UPC Report 12|24

Opt-in despite national proceedings

The UPC Court of Appeal ruled that national proceedings brought before the start of the UPC do not prevent the patent proprietor from withdrawing a previously declared opt-out (Article 83(4) UPCA) in order to then assert the patent before the UPC (decision of 12 November 2024 – UPC_CoA_489/2024). That applies irrespective of whether national proceedings have been concluded prior to the start of the UPC or are still pending following the start of the UPC. Only proceedings initiated before a national court after 1 June 2023 result in the “lock-out” of a patent for which an opt-out has been declared. Patent proprietors who lose in national proceedings can therefore try their luck again before the UPC, provided that they do not submit the same subject matter of the dispute to the UPC for decision, Article 29 to 32, 71c(2) Brussels I Regulation (see Court of Appeal, decision of 17 September 2024 – UPC_CoA_227/2024).

Doctrine of equivalence

The Hague Local Division proposed a test for infringement by equivalence comprising the following four questions (order of 22 November 2024 – UPC_CFI_239/2023):

1. Technical equivalence: Does the variation (essentially) solve the same problem that the patented invention solves, and does it (essentially) perform the same function in this context?
2. Fair protection for the patent proprietor: Is extending the protection of the claim to the equivalent proportionate to fair protection for the patent proprietor in view of its contribution to the art and is it obvious from the patent publication to a person skilled in the art how to apply the equivalent element (at the time of infringement)?
3. Reasonable legal certainty for third parties: Does the skilled person understand from the patent that the scope of the invention is broader than what is claimed literally?
4. Is the allegedly infringing product novel and inventive over prior art?

The second and third questions essentially only reflect the objectives formulated in the Protocol on the Interpretation of Article 69(1) EPC but does not provide any guidance as to the criteria to be applied to achieve these objectives. The second question is not limited to the requirement established by German case law that the deviating means was obvious to the skilled person; it additionally requires that the extension of protection is appropriate in view of the invention’s contribution to the art. The third question leaves open what guidance needs to be found in the patent for the skilled person to include variations in the scope of protection, or to exclude variations from the scope of protection. The grounds for the decision do not contain any further details on how the local division arrived at its proposed test, and leave open which criteria are to be used to answer the four questions. The decision therefore leaves courts and practitioners plenty of leeway as to how to apply in practice the (excessively) generally formulated test.

FRAND defence

The Mannheim Local Division commented on the requirements for the FRAND antitrust defence, which can prevent an injunction from being issued (decision of 22 November 2024 – UPC_CFI_210/2023). Compliance with the reciprocal obligation programme established by the ECJ to negotiate a fair, reasonable and non-discriminatory (FRAND) licence (judgment of 16 July 2015 – Huawei v. ZTE) must always be assessed as part of the parties’ overall pre-trial behaviour, it said.

In response to a patent proprietor’s initial notification, the user must only indicate its initial willingness to negotiate further. Both sides must behave constructively in the ensuing negotiations. The SEP holder must make a license offer and provide reasons why it is FRAND-conform. It cannot rely only on simple mathematical calculations. The user must submit specific objections and – depending on the progress of the negotiations – explain them. The UPC should take the implementer’s pre-trial objections as a basis for any review of the FRAND conformity of the patent proprietor’s license offer, it said.

The local division’s decision suggests that the UPC – unlike the German courts – will not refuse to review an offer’s FRAND conformity.

Preclusion of arguments in revocation actions

The Paris Central Division has set strict time requirements for the burden of pleading (decision of 27 November 2024 – UPC_CFI_308/2023): All grounds for invalidity and the entire prior art establishing the lack of novelty or inventive step must be presented in the statement of claims of the revocation action. Arguments and evidence are to be elaborated in the first round of written pleadings (“front-loaded system”).

New grounds for invalidity or prior art can only be introduced into the proceedings later if the UPC grants leave to do so upon written request. The new arguments will only be allowed by the court if – applying reasonable diligence – it was not possible to make the new submission at an earlier stage and if the new submission will not unreasonably hinder the other party in its conduct of the proceeding (Rule 263.2 RoP). For example, leave may be granted if the defence’s arguments justify the introduction of new invalidity challenges. If there is no (close) connection to the defendant’s arguments, the UPC will not consider the new invalidity challenge or documents.

It remains to be seen whether the Court of Appeal will uphold this rather strict application of the principle of preclusion. Pending clarification by the Court of Appeal, it would appear prudent to ensure that actions for revocation are substantiated as comprehensively as possible and err on the side of too many lines of argument rather than too few. If a new citation or argument cannot be introduced into a revocation action until the reply stage or even later, specific reasons should always be provided as to which of the defendant’s submissions prompted the new submission.

Proportionality defence – consideration of third-party interests

The Munich Local Division has ruled that third-party interests – for example, patients’ interests – may militate against the issuance of an injunction (decision of 15 November 2024 – UPC_CFI_15/2023). The UPC can consider third-party interests when exercising its discretion as to whether or not to grant an injunction (Article 63(1) UPCA), it ruled.

In this respect, it may play a role whether the infringer has sought a licence from the patent proprietor and, if necessary, initiated compulsory licensing proceedings. The court’s assessment in parallel compulsory licensing proceedings was a strong indicator of the existence of relevant third-party interests on the one hand and of the infringer’s willingness as a licensee on the other. If no compulsory licensing proceedings was initiated, that would be an indicator that the infringer was not a willing licensee, which in turn would be a reason not to restrict the court injunction. However, the court may still take third-party interests into account if the infringer is an unwilling licensee.

In the case decided, the Munich Local Division found the infringer to be an unwilling licensee. However, it also found relevant patients’ interests and therefore still imposed (slight) restrictions on the scope of the injunction: Infringing implants whose implantation in patients had already been scheduled on the day of the Munich Local Division’s decision are exempt from the injunction.

Publication order

According to the Hague Local Division, an infringer can be required to publish a text on the home page of its website for a duration of one month notifying users of the website that the UPC has ruled they have infringed a patent, that they will no longer market the infringing embodiment, and that customers could return the infringing embodiment to the infringer for a refund of the purchase price/costs (order of 22 November 2024 – UPC_CFI_239/2023).

The Dutch local division based its publication order on Article 64 and Article 80 UPCA and found the measure to be proportionate because the infringer is a former licensee of the patent proprietor. It seems unlikely that the UPC Court of Appeal will uphold the legal opinion of the local division. Neither Article 64 nor Article 80 UPCA provide for public statements as ordered by the local division here, which have considerable pillory effect. The Düsseldorf Local Division – according to which the punitive nature of the publication of an infringement decision is only proportionate if, by way of exception, the other orders (injunction, disclosure of information, recall, etc.) do not sufficiently guarantee the necessary protection of the claimant (order of 31 October 2024 UPC_CFI_373/2023) – seems to be more in line with the UPCA.

Limited assertion of patents in preliminary injunction proceedings

The Milan Local Division has ruled that auxiliary requests to amend a patent are inadmissible in preliminary injunction proceedings (order of 22 November 2024 – UPC_CFI_400/2024). It also held that it was inadmissible to subsequently limit the application for an injunction to a version of the claim that was initially only asserted as an auxiliary motion.

According to the Milan Local Division, this approach is incompatible with the nature of summary proceedings and the principle of `equality of arms’ in court. An (auxiliary) request to amend the patent is only admissible as a defence against a counterclaim for revocation (Rule 30.2 RoP) or a revocation action (Rule 50.2 RoP). In preliminary injunction proceedings, however, the UPC cannot decide on the validity of the patent in suit, said the local division. This legal opinion had previously been expressed by the Lisbon Local Division in an obiter dictum (order of 15 October 2024 – UPC_CFI_317/2024).

The Milan Local Division did not decide the question of whether it is permissible to base an application for preliminary injunction on a limited version of the claim from the outset. The Munich Local Division considers the limited assertion of a patent in preliminary injunction proceedings to be permissible but holds that the EPG must answer the question whether there is a sufficient degree of certainty that the patent is valid with regard to the granted, non-limited version of the patent (order of 10 October 2023 – UPC_CFI_17/2023).

Stay due to parallel opposition proceedings

In the opinion of the UPC Court of Appeal, as long as infringement proceedings are not ready for decision it is at the UPC’s discretion whether or not to stay infringement proceedings with regard to parallel opposition proceedings pending before the EPO (Article 99 et seq. EPC); but it is not mandatory (decision of 21 November 2024 – UPC_CoA_511/2024). Article 33(10) UPCA allows the UPC to stay proceedings if a “rapid” decision by the EPO is to be expected (see also Rule 295(a) RoP).

According to the Court of Appeal, this not only applies to final decisions issued by the EPO, but also to cases in which the expected decision can still be appealed. When weighing the interests at stake, the court must consider the specific facts and circumstances of the individual case (such as the stage of the infringement action and opposition proceedings, and the likelihood of the patent being revoked). It can also take into account whether the pending decision by the EPO is appealable and whether such an appeal is likely to occur.

Different rules apply if the infringement proceedings are ready for decision (Rule 295(g) in conjunction with Rule 118.2(b) RoP). In this case, the UPC shall stay the infringement proceedings if it is of the view that there is a high likelihood that the relevant claims of the patent will be held to be invalid on any ground by a final decision of the European Patent Office where such decision of the European Patent Office may be expected to be given rapidly (Rule 118.2(b) RoP).

Security for legal costs

Under Rule 158 RoP, the UPC may, at any time during proceedings, at the reasoned request of one party, order the other party to provide adequate security for the potential legal costs incurred by the requesting party. The Court of Appeal has decided that such an order requires (only) that the enforcement of a costs order would be unduly burdensome; it does not have to be shown that enforcement would be impossible (decision of 29 November 2024 – UPC_CoA_548/2024).

The burden of proof that enforcement of the order would be unduly burdensome is borne by the applicant. If the applicant invokes potential difficulties with foreign enforcement, it must present information on both the relevant foreign law and its application. If it invokes the opposing party’s lack of financial strength, only the financial position of the opposing party itself is relevant; it does not help the opposing party if it belongs to a financially sound company group. The situation may be different if one of those group companies has assumed a guarantee for the opposing party. The mere fact that the opposing party is an SME is not in itself sufficient to justify doubts as to its financial strength.

It is further irrelevant whether the opposing party is willing to pay the costs ordered or will try to avoid enforcement (as long as enforcement remains possible without undue burden). Nor is it relevant whether or not the opposing party is likely to have to pay costs. The UPC does not have to take the likely outcome of the case into account when deciding on the provision of security.