UPC ruling overturning UK patent injunction offers guidance on the court’s reach

In simple terms, companies that want the UPC to stop competitors from selling products or carrying out other activities that may infringe their patents – even in countries outside the UPC system – now have clearer guidance. At the same time, businesses that may want to challenge or resist such requests also have a better understanding of the rules.

The guidance confirms that the UPC can, in some cases, extend its decisions to cover activities outside UPC countries. However, it also makes clear that there are limits, and it sets out when judges are likely to use these powers.

The guidance was provided by the UPC’s Court of Appeal (CoA) in a landmark decision (57-page / 2MB PDF) in which it overturned an injunction that had banned Kodak from selling a product in the UK market. That injunction, issued by the Mannheim local division (LD) of the UPC last summer, was granted on the basis that Kodak had infringed Fujifilm’s European patent in force in the UK – a finding it reached despite the fact the UK does not participate in the UPC system.

The guidelines provided by the UPC CoA provide a helpful framework for the management of disputes in which the UPC’s long arm jurisdiction is asserted.

The law relevant to the UPC’s jurisdiction

The UPC system is designed to enable holders of unitary patents or European patents not opted out of the system to more easily enforce their patent rights on a cross-jurisdictional basis. Conversely, patents in-scope of the UPC’s jurisdiction are at risk of being revoked in multiple countries via a single ruling. Only EU member states can participate in the UPC system, though just 18 of the 27 countries eligible to participate have become UPC contracting member states to-date.

However, in certain circumstances, the UPC may exert its ‘long-arm jurisdiction’ to award relief arising from the infringement of a European patent in certain jurisdictions outside its territory, including non-UPC EU countries such as Spain, and non-EU, or third, countries such as the UK.

The UPC’s international jurisdiction to decide cross-border disputes is determined by the Brussels Recast Regulation (BRR), the EU legislation which regulates jurisdiction and the recognition and enforcement of judgements between EU member states, as provided by Article 31 of the UPC Agreement (UPCA). The UPC, as a common court to several EU member states, is deemed to be a court of an EU member state pursuant to Article 71a(2) of the BRR, and would have jurisdiction where, under the BRR, the national court of a UPC contracting member state would have jurisdiction, as per Article 71b(1) of the BRR. 

The BRR also gives the UPC jurisdiction over defendants based outside the EU for acts of patent infringement committed within UPC countries, under Article 71b(2). It also, under Article 71b(3), introduces the power, subject to certain limitations, for the UPC to award damages arising from infringement of a European patent in certain jurisdictions outside the EU. 

The general rule to determine jurisdiction is set out in Article 4(1) BRR, which provides that a person based in an EU member state should be sued in the courts of that member state. However, there is an exception – where patent validity is in issue, Article 24(4) BRR gives exclusive jurisdiction to the national courts where the patent is registered, regardless of where the defendant is based and irrespective of whether validity was raised by way of an action or defence. 

The case law

Last year, in the ground-breaking decision in the case of BSH Hausgeräte v Electrolux, the EU’s highest court, the Court of Justice of the EU (CJEU), clarified the interplay between Article 4(1) and Article 24(4), and confirmed that, where a defendant is sued in the court of its domicile, national courts of EU member states can rule on the infringement of ‘foreign’ patents – i.e. patents in force in third countries outside the EU, such as the UK – even when the validity of those patents is challenged.

The Mannheim LD’s decision was the first by a UPC division post-BSH Hausgeräte to apply this principle, and the UPC’s ‘long arm jurisdiction’ to a third country, in practice.

As well as reaching a finding of infringement by Kodak in relation to a European patent designated in Germany, the Mannheim LD awarded Fujifilm a UK injunction against Kodak in relation to the UK part of its European patent for lithographic printing plate technology. Other patent holders have taken advantage of the UPC’s long arm jurisdiction since.

Kodak has now successfully appealed against the Mannheim LD’s decision, with the UPC CoA overturning the findings of infringement it had reached in respect of both the German and UK designations of Fujifilm’s European patent.

This was a highly anticipated decision, but the indications following the hearing were that the injunctions would most likely be overturned on the basis of a lack of evidence of infringement. What is most significant for practitioners and businesses that may litigate before the UPC is that the court took the opportunity to provide practical guidance on managing UPC long-arm jurisdiction claims. In its decision, the court clarified that a distinction needs to be drawn between whether a UPC division accepts jurisdiction to hear claims relating to European patent designations in non-UPC states and, if it accepts that it has jurisdiction relating to those long-arm claims, when it should exercise those powers.

Accepting long-arm jurisdiction

The UPC CoA considered that the UPC’s jurisdiction can extend to all European patent designations, including those in third countries such as the UK, and is not confined to UPC contracting member states.

The court found support for this in the UPCA. Article 34, which provides that “decisions of the Court shall cover, in the case of a European patent, the territory of those Contracting Member States for which the European patent has effect” does not, the CoA found, limit the UPC’s jurisdiction to only UPC contracting member states. The court also found that this is supported by Articles 71a and 71b of the BRR, which establish the UPC as a common court, meaning that the UPC would have jurisdiction where a national court would have jurisdiction under that regulation.

The CoA further said that, when the UPC contracting member states entered into the UPCA, there was no indication they intended to confine UPC jurisdiction to the UPC territory, and therefore the UPC’s jurisdiction should not be more limited than that of national courts. 

Further support was found in Article 3 of the UPCA, which does not limit the UPCA to European patents in force only within the UPC’s territory, and Article 24(3), which allows the UPC to apply national law of non-contracting states.

The UPC CoA considered that Article 4(1) BRR was central to anchoring the UPC’s jurisdiction.

Where the court has jurisdiction under Article 4(1), the court held that the UPC cannot decline jurisdiction on the ground that a court of a non-member state, such as the UK, would be a more appropriate forum for the trial of the action, even if the jurisdiction of no other member state is in issue, or the proceedings have no connecting factors to any other member state. 

In this case, the CoA found that the Mannheim LD had correctly applied Article 4(1), and that the domicile of the Kodak entities in Germany was sufficient to bring the company’s alleged infringements in the UK within the scope of UPC scrutiny.

It is also noteworthy that Fujifilm’s UK infringement claim failed not because of international jurisdictional issues but due a failure to establish joint liability for infringement under UK law.

The CoA confirmed that the UPC’s jurisdiction extends to claims of ‘joint tortfeasorship’. However, such accessory liability must still be established under the applicable national law and was not found to be the case on these facts.

Exercising the long-arm jurisdiction

Where the UPC is found to have long-arm jurisdiction, consideration then has to be given to whether it is possible to exercise that jurisdiction, the UPC CoA said.

The court considered this issue in detail, outlining the considerations the UPC divisions must give to long-arm jurisdiction claims, and building in some safeguards as to how such long arm jurisdiction claims are managed.  The court’s decision provides a useful, structured framework which clarifies how it will manage different scenarios in which the UPC’s long arm jurisdiction is asserted. These principles provide some practical case management and strategic tools for both claimants and defendants to such proceedings.

Importantly, the court also confirmed that where the UPC confirms that if it has jurisdiction to hear an alleged infringement of a non-UPC European patent, it must apply national patent laws, as well as international law principles of comity which provide for courts in one jurisdiction to recognise and give effect to the laws and decisions from other jurisdictions to avoid overstepping their boundaries.

Comity is a particularly hot topic given recent tensions between UK and UPC judges in FRAND disputes, as well as the recent rulings concerning the extent of the UPC’s long-arm jurisdiction, so this pragmatic decision is welcomed.

The UPC CoA identified three different categories of proceedings in respect of European patents in force in EU countries that are not a UPC contracting member state, such as Spain, in ‘Lugano’ countries – the Lugano Convention governs jurisdiction and the enforcement of judgments between EU member states and EFTA member states Iceland, Norway and Switzerland – or in third countries, like the UK. Critical to the steps the UPC must take is whether the proceedings involve a challenge to the validity of the relevant patent.

The first category concerns cases in which a revocation action has been lodged with the UPC concerning a non-UPC patent. In all such cases, the UPC must decline jurisdiction, the UPC CoA said.

The second category concerns a UPC infringement action based on non-UPC designations, where validity is contested. In such cases, the CoA said the UPC should first offer the rights holder the opportunity to withdraw the extra-territorial “long-arm” claim within an appropriate period of time.

For non-UPC EU and Lugano Convention country patents, if the rights holder decides not to withdraw the action, the alleged infringer must then be given the opportunity to challenge the validity in the national courts, again within an appropriate period of time. UPC judges should ‘stay’, or put on hold, the UPC proceedings until a final decision has been reached in respect of the national revocation action. However, if a national revocation action is not lodged in time, the UPC could move to determine the question of infringement, based on an assumption that the patent in question is valid, according to the CoA.

For cases involving European patents in force in a third country, where the rights holder decides to not withdraw the infringement action, the UPC will in any event dismiss the infringement action unless there are specific reasons not to do so.

The third category concerns cases where an UPC infringement action has been commenced also based on non-UPC patent designations, and the patent in force in the UPC territory is considered valid and infringed in the UPC territory.

This third category is the most interesting, and the Court of Appeal’s findings here provide important strategic guidance for businesses that are or may become engaged in UPC litigation and in which the court’s long arm jurisdiction may play a role.

In such cases, where a European patent is found valid and infringed within the UPC territory, where it is appropriate and in order to avoid undue delay, the UPC may proceed on the basis that there is a “reasonable, non-negligible possibility” that the patent will be held valid by the national court, and may issue a decision under the “condition subsequent” that the relevant claims are held to be invalid by the national court.

If the national court finds the patent to be valid, the decision and any injunctive relief will remain in place with the condition subsequent. If the national court issues a final decision that the patent is valid, the UPC injunction will become permanent. If, however, the final decision of the national court is that the patent is invalid, the UPC decision, including any injunction, falls away, and in such a case the patentee may request a stay of the UPC proceedings until a final national decision has been rendered.

With this framework, the court has provided practical case management guidelines which allow it to exercise its jurisdiction, while respecting boundaries imposed by the BRR and principles of comity and the CJEU’s BSH Hausgeräte ruling, and it will therefore be interesting to see how it is received by national courts.

The decision also highlights important strategic considerations for both rights holders and alleged infringers. A clear take away is the value of assessing the merits of filing early national revocation actions to mitigate the risks of the UPC’s long arm jurisdiction. This may move some focus back to the national patent courts.