CJEU Grand Chamber to Hear Argument Concerning Cross-Border Relief

Last week, Florian Mueller published a post on his new site ipfray, titled Grand Chamber of European Court of Justice takes patent case—question of cross-border jurisdiction.  The case at issue is BSH Haugeräte GmbH v. Electrolux AB, and although the questions referred date back to May 2022 and the case has already been heard by a regular chamber, the CJEU’s decision to assign the matter to a “Grand Chamber” of fifteen judges is recent. The questions referred are:

Is Article 24(4) of Regulation (EU) 1215/2012 1 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters to be interpreted as meaning that the expression ‘proceedings concerned with the registration or validity of patents … irrespective of whether the issue is raised by way of an action or as a defence’ implies that a national court, which, pursuant to Article 4(1) of that regulation, has declared that it has jurisdiction to hear a patent infringement dispute, no longer has jurisdiction to consider the issue of infringement if a defence is raised that alleges that the patent at issue is invalid, or is the provision to be interpreted as meaning that the national court only lacks jurisdiction to hear the defence of invalidity?

 

Is the answer to Question 1 affected by whether national law contains provisions, similar to those laid down in the second subparagraph of Paragraph 61 of the Patentlagen (Patents Law), which means that, for a defence of invalidity raised in an infringement case to be heard, the defendant must bring a separate action for a declaration of invalidity?

 

Is Article 24(4) of the Brussels I Regulation 1 to be interpreted as being applicable to a court of a third country, that is to say, in the present case, as also conferring exclusive jurisdiction on a court in Turkey in respect of the part of the European patent which has been validated there?

The basic facts are these.  BSH owned EP 1 434 512, validated in ten EPO member states, including Türkiye and the U.K.  In 2020, BSH filed an infringement action against Electrolux in Sweden, for infringing all ten national patents.  The patents have since expired, but BSH still hopes to recover damages.  Electrolux argues, however, that because Electrolux raises invalidity as a defense, article 24(4) of the Brussels I bis Regulation (Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters) and CJEU case law (specifically, GAT v. LuK, Case C-4/03 (2006) and Roche Nederland BV v. Primus, Case C-539/03 (2006)), constrain the Swedish court to adjudicate only the alleged infringement of the Swedish patent; and that the question of whether the defendant has infringed the other national patents can be decided only in those patent-validating nations, even if invalidity is raised only as a defense.  Article 24(4), which was added to the Regulation to conform to the decision in GAT v. LuK, reads as follows (with ellipses as in AG Emiliou's opinion, discussed below):

 

The following courts of a Member State shall have exclusive jurisdiction, regardless of the domicile of the parties:

 

…

           

(4)      in proceedings concerned with the registration or validity of patents …, irrespective of whether the issue is raised by way of an action or as a defence, the courts of the Member State in which the deposit or registration has been applied for [or] has taken place …

 

Without prejudice to the jurisdiction of the European Patent Office under [the EPC], the courts of each Member State shall have exclusive jurisdiction in proceedings concerned with the registration or validity of any European patent granted for that Member State.

For its part, BSH urges that the Swedish court should consider the infringement of all ten patents, though if Electrolux contests validity, the court may provisionally stay any judgment of infringement until invalidation proceedings brought in the patent-validating countries are final. 

Interestingly, the Advocate General’s opinion strongly criticizes GAT v. LuK but recognizes that because the rule the court articulated in that case is now codified as article 24(4), there is no question of the court overruling it.  Instead, he argues that the “lesser evil” is, essentially, that urged by BSH, namely that the Swedish court (the court of the defendant’s domicile) has jurisdiction over the infringement claims, but should consider staying proceedings pending the outcome of invalidation actions in the other countries.  As for Türkiye, which is not bound by Brussels Regulation bis I (as the U.K. is, even after Brexit, as a matter of domestic legislation), EU law cannot confer upon the Turkish court exclusive jurisdiction over matters related to patent validity.  Nevertheless, while the court of an EU member state such as Sweden may have jurisdiction to decide the validity of the Turkish patent (without an erga omnes effect), the AG recommends that it may decline to exercise that jurisdiction “reflexively” (that is, to treat the matter as it would if the other state were an EU member state, subject to "some limited discertion" (para. 152)).      

For further analysis, see posts by Geert van Calster and by Lydia Lundstedt.  For background on GAT v. LuK, Roche v. Primus, and other relevant CJEU case law, see Paul England, Cross-border actions in the CJEU and English Patents Court--ten years on from GAT v. LuK, 12 JIPLP 105 (2017); see also my book pp. 250-53.

Lau on FRAND in Singapore and China

An article I only recently came across is Joseph Lau's FRAND Defences Against the Grant of Injunctive Relief:  Applying Huawei v. ZTE in Singapore and China, 16 Asian J. Comp. L. 33 (2021).  Here is  a link to the article, and here is the abstract:

From the size of A4 paper to 5G in the telecommunications sector, standards are ubiquitous. Standard essential patents (SEPs), which protect technology essential to standards, enable their proprietors to gain significant market power. Antitrust authorities therefore scrutinize the exercise of SEPs for breaches of competition law. In this regard, the ability of SEP proprietors to obtain injunctions against implementers as a remedy for infringement of SEPs where licensing negotiations have broken down or are ‘ongoing’ has proven controversial. Some fear that this enables SEP proprietors to threaten injunctions unless implementers agree to unfair, unreasonable, or discriminatory terms. In Huawei Technologies Co Ltd v ZTE Corp [2015] ECLI:EU:C:2015:477, the Court of Justice of the European Union identified circumstances where a SEP proprietor’s application for injunctive relief as a remedy for infringement of its SEP constitutes an abuse of a dominant position, with the classification of the SEP proprietor’s application as being abusive forming a ‘FRAND Defence’ which implementers may invoke against the grant of the injunction requested. This article analyzes whether this approach can be replicated by the Singapore Courts and whether the Chinese Courts, which have already dealt with SEP licensing disputes, adopt a similar approach.

I thought the article's discussion of how courts in Singapore might address FRAND cases was quite interesting.  The author argues that the most likely doctrinal tool would not be competition law, but rather the equitable nature of injunctive relief, Singapore being a common-law jurisdiction.  The article also includes a good discussion of Chinese case law and Chinese court guidelines as of 2020.

 

Two Observations about the Delhi High Court Decision in Lava v. Ericsson

I now have had the opportunity to read the relevant portions of the Delhi High Court’s recent Lava v. Ericsson decision, which (as previously noted by Florian Mueller) ordered Lava to pay Ericsson a global FRAND royalty, covering a portfolio of FRAND-committed SEPs for the period 2011-20, plus costs, totaling approximately USD $30 million (specifically, "1.05% of the net selling price of devices sold by Lava" from November 1, 2011 through May 8, 2020, amounting to Rs. 244,07,63,990, with postjudgment interest at 5% and costs).  In summary, the court considered Lava to be an unwilling licensee, because of its holdout behavior; relied on Ericsson’s proposed comparable licenses to come up with a FRAND rate; rejected Lava’s proposed comparable, and also its proposed top-down approach for lack of evidence on (among other things) the aggregate royalty burden; found no evidence that Ericsson had engaged in holdup or royalty stacking; rejected Lava’s argument that the appropriate royalty base would be the SSPPU, rather than the end product (smartphones); and also concluded that a FRAND license would be global in scope, even though Lava primarily sells phones in India.  All of this may be well-grounded in the law and the evidence (there are a lot of redactions concerning the comparables), but there are two things that, at least initially, I’m finding a bit confusing.

The first is the doctrinal basis for granting a global portfolio license.  Lava initiated the litigation, asking the court to declare inter alia that Ericsson “is bound to grant an irrevocable license under its standard essential patents, including patents which are essential and/or claimed to be essential by the Defendant to 2G and/or 3G standards, on fair, reasonable and non-discriminatory (FRAND) terms, to the Plaintiff herein,” and to “[d]eclare the fair, reasonable and non-discriminatory (FRAND) terms, including royalty rates, on which the Defendant should grant a license under its Indian patents and patent applications which are enforceable and essential to 2G and/or 3G standards, to the Plaintiff herein” (p.15).  In turn, Ericsson sued Lava for the infringement of eight specific (assertedly standard-essential) patents.  If I am understanding this correctly, though, by the time the case was litigated on the merits, Lava no longer wanted the above declaration, and instead proposed that the court limit its attention to the eight patents in suit.  The court nevertheless set the terms of a global portfolio license, stating in paragraph 635 that “[t]he issue the Court is adjudicating . . .  is whether Ericsson can obtain a declaration that the royalty rates offered by them to Lava in respect of their portfolio of SEPs, are indeed FRAND.”  So maybe the court understood Ericsson to be seeking a declaratory judgment of some sort permitted under Indian law.  (At p.16, the court states that Ericsson sought inter alia a declaration "that the rates offered by [Ericsson] qua its portfolio of Standard Essential Patents are FRAND in nature.")  But the resolution of the case seems to me somewhat different from the way these types of cases have been litigated elsewhere.  In the U.K., for example, a decision that the FRAND-committed SEPs in suit are valid and infringed may result in the court offering the defendant a choice between being enjoined from practicing those patents in the U.K. or accepting the terms of a court-determined global license (the so-called FRAND injunction).  But here, by 2020 there was no threat of injunction, because all of the patents in suit had expired.  Another possibility in some countries might be for the defendant to allege that it is a third-party beneficiary of the patentee’s FRAND commitment, and to sue for breach of contract and/or a declaratory judgment; the end result may be for the court to declare what the terms of a FRAND license would be, as in Microsoft v. Motorola.  Or maybe the patentee can seek a declaration that its offer is FRAND (and therefore that the patentee is not in breach of its obligations), as indeed Ericsson was doing here.  What I’m not sure I’ve seen before, however, is a court adjudicating a patent infringement suit involving a discrete number of SEPs and awarding, as past damages for the infringement, a FRAND royalty covering the entire portfolio, including patents not in suit.  Of course, in this case, if the defendant doesn’t sell any products outside of India, it isn’t paying a royalty on any non-Indian patents, even if the non-Indian patents affect the global royalty rate Ericsson charges; but it's not clear to me that the patents in suit are the only Indian SEPs Ericsson owns (see para. 725, in which Lava asserts that Ericsson has "about 30 Indian patents," though not specifying whether any of the other 22 or so are SEPs).  This seems unusual to me; again, if I’m understanding correctly, this case was litigated as a patent infringement suit, and the court is awarding damages for patent infringement, not merely declaring what the terms of a global license would be.  If, however, Ericsson has only eight Indian SEPs (one of which the court found to be invalid, thus reducing the number to seven), then maybe the global rate (based on Ericsson's global portfolio) multiplied by the number of products Lava sold in India is the correct measure of damages for the infringement of the seven valid Indian SEPs.  But this is not entirely clear to me from the decision, though it's possible I'm overlooking something.  (I need to check to see if any of the Chinese FRAND cases have followed this fact pattern; off the top of my head, I'm not sure.)  Or maybe it's simpler than I am making it out to be; perhaps the court is saying that to determine the damages for the infringement of the seven patents in suit, you need to take into account that the patentee would have conditioned the use of those seven patents on the defendant's agreement to a global license.  In other words, but for the infringement, the defendant would have agreed to a global license, so the damages needed to compensate the patentee for the infringement of the seven patents equal the defendant's turnover multiplied by the global rate.  I'm not sure that argument would fly under U.S. patent damages law--it sounds almost like a convoyed goods argument, and the U.S. approach to damages for convoyed goods is somewhat more restrictive than in some countries (see my recent post here)--but maybe it works in India, and that might be the correct interpretation of paras. 680 et seq. of the decision.  

The other thing that seems odd to me is the statute of limitations issue.  Apparently the general statute of limitations under Indian law is three years, but the court concluded that certain provisions of the Patent Act trumped this general provision: §§ 11A(7) and 45(3), which allow the patentee to recover damages covering the period of time beginning from the date of publication of the patent application, as long as the patent subsequently issues (a common provision in many countries’ patents laws), and § 111, which states that the patentee can sue for damages once the defendant knows or has reason to know of the existence of the patent (a common provision in some Commonwealth countries).  The court reads these provisions as allowing Ericsson to sue for damages beginning in 2011, which is when it put Lava on notice, even though Ericsson did not file suit for infringement until 2015.  If I am understanding correctly, the logic of the decision would seem to eliminate the statute of limitations altogether for patent infringement suits, by allowing the patentee to sue for damages at any time once it puts the defendant on notice (though perhaps subject to the equitable doctrine of laches?).  Maybe that is correct as a matter of Indian law—it’s not a matter on which I claim any expertise—but it strikes me as a somewhat unusual practice. 

Van Dongen on Proportionality and Injunctions in the UPC

Lisa Van Dongen has posted a paper on ssrn titled Proportionality and Flexibilities in Final Injunctive Relief, forthcoming in The Unified Patent Court: Problems, Possible Improvements and Alternatives (Alain Strowel et al. eds., Ledizioni, 2023).  Here is a link to the paper, and here is the abstract:

          In 2006, the patent world was shaken to the core by eBay v MercExchange, a case that questioned several basic principles in patent enforcement that were considered well established. The US Supreme Court sent a clear signal that patent rights were not to be considered absolute, and courts should thus not enforce them in automated fashion with injunctive relief. This case has received considerable attention globally, with many patent scholars analysing it in meticulous detail and questioning the European approach. Even though there is no agreement in the field on the optimal balance in patent enforcement (and likely never will be), even the most adamant proponents of strong patent enforcement agree that there may be other interests that merit the denial or tailoring of final injunctive relief. Yet, the automated tendencies in patent enforcement in Europe - the finding of an infringement automatically leading to the (blanket) grant of a permanent injunction - remain not only as prevalent as they have been for several decades, but also without any clear departures by courts (apart from English judges) from such tendencies indicative of course changes. What is more, is that the possibility for Europe to break with automated tendencies in enforcement will soon be further complicated by the addition of another layer to Europe’s existing patent systems, namely by the creation of the Unified Patent Court (UPC) and the unitary patent. If this system takes off, decisions of this new court will carry significant weight in European patent enforcement due to several organisational and territorial aspects. The UPC has even been described as a potential judicial counterbalance to pro-patent tendencies in patent offices, particularly the European Patent Office (EPO). However, considering the strange construct of its creation, it is questionable that the UPC will be that judicial counterbalance and lead the way for other courts in Europe. Some of these aspects might also create some tension with other systems it will have to co-exist and interact with. A closer look is thus imperative. This paper aims to do just that, testing the hypothesis: The UPC will not bring about a change in the current automated tendencies in granting final injunctions, but rather cement them. This paper explains why there will be no push from the EU to try and do so based on the current status of EU harmonisation in patent enforcement, questions the UPC’s capability and willingness to break with the existing automated tendencies based on the UPCA’s formulations and organisational features of the UPC, and explores some legislative solutions at the European level to move Europe away from automated tendencies in patent enforcement.

This is an insightful paper, and I suspect that the author is correct in predicting that the UPC will not depart from the status quo in favor of near-automatic granting of injunctive relief to the prevailing patent owner.  Her recommendation that the EU consider legislation providing more detail on when and how proportionality might result in limitations on (tailoring) injunctive relief, or in some instances denying such relief altogether, seems to have merit.

New Indian SEP Case

Multiple sources are reporting on a March 28, 2024 judgment of the Delhi High Court, awarding Ericsson the equivalent of approximately USD$30 million in a SEP dispute against a firm called Lava.  I have not yet succeeded in obtaining a copy of the judgment, which is said to be quite long, but recommend that readers take a look at Florian Mueller's discussion of it on his new site, ipfray.  I probably will have some comments on the decision after I obtain a copy, read it, and digest it, which might however take a while.

Alicante IP Colloquia

For anyone finding themselves in southeastern Spain on April 19, Alicante IP Colloquia is putting on an in-person event at noon titled «Hacia la cuantificación del daño» ("Toward the quantification of damages").  Panelists will be Judges Florencio Molina López and Gustavo Andrés Martin Martín.  The event is free, but registration is mandatory (link available here).  Judge Molina López is the author of a recent book on protective letters (see here).  I'm guessing the panelists will address the recent decision of the Madrid Court of Appeals in Eli Lilly v. Teva, previously noted on this blog here and here.

Federal Circuit Affirms Denial of Preliminary Injunction

The case is Biomedical Device Consultants & Laboratories of Colorado, LLC v. ViVitro Labs, Inc., nonprecedential opinion published last Thursday and authored by Judge Lourie, joined by Judges Dyk and Stark.  Plaintiff BDC, which manufactures and sells heart valve durability testing devices, sued its competitor ViVitro for infringement of U.S. Patent 9,237,935, which is “directed toward accelerated rate fatigue testing devices for prosthetic valves” (p.2). The district court denied BDC’s motion for a preliminary injunction, “finding that it failed to establish a likelihood of success on the merits for two independent reasons,” namely substantial questions as to both infringement and validity.  On appeal, the Federal Circuit affirms on the basis that there is a “substantial question of validity,” and does not address the infringement issue (though toward the end of the opinion it "caution[s] that claim terms are generally not limited to the preferred embodiments"(p.14), which might be interpreted as expressing some possible discomfort with the district court's claim construction and hence infringement analysis).  Without rehashing the evidence before the court, I would note only that the opinion does not appear to break any new ground on the legal questions.  It cites Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372 (Fed. Cir. 2009), which is probably the leading opinion addressing the parties’ burdens when a defendant responding to a motion for preliminary injunction challenges validity, only in passing, but the analysis seems consistent with that case.  In particular, the court states that

At the preliminary injunction stage, a defendant may raise a substantial question of validity “on evidence that would not suffice to support a judgment of invalidity at trial.” Amazon.com, 239 F.3d at 1358. The question here is one of “vulnerability,” which “requires less proof than the clear and convincing showing necessary to establish invalidity itself.” Id. Furthermore, the district court’s assessment of prior art references is an issue of fact reviewed for clear error. . . (p.8).

Proceeding from these premises, the court concludes that “the district court did not make a clear error in its assessment of the prior art,” and “therefore did not abuse its discretion in finding that BDC failed to demonstrate that ViVitro’s anticipation defense lacked substantial merit.  See Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372, 1377 (Fed. Cir. 2009) (“[I]t is the patentee, the movant, who must persuade the court that, despite the challenge presented to validity, the patentee nevertheless is likely to succeed at trial on the validity issue.”)” (pp. 10-11).  The court also rejects BDC’s arguments that the district court did not address four of the eight claims in suit, finding that the district court did indeed conclude that there was a substantial question of obviousness as to those claims, and did not abuse its discretion in so concluding.