Lavie and Shapira on Rivalrous Remedies

Shay Lavie and Roy Shapira have posted an article on ssrn titled Rivalrous Remedies, Vand. L. Rev. (forthcoming).  Here is a link to the paper, and here is the abstract:

Legal scholarship typically conceptualizes enforcement as operating directly on wrongdoers: either by enjoining them ex ante or by imposing monetary sanctions on them ex post. Yet across a wide range of legal fields, courts and lawmakers have long employed a different and largely untheorized instrument. Instead of sanctioning the wrongdoer directly, these doctrines deter misconduct by conferring a legal advantage on the wrongdoer’s rival: a business competitor, a litigation counterparty, or another strategically positioned actor. For example, when a patent holder forces customers to sign aggressive licensing agreements, courts may allow the patent holder’s competitors to freely infringe the patent. And in family law, when one parent alienates a child from the other, courts often respond not by fining the alienator parent but by granting the alienated parent additional visitation rights.

 

This Article is the first to systematically analyze this institutional design, which we term “rivalrous remedies.” In the process, the Article makes three contributions. Conceptually, it identifies the conditions under which regulating behavior indirectly—by empowering rivals—can outperform classic remedies. Rivalrous remedies can leverage the superior information and incentives of rivals. At the same time, these remedies operate effectively only in certain market structures and pose risks of overuse and spillover harms to third parties.

 

Descriptively, the Article demonstrates the prevalence of rivalrous remedies by analyzing nine doctrines across diverse legal fields: from false advertising to defamation law to civil procedure. While each doctrine has been criticized by scholars in their respective fields, viewing them through a common lens reveals a shared institutional logic: they emerged to address chronic underenforcement problems. In particular, these doctrines respond to underenforcement by shifting who enforces (not necessarily the direct victim) and/or how enforcement occurs (through largely self-executed mechanisms requiring minimal judicial involvement).

 

Normatively, the Article offers guidance for courts interpreting existing rivalrous remedies, identifying when they should be expanded, constrained, or combined with traditional remedies. It also proposes the adoption of a new rivalrous remedy in trade secret law to address enforcement failures surrounding consumers’ “right to repair.”

Although I don’t necessarily with everything in the paper, its presents an intriguing analysis of a variety of doctrines—including one that I have written on from time to time (including in my forthcoming book, Wrongful Patent Assertion), namely IP misuse.  On misuse in particular, the authors argue that traditional remedies against, say, overextensive licensing practices are often ineffective, because the direct victim may have difficulty proving (for example) an antitrust violation (or, in the copyright sphere) fair use.  Patent and copyright misuse law can counter this potential underenforcement problem by conferring an advantage (unenforceability of the subject IP) on the patent or copyright owner’s rivals; in principle, this “rivalrous remedy” should serve as a deterrent against the overextensive licensing practice in the first place.  Of course, how effective that deterrent is depends on the rivals being aware of the overreaching, and being confident that they would prevail on the misuse defense if sued for infringement.  (One possible countervailing consideration, it occurs to me, is that under the traditional understanding of misuse the penalty of unenforceability lasts only until the misuse is purged, so a rival might still be hesitant to make any irreversible investments in reliance on its ability to lawfully access the subject IP.)  Moreover, as the authors note, “the patent misuse doctrine is imperfect,” because “[c]ourts sometimes have a hard time distinguishing between practices that do not hurt competition and those that do” (p.22).  All that said, this is an interesting way of thinking about misuse and doctrines in other bodies of law such as false advertising (where the idea of investing competitors with the right to sue has sometimes been thought of as, in effect, deputizing them to vicariously avenge the direct injuries suffered by consumers) and antitrust.  I think one could probably extend the analysis to the tort of interference with prospective business relations as well, insofar as that body of law confers upon a disappointed rival some recourse against a person who has used improper means to discourage third parties from doing business with the rival—though my sense is that, in its current form, this tort is rarely successful.  

AIPPI 2025 Study Question Q296: Preliminary Injunctions: Requirements for compensating damage suffered by defendant

One of the topics I discuss at some length in other forthcoming book, Wrongful Patent Assertion:  A Comparative Law and Economics Analysis (Oxford Univ. Press, forthcoming May 2026), is whether a patentee who obtains a preliminary injunction on the basis of a patent that subsequently is determined to be invalid or not infringed should be obligated to compensate the temporarily excluded defendant for its losses, and if so in what amount.  As I discuss in the book, practice around the world differs in many important respects.  Courts in the U.S. almost always limiting the patentee’s liability to the amount of the injunction bond it is required to post (which amount may turn out, ex post, to be undercompensatory).  The U.K. requires plaintiffs to agree to a cross-undertaking, essentially a contract obligating the payment of compensation in the event the preliminary injunction is thereafter lifted, while the CJEU has given mixed signals regarding what is permitted under EU law (see, e.g., discussion on this blog here).  Anyway, the AIPPI has made available its Resolution, its Summary Report, and the individual reports for 43 members, including not only the U.S. and the U.K. but also China, Japan, South Korea, India, several EU member states, and a smattering of countries in South America, Asia, and Middle East.  Among these members, there is substantial support for a rule that would require, as a general matter, full compensation of the defendant’s actual damages suffered as a result of the wrongly-issued preliminary injunction (as opposed to a more plaintiff-friendly approach that would limit liability to bad-faith assertions), albeit perhaps subject to some mitigating factors.  Whether or not you are an AIPPI member yourself, you can download all of the reports by going to aippi.org, clicking on “Library” and then “Search,” and then typing in “Q296.”

On this same topic, Hans-Jürgen Ahrens recently published an article titled Schadensersatz nach aufgehobener einstweiliger Verfügung wegen nichtigen Arzneimittelpatents—zugleich Besprechung von BGH GRUR 2025, 574—Glatirameracetat (Damages compensation following the lifting of a  preliminary injunction concerning an invalidated medicament patent—As well as case law of the Federal Supreme Court, GRUR 2025, 574—Glatirameracetate).  (The German case itself is related to the European Commission’s investigation of Teva relating to the drug Copaxone, which I have discussed previously here and will also be discussing, albeit briefly, in my forthcoming book.)  Here is a copy of the BGH decision itself, in which the court holds, inter alia, that the infringement defendant seeking to recover its own lost profit caused by the preliminary injunction may not also claim the infringer’s profit in excess of that lost profit—though it leaves open the question whether the defendant could choose to use any of the three methods for calculating its own actual loss, including the patentee’s profit, as the (single) method for estimating its actual loss.  For discussion of a recent British decision rejecting the argument that defendants may recover the plaintiff’s profits, see my previous blog post here.       

Jüngst and Schroeder on Damages for Wrongly-Issued Preliminary Injunctions in the UPC

I commend to readers’ attention an article by Oliver Jan Jüngst and Moritz Schroeder titled ֦PI damages֞:  Revocation of provisional measures and compensation of the Defendant under R.213.2 RoP, 2025 GRUR Patent 340.  Here is the abstract:

The tide can turn in any patent case for various reasons – e.g. if a patent is revoked at some point.  Yet, what can be done to compensate for damages incurred by a party because of provisional measures being granted on the basis of said patent?  The economic consequences of such a measure can be severe and hence, a compensation mechanism is necessary to strike a fair balance between the interests of right holders and other parties as emphasized in the UPCA considerations.  While the RoP indeed provide for a compensation in R. 213.2 RoP, once again, the specific assertion raises many questions, some of which are presented here.

The authors state that, to their knowledge, there are at present no cases in which the UPC has addressed the compensation due to a defendant who is preliminarily enjoined on the basis of a patent that is subsequently determined to be invalid or not infringed; and the wording of the relevant provisions, namely article 60(9) of the UPCA (read in conjunction with article 62(5)) and Rule 213.2 of the Rules of Procedure, require some interpretation.  The authors suggest that there may be no uniformly correct answers in regard to the court (first instance or appellate) in which the claimant should seek relief, or the deadline for filing its claim   And while they do not discuss the CJEU’s decision in Mylan v. Gilead (previously noted on this blog here), which holds that a regime of strict liability is compatible with IPRED article 9(7)—and they note that the wording of Rule 213.2 suggests a discretionary standard (“. . . the Court may order”)—they imply that it might make sense for the UPC “to ‘mirror’ its developing practice of allowing injunctions on a regular basis . . . via also regularly finding the general liability of a PI applicant under R. 213.2 RoP if a PI is lifted at a later stage.”  They also suggest that, in an appropriate case, liability could include not only the accused infringer’s lost profits but also other expenses incurred as a result of the injunction, and (perhaps) even losses suffered outside the UPC territory if these are caused by the injunction.

In the same issue of GRUR is Hans-Jürgen Ahrens’ article Schadensersatz nach aufgehobener einstweiliger Verfügung wegen nichtigen Arzneimittelpatents—zugleich Besprechung von BGH GRUR 2025, 574—Glatirameracetat (“Damages following a preliminary injunction vacated on the basis of an invalidated drug patent—the German Federal Supreme Court’s Decision in Glatiramer Acetate, GRUR 2025, 574").  The decision under consideration—BGH, Judgment of March 13, 2025,  IX ZR 201/23, previously noted on this blog here under the heading “Update” —holds, inter alia, that consistent with previous German case law and the Mylan decision, the patentee can be held strictly liable to the wrongly-enjoined party for the latter’s damages attributable to the injunction, though not (as a general matter) the patentee is not liable to affected third parties (here, a sister corporation of the accused infringer to whom the latter had leased its business); and that the claimant cannot also recover the patentee’s profit attributable to the wrongly-issued injunction (though it may be possible for the amount of the patentee’s profit to serve as evidence of the claimant’s damages, if I understand correctly).  (Regarding the issue of recovering the patentee's profits, cf. the recent EWHC decision to similar effect, noted here.)    

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.    

Unfair Competition by Publicizing a Pending Infringement Action

Both ip fray and JUVE Patent have recently reported on the decision of the Tribunal des Activités Économiques de Lyon (available here) awarding bioMérieux SA €10,000, after Qiagen N.V. published a press release concerning Qiagen’s having filed a patent infringement suit against bioMérieux in the Düsseldorf Local Division of the UPC.  Since the topic of whether, or under what circumstances, an IP owner may be found liable for disparagement (and/or in violation of unfair competition or other law) for accusing another firm of infringement is one of the topics I address in my forthcoming book Wrongful Patent Assertion, I thought I should say something about this decision, which highlights some of the risks posed under the relevant French law.  

As I discuss in the book, France is hardly the only country in which IP owners need to be careful about sending warning letters, especially when the recipient of the latter is an alleged “secondary infringer” (i.e., a customer, distributor, or supplier of an alleged “primary infringer,” that is, an alleged infringing manufacturer).  The U.K., for example, has a statutory cause of action known as “unjustified threats” that is intended to protect secondary infringers from groundless threats of infringement liability; and there is also a rather complex body of German decisions differentiating between permissible inquiry letters and potentially impermissible warning letters.  (For detailed discussion, see Minyu Zheng, Legal Responses to Unjustified Threats of Patent Infringement – Intellectual Property Approach or Unfair Competition Approach? (Edward Elgar Publ. 2024), previously noted on this blog here.)  On the other hand, it is extremely difficult to win such cases in the U.S., in part because of perceived First Amendment protections.

More relevant here, previous French caw law has found that it also can be a violation of unfair competition law to publicize a pending action, at least prior to the rendering of a first instance judgment. To illustrate, consider this 2004 Cour de cassation decision holding that Défi France had violated unfair competition law by reporting its own pending (and ultimately successful) unfair competition lawsuit, against a firm called LVP partner’s, to Défi France’s client Nissan.  The recent decision of the Lyon court seems consistent with this earlier case, in finding that the publication of the press release can constitute dénigrement (disparagement) and unfair competition.  The decision states, inter alia, that the press release informed the technical sector and the general public of the filing of the complaint, “without communicating any data as to the context and the nature of the facts giving rise to the dispute,”  apart from any adversarial proceeding and in the absence of  any judicial decision, in relation to a patent in a very sensitive field in the health care sector (my translation from the French).  The court awarded damages as noted above; ordered Qiagen not to make further public comments about the case prior to a judicial decision; and ordered Qiagen to post the Lyon court’s decision on its own website.  As the above commentators suggest, this aspect of French law may not be well-known to companies outside of France, and questions may still remain regarding exactly how to comply with French law while also satisfying obligations to keep one’s own shareholders informed of material information.    

Damages for a Wrongly Granted Preliminary Injunction Under German Law

One of the topics I discuss in my forthcoming book Wrongful Patent Assertion:  A Comparative Law and Economics Analysis is whether a patent owner who obtains a preliminary injunction of the basis of a patent that is subsequently determined to be invalid or not infringed should have to compensate the defendant for any losses the latter suffers during the period it was excluded from the market.  Although the CJEU’s decision in Bayer Pharma AG v. Richter Gedeon Vegyészeti Gyár Nyrt, Case C-688/17 (CJEU 2019), seemed to indicate that holding the patentee would be liable only if it obtained the preliminary injunction in bad faith, its subsequent decision in Mylan AB v. Gilead Sciences Finland Oy, [1] Case C-473/22 (CJEU 2024), upheld member states’ authority to hold patentees strictly liable, as long as the court has authority to consider the totality of the circumstances, including the fault if any of either party, before rendering a decision.  (See previous post here.)  Anyway, my understanding was that Germany was one of the E.U. member states that applied a strict liability standard to this issue.  I was therefore surprised this morning when I read Konstanze Richter’s article on JUVE Patent titled No damages for Glenmark in battle over Mundipharma’s Targin.  The article discusses a decision of the Düsseldorf Higher Regional Court affirming a 2024 decision of the Düsseldorf Regional Court denying compensation, where the plaintiff was not at fault in seeking a preliminary injunction.  I was able to find the Regional Court decision on openjur.de, but I don’t think the Higher Regional Court decision is publicly available yet (or at least, I haven’t found it).  The lower court decision and the JUVE article both note the Higher Regional Court’s 2023 decision in a case involving Mylan and Teva, in which then-judge Thomas Kühnen awarded Mylan lost profits as a result of its having been excluded from the market during a period of time when Teva was enforcing a preliminary injunction relating to one of its glatiramer acetate divisionals.  In that case, decided just prior to the CJEU’s Mylan decision, the court held that it didn’t have to decide whether the strict liability rule as embodied in article 945 of Germany’s Code of Civil Procedure (ZPO) was in comformity with E.U. law, because in the court’s view Teva was at fault.  Here, the lower court stated that in the Teva decision “the Higher Regional Court only examined and ultimately affirmed such fault so that it could leave aside the question of the conformity of strict liability under § 945 with European law against the background of the Enforcement Directive.  Such a special case is not at issue here.  In addition, the corresponding considerations are overtaken by CJEU” (citing Mylan v. Gilead) (para. 109).

I'm not sure how to interpret this, but it may be that this case is distinguishable from the common preliminary injunction situation because the claimant here had agreed that it would cease marketing its allegedly infringing product, albeit without prejudice to subsequently pursuing a claim for damages.  (The patentee nevertheless obtained two preliminary injunctions from the German courts, see lower court opinion para. 40.)  So maybe in this setting, the claimant is not entitled to damages for a wrongly-issued preliminary injunction unless the defendant is at fault, but normally would be strictly liable?  Or is this case signaling a more general departure from the strict liability standard?

If any readers have more information on this issue, I’d be interested in hearing from you.

Update:  I see now that I misunderstood the JUVE Patent article.  The decision at issue--OLG Düsseldorf, Judgment of April 30, 2025, I-2 U 45/24--is available here.  It held that the patentee was not liable without fault for having sent a warning letter that induced the generic drug manufacturer to delay the launch of the latter's product.  This specific case did not involve a preliminary injunction, although there was another case in which a different court had entered preliminary injunctions, involving the same drug, against other parties.  Moreover, the BGH in March reaffirmed the general rule that a wrongly-enjoined party can recover its lost profit under a strict liability rule.  See BGH, Judgment of March 13, 2025,  IX ZR 201/23.