction filed within six weeks after the test purchase was not urgent because the applicant had not stated at what point in time before the test purchase it had become aware of the potentially infringing product and there were strong indications that this knowledge had existed at least seven months (if not three years) before the test purchase (order of 15 October 2024 – UPC_CFI_317/2024). According to the Lisbon Local Division’s opinion, which we think is correct, the UPC cannot find that the urgency requirement has been met if the applicant is silent about from what point in time on it was aware of the potentially infringing embodiment and could therefore have initiated measures to investigate a potential patent infringement. This is because the period of delay within the meaning of Rule 211.4 RoP commences on the date on which the applicant, when exercising due care, should have had the necessary facts and evidence to file an application for provisional measures with the prospect of success (order of 25 September 2024 – UPC_CoA_182/2024).

Patent infringement through domain ownership 

The Lisbon Local Division found that merely owning an internet domain constitutes a patent infringement within the meaning of Article 25(a) UPCA if infringing products are offered and/or sold through that domain (order of 15 October 2024 – UPC_CFI_317/2024). It seems doubtful that the UPC Court of Appeal would agree with this view in such absolute terms. If, from the perspective of interested parties, the domain owner cannot be considered as a source of supply for the products advertised on the website, for example because the website only makes reference to third parties as sources of supply, the domain owner is in our opinion not offering a product within the meaning of Article 25(a) UPCA. In this case, the domain owner could at most be held liable as an intermediary pursuant to Article 63(1), sentence 2 UPCA.

Restriction of a preliminary injunction 

The Düsseldorf Local Division restricted an injunction against an automotive supplier by permitting it to fulfil existing supply obligations vis-à-vis a specific OEM (order of 31 October 2024 UPC_CFI_347/2024 and order of 31 October 2024 UPC_CFI_368/2024). The restriction was the result of balancing the interests of the patentee and of the implementer. The supplier was prohibited from expanding its use of the infringing embodiment by either distributing the infringing embodiment to other customers or by increasing the quantities supplied to its existing customer beyond the existing supply contract. In addition, the continued supply was made contingent on the provision of a security deposit by the supplier. The Local Division emphasised that the issuance of a restricted injunction was a strictly limited exception. The decisive factors it cited were, first, the particularities of the automotive industry (need for homologation and type approval) in general, which precluded the short-term substitution of the infringing embodiment with the patent proprietor’s alternative product, and, second, the expected damage to the defendant in the specific case, which would have far exceeded the damage to the applicant.

Validity in preliminary injunction proceedings  

When issuing a preliminary injunction, the UPC must consider the validity of the patent (Rule 209.2(a) RoP). However, the UPC can only make a prognosis decision because a patent cannot be revoked using a preliminary injunction. According to the Düsseldorf Local Division, the UPC must examine how the panel – including a technically qualified judge –would likely decide on the revocation of the patent in the event of a claim on the merits (order of 31 October 2024 – UPC_CFI_347/2024).

Decisions by other European Courts and the EPO concerning the same patent are not binding on the court, it said, but may provide helpful indications that the court can take into account. The generally high revocation rate of European patents had no relevance to the question of whether the patent in suit was more likely to be invalid than not; no conclusions about the validity of the patent in suit could be drawn from general statistical considerations.

In our view, the high revocation rate should be taken into account when deciding whether to issue a preliminary injunction without hearing the defendant. If a patent has not yet withstood a challenge to its validity and there has been no pre-litigation exchange between the parties, the high revocation rate means that the UPC cannot generally assume that the legal validity of the patent is certain enough for it to issue a preliminary injunction.

The UPC Court of Appeal’s first panel did not originally set a positive standard for reviewing the validity of a patent, but rather decided only that a preliminary injunction was unfounded if it was more likely than not that the patent was invalid (order of 26 February 2024 – UPC_CoA_335/2023). Using this test as a starting point, the UPC Court of Appeal’s second panel held that it was sufficient for a preliminary injunction that it was not more likely than not that the patent in suit was invalid (order of 25 September 2024 – UPC_CoA_182/2024).

Unlawful appropriation defence in preliminary injunction proceedings

In preliminary injunction proceedings before the UPC, the defence of unlawful appropriation of a patent can be considered in three different respects: possible lack of standing to bring an action, a ground for invalidity, and as a factor to be taken into consideration in the balancing of interests. In the view of the Düsseldorf Local Division, however, this objection is rejected without substantive examination, at least in preliminary injunction proceedings, if a defendant has failed to enforce its alleged claim for surrender of the patent in due time before the national courts (order of 31 October 2024 UPC_CFI_347/2024 and order of 31 October 2024 UPC_CFI_368/2024). In the case decided, the notice of grant of the patent was published around two years before the injunction proceedings, but no action for surrender of the patent had been filed in Germany; in France, an action for surrender of the patent was filed only after commencement of the preliminary injunction proceeding.

Patent construction – no Gillette defence

The Düsseldorf Local Division confirmed the patent construction principle according to which the subject matter protected by the claim cannot generally be limited to a preferred embodiment (order of 31 October 2024 UPC_CFI_373/2023). It also commented on the relevance of prior art in determining the scope of protection of a patent. While prior art as such is not mentioned in Article 69(1) EPC as an instrument for claim construction, it was not irrelevant to claim construction, the Local Division said.

If prior art is discussed in the description of the patent in suit, the relevant considerations must be taken into account. If the patent distinguishes itself from the (discussed) prior art in a particular way, an interpretation that negates that distinction should be avoided. Applying these principles, the Local Division saw no room for the Gillette defence raised by the defendant. The Gillette defence, based on a 1913 UK judgment, requires the defendant to show that the contested embodiment would have lacked novelty – or at least inventive step – at the priority date of the patent ([1913] UKHL J0630-1 - Gillette Safety Razor v. Anglo-American Trading).

Publication order 

According to the Düsseldorf Local Division, the publication of a decision of the UPC (Article 80 UPCA) may only be ordered by the UPC if the necessary protection of the claimant has not been effectively and sufficiently ensured by the other measures ordered by the court, e.g. injunction, disclosure of information, or recall order of 31 October 2024 UPC_CFI_373/2023). As part of the required weighing of interests, the Local Division takes into account that the right of publication contains an element of punishment for the defendant. The decision suggests that as a rule, the UPC will not order publication of its decision. The plaintiff must substantiate that and to what extent the specific case differs from other cases of patent infringement such that publication of the decision is by way of exception necessary and appropriate.

Entitlement to file an application in preliminary injunction proceedings

In preliminary injunction proceedings, the Düsseldorf Local Division appears to want to impose strict requirements on the defendant to rebut the presumption that the information in the patent register is correct, i.e. that the registered patent owner is the actual proprietor of the patent under substantive law (order of 31 October 2024 UPC_CFI_347/2024 and order of 31 October 2024 UPC_CFI_368/2024). In general, the applicant bears the burden of proof for its entitlement to file an application for provisional measures, Article 47 UPCA. In the case of a European patent, substantive ownership is decisive, with registration having the effect of a rebuttable presumption, Rule 8.5(c) RoP. The presumption reverses the burden of proof in favour of the patent proprietor recorded in the patent register. The Düsseldorf Local Division seems to want to increase the requirements for this burden of proof, qualifying the presumption as a “strong” presumption that can only be rebutted in proceedings for provisional measures if the title is manifestly erroneous. 

Suspension of enforcement of an injunction

An appeal against a decision by the Court of First Instance does not have suspensive effect (Article 74(1) UPCA). However, the Court of Appeal may order suspensive effect upon application (Rule 223.2 RoP) where the first-instance decision under appeal is clearly erroneous or where its enforcement would render the appeal largely irrelevant. The Court of Appeal has now made the standard of review more specific (order of 29 October 2024 – UPC_CoA_549/2024). The Court of First Instance will have made a clear error, i.e. an “obvious violation of the law”, where, on summary review, its decision is not supported by the findings of fact and legal considerations on which it is based. Suspensive effect must then be ordered as a matter of course. As a rule, this also applies in cases where the ruling under appeal may ultimately prove correct based on other findings of fact or legal considerations.

Defendant to bear costs despite dismissal of action

Unless equity requires otherwise, the costs of proceedings before the UPC are generally borne by the unsuccessful party, Article 69(1) UPCA. According to the UPC Court of Appeal, a defendant who complies with a claimant’s motions for legal relief by issuing a comprehensive undertaking to such effect has to bear the costs regardless of the likelihood of success of the action in the absence of the undertaking (order of 4 October 2024 – UPC_CoA_2/2024). As a rule, the admissibility and merits of the action at the time when the undertaking is issued were not to be taken into consideration in determining which is the successful party. The plaintiff had prevailed because of the comprehensive undertaking. It is therefore advisable for defendants either to not submit an undertaking or to do so as early as possible (because the court costs will be lower the earlier the proceedings are brought to an end).

The situation may be different where the plaintiff has not sent a warning letter prior to starting the UPC proceeding. The UPC Court of Appeal pointed out that equity may require the costs to be awarded to the defendant in cases where a claimant initiates proceedings without first sending a warning and the defendant issues an undertaking immediately after the start of the proceedings since the claimant would then have caused unnecessary costs.

Admissibility of third-party intervention by a patent pool administrator

A person who can establish a legal interest in the result of an action submitted to the UPC may file an application to intervene, Rule 313.1 RoP (which, as a rule, must be done during the written proceedings, Rule 313.2 RoP.) The Munich Local Division has ruled that the interest of the administrator of a patent pool (HEVC standard) in the outcome of an action brought by a pool member for infringement of one of the pool patents qualifies as the required legal interest (order of 2 October 2024 – UPC CFI 153/2024).

The Local Division considered it sufficient that the pool administrator was authorised to negotiate and grant patent licences on behalf of the pool members in compliance with their FRAND obligations, to monitor compliance with the licences and to collect the licence fees and distribute them to the licensors, whereby the patent pool was only permitted to contain standard-essential and valid patents. The Local Division considered the pool administrator to derive its legal position from the claimant (the patent owner) and to therefore be directly affected in this status by the outcome of the action. This qualifies as a direct and current interest in the result of the action (in contrast to an – insufficient – “indirect” interest, which exists, for example, if the prospective intervener is merely a party to a parallel, similar case, see UPC Court of Appeal, order of 10 January 2024 – UPC_CoA_404/2023).

Where an intervener is granted leave to intervene, it is to be treated as a party (Rule 315.4 RoP). The orders issued to the party supported by the intervener apply equally to the intervener, e.g. any restrictions of access to confidential information ordered by the court.