Sunday, July 17, 2022

Patent holders should forget about Dutch courts for preliminary injunctions--unless the appeals court reverses Judge Brinkman in light of ECJ ruling

The Dutch patent judiciary's reputation is seriously in jeopardy now, which will also have implications for the Netherlands as a UPC venue of first instance.

So far, some patent holders believed that preliminary injunctions were more likely to be granted by Dutch courts than their German counterparts, as the latter effectively required the patent-in-suit to have been affirmed against the same invalidity contentions in another adversarial proceeding (opposition before patent office or nullity litigation in the Federal Patent Court). Not so anymore: in April, the European Court of Justice agreed with the Munich I Regional Court that under EU law (Intellectual Property Rights Enforcement Directive), injunctive relief must be reasonably available to patent holders even at the preliminary-injunction stage. I wonder whether Judge Edgar Brinkman ever cared to read what the ECJ wrote.

Given the combination of Judge Brinkman's utterly unbalanced decision to deny a preliminary injunction in Ericsson v. Apple and the lower Munich court's triumph in the ECJ over its own appeals court, it now makes a lot more sense to file PI motions in Germany than in its northwestern neighbor country. In Germany, Munich is the go-to venue, but I wouldn't underestimate Mannheim or Dusseldorf either. Just this week it became clear again that Munich is where unwilling licensees sometimes learn the hard way (for the avoidance of doubt, that particular case was about a non-standard-essential patent, but more recently, Ford took an Avanci license shortly after a Munich SEP injunction).

I'd normally have reported on Judge Brinkman's PI denial sooner, but I became aware of it only when Apple filed an English translation with the United States District Court for the Eastern District of Texas as an exhibit to its "emergency motion" relating to Ericsson's Colombian preliminary injunction--and that one has recently been the most interesting development in that dispute, and even in the wider patent enforcement context.

So here's the translation of that quirky Dutch decision, on which I'll comment below:

Ericsson requested a preliminary injunction against three Apple entities, which was denied on May 9.

I don't see a point in spending too much time on the extraterritorial parts, such as Ericsson wanting to hold Apple Benelux responsible not only for its actions in the Netherlands but also in Belgium. While I think it's really weird for the Dutch court to assume that Apple Benelux (Benelux = Belgium + Netherlands + Luxembourg) isn't doing business in Belgium as well as the Netherlands, that is no longer going to be important once the Unified Patent Court commences its operation. It is, however, one of various parts of the decision that seriously call into question whether the court was fair and reasonable.

Apple's tax optimization strategy involves a Dutch entity, so one may wonder whether there was a pro-Apple bias here. The decision is fundamentally inconsistent with what one would see in a fair jurisdiction from a rather experienced judge. Protectionism at play? Sorry, but if a judge thinks an entity named Apple Benelux B.V. doesn't necessarily do business in Belgium (the "Be" in "Benelux") and the Netherlands (the "ne" in "Benelux"), despite Ericsson (according to the decision) having pointed to indications that went beyond the name, one is left to wonder what's going on there. It's really crazy.

The part that should scare all patent holders willing to extend a license away from the Dutch judiciary (short of an appellate decision that reverses Judge Brinkman) is paragraph 4.30 (page 13). After describing what the patent relates to, but otherwise failing to address the technical merits of the infringement allegations, Judge Brinkman then decides even the Netherlands-specific part of the case against Ericsson (and imposes costs) because "[a]n injunction would have very far-reaching consequences for Apple" and Ericsson is not a competitor in the smartphone or tablet computer market, but "focused on generating licensing revenue by making the patented technology accessible to licensees."

While Judge Brinkman at least clarifies that there is "a different test" in place at the stage of the main proceedings, his reasoning is flawed even at the preliminary-injunction stage.

Judge Brinkman's mistake is that he focuses only on the harm to Apple and on the monetary nature of Ericsson's harm. In other words, the balance of the hardships. But in case he hasn't noticed, the Netherlands is not the 51st state of the United States but a member state of the European Union.

In the EU, however,the standard is different. There is no "inadequacy of monetary relief" requirement. The existence of direct competition between the parties is recognized by the ECJ as a factor that makes it particularly important to ensure the availability of preliminary injunctions as the ECJ noted in Phoenix v. Harting (the case that originated from Munich; here's the official English version of the ECJ judgment):

"32. In the second place, it should be noted that, in accordance with Article 9(1)(a) of Directive 2004/48, read in conjunction with recital 22 thereof, the provisional measures available under national law must enable the infringement of an intellectual property right to be immediately terminated, without awaiting a decision on the merits. Those measures are particularly justified where any delay would cause irreparable harm to the holder of such a right. Thus, the ‘time’ factor is of particular importance for the purposes of effective enforcement of intellectual property rights." (emphasis added)

So, if Ericsson was competing directly with Apple, the measures would be particularly justified. But it is then clear legal error on Judge Brinkman's part to set the bar for a patent PI so high that it is, on the bottom line, exclusively available to direct competitors.

His decision also fails to consider that Ericsson's licensees, such as Samsung, do compete with Apple.

The ECJ made it abundantly clear that patent PIs must be widely available:

"39. It is also apparent from the Court’s case-law that the provisions of that directive are intended to govern the aspects of intellectual property rights related, first, to the enforcement of those rights and, secondly, to infringement of them, by requiring that there must be effective legal remedies designed to prevent, terminate or rectify any infringement of an existing intellectual property right (judgment of 18 December 2019, IT Development, C‑666/18, EU:C:2019:1099, paragraph 40 and the case-law cited)." (emphasis added)

The ECJ said: PIs must be available to immediately stop any infringement. Not just in cases involving direct competitors.

So what should Judge Brinkman have done instead?

Instead of terminating his analysis of whether a PI should be available if Ericsson prevailed on the technical merits after finding that the balance of hardships tips in Apple's favor if an injunction had to be enforced, he should have asked himself--and Apple--a very simple question:

Why shouldn't Apple have to take reasonable steps to render such enforcement unnecessary in the first place?

Let's assume for the sake of the argument that Judge Brinkman was right that "there is no simple alternative solution available to Apple et al. to circumvent EP 131's patented technology in [its] consumer products" because it's a circuitry patent, so you can't just do a quick software update. I don't know whether Apple actually could replace some chipset within a few months, but again, let's just assume the judge got that part right. That still doesn't mean Ericsson isn't entitled to a PI.

The question is then why Apple doesn't simply take a license. In the U.S. that question wouldn't be asked in this kind of case, but again, this is a case in the EU and Judge Brinkman disregards the ECJ's guidance by cutting his analysis short in a way that is highly prejudicial to a patent holder (in this case, Ericsson).

Judge Brinkman's decision does not explain why Apple should get away with what may be an ongoing infringement--and why Ericsson should bear the costs of the litigation--when there is a licensing offer on the table. In my opinion, there should at least have been some discussion of whether that licensing offer was facially unreasonable or not. Is it really irreparable harm if Apple takes a license that costs $5 per iPhone?

For now, if you seek a patent PI in Europe, that court in The Hague is definitely not a venue I would recommend.