Monday, October 14, 2019

Bayer v. Richter: Worst CJEU Decision Ever?

OK, so maybe that's a bit harsh.  But the September 12, 2019 judgment in Case C-688/17, Bayer Pharma AG v. Richter Gedeon Vegyészeti Gyár Nyrt. and Exeltis Magyarország Gyógyszerkereskedelmi Kft. seems very problematic to me.  This case first came to my attention via blog posts on IPKat and Kluwer, after which I mentioned it on this blog but said I would return to it after I had read the decision myself.  Now I have, and if I'm reading it correctly, the court is reading article 9(7) of the Intellectual Property Rights Enforcement Directive and the corresponding recitals (as well as article 50(7) of TRIPS) as standing for the proposition that, when a patent owner demonstrates irreparable harm and the court issues a preliminary injunction (based on irreparable harm and other factors), but the patent is later invalidated (and the preliminary injunction therefore dissolved), the court may not award the defendant compensation unless the patent owner's act of requesting the injunction constituted an abuse.  (Further, the court states that this interpretation must be a matter of uniform EU law.)  The court's reasoning is that the application for a preliminary injunction is "unjustified" only if there was no risk of irreparable harm (see paras. 62-63).  Therefore, the fact that the defendants's launch of their generic contraceptive product put Bayer at risk of suffering irreparable harm may mean that Bayer isn't required to pay adequate compensation to the defendants, even though the patent in suit was later invalidated, for having been wrongly excluded from the market.  (I say "may" only because, as the commentator on IPKat notes, the injunction was lifted on other grounds before the patent was invalidated, and thus the defendants may still have a basis for seeking compensation in the Hungarian court.  But the broader principle against compensation otherwise would appear to apply.) 

Here is the relevant text of article 9(7):
Where the 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.
This interpretation strikes me as bizarre, particularly in light of what I understood to be common practice outside the U.S. of requiring plaintiffs who obtain a preliminary injunction but then lose on the merits to compensate the defendant for its losses, even beyond the amount of the judgment bond.   (For previous discussion on this blog, see here; see also, titled )  Perhaps that practice was not as widespread as I had thought?

Now, maybe the case will be limited to its facts--the defendants here launched before they filed an invalidation action, and Hungary has a bifurcated system such that a patent could be infringed but later found invalid.  But this still seems like a bad policy.  The court's statement that a contrary holding would "run counter to the directive's objective of ensuring a high level of protection of intellectual property" ignores the harm that follows if the owner of a nonexistent IP right can exclude a competitor from the market.

1 comment:

  1. As I read it, the strict answer to the question is only that the legislature may provide that the defendants will not be compensated [58], [71], but without saying that such compensation is prohibited. It looks like the referring court was inclined not to order compensation and was wondering whether that was permissible. Recital (22) says you have to provide compensation for unjustified preliminary injunctions, but doesn't (on its face) say you can't provide compensation for injunctions that are justified at the time, if they turn out to have been "unjustified" with hindsight. Now, I acknowledge that some of the policy reasoning eg [65], imply that compensation should not be granted in such circumstances, but I'm not sure there is an express holding to that effect. Also, as I read it, this deals with legislation. In UK practice as I understand it, compensation is ordered on the basis of an undertaking by the patentee to the court agreeing to compensate the defendant, which is given at the time the injunction is granted. It's not clear that the decision applies at all when compensation is granted on that basis. Art 9(7) says the defendant must be compensated in certain circumstances; it's hard to read it as saying the defendant must not be compensated in certain circumstances. (Though again, the CJEU reasoning does seem to suggest as much.)