Liability of the Applicant for a Precautionary Measure is to be determined Case by Case and based on the applied national legislation – two recent ECJ Decisions

Preliminary Ruling by the European Court of Justice (ECJ) of Jan. 11, 2024 (ECJ, Case C-473/22)

See CURIA - Documents (europa.eu)

On a request for a Preliminary Ruling by the Markkinaoikeus (Market Court in Finland), the European Court of Justice (ECJ) has decided that also in the case of lack of negligence (or omissions) by the applicant for a Precautionary Measure (“strict liability”) a claimant who has adopted a Precautionary Measure against an Infringer of a patent right – here in the form of a Supplementary Protection Certificate (SPC) that extends the protection term of the basis patent – can be subject to a duty of compensation of losses suffered by the defendant resulting from a Provisional Measure caused by the claimant which is subsequently revoked.

The basis for the Preliminary Ruling was a request by the Market Court of Finland whether a compensation based on a national legal provision also allowing compensation claims independent of whether or not there was negligence on the side of the claimant of a Provisional Measure (so-called “strict liability”) can be in agreement with Art. 9(7) of European Directive 2004/48 (also called “Enforcement Directive”). 

The Enforcement Directive aims at ensuring an approximation of legal protection of Intellectual Property in the EU member states. The purpose is the protection against product piracy by means available under private law, including Precautionary Measures (e.g. preliminary injunctions).

The concrete legal implementation was reserved to the member states, as a Directive (in contrast to a directly binding and applicable EU regulation) is not directly “law” in a member state. (As a side remark, Germany was behind schedule with the implementation and treaty violation proceedings were started by the Commission – the corresponding law entered into force in September 2008).

Art. 9(7) reads as follows:

„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“

Under Finnish law, Paragraph 11 of Chapter 7 of the Code of Judicial Procedure, transposing Art. 9(7) of the Enforcement Directive, it is provided that a claimant who has resorted unnecessarily to a Precautionary Measure is liable to compensate the opposing party for the damages caused by the Precautionary Measure and its enforcement, and the expensed incurred”.

The present Case was (after expiry of the patent term of EP 0 915 894) based on Supplementary Protection Certificate (SPC) No.266 ‘Tenofovir disoproxil (TD) and the salts, hydrates, tautomers and solvates thereof, in combination with emtricitabine’. Gilead and affiliated companies sued Mylan for infringement, including a request on Precautionary Measures which was also granted initially.

However, the Precautionary Measure was in the end set aside and the SPC was then revoked and thus null and void.

Based on Paragraph 11 of Chapter 7 of the Code of Judicial Procedure which is described above Mylan then applied to the Markkinaoikeus (Market Court), the referring court in the present case, for an order that Gilead and Others pay it compensation in the amount of EUR 2 367 854.99, plus default interest, as compensation for the injury caused by the provisional measures unnecessarily obtained on the basis of the SPC at issue, which was subsequently found to be invalid.

Gilead, in reply, stated that another judgment - Bayer Pharma - gave an interpretation of that provision which precludes an obligation to pay compensation being imposed solely for the reason that the SPC at issue, the infringement of which justified the adoption of the order for provisional measures, was subsequently found to be invalid.

The ECJ was then requested in the present to decide by a preliminary ruling in the presently reported Case how the following question is to be answered:

„Is a compensation regime based on strict liability, such as that … in force in Finland, to be regarded as compatible with Article 9(7) of [Directive 2004/48]?“

The question is thus, in simplified form, whether it is possible, also in the case without without negligence (e.g., negligent assertion of an unenforceable protective right in spite of knowledge of its possible defectiveness) – quasi automatically – claim compensation if the asserted right, in the end, turns out to be invalid.

The ECJ has now decided that Art. 9(7) of the Enforcement Directive has to be interpreted in such a way that it is “not precluding national legislation which provides for a mechanism for compensation for any injury caused by a provisional measure, within the meaning of that provision, based on a system of strict liability of the applicant for those measures, in the context of which the court is entitled to adjust the amount of damages by taking into account the circumstances of the case, including whether the defendant played a part in the occurrence of the injury”(underlining added). What is important is thus that the seized court has the option to adjust the amount of damages for compensation based on the circumstances of the given case.

The ECJ writes:

„It cannot be argued that a strict liability mechanism such as that at issue in the main proceedings would upset the balance described in the preceding paragraph by deterring the holder of an intellectual property right from bringing legal proceedings and relying on that right. The provisional measures are intended to prevent an imminent infringement of such a right or to prevent the continuation of an alleged act of infringement. However, if it ultimately transpires that there has been no infringement of that right, the basis for the provisional measures disappears, which, in principle, obliges the applicant to provide compensation for any injury caused by those unjustified measures. In that last regard, it should, however, be noted that a strict liability mechanism such as that at issue in the main proceedings, in the context of which the court seised may take into account all the circumstances of the case, including any participation by the defendant in the occurrence of the injury, makes it possible, inter alia, to adjust the amount of damages and thereby mitigate any deterrent effect for the holder of the intellectual property right” (underlining added).

The Finnish Market Court, who had invoked the present preliminary ruling, can thus now decide on the amount of compensation.

The decision „Bayer Pharma“ which was mentioned above (C-688/17) – see CURIA - Dokumente (europa.eu) – related to a different setting in a case in Hungary, where also “appropriate compensation” was the issue when Bayer tried to prevent a product launch by Richer Gedeon which was made before the expiry of a Bayer patent. The patent, however, was then revoked. The Hungarian law implementing the Enforcement Directive excludes a compensation if no preceding assessment of risks has been conducted, that is, it excludes an automatic compensation right. The ECJ confirmed that Art 9(7) of the Enforcement Directive does not preclude a provision which “provides that a party shall not be compensated for losses which he has suffered due to his not having acted as may generally be expected in order to avoid or mitigate his loss and which, in circumstances such as those in the main proceedings, results in the court not making an order for provisional measures against the applicant obliging him to provide compensation for losses caused by those measures even though the patent on the basis of which those had been requested and granted has subsequently been found to be invalid, to the extent that that legislation permits the court to take due account of all the objective circumstances of the case, including the conduct of the parties, in order, inter alia, to determine that the applicant has not abused those measures (underlining added).”

Thus, even where the Finnish (prima facie no negligence of the claimant of a Precautionary Measure; “strict liability”, that is, in principle damage compensation duty even without culpability) and the Hungarian legislation (no compensation in case of lack of diligence, that is, quasi only fault-based compensation duty) differ, this is, on the one hand, possible under the Enforcement Directive, on the other hand it is clarified now that “Bayer” does not exclude a “strict liability”, but that in determining the compensation the circumstances of the given case must be taken into account – “strict liability” as in Finland thus does not mean automatic full liability.

As a side remark, also in Germany a damage compensation duty without requiring fault-based is provided for (Paragraph 945 Code of Civil Procedure, “ZPO”). Here, a possible contributory negligence is evaluated case by case when determining the amount of compensation, so that the final judgment does not affect the legal force of a non-fault based duty for compensation in case of subsequent annulment of a preliminary injunction.