Thursday, April 28, 2022

European Court of Justice opens floodgates to preliminary patent injunctions in major victory for Munich I Regional Court's patent-specialized judges

Today the European Court of Justice (ECJ), the upper division of the Court of Justice of the EU (CJEU), handed down what may be its most consequential patent-related decision ever (or, at a minimum, after Huawei v. ZTE, its seminal decision on FRAND-encumbered standard-essential patents). It is presently available only in German (the language of the proceedings) and French (the court's primary working language). The gist is that preliminary injuntions over patents will now be more readily available than before, even if a patent is not battle-tested in the sense of having survived an opposition or nullity proceeding.

Companies that often get sued over patents will think or say: "Bummer!"

What makes this decision even more important is that it will govern the grant or denial of preliminary patent injunctions by the Unified Patent Court (UPC), which is expected to be no less (in my view, even more) patentee-friendly than Germany's patent courts.

Before I elaborate on this, I wish to extend my congratulations to the three judges who, on behalf of the court's 21st Civil Chamber, masterfully crafted the request for preliminary ruling (also called a "preliminary reference") that gave rise to today's ECJ decision:

Early last year, the lower Munich court decided to leapfrog its appeals court, the Munich Higher Regional Court, which like its counterparts in the other major circuits for German patent infringement litigation (Karlsruhe, which is the appeals court for patent cases originating from Mannheim, and Dusseldorf) imposed a rather exacting requirement: a patent-in-suit had to be affirmed in an adversarial proceeding (i.e., a nullity case before the Federal Patent Court of Germany or an opposition proceeding before the European Patent Office or the German Patent & Trademark Office, whichever office had granted the patent in question) in order to be able to underly a preliminary injunction. Not just that: if a new challenge to a patent raised invalidity contentions (such as by presenting new prior art) that had not been previously addressed, the fact that the patentee had managed to fend off a different challenge didn't count in this new situation.

Judges Pichlmaier, Dr. Fricke, and Dr. Schacht got exactly the outcome they wanted. They had strategically phrased their question in such a way that the ECJ couldn't have answered in any other way unless there had been qualms over whether it is proportionate to allow preliminary patent injunctions over battle-untested patents when considering the high invalidation rate in adversarial proceedings. But even if the court had wanted to take that position (for which there is no indication anyway), I believe it couldn't really have promulgated a per se rule like that. What would have been achievable if those advocating weaker patent enforcement rules had done a better job would have been for the court to acknowledge that high invalidation rates--even though the law isn't a matter of statistics--may go into the proportionality analysis.

The abject failure of efforts to reform German patent remedies law is demonstrated by today's decision, which cites § 139(1) of the German Patent Act (PatG), but does not even go on to quote or discuss a potential proportionality defense.

The ECJ ruling is lopsided: the court's emphasis is overwhelmingly on the need to protect right holders, with the interests of defendants being taken into consideration only to the extent that collateral must be provided in order to enforce.

The court's reading of the EU's IPR Enforcement Directive and its purpose is particularly clear in paragraph 38, which I will now translate as follows:

"Therefore, Directive 2004/48 merely sets forth a minimum standard for the enforcement of intellectual property rights, which does not preclude Member States from enacting measures affording stronger protection (Judgment of January 25, 2017, Stowarzyszenie OĊ‚awska Telewizja Kablowa, C‑367/15, EU:C:2017:36, para. 23 and the case law cited therein)."

The decision stresses on more than one occasion that the purpose of the Enforcement Directive is to ensure a high level of protection of intellectual property rights throughout the bloc.

The ruling culminates in the following short-form answer to the Munich I Regional Court's question (this is now my translation):

"Art. 9(1) of Directive 2004/48/EC of the European Parliament and the Council of April 29, 2004 on the enforcement of intellectual property rights is to be interpreted to the effect that it disallows national jurisprudence according to which the grant of a preliminary injunction over the infringement of a patent is generally denied if the patent-in-suit has not been affirmed, at a minimum, in an opposition or nullity proceeding of first instance."

What's going to happen now?

This is a clear signal from the top EU court to the national courts in its 27 Member States as well as additional countries that are members of the European Economic Area--and even to the UK, which is no longer bound by ECJ case law but whose judges must have been watching with great interest--that patentees should have better access to preliminary injunctions.

Munich is now going to be Ground Zero for preliminary patent PIs, simply because the judges of the Munich I Regional Court's patent divisions (not only the ones who ordered the preliminary reference) have a certain judicial philosophy that has just been validated by the ECJ. But the ruling applies EU-wide.

An aggressive but far from unjustifiable reading of the decision is that if a court anywhere in the EU concludes at the preliminary-injunction stage that a patent is likely valid and infringed, a PI should issue--and defendants are not entitled to more than a bond or a deposit that ensures they can be made whole in the event they can later establish wrongful enforcement. The reason why this reading would be pretty reasonable is that the ECJ states very clearly that the purpose of the EU's IPR Enforcement Directive is to enable right holders to quickly shut down any infringing actions.

It is, however, too early to predict how exactly the case law will evolve in Germany and other EU Member States. The per se requirement of a patent having been affirmed in an adversarial proceeding is history, but this doesn't mean that courts might not still decide to exercise some restraint when granting patent PIs. It also remains to be seen how this will play out in connection with standard-essential patents (SEPs), though the German Sisvel v. Haier approach to Huawei v. ZTE could be applied to PI decisions as well.

In the short term, it's a given that patent holders seeking to enforce their rights will now be emboldened and encouraged to request PIs, especially but not only in Munich.

In the mid term, we will see patent PIs that will be enforceable in all UPC Member States at the same time. Those PIs will put enormous pressure on infringers to settle.

In the long term, only a revision of the EU's IPR Enforcement Directive could result in a trend reversal. But after that miserable failure of an attempt to "reform" Germany's patent injunction statute and considering that the same organizations didn't really do anything that could have effectively influenced the decision that finally came down today, I don't see legislative action weakening patent enforcement anytime soon.

For the net licensors among this blog's readers, today's ECJ decision is fantastic news. And it comes only two days after World Intellectual Property Day.

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