Reetz et al. on Injunctions Under the UPC Agreement

I mentioned last week (here) that Alexander Reetz, Camille Pecnard, Riccardo Fruscalzo, Ruud van der Velden, and Mark Marfé,had just published a paper titled Die Befugnisse der nationalen Gerichte unter dem EPÜ und des Einheitlichen Patentgerichts (EPG) nach Art. 63 (1) EPGÜ zum Erlass von Unterlassungsverfügungen--eine rechtsvergleichende Untersuchung (which I translated as "The Authority of National Courts Under the Unified Patent Agreement and of the Unified Patent Court according to Article 63(1) of the Agreement on the Unified Patent Court with respect to Granting Injunctions--A Comparative Investigation") in the March 2015 issue of GRUR/Int.  I had started to read the article in the original German when I discovered that an English-language version of the article (titled The power of national courts and the Unified Patent Court to grant injunctions: a comparative study) had become available in the current edition of the Journal of Intellectual Property Law and Practice (link here).  Here is the abstract:

Continental Europe and the United Kingdom give diverging answers to the question of whether the granting of a cease and desist order (‘permanent injunction’) in favour of the proprietor of a European patent (EP) may in a specific case be refused due to considerations of proportionality.

The authors discuss the differences between Continental Europe and the United Kingdom and argue that the future Unified Patent Court (UPC), under the Agreement on a Unified Patent Court (UPCA) and the 17th version of the Rules of Procedure (RoP), can make use of a pan-European ‘lowest common denominator’ when deciding whether proportionality should play a role in deciding on an injunction claim. 

The authors begin with a brief discussion of, principally, EC Enforcement Directive articles 11 ("Member States shall ensure that, where a judicial decision is taken finding an infringement of an intellectual property right, the judicial authorities may issue against the infringer an injunction aimed at prohibiting the continuation of the infringement") and 12 ("Member States may provide that, in appropriate cases and at the request of the person liable to be subject to the measures provided for in this section, the competent judicial authorities may order pecuniary compensation to be paid to the injured party instead of applying the measures provided for in this section if that person acted unintentionally and without negligence, if execution of the measures in question would cause him/her disproportionate harm and if pecuniary compensation to the injured party appears reasonably satisfactory").  In the authors' view, apart from article 12 the Directive (in article 3(2)) expressly recognizes proportionality as a rationale for restricting a court's power to grant a permanent injunction only for (1) abuse of right and (2) violations of competition law.  

They then proceed with a discussion of the law on injunctions in Germany, France, Italy, the Netherlands, and the U.K., stating that none of these countries have "invoked the option conferred by Article 12 of the Enforcement Directive to implement a proportionality requirement into their national laws."  Thus in Germany, the authors conclude, "there is no scope for a restriction for reasons of proportionality of the power to grant injunctions" and  injunctions must be granted, absent an abuse of right or competition law violation.  Similarly, in France "only in extraordinary circumstances have . . . courts to date refused to grant an injunction despite patent infringement being established," and in Italy as well "no . . . court has refrained from granting an injunction on the grounds of it being disproportionate in the specific case," though a minority of decisions have refused injunctions where "the patent infringement was discontinued and the risk of repetition was removed . . . ."  Dutch law did not transpose article 12 either, though under some circumstances a Dutch court will apply the abuse of right principle to preclude injunctive relief for the alleged infringement of SEPs (see, e.g., my post here).  

By contrast, under the law of England and Wales injunctive relief traditionally is viewed as discretionary in nature, involving, as a "starting point," application of the four Shelfer factors (see my post here).  Although some recent English precedent has indicated that courts nevertheless should award injunctions for the infringement of IP rights unless the grant would be "grossly disproportionate," a 2014 (non-IP) case from the U.K. Supreme Court (Coventry and others v. Larence and another [2014] UKSC 13) suggests "a more flexible approach should be taken by a judge, when asked to award damages instead of an injunction, than that suggested in recent cases. In such a situation, the judge should not have an inclination either way, and the outcome should depend on all the evidence and arguments."  In a subsequent 2014 High Court case involving trademark infringement (Comic Enterprises v. Twentieth Century Fox [2014] EWHC 2286 (Ch.)), the court "concluded that the question of whether to allow damages in lieu of an injunction requires a multifactorial approach, balancing the right of intellectual property against the right to freedom of expression and the right of the arts to be free from constraint."  Nevertheless, the authors do not read either of these latter two cases as departing from earlier precedent, and note that the burden remains on the defendant (in contrast to the U.S. eBay approach).

As for the UPC, the authors note that article 63(1) of the Agreement  on a Unified Patent Court (UPCA) states that "Where a decision is taken finding an infringement of a patent, the Court may grant an injunction against the infringer aimed at prohibiting the continuation of the infringement."  Understood in its proper context, however, the authors argue, the word "may" in article 63(1)

is to be understood in the sense of ‘shall have the authority to’. It cannot be derived from these provisions, directed at the Member States, that the court shall have the power to exercise decisionmaking discretion. In actual fact, these provisions are—in line with their purpose—to be understood merely as a task for the Member States to provide their courts with the legal power to grant injunctions. What is more, these provisions allow the legal tradition of each Member State to retain its ancestral habitat. . . .

. . . However, assuming that article 63(1) would confer a procedural discretion to the UPC for refusing an injunction where there is a finding of infringement, the case law of the courts of England and Wales would require that such argument for withholding an injunction must be exceptionally strong. In other words, Article 63(1) cannot be regarded as a decent ‘port of entry’ for the importation of a standard analogous to the US Supreme Court judgment in eBay.

Finally, towards the end the paper discusses Rule 118.2 of the 16th Draft of the Rules of Procedure of the Unified Patent Court, which states 

Without prejudice to the general discretion provided for in Articles 63 and 64 of the Agreement, in appropriate cases and at the request of the party liable to the orders and measures provided for in paragraph 1 the Court may order damages or compensation to be paid to the injured party instead of applying the orders and measures if that person acted unintentionally and without negligence, if execution of the orders and measures in question would cause such party disproportionate harm and if damages or compensation to the injured party appear to the Court to be reasonably satisfactory.

The authors note that this language "was taken almost word for word" from article 12 of the Directive.  They then argue that 

It is Rule 118.2 of the RoP—and not the UPCA—that attempts to provide for damages or compensation (hereinafter ‘alternative compensation’) instead of the injunction, as a separate claim according to substantive law. The Rules of Procedure, however, cannot do so. Rule 118.2 RoP is not ‘compliant’ with the UPCA (Art 41(1) sentence 2 UPCA), since it does not merely stipulate a ‘condition’ for the ordering of an injunction within the meaning of Articles 63 and 56(1) UPCA, thus clarifying the norm.

The point may be moot, however.  Presumably the paper went to press before the 17th Draft of the Rules of Procedure were out, and as I discussed here this past December, the 17th Draft (unfortunately, in my view) deleted Rule 118.2 altogether.  C'est la vie.