Compensation for Wrongful Preliminary Injunctions in Germany

 

The 13/2023 issue of GRUR includes an excerpt from a September 2022 decision of the LG Düsseldorf (Judgment of Sept. 29, 2022, 4c O 48/21— Glatirameracetat, 2023 GRUR 957-66, full text available from dejure.org here) and an accompanying article by Marco Stieff and Anja Geller, that touch on a topic I discuss in a pending book project: namely, under what circumstances can a defendant (often a generic drug company) or a third party recover compensation for losses suffered from having been excluded from the market as a result of a preliminary injunction, where the patent in suit has been subsequently invalidated or found to be not infringed.  Readers will recall that this topic has been taken up once in recent memory by the CJEU in Bayer v. Richter, and is the subject of another pending dispute there in the case of Mylan v.  AB v. Gilead Sciences Finland Oy, Case C-688/17 (CJEU filed July 15, 2022).  (See my blog post of July 9, noting that this subject is also the topic of discussion in a recent post on the Kluwer Patent Blog.)  In the German case, the court concluded that Mylan (the generic firm) could recover its losses and also losses suffered by its sister company, Mylan Germany GmbH, even though the latter was not a named party in the injunction proceeding.  I may have more to say about this case in a future post, after I've had some time to read it more carefully.  For now, I will note only that the authors of the article, titled Ersatzansprüche bei ungerechtfertigten einstweiligen Verfügungen im Pharmabereich:  Ansprüche des Antragsgegners und geschädigter Dritter (“Compensation claims for wrongful preliminary injunctions in pharmaceutical cases:  Claims of injunction defendants and injured third parties”), 2023 GRUR 931-37, are supportive of the outcome but argue that third parties should be given greater leeway to claim compensation from the firms that obtain preliminary injunctions under these circumstances.  Here is the abstract of their article, in the authors’ own English translation which is provided along with the German:

Preliminary injunctions are commonly granted for pharmaceutical patents.  If an order later proves to be unfounded, under § 945 German Code of Civil Procedure (ZPO) the defendant generic company can claim damages on the basis of the plaintiff’s strict liability.  However, attempts to enforce these claims are rare, and even when they are, originators have little to fear because their profits routinely exceed the losses of the generic companies by a wide margin.  Yet delayed market entry by generic companies not only harms generic companies themselves, but also leads to the unjustifiable maintenance of high prices for patent-protected medicines.  The resulting higher costs place a burden on the already strained healthcare system as well as on the health insurance companies.  § 945 ZPO does not take into account these higher costs, raising the question of the need for further bases for claims.

The authors discuss cases in France, the U.K. (a case I blogged about here), and the Netherlands that have denied third parties compensation, though in the Dutch case the party seeking compensation (actually, unjust enrichment) initially was successful before the court of first instance (only to lose on appeal).  The authors speculate about whether such a claim would succeed in Germany, but conclude that in general German courts should be more cautious than they currently are before granting preliminary injunctions in pharma cases, given the high rate of invalidation and the prospect that injuries suffered by generic firms, much less third parties, often will not be fully compensated.

From Around the Blogs

1.  In December 2021, the UKIPO published a call for views "to gather evidence on whether the ecosystem around SEPs is functioning efficiently and effectively and strikes the right balance for all entities involved."  In March 2023, it published a supplementary questionnaire "aimed at small and mid-cap businesses that are involved in standardisation and licensing of SEPs."  It has now published summaries of the responses to both calls, which are available here.  The responses show, perhaps not surprisingly, a considerable division of views on issues such as how well the system is currently working, whether holdup or holdout is more of a problem, the need for greater essentiality checking and for greater transparency, etc.  For now, the UKIPO itself is not expressing any views; rather, it states, “Given the breadth of issues raised and the divergence of the views on whether there is a case for government intervention, the IPO has decided that it will require a further period to assess the issues and, as appropriate, consider the merits of the proposals submitted.”  The summaries are themselves summarized in commentaries on IPKat, IP Watchdog, and JUVE Patent.

2. On IPKat, Henry P. Yang published Unpacking IDC v Lenovo (Part I): The approach on unpacking and comparing prior licence agreements.  As the title suggests, a second installment is contemplated.  Meanwhile, Florian Mueller published a post titled Mr Justice Mellor declares Lenovo the overall winner of FRAND dispute with InterDigital, awards fee-shifting but InterDigital is awarded interest of $46 million.  For my thoughts on the decision, see here.

3.  There has been some discussion of a bill, the Advancing America's Interests Act, pending in the U.S. House of Representatives that would tighten the requirements for nonpracticing entities to seek relief from the U.S. International Trade Commission (ITC), by inter alia limiting the ability of licensing companies to claim that they are “domestic industries” unless they actually transfer technology.  Seems like an excellent idea to me, to prevent NPEs from circumventing eBay.  For discussion on Patently-O and Bloomberg Law, see here and here.

4.  On Sufficient Description, Norman Siebrasse published a post titled Misleading the Court as a Basis for Punitive Damages, discussing a recent decision of Canada’s Federal Court awarding punitive damages in the amount of $200,000 (on top of lost profits damages of $150,000)

5.  Also on IPKat, Anna Maria Stein published Non-infringement declaration for alleged design infringement in Germany:  not in Italy, says Italian Supreme Court, discussing an Italian Supreme Court decision concluding, on the basis of the Brussels Regulation (Recast), that Italy lacked jurisdiction where the allegedly infringing goods were made in Italy but sold in Germany, and the German patent owner sent a warning letter to the German seller.  

UKSC Denies Appeal in Anan Kasei v. Neo

As reported on Law360 earlier today, on June 9 the U.K. Supreme Court refused permission to appeal in Anan Kasei Co Ltd and another (Appellants) v Neo Chemicals and Oxides (Europe) Ltd and others (Respondents), UKSC 2023/0021, in a one-sentence statement that “the application does not raise an arguable point of law” (see here).  As readers may recall, this is the case in which:

(1) the Patents Court concluded that a patent owner can recover lost profits on sales it would have made in another country, but for a defendant’s predicate act of domestic infringement, subject to application of the doctrine of proximate cause (¶¶ 87-109); and declined to depart from the rule established in 1888 by the House of Lords in United Horse Shoe & Nail Co. v. John Stewart & Co., which precludes a defendant from avoiding a judgment for lost profits by showing that it could have resorted to a noninfringing alternative (¶¶ 118-39) (see here); and 

(2) the Court of Appeal affirmed the ruling on extraterritorial damages (and did not address the United Horse Shoe issue, other than to note that “Neo could not have supplied a non-infringing alternative which JM would have accepted," ¶ 108) (see here).

Both decisions came to the conclusion, however, that on the evidence presented the patent owner wasn't able to prove a sufficient causal link to recover the extraterritorial damages sought.

For reasons stated in my previous two posts on this case (see here and here), I agree with the courts’ conclusion on the law on extraterritorial damages, for reasons stated in my article Extraterritorial Damages in Patent Law, 39 Cardozo Arts & Enter. L.J. 1 (2021).  I remain hopeful that someday the U.K. courts overturn United Horse Shoe, for reasons I have stated in numerous works, including this coauthored chapter from the edited volume Patent Remedies and Complex Products: Toward a Global Consensus (C. Bradford Biddle et al., Cambridge Univ. Press 2019).

A couple of recent discussions of preliminary injunctions in Germany and elsewhere

Last week on the Kluwer Patent Blog, several authors collaborated on a post titled Preliminary Injunctions:  A View from Young IP Law.  The post summarizes a “panel discussion on preliminary injunctions relating to patents at Young EPLaw 2023,” with a focus on the U.K., Belgium, Germany, and Italy, and “cover[s] three topics:  conditions to obtain a preliminary injunction, potential liability when enforcing that injunction, and looking ahead on preliminary injunctions, including in the UPC context.”  I commend the post to readers’ attention, and will only note here the authors’ discussion of Germany, where (as noted previously on this blog, here, here, here, and here) there remains something of a disagreement among the courts in Düsseldorf and Munich regarding whether, or the extent to which, the CJEU’s Phoenix Contact decision requires a modification of the Düsseldorf court’s “rule-exception” approach—namely, that a patent will be presumed valid only if it has survived a validity challenge, subject to various exceptions.  This is also the topic of a recent article by Nadine Westermeyer and Tilman Müller-Stoy, titled Prüfung des „hinreichend gesicherten Rechtbestands‟ des Patents im Verfügungsgefahren nach EuGH „Phoenix Contact‟—eine Renaissance? (“Examination of “sufficiently established validity” of the patent in the preliminary injunction proceeding after the CJEU’s “Phoenix Contact”—a renaissance?”, 6/2023 Mitteilungen der deutschen Patentanwälten, pp. 257-61.  The abstract, in my translation from the German, reads as follows:

 

In connection with the CJEU’s decision in Phoenix Contact, the validity of the patent at issue in a preliminary injunction proceeding, the requirements for establishing this, and the preexisting judicial practice of some of the Higher Regional Courts all come under discussion.  The present contribution aims for an EU-conforming of the case law on the basis of lawful, practical, and legally effective considerations.

These authors argue that Phoenix Contact imposes a rebuttable presumption of validity; and that, in view of the overarching examination for proportionality, a flexible, case-by-case approach is preferable to a rule-exception standard.

Going back to the Kluwer Patent Blog post, as noted above the authors there go on to discuss the consequences (if any) to the patentee of having obtained a preliminary injunction when the patent in suit is thereafter determined to be either noninfringing or invalid.  This too has been the subject of a still fairly recent CJEU decision (Bayer v. Richter), which I have noted here several times (see here, here, here,  here, here, and here), and which seems to permit EU courts to award no compensation to the wrongly-excluded defendant, at least where the patentee did not act in bad faith in obtaining the injunction.  The authors note another pending CJEU decision (Mylan) that may clarify Bayer, however, and discuss how national practice differs in the U.K. (no longer a member of the E.U., in any event), which typically requires patentees to post a cross-undertaking for damages; Germany, which typically awards compensation; and Belgium and Italy, where they often do not (though Italy appears to require compensation for wrongly-granted preliminary injunctions in trade secret cases).  I will need to delve more deeply into this, as I continue work on my book project on wrongful patent assertion.