EWHC Rejects Request for Award of Profits for Ex Post Wrongly Issued Preliminary Injunction

The question of whether, or under what circumstances, a patentee who obtains an ex post wrongly issued preliminary injunction—that is, a preliminary injunction temporarily excluding an accused infringer from the market, on the basis of a patent the relevant claims of which are determined, ex post, to be invalid or not infringed—should be obligated to provide monetary relief to the accused infringer (or others) is one that I devote considerable attention to in my forthcoming book, Wrongful Patent Assertion:  A Comparative Law and Economics Analysis (Oxford Univ. Press, 2026).  The answer to that question differs to some extent among the major jurisdictions for patent litigation.  As readers may recall, the CJEU has issued two rather different judgments on this topic in recent years, in Bayer Pharma AG v. Richter Gedeon Vegyészeti Gyár Nyrt, Case C-688/17, ECLI:EU:C:2019:722 (CJEU 2019), and Mylan AB v. Gilead Sciences Finland Oy, Case C-473/22, ECLI:EU:C:2024:8 (CJEU 2024).  (For previous discussion on this blog, see, e.g., here.)  In the U.S., liability is almost always limited to the amount of the bond the plaintiff is required to post, while in the U.K. and some other common-law jurisdictions courts typically require a party seeking a preliminary injunction to execute a “cross-undertaking,” essentially a legally enforceable promise that it will compensate the defendant for losses suffered as a result of a preliminary injunction that subsequently is discharged.  This last approach more or less guarantees the wrongly accused defendant the profit it lost as a result of its temporary exclusion—but it nonetheless can leave the plaintiff better off than it would have been absent the wrongly-issued injunction, because the profit earned by a monopolist normally will be greater than the duopoly profit the monopolist and the accused infringer each would have earned in the absence of the injunction.  This economic consequence leads some commentators to wonder whether the plaintiff should be required to disgorge the entire profit it earned as a result of the preliminary injunction, but to date this approach has mostly been rejected by the courts (one problem being how to divide up the monopoly profit where it has been earned at the expense of multiple entities). 

Anyway, as I said, I discuss the relevant case law and commentary in my forthcoming book, though I'm not sure whether  I will be able to add a citation to a decision handed down this morning by the Patents Court for England and Wales, Sandoz AG v. Bayer Intellectual Property GmbH, [2025] EWHC 2201 (Pat.), involving the issue of monetary relief for an ex post wrongly-issued preliminary injunction.  (Hat tip to ip fray for calling this decision to my attention.)  Not surprisingly, the court follows the majority approach in rejecting Sandoz et al.’s request for disgorgement of profits, notwithstanding these parties’ argument that a cross-undertaking entitles the enjoined party to monetary relief “as if there had been a contract in which the applicant agreed not to prevent the respondent from doing that which the injunction prevented him from doing,” and that in exceptional cases English courts can award disgorgement as a remedy for breach of contract.  Consistent with other English cases, the court concludes that the cross-undertaking is limited by its terms to compensatory damages.  Whether disgorgement would be a desirable remedy because it provides a greater deterrent—or whether it would unduly chill patent owners from enforcing their rights—nevertheless remains an interesting policy question, and I hope that this decision (and my book!) will inspire further debate--though this may be one of those issues for which economic analysis can never provide a definitive answer.    

China’s Supreme People’s Court Revokes Preliminary Injunction

The case is the Supreme People’s Court Judgment of 3 July 2024—(2024) Zui Gao Zho Min Fu No. 1, reported in GRUR Int. 74(4), 2025, pp. 356-60, and translated by Xiao Wang.  The court of first instance had granted an act preservation measure (China’s analogue to a preliminary injunction) in favor of the plaintiff patent owner, ordering the defendant to cease manufacturing and selling two models of self-cleaning sweeping and mopping robot.  In revoking the decision, the SPC relies on article 104(1) of the Civil Procedure Law, and on certain articles from the Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in Cases Involving the Examination of Act Preservation in Intellectual Property Right Disputes (Jan. 1, 2019) [hereinafter Provisions].  I don’t know of an official translation into English of the current version of the Civil Procedure Law, but you can use a machine translator or refer to the GRUR Int. article, which provides two translations of article 104(1).  All of these reference the need for “an emergency” or “urgent circumstances.”  The GRUR Int. article also provides translations of the relevant articles from the Provisions, or you can consult this unofficial translation that is available online.  In any event, the SPC says that a court should first consider urgency, and in this regard it references article 6 of the Provisions, which provides as examples of urgency the imminent disclosure of a trade secret; the imminent infringement of the applicant’s personal or privacy rights; the imminent illegal disposition of IP rights; the infringement or expected infringement of IP rights at a time-sensitive place such as a trade fair; “a time-sensitive popular program is being or will be infringed” (I’m not sure what that means, but I would guess it is referring to the infringement of rights in a broadcast or live event?); or other circumstances exist requiring immediate measures.  Here, the SPC says there was no urgency.  None of the specific examples cited above were present, and the patentee waited 10 months after becoming aware of the alleged infringement to file its application.  The court also considers articles 7, 8, and 10 of the Provisions, which set forth, respectively, the general factors to be considered in deciding whether to grant the application ((1) whether the applicant's request has a factual basis and a legal basis, including whether the claimed intellectual property right is stable; (2) whether not taking act preservation measures will cause irreparable damage to the applicant's lawful rights and interests or cause the judgment of the case to be difficult to enforce; (3) whether the damage caused to the applicant by not taking act preservation measures exceeds the damage caused to the respondent by taking the act preservation measures; (4) whether taking act preservation measures harms the public interest; (5) other factors that should be considered”); the factors to be used in determining whether the IP rights are “stable” (e.g., have they undergone substantive examination, are they involved in or likely to be invalidated, etc.); and  the factors to be used in assessing whether the owner faces “irreparable damage.”  Here, the court notes that the patent in suit is an invention patent (not a design patent or utility model), so it has undergone substantive examination, but that courts nevertheless should be cautious in cases requiring a “very complex technical comparison.”  Moreover, although the applicant submitted an infringement analysis, the court characterizes it as not “a specific and in-depth analysis of the disputed technical features in conjunction with the specification,” so that “its conclusion is difficult to judge”; and there is (or at least was, during the relevant time period) an invalidation proceeding pending.  In addition, the SPC believes that the relevant damage here could be compensated by money.  Thus, the evidence was insufficient to show that the harm to the patentee from not granting the measure would exceed the harm to the defendant of granting it.  Finally, there are alternative products on the market and the public interest is not really at issue.  Overall, however, it was error to grant the injunction.

From Around the Blogs

1. On IPKat, Anastaslia Kyrylenko published a post titled CJEU to address compatibility of Italian anticipatory measures with Enforcement Directive.  The post discusses a recent referral from the Italian Supreme Court to the Court of Justice for the European Union, M.M. Ristorazione, C-132/25 (docketed Feb. 10, 2025).  The referral is said to pose the question whether, contrary to the courts of first and second instance, an injunction granted under article 700 of Italy’s Civil Procedure Code as an “emergency measure” (provvedimenti d’urgenza) in regard to possible trademark infringement qualifies as a “provisional measure” and therefore requires the movant to file suit within 21 business days or 30 calendar days, whichever expires later, under both TRIPS and the Intellectual Property Rights Directive.

Also on IPKat, Jocelyn Bosse published a post, titled Apple variety infringement ruling sees record-breaking amount of damages in China, about a recent decision of China's Supreme People's Court awarding RMB 3.3 million (which included a punitive component) for the infringement of a protected variety of apple.  Here is a press release about the case from the SPC itself.  Neither of these sources links to the text of the actual decision, however.

2.  The difficulty of obtaining the text of some Chinese decisions is itself something of a sore point for many, including the European Union, which has complained about it in two pending WTO matters.  The first, filed in 2022,  argues that Chinese courts’ issuance of ASIs violates articles 1, 41, and 63 of the TRIPS Agreement.  See WT/DS611—China—Enforcement of Intellectual Property Rights, https://policy.trade.ec.europa.eu/enforcement-and-protection/dispute-settlement/wto-dispute-settlement/wto-disputes-cases-involving-eu/wtds611-china-enforcement-intellectual-property-rights_en.  As noted in a recent post on ip fray opining that the EU has lost the initial case, the panel released its report to the parties in February, but it has not yet been made publicly available, and the parties have agreed to arbitrate the appeal (there being no functioning WTO appellate body for at least the last five years).  Meanwhile, in January the EU commenced a request for consultation with China regarding China’s practices with regard to establishing the terms of global FRAND licenses, as in the 2023 Nokia v. OPPO dispute.  The EU contends that China’s practice violates Paris Convention article 4bis, as incorporated under TRIPS article 2.1, as well as TRIPS articles 1, 28, and 63. See WT/DS632-1—China—Measures Concerning Patent Licensing Terms:  Request for Consultations by the European Union, Jan. 22, 2025, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/DS/632-1.pdf&Open=True.  Enrico Bonadio has a post on the Kluwer Patent Blog, titled The WTOdispute between China and EU over Chinese SEPs global rate-setting.

3.  On SpicyIP, Yogesh Byadwal published Injunction against Natco refused:  Public Interest Triumphs—Maybe.  The post discusses a March 24 decision of the Delhi High Court in F. Hoffman-LaRoche Ag v. Natco Pharma Ltd., in which the court invoked the public interest in denying a preliminary injunction against Natco’s production of a generic version of the drug Risdiplam.

Kaushal on Bank Guaranties in Indian FRAND Litigation

Tejaswini Kaushal has published a post on SpicyIP titled Secrets and Standards:  Analysing Pro-tem Securities in InterDigital v. Oppo [Part II].  As the title suggests, this is the second installment of a two-part post relating to the InterDigital v. Oppo FRAND litigation in India, the first addressing confidentiality and disclosure of license agreements.   The second post addresses the use of bank guarantees to secure interim relief to the SEP owner pending trial, which the Delhi High Court recently approved.

The basic idea, as I describe it in a project I am currently working on, is that in some jurisdictions court sometimes permit defendants to post a guaranty, or to actually deposit interim royalties, to avoid being preliminarily enjoined.  In recent years, Indian courts have employed this procedure in FRAND cases, as the post above discusses.  Both IPRED and the UPC also authorize this practice.  See IRPED art. 9(1)(a) (stating that member states shall ensure that courts may condition the continuation of an infringement "subject to the lodging of guarantees intended to ensure the compensation of the rightholder"); UPCA art. 62(1) (authorizing the court “to prohibit, on a provisional basis and subject, where appropriate, to a recurring penalty payment, the continuation of the alleged infringement or to make such continuation subject to the lodging of guarantees intended to ensure the compensation of the right holder”); and it is mentioned as a possibility in the European Commission’s draft regulation on SEPs, in recital 35 and in articles 1(4) and 35(4).  (Huawei v. ZTE also mentions, in its elaboration on the “FRAND dance,” that “where the alleged infringer is using the teachings of the SEP before a licensing agreement has been concluded, it is for that alleged infringer, from the point at which its counter-offer is rejected, to provide appropriate security, in accordance with recognised commercial practices in the field, for example by providing a bank guarantee or by placing the amounts necessary on deposit” (para. 67). This is not necessarily a court-ordered procedure, but rather part of the implementer's responsibility to show that it is a willing licensee, though I suppose it also would have the effect, discussed below, of reducing or eliminating the interim harm facing the SEP owner and thus should be relevant to whether the owner is entitled to a preliminary injunction.)  On the other hand, article 12 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Laws in Adjudication of Action Preservation Cases Involving IP Disputes (Jan. 1, 2019) (China), states that preliminary injunctions granted by Chinese courts “are generally not cancelled because the respondent provides a guarantee, except with the applicant's consent”); and, as I noted in a post ten years ago titled Setting the Amount of an Injunction Bond (and a Brief Digression about the Wright Brothers), this does not appear to be an authorized practice under U.S. law, although there are some old cases (including one, you guessed it, involving the Wright Brothers of airplane fame) in which federal district courts employed it.  (I should mention as well that Hui Zhang’s very informative 2019 Kluwer Patent Blog post on the Chinese Provisions noted above states that the practice is authorized under German law.  I imagine that must be the case, since IPRED requires it, but if readers can provide me with a citation to any cases in which this procedure has been employed, in Germany or for that matter anywhere else, I would appreciate it.)

If I understand correctly, the effect of the court’s or plaintiff’s acceptance of a bank guaranty or the payment of interim royalties in this context would be to render some of the patent owner’s allegedly irreparable harm—such as the risk of the defendant’s insolvency, or of a final damages judgment failing to properly account for the time value of money or other advantages accruing to the defendant from delay—reparable, and thus would provide a doctrinal basis for denying the preliminary injunction.  (In this regard, I would also note that the InterDigital decision discussed in the SpicyIP post states (at para. 99) that normally the court must first determine that the plaintiff has a prima facie case.  The logic, I think, would be that there is no need to calibrate the effect of a guaranty on the balance of hardships if there is no prima facie case.)  Theoretically, I would imagine that the practice also could enable a defendant who believes the court has erroneously balanced the relative hardships in favor of the plaintiff to “repair” some of the plaintiff’s allegedly irreparable harm by compensating the plaintiff for harms that otherwise would be, at least as a practical matter, non-compensable under governing law, such as harm to reputation or moral prejudice—though I would expect such cases to be extremely rare, perhaps nonexistent.  Again, though, if readers have any further insights on these issues, I would be interested in hearing from you. 

On a somewhat related note, Gregory Bacon and Aida Tohala published a post on the Kluwer Patent Blog last week about a decision of the Hague Local Division of the UPC, Abbott Diabetes Care Inc. v. Sibio Technology Limited, granting a preliminary injunction notwithstanding the defendant's undertaking to withdraw its allegedly infringing product from Germany, France, and the Netherlands.  The court was not persuaded that the undertaking would be effective, because Abbott "was able to purchase the contested device and have it delivered in Germany and the Netherlands, even after the undertakings were given," and because of the "lack of commitment as to penalty in the event of breach."   

Are Cross-Undertakings of Damages for the Benefit of Third Parties Consistent with IPRED Article 9(7)?

The short answer to the question posed above is, “I don’t know.”  But the question was briefed, though ultimately not answered, in a recent Irish decision.

To put the matter in context, many common-law counties (but not the U.S.) follow long-standing British practice of requiring an applicant for a preliminary injunction to make an undertaking (sometimes called a cross-undertaking), which I describe in a project I am currently working on as “a legally enforceable promise that it will compensate the defendant for losses suffered as a result of a preliminary injunction that subsequently is  discharged.”  In the U.K., courts sometimes require applicants to make cross-undertakings not only for the benefit of the defendant, but also for third parties (for example, the National Health Service) who may be negatively affected by a preliminary injunction (for example, prohibiting the marketing of a generic drug).  The question of whether this practice is consistent with the EU’s Intellectual Property Enforcement Directive (IPRED), of course, no longer affects the U.K., but it could affect EU countries that follow the British practice. 

Readers also may recall that the CJEU’s case law interpreting the relevant provision of IPRED (article 9(7)) is not altogether clear.  Article 9(7) states that “where “provisional measures are revoked or where they lapse due to any act or omission by the applicant, or where it is subsequently found that there has been no infringement or threat of infringement of an intellectual property right, the judicial authorities shall have the authority to order the applicant, upon request of the defendant, to provide the defendant appropriate compensation for any injury caused by those measures.”  Within the past five years, the CJEU has decided two somewhat difficult-to-reconcile cases interpreting this language.  First, in Bayer Pharma AG v. Richter Gedeon Vegyészeti Gyár Nyrt., Case C-688/17 (2019), the CJEU held that IPRED did not forbid a member state from denying compensation where the defendants launched at risk, even though the patent in suit was subsequently invalidated, where the application for a preliminary injunction appears to have been ex ante (though not ex post) justified.  But earlier this year, in Mylan AB v. Gilead Sciences Finland Oy, Case C-473/22 (2024), the Court upheld Finland’s practice of rendering the movant strictly liable to the defendant for losses caused by the interim enforcement of a patent that is later found to be invalid or not infringed, at least as long as “the court is entitled to adjust the amount of damages by taking into account the circumstances of the case, including whether the defendant played a part in the occurrence of the injury.”  (For previous discussion on this blog, see here and here.)  For now, at least, I interpret Mylan as standing “for the proposition that either a fault-based or strict liability standard is acceptable under EU law, as long as the standard permits the court to consider the totality of the circumstances, including the fault if any of either party, before either on the one hand denying relief, or on the other setting the ‘appropriate compensation.’”  Of course, this leaves open the question of how much leeway EU member states have in determining what the appropriate compensation, if any, should be where the application was made in good faith but the defendant launched at risk.

It also leaves open the question of whether requiring the movant to compensate nonparties is consistent with article 9(7), which is where the post started.  The issue was recently briefed in Bristol Myers Squibb Holdings Ireland Unltd. v. Norton (Waterford) Ltd. t/a Teva Pharms. Ireland, [2024] IECA 49, a case in which the trial court had allowed the undertaking to be expanded to include companies related to the defendant, but only after the injunction had been granted. On appeal, Ms. Justice Costello, writing for the court, engages in a thorough discussion of the Irish and English case law on undertakings, as well as the difficulties that may arise when courts consider extending undertakings to nonparties.  Ultimately, she concludes that the requested extension here was untimely, because the injunction had already been granted.  The court therefore leaves for another day a discussion of the circumstances, if any, under which Irish law would permit the undertaking to include losses suffered by third parties—while also concluding that Teva's evidence in support of the expansion was, in any event, lacking; that Irish law may be less amenable than is English law to including third parties within the scope of an undertaking; and, as above, without resolving whether such extensions would be consistent with the CJEU’s case law interpreting article 9(7).  (The decision references only the Bayer decision, however, presumably because Mylan was decided after briefing and argument—in fact, just a few weeks before the Irish decision came down on March 1.)

If readers are aware of any articles discussing IPRED’s compatibility with cross-undertakings for the benefit of third parties, please let me know.  I am aware of one recent article by Marco Stief and Anja Geller discussing a recent German case that allowed a related company to be compensated, and arguing that unrelated third parties as well should be accorded a right to remuneration.  See Marco Stief & Anja Geller, Ersatzansprüche bei ungerechtfertigten einstweiligen Verfügungen im Pharmabereich:  Ansprüche des Antragsgegners und geschädigter Dritter, 2023 GRUR 931, previously noted on this blog here.

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I will be taking a blogging break for the next two weeks.  I plan to resume the week of June 24.