Van Dongen on Sustainable Destruction of Patent-Infringing Goods

Lisa van Dongen has posted a paper on ssrn titled Sustainable Destruction of Patent Infringing Goods: An Oxymoron?  (Hat tip to Jorge Contreras for calling this paper to my attention.)  Here is a link to the paper, and here is the abstract:

This paper explores the feasibility and attractiveness of alternative solutions to destruction based on the Customs Enforcement Regulation (Regulation 608/2013), the IP Enforcement Directive (Directive 2004/48), and the UPC Agreement. It finds that the current European system actually undermines the ability of actors involved to opt for more sustainable alternatives to the destruction of infringing goods, despite the increasing awareness that the destruction of infringing goods is generally not the most sustainable remedy a patentee has at their disposal. Indeed, a lot can be said about the cost to the parties involved, the environment, society and those who could have directly benefited from the infringing products when products are recalled and destroyed. This is true for most-if not all-infringing products in varying degrees, but this is especially contentious when it involves goods such as medicines and medical devices. Unfortunately, alternatives to a destruction order are currently complicated or even curtailed by a number of factors. One obstacle is the Customs Enforcement Regulation, which does not allow much room for an alternative route once the rights holder has asserted their rights. While the IP Enforcement Directive prescribes the application of a proportionality test by courts considering the seriousness of the infringement, the remedies ordered and the interests of third parties, it depends on the corresponding national provisions and case law how much effect is given to this precondition. Last, even if patentees are open to alternatives to requesting an order for destruction, finding an alternative that would accomplish the same without costing more may not be straightforward as a practical matter. The chapter concludes with a few final thoughts on the way forward.

This is a very good paper, both in terms of its analysis and its description of the current state of the law in the EU.  I’m also gratified by the paper’s generous citations to my article with Professor Shen on the destruction remedy, and to foundational work on sustainability by Professor Charlotte Vrendenbarg.

Van Dongen on Proportionality and Injunctions in the UPC

Lisa Van Dongen has posted a paper on ssrn titled Proportionality and Flexibilities in Final Injunctive Relief, forthcoming in The Unified Patent Court: Problems, Possible Improvements and Alternatives (Alain Strowel et al. eds., Ledizioni, 2023).  Here is a link to the paper, and here is the abstract:

          In 2006, the patent world was shaken to the core by eBay v MercExchange, a case that questioned several basic principles in patent enforcement that were considered well established. The US Supreme Court sent a clear signal that patent rights were not to be considered absolute, and courts should thus not enforce them in automated fashion with injunctive relief. This case has received considerable attention globally, with many patent scholars analysing it in meticulous detail and questioning the European approach. Even though there is no agreement in the field on the optimal balance in patent enforcement (and likely never will be), even the most adamant proponents of strong patent enforcement agree that there may be other interests that merit the denial or tailoring of final injunctive relief. Yet, the automated tendencies in patent enforcement in Europe - the finding of an infringement automatically leading to the (blanket) grant of a permanent injunction - remain not only as prevalent as they have been for several decades, but also without any clear departures by courts (apart from English judges) from such tendencies indicative of course changes. What is more, is that the possibility for Europe to break with automated tendencies in enforcement will soon be further complicated by the addition of another layer to Europe’s existing patent systems, namely by the creation of the Unified Patent Court (UPC) and the unitary patent. If this system takes off, decisions of this new court will carry significant weight in European patent enforcement due to several organisational and territorial aspects. The UPC has even been described as a potential judicial counterbalance to pro-patent tendencies in patent offices, particularly the European Patent Office (EPO). However, considering the strange construct of its creation, it is questionable that the UPC will be that judicial counterbalance and lead the way for other courts in Europe. Some of these aspects might also create some tension with other systems it will have to co-exist and interact with. A closer look is thus imperative. This paper aims to do just that, testing the hypothesis: The UPC will not bring about a change in the current automated tendencies in granting final injunctions, but rather cement them. This paper explains why there will be no push from the EU to try and do so based on the current status of EU harmonisation in patent enforcement, questions the UPC’s capability and willingness to break with the existing automated tendencies based on the UPCA’s formulations and organisational features of the UPC, and explores some legislative solutions at the European level to move Europe away from automated tendencies in patent enforcement.

This is an insightful paper, and I suspect that the author is correct in predicting that the UPC will not depart from the status quo in favor of near-automatic granting of injunctive relief to the prevailing patent owner.  Her recommendation that the EU consider legislation providing more detail on when and how proportionality might result in limitations on (tailoring) injunctive relief, or in some instances denying such relief altogether, seems to have merit.

Stief on Preliminary Injunctions Prior to Grant

The issue of whether courts in EPO member states have authority to grant preliminary injunctions on the basis of pending patent applications has recently been litigated in a number of European countries (see previous mentions on this blog here, here, here, and here).  Marco Stief has now published two papers, one in German and one in English, on the topic, noting that such injunctions appear to be permissible in some countries, albeit in several of them only in exceptional cases.  His more recent contribution is Fingolimod—(no) injunction before patent grant, J. Intell. Prop. L. & Prac. __ (forthcoming 2024).  Here is the abstract:

This article analyses the position of European courts on the availability of preliminary injunctions on the basis of a patent application, reviewing several national decisions in the fingolimod litigation. The decisions handed down by the Düsseldorf Regional Court, the Tribunal Judiciaire de Paris, the Danish Maritime and Commercial Court, the District Court of The Hague and the Barcelona Commercial Court show that the courts, with limited exceptions, reject provisional legal protection on the basis of a mere patent application on the grounds of absence of legal certainty.  The analysis identifies four (minimum) prerequisites that must be fulfilled for the courts to consider the possibility of issuing an injunction before a patent is granted.

The corresponding German article is (Keine) Unterlassungsverfügung:  Zugleich Besprechung von LG Düsseldorf „Fingolimod‟ unter Berücksichtigung von Parallel-Verfahren in anderen Jurisdiktionen, ("No Preliminary Injunction:  As Well as Case Law from the Düsseldorf Regional Court in "Fingolimod" in Consideration of Parallel Proceedings in Other Jurisdictions"), 23/2023 GRUR 1651-60.

For a different point of view, see Matthieu Dhenne’s article Preliminary Injunctions Based on a Patent Application:  A Justified Solution? (Fingolimod Case), 45 EIPR 236 (2023), previously noted here, and his more recent post FINGOLIMOD or the Hesitation Blues: can preliminary injunctions be based on a patent application under French law?, Kluwer Patent Blog, Dec. 19, 2023, which updates the French case law discussed in his earlier article and in the two Stief articles.

Dutch Supreme Court: Health Insurer Not Entitled to Reimbursement for Payments Made in Connection with Subsequently Invalidated Patent

While we await the CJEU’s judgment (date not yet announced) in Mylan AB v. Gilead Sciences Finland Oy, Case C-473/22 (see post discussing Advocate General Szpunar’s opinion here), the Supreme Court of the Netherlands has issued a decision addressing whether compensation is due for losses suffered during the period of time a patentee enforced a preliminary injunction concerning a patent that is later revoked.  The case, Menzis Zorgversekeraar N.V. v. AstraZeneca B.V., is briefly excerpted in this post on EPLaw, which links to the decision in the original Dutch and in English translation.  The patent in suit covered a sustained release formulation of a drug, quietapine.  (An earlier patent on the immediate release version of the drug expired in 2012.)  The District Court of the Hague sustained the validity of the sustained release patent in 2012, after which AstraZeneca obtained a preliminary injunction prohibiting Sandoz from marketing a generic version of the sustained release formulation in the Netherlands.    In 2014, however, the Court of Appeal for the Hague reversed the 2012 judgment and revoked the Dutch patent for lack of inventive step, following which Astra Zeneca’s competitors launched their generic versions.  In 2016, Menzis, a health insurer, filed a complaint alleging that AstraZeneca should be required to compensate Menzis for losses sustained from having to reimburse insureds for the use of AstraZeneca’s brand-name sustained release formulation during the time the generic drugs were excluded from the market.  The district court ruled for Menzis, but the Court of Appeal reversed, and the Supreme Court affirms the Court of Appeal.

In so ruling, the Court of Appeal ruling (which the Supreme Court quotes with approval) held that “[i] follows from the CFS Bakel/Stork judgment [no citation provided] that Dutch law conforms to the view - also held in our neighboring countries - that some form of culpability on the part of the patentee is required in order to assume liability after the revocation of a patent” (para. 5.2).  The Court of Appeal either distinguished or overruled what I assume to be a previous Netherlands Supreme Court decision, Ciba Geigy/Voorbraak (paras. 5.7 - .5.8):

In that judgment, the Supreme Court ruled that, in principle, it should be assumed that the person who, by threatening enforcement, forced his opposing party to behave in accordance with an injunction issued in summary proceedings, has acted unlawfully if, as the judgment on the merits of the case shows with hindsight, he was not entitled to require the opposing party to refrain from the acts in question. Irrespective of whether that judgment is consistent with the rules of the European Enforcement Directive as interpreted in the Court of Justice's judgment in Bayer/Richter (AstraZeneca disputes that), it does not follow from the Ciba Geigy/Voorbraak judgment that the patentee has strict liability to others other than the party who has been forced to comply with an interlocutory injunction by threat of enforcement. The rationale for this judgment focuses exclusively on the special position of that opposing party and is based in part on the consideration that penalties forfeited for failure to comply with the interlocutory injunction will continue to be forfeited following a contrary judgment on the merits. The latter strikes a certain balance between the clashing interests. That balance is lacking when extending strict liability to parties such as Menzis, which are not liable to forfeit penalties for non-compliance with the injunction.

 

. . . [T]he judgment in Ciga Geigy/Voorbraak is not exclusively based on the provisional nature of a decision in summary proceedings, but also on (the precisely definitive nature of) the indebtedness of forfeited penalties. . . .

The Court of Appeals further correctly concluded that AstraZeneca’s reliance on the patent during the relevant time period was not unlawful.  The standard is whether “AstraZeneca knew, or should have realized, in that period that a serious, non-negligible chance existed that the patent would not stand up in opposition or nullity proceedings,” (para. 5.10), and the Court says no:  the 2012 district court decision supported validity, and some other European countries also upheld the validity, although the English High Court found the U.K. portion of the patent invalid in 2012.  Finally, the Supreme Court states that, although “the circumstance that AstraZeneca did not act unlawfully does not automatically imply that the enrichment alleged by Menzis is justified,” the facts do not support a finding of unjust enrichment.     

One additional notable thing about this case is that, as stated above, it was the health insurer that was seeking reimbursement, rather than the excluded generic firms.  Except for the fact that the present case does not involve any allegation of fraud, this situation is reminiscent of Sec’y of State for Health v. Servier Labs. Ltd., [2021] UKSC 24, in which the U.K. Supreme Court rejected a claim that the defendants, who allegedly caused the U.K.’s National Health Service to suffer economic harm by defrauding the EPO into issuing a patent that later was found to be invalid, could be liable under the doctrine of “unlawful means.”  The UKSC held that the doctrine does not apply unless the defendant’s conduct affected the third party’s (EPO’s) freedom to deal with the plaintiff.  Here, by contrast, it appears that the Dutch courts would permit a health insurer to collect reimbursement on the right set of facts.

Some Recent Discussion of Preliminary Injunctions in the EU

1.  Christian Le Stanc recently published a short commentary titled Que fair contre les méchants «patent trolls»? (“What to about patent trolls?’”), Propriété Industrielle, Sept. 2023, pp. 1-2.  The commentary notes a written question submitted earlier this year by French MP Christophe Blanchet to the Minister of Justice, posing this very question, i.e., “If and how the government intends to act to better protect rightsholders and operating companies against the rogue utilization of the courts, specifically in guaranteeing an effective and harmonized application of the proportionality principle in constraining the automatic grant of injunctions at the national and European level, and within what time frame” (my translation from the French).  Dr. Le Stanc characterizes the government’s response as “Rien” (nothing).  More specifically, the government’s response notes that the rules are intended to assure a balance between rightsholders and other parties; and states that French and EU law, including IPRED and the UPA, are such as to confine the harmful activities of “patent hunters.”  Dr. Le Stanc appears to have been hoping for something a bit more forceful, and states that under the proportionality principle it would be legitimate to award patent trolls only a reasonable royalty, rather than an injunction.  (For the submitted question and response, see here.)

2. Léon Dijkman published a post on IPKat titled What is the standard for preliminary injunctions before the UPC?   The post notes the recent decision of the UPC Munich awarding a 10x Genomics a preliminary injunction against Nanostring (pending motion previously noted here; English-language translation of the decision available from Tilman Müller-Stoy on EPLaw here).  The author states that the court articulated a “two-fold necessity argument” comprising both urgency and threatened harm to the patentee; the latter may take into account such factors as price erosion, market erosion, and the products’ life cycles. The author also notes some possible ambiguity over how the balance of interests fits in, but reads the decision as requiring consideration of this factor (that is, whether the patentee’s interest in obtaining interim relief outweighs the infringer’s interest in avoiding it), and that ownership of a patent that is likely infringed and valid (following some preliminary assessment of validity) can tilt the balance in favor of the patentee.  In addition, the court considered the defendant’s proportionality argument, but found it lacking for various reasons (and considered the patentee’s status as an NPE immaterial).  For additional discussion of 10x v. Nanostring, see Konstanze Richter’s write-up on JUVE Patent and another here by Dr. Julia Traumann Emmanuel Gougé.  Also, as noted by Dr. Dijkman and as discussed in a recent post on the Kluwer PatentBlog, 10x failed to obtain a second UPC preliminary injunction against Nanostring, apparently for lack of sufficient evidence of infringement and validity of the patent in suit in that case.  And even more recently, Tilman Müller-Stoy published an illuminating post on EPLaw titled UPC–10x Genomics/Harvard v NanoString, discussing both preliminary injunction proceedings.

3. Rik Lambers published a post on the Kluwer Patent Blog titled Status Quo Vadis?  The post discusses a Dutch decision granting a “status quo injunction,” which the author describes as “preliminary relief in preliminary relief proceedings,” which was then followed by an actual preliminary injunction against Teva’s marketing a generic version of a drug owned by Grünenthal (despite a broader version of the claim in suit having been invalidated in Germany and the U.K.)

4.  On JUVE Patent, Konstanze Richter published a post titled UPC imposes penalty payment on Revolt in e-bike dispute with MyStromer.  The post discusses a follow-up proceeding to what was the UPC’s first ex parte decision this past June (previously noted here).  According to the post, the court “imposed a penalty payment totaling €26,500,” which “is mainly due to the German dealer offering the [accused] bikes for sale in September.”