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On September 12, the European Court of Justice (ECJ) ruled on the request for a preliminary ruling from the Budapest High Court (Hungary) relative to the interpretation of article 9.7 of Directive 2004/48/EC of the European Parliament and of the Council, of April 29, 2004, on the enforcement of intellectual property rights (the “Directive”).
“Provisional and precautionary measures
7. 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 harm caused by those measures” (emphasis added).
This case involves the Bayer, Richter and Exeltis pharmaceutical companies.
Bayer had filed an application for a patent for a contraceptive ingredient with the Hungarian Industrial Property Office, published in 2002 and granted in October 2010.
At the end of 2009 and in 2010, Richter and Exeltis began marketing a contraceptive product. Shortly thereafter, in November 2010, Bayer requested provisional measures against them to prohibit them from selling this product. However, the provisional measures were rejected on the grounds that the infringement of the Bayer patent had not been demonstrated.
In December 2010, Richter and Exeltis submitted an application for a declaration of invalidity of the Bayer patent, and in May 2011, Bayer again requested provisional measures against Richter and Exeltis. This time the request was upheld. Practically at the same time, Bayer initiated proceedings for infringement of its patent against Richter and Exeltis, which were suspended until a final decision on the invalidity of its own patent was issued.
In 2012, the Hungarian court and the Industrial Property Office refused the provisional measures, indicating that the measures could not be deemed proportionate because of (i) the advanced stage of the proceedings for a declaration of invalidity of the Bayer patent; and (ii) Bayer had withdrawn the application for a similar European patent.
The Bayer patent was declared completely invalid in September 2012, and it was not until 2017 when Bayer’s claim was definitively dismissed.
As a result, Richter and Exeltis lodged counterclaims requesting that Bayer be ordered to compensate them for harm caused by the revoked provisional measures, while Bayer submitted that those claims should be rejected, arguing that there was no legal basis for their application.
Questions put to the ECJ
It is worth noting that there is no provision whatsoever in Hungarian Law that regulates the situation contemplated in article 9.7 of the Directive. Consequently, the Budapest High Court raised two preliminary questions.
1) What is the scope of the Directive? Is it limited to ensuring the defendant a right to “appropriate compensation,” or does it also define the content of that right?
The ECJ indicates that the Directive should be interpreted as an obligation imposed on Member States, which should empower the courts to order the party that requested precautionary measures to provide, on request of the defendant, appropriate compensation for harm caused by those measures.
It also defines the content of the right:
- It can be exercised when the provisional measures are repealed or cease to apply, or when it is proven that there was no infringement or threat of infringement;
- It covers all harm that the provisional measures may have caused; and
- It must be “appropriate compensation.”
The ECJ highlights that the wording of the Directive does not refer to national law, so it understands that its interpretation does not fall within the competences of the States. If each State were to interpret this term, it would put an end to the principle of uniform application sought by the Directive. Therefore, it indicates that:
“(…) as regards that concept of “appropriate compensation,” it should be the subject to an independent and uniform interpretation, without it coming within the competence of different Member States.
This conclusion is borne out by the objective pursued by Directive 2004/48 (…), whose objective is to approximate Member State legislative systems to ensure a high, equivalent and homogeneous degree of intellectual property protection in the internal market” ( emphasis added).
Likewise, it establishes that it is for the Member States themselves to assess the specific circumstances of each case, to decide whether it is appropriate to order the applicant to remedy any harm to the defendant by “appropriate compensation,” i.e., justified in light of those circumstances.
Finally, although this task corresponds to the Budapest High Court, the ECJ further analyzed the specific case to assess a possible “appropriate compensation”:
- Bayer’s patent was granted after Richter had begun marketing the contraceptive product;
- Bayer applied for precautionary measures twice: before and after the granting of its patent;
- When the second precautionary measures were granted, the invalidity of the Bayer patent had already been requested; and
- After being granted, the provisional measures were annulled by the appeal court.
2) Does the concept of “appropriate compensation” of the Directive preclude the application of national law that excludes the defendant from being able to obtain compensation for the harm suffered for not acting as would generally be expected of a person in that situation, provided the applicant for the provisional measures has acted with due diligence?
The ECJ, based on the context and purpose of the Directive, indicated that its recitals provided that “appropriate compensation” was a guarantee considered necessary to cover the costs and harm to which the defendant has been subject following an “unjustified request” for provisional measures.
The ECJ makes the distinction between:
- Justified provisional measures. In those cases in which “it is duly justified that any delay would cause irreparable harm to the holder of an intellectual property right.”
- Unjustified provisional measures. In those cases in which “there is no risk that irreparable harm may be caused to the holder of an intellectual property right in the event of delay in the adoption of the measures sought.”
In assessing this specific case, the ECJ revealed that Richter and Exeltis were marketing products similar to Bayer’s, although Bayer had a patent application (first provisional measures) or a patent (second provisional measures) that could affect the marketing.
In light of this, despite being for the Hungarian court to ascertain, the ECJ regarded this conduct as objectively indicative of a risk for Bayer and of irreparable harm in case of delay in adopting the provisional measures it requested. Consequently, a priori, it upheld that Bayer’s claim could not be regarded as unjustified. Also, the mere fact that the provisional measures were repealed could not be considered a decisive factor in proving the unjustified nature of the claim that gave rise to the provisional measures.
The ECJ concluded that reaching a different solution could discourage patent holders from availing themselves of the provisional measures, which would run counter to the objectives of the Directive.
As regards the conduct of the applicant, the ECJ indicated that, in light of the interpretation of the Directive, it should focus on “avoiding the creation of barriers to legitimate trade and to provide safeguards against abuse,” leaving it to the national courts themselves to determine whether the applicant has abused those measures by analyzing their behavior and verifying all objective circumstances of the specific case.
Therefore, the response to this question was negative:
“Article 9.7 of Directive 2004/48/EC of the European Parliament and of the Council, of April 29, 2004, on the enforcement of intellectual property rights, in particular, the concept of “appropriate compensation” in that provision must be interpreted as not precluding national law that provides that a party shall not be compensated for the harm suffered for not having acted as may generally be expected to avoid or mitigate losses and that, in circumstances such as those in the main proceedings, results in the court not ordering compensation for harm caused by the provisional measures, even though the patent on which they had been requested and granted has subsequently been found to be invalid, provided that legislation enables the court to take due account of all the objective circumstances of the case, including the conduct of the parties, to inter alia, determine that the applicant has not abused those measures” (emphasis added).
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