CJEU: Courts May Award Preliminary Injunctions Even if Validity Has Not Been Confirmed in Opposition or Invalidity Proceedings

As reported on JUVE Patents and FOSS Patents earlier today, the Court of Justice has  published its decision in Phoenix Contact GmbH & Co. KG v. Harting Deutschland GmbH & Co. KG, available here.  I discussed the Munich court's referral to the CJEU last  year, writing:

The set-up for the referral is that German patent litigation is bifurcated, meaning that the district courts hear infringement trials, but validity challenges are litigated separately (either as opposition proceedings before the EPO or the Deutsches Patent- und Markenamt, or in nullity actions before the Bundespatentgericht).  Validity challenges take longer than infringement trials, which gives rise to the "injunction gap"--meaning that a court may enter an injunction against an accused infringer in an infringement action, only to have it determined several months later that the patent in suit was invalid.  (For an interesting take on this issue, see this recent post on IPKat.)  Bifurcation also affects preliminary injunction practice, in that German courts generally do not grant preliminary injunctions in patent cases unless the patent in suit has survived a validity challenge in of these other forums (though there are exceptions, as Holzapfel and Dölling note, citing the Düsseldorf Oberlandesgericht’s 2008 decision Olanzapin, for discussion of which see my book pp. 243-44 and this 2017 blog post).  Anyway, the Munich I District Court has now referred the following matter to the CJEU, as announced in a press release:

Ist es mit Artikel 9 Abs. 1 der Richtlinie 2004/48/EG vereinbar, dass im Verfahren des einstweiligen Rechtsschutzes letztinstanzlich zuständige Oberlandesgerichte den Erlass einstweiliger Maßnahmen wegen der Verletzung von Patenten grundsätzlich verweigern, wenn das Streitpatent kein erstinstanzliches Einspruchs- oder Nichtigkeitsverfahren überstanden hat?

Holzapfel and Dölling translate this as "Is it in line with Article 9(1) of Directive 2004/48/EC for the Higher Regional Courts having jurisdiction at final instance in proceedings for interim relief to refuse in principle to grant interim measures for infringement of patents if the patent in dispute has not survived opposition or nullity proceedings at first instance?"  Mueller translates it as ""Is it a correct application of Art. 9 para. 1 of Directive 2004/48/EC that higher regional courts, whose decisions cannot be appealed further in preliminary injunction proceedings, generally deny injunctive relief over patent infringement if the patent-in-suit has not survived an opposition or nullity proceeding in the first instance?"  .  . . .

. . .  the press release indicates that the referring court doesn't think that German practice is in conformity with article 9(1), because a recently-granted patent is effectively denied the possibility of preliminary injunction relief; moreover, patent owners don't have the ability to control whether their patents will be subject to a validity challenge. In addition, the release notes that patents, unlike some other forms of IP, are issued only after there has been an examination for compliance with the requirements of patentability.

To cut to the chase, the CJEU concludes that there is no general rule precluding the entry of preliminary relief where the patent in suit has not yet survived a nullity challenge. The court states, inter alia:

33  In the present case, the referring court states that the patent at issue is valid and that it is the subject of an infringement, such that the application for interim relief brought by Phoenix Contact should be granted. However, that court is bound by national case-law under which the patent concerned may enjoy interim judicial protection only where the validity of that patent has been confirmed by a decision given at first instance in patent validity proceedings.

34   It must be stated that such case-law imposes a requirement which deprives Article 9(1)(a) of Directive 2004/48 of any practical effect in so far as it does not allow the national court to adopt, in accordance with that provision, an interlocutory injunction in order to terminate immediately the infringement of the patent in question even though that patent, according to the national court, is valid and is being infringed. . . .

40   A national procedure aimed at the immediate termination of any infringement of an existing intellectual property right would be ineffective and, consequently, would disregard the objective of a high level of protection of intellectual property, if the application of that procedure were subject to a requirement such as that laid down by the national case-law referred to in paragraph 33 of the present judgment. . . .

54   In the light of all the foregoing considerations, the answer to the question referred is that Article 9(1) of Directive 2004/48 must be interpreted as precluding national case-law under which applications for interim relief for patent infringement must, in principle, be dismissed where the validity of the patent in question has not been confirmed, at the very least, by a decision given at first instance in opposition or invalidity proceedings.

Of particular interest to me, given my pending project on wrongful patent assertion (which will discuss, among other things, the CJEU's Bayer Pharma decision, which I have criticized as being too favorable to patent owners), the court rejects arguments that its ruling will result in abuses, stating:

42  Furthermore, as regards the risk that the defendant in the proceedings for interim relief may suffer harm as a result of the adoption of interim measures, it must be recalled that, under Article 3(2) of Directive 2004/48, the measures, procedures and remedies necessary to ensure the enforcement of intellectual property rights covered by that directive must be applied in such a way as to avoid the creation of barriers to legitimate trade and to provide safeguards against their abuse.

43      That provision therefore requires the Member States and, ultimately, the national courts to offer guarantees that, inter alia, the measures and procedures referred to in Article 9 of Directive 2004/48 are not to be abused (judgment of 12 September 2019, Bayer Pharma, C‑688/17, EU:C:2019:722, paragraph 68).

44      In that regard, it must be noted that the EU legislature has, in particular, provided for legal instruments which make it possible to mitigate comprehensively the risk that the defendant will suffer harm as a result of provisional measures, thereby ensuring its protection.

45      First, under Article 9(5) of Directive 2004/48, Member States are to ensure that the provisional measures referred to, inter alia, in paragraph 1 of that article are revoked or otherwise cease to have effect, upon request of the defendant, if the applicant does not institute, within a reasonable period, proceedings leading to a decision on the merits of the case before the competent judicial authority, the period to be determined by the judicial authority ordering the measures where the law of a Member State so permits or, in the absence of such determination, within a period not exceeding 20 working days or 31 calendar days, whichever is the longer.

46      Secondly, Article 9(6) of Directive 2004/48 provides for the possibility of making such provisional measures subject to the lodging by the applicant of adequate security or an equivalent assurance intended to ensure compensation for any prejudice suffered by the defendant. That protective instrument may be implemented by the competent court hearing the application for interim relief at the time when it examines that application.

47      Thirdly, Article 9(7) of Directive 2004/48 provides, in the cases referred to in that provision, for the possibility of ordering the applicant, upon request of the defendant, to provide the defendant appropriate compensation for any injury caused by those provisional measures.

48      Those legal instruments constitute guarantees which the legislature deemed necessary as a counterweight to the prompt and effective provisional measures for which it made provision. Thus, they correspond to the guarantees laid down by Directive 2004/48 in favour of the defendant, as a counterweight to the adoption of a provisional measure which affected its interests (see, to that effect, judgment of 16 July 2015, Diageo Brands, C‑681/13, EU:C:2015:471, paragraphs 74 and 75).

If there is a silver lining in this decision, perhaps it is the above passages' (arguable) implicit narrowing of Bayer Pharma--plus, perhaps, Judge Pichlmaier's statement to JUVE Patent that it would "make most sense to merge the jurisdictions for infringement and validity, as envisaged by the UPC. It is also common practice in other countries.”  I myself have long thought that bifurcation is a bad idea. 

For previous discussion on this blog of Bayer Pharma, see here, here, here, and here.

Article in Today's Bloomberg Law Concerning Enhanced Damages

You might have expected the Supreme Court's 2016 decision in Halo Electronics, Inc. v. Pulse Electronics, Inc. to have clarified the standard for awarding enhanced damages under U.S. patent law--and it did to some extent, but lots of other questions remain, or perhaps were even generated by Halo itself.  An article by Matthew Bultman in today's Bloomberg Law, titled Paying More in Patent Damages a Puzzle Ready for High Court, discusses a recent certiorari petition and amicus brief asking the U.S. Supreme Court to decide whether a showing of "egregious" infringement is a prerequisite for an award of enhanced damages.  The article also notes several other issues that have continued to divide the lower courts.   Among the latter are whether a finding of willful infringement can be based on the continuation of infringement after service of the complaint, in a case in which there is no evidence the defendant was aware of the patent prior to suit, or whether such knowledge must exist prior to suit; and whether, as I put it, "willful blindness or something short of literal intent to infringe can substitute for intentional, willful infringement."  And yes, the article does quote me, as well as Professor Karen Sandrik, who has written a terrific empirical study of post-Halo cases, previously noted here.  For previous discussion of some of these topics on this blog, see, e.g., here, here, and here.

Cotter on Standing and Nominal Damages

I have a new paper up on ssrn, titled Standing, Nominal Damages, and Nominal Damages 'Workarounds' in Intellectual Property Law After TransUnion, 56 UC Davis Law Review __ (forthcoming 2023).  Here is a link to the paper, and here is the abstract:

            In June 2021, the United States Supreme Court held, in TransUnion LLC v. Ramirez, that plaintiffs lack standing to assert claims for statutory damages under the Fair Credit Reporting Act unless they can demonstrate “concrete harm” arising from those violations. Although TransUnion was not a case involving intellectual property (IP) rights, if the rationale of the decision is that Congress cannot authorize federal courts to entertain claims for statutory damages unless the plaintiff shows that it has suffered actual harm, some common monetary awards for the infringement of IP rights—specifically, statutory damages, reasonable royalties, and (in design patent law) awards of the infringer’s total profit, all of which are intended to reduce the risk that IP owners otherwise would be left with nothing more than nominal damages—would appear to be in jeopardy. This Article argues, nonetheless, that these three remedies, which the Article refers to as nominal damages “workarounds,” rest on a sufficient footing to overcome the sort of jurisdictional objection at issue in TransUnion, for two reasons. The first is that, as TransUnion itself recognizes, “history and tradition offer a meaningful guide to the types of cases that Article III empowers federal courts to consider”; and history and tradition show that for over a hundred years courts have presumed that violations of IP rights cause harm, sufficient to sustain (at least) an award of nominal damages (or in the case of copyright, statutory penalties). Second, because the value of IP rights (unlike the rights at issue in TransUnion) often lies in the owner’s ability to license those rights to others who can exploit them more efficiently, from a functional perspective it often makes sense to conceive of infringement as causing harm when it deprives the owner of an opportunity to license.

 

            The Article further argues three additional points: first, that reasonable royalties are generally superior to both statutory damages and total profit awards as a nominal damages workaround; second, that courts retain authority to award nominal damages, as opposed to awarding zero damages or dismissing a claim altogether, when IP owners fail to satisfy all of the necessary conditions to qualify for one of the workarounds; and third, that courts should award only nominal damages in two recurring situations, namely when the evidence shows that the IP in suit provided no advantage over the next-best available noninfringing alternative, or that the defendant manufactured or acquired the IP unlawfully but then failed to use it. The Article rejects the view, however, expressed by some scholars, that courts should award only nominal damages in patent infringement actions in cases brought by patent assertion entities.