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CJEU Decides on Damages under the IPR Enforcement Directive

September 13, 2019

CJEU Decides on Damages under the IPR Enforcement Directive

Interpretation of “Appropriate Compensation” for the Defendant after Injunction was Lifted

The final decision of the Court of Justice of the European Union (CJEU) in case C-688/17 was issued on 12 September 2019. The epi Litigation Committee has been following this referral from the Hungarian court with interest as it relates to the interpretation of compensation for defendants under Art 9(7) of the IPR Enforcement Directive (2004/48/EC).

Background

This case concerns a patent for a contraceptive pharmaceutical held by Bayer. Upon Bayer’s request, the Hungarian court had issued preliminary injunctions against the defendants, Richter and Exeltis, who had launched infringing products in Hungary, just before the Bayer patent had been granted. The preliminary injunction was lifted after a couple of months because of serious doubts on the validity of the patent. Later, the patent was finally declared invalid. After the invalidation of the patent the defendants requested the court to order Bayer to provide compensation for the damage suffered due to the provisional measures under Art. 9(7) of the IPR Enforcement Directive. Bayer argued that this request should be rejected because the defendants had deliberately and illegally launched their products without first challenging the validity of the patent and awaiting a decision in this regard (“launch at risk”). Such behaviour would be excluded under general provisions of the Hungarian Civil code any compensation. Richter and Exeltis argued that the national provisions should be interpreted in the light of Art 9(7) of the Enforcement Directive and therefore they would be entitled to a compensation.

The Hungarian court referred questions to the CJEU with regard to the interpretation of Art 9(7) of the Enforcement Directive (2004/48/EC). The court intended to know whether this provision exclusively guarantees the defendant's right to compensation and it also determines the content of that right, accordingly it precludes the application of the general rules of national civil law on liability and compensation. The court also wished to know whether Article 9(7) precludes the national court from examining, on the basis of national rule of civil law, the role of the defendant in the occurrence of the damage and, in particular, whether he acted “as could have been generally expected in the circumstances.”

Questions Referred

The following questions were referred:

Should the expression ‘appropriate compensation’ referred to in Article 9(7) of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights, be interpreted to mean that Member States are required to lay down rules of substantive law governing the liability of the parties, as well as the scope and manner of the compensation, by virtue of which the courts of the Member States may order the claimant to compensate the defendant for damage caused by measures which have subsequently been revoked by the court or which have subsequently lapsed due to any act or omission by the claimant, or where the court has subsequently found that there was no infringement or threat of an infringement of intellectual property rights?

If the answer to the first question is in the affirmative: does Article 9(7) of [Directive 2004/48] preclude such national legislation according to which the compensation relating to the cited provision of the Directive is subject to the general rules of national civil law relating to liability and compensation for damage, under which national rules the court does not enforce the claimant to repair the damage caused by interim measures which have subsequently proved to be unfounded due to the invalidity of the patent and for which the defendant is responsible by failing to act as could normally have been expected in the circumstances, provided that the claimant, by applying for an interim measure, has acted as could normally have been expected in the circumstances?

CJEU’s Answer

After the Advocate General’s opinion of 11 April 2019, the CJEU provided the following answer to the preliminary questions:

The term “appropriate compensation” in Art 9 (7) of the Enforcement Directive shall be interpreted in a way, that national rules are not in contradiction with it, if such national rules provide that there is no obligation to compensate for such damages that have affected the given person by not having acted for avoiding or minimizing the damages in a way that would have been generally expectable; and based on which national rules the court - in circumstances such as in the basic case – decides that the party requesting preliminary injunction is not obliged to compensate the damages of the opposite party even though the patent that was the basis of the PI was later revoked – provided that such national rules allow the court to take into account all objective circumstances of the case, including if the applicant has applied for the given measures (the PI request) misusing its rights.

Comment

After first reading it can be said that the decision is favourable for patentees in general as it gives the possibility to the national judge to reject any damage claim if the PI was lifted as a consequence of revocation. Accordingly, it is possible to deny compensation for the period e.g. before the first instance revocation. A lot will depend on the application of this decision by national Courts regarding what can be regarded as normally expected behaviors of the parties or as misuse by a requestor of preluminary injunctions. LitCom wil continue to watch this area of patent litigation.

Footnote: Translation conducted with the help of DeepL (https://www.deepl.com/translator)

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