No automatic compensation for a wrongful PI, rules the CJEU

December 2019

In its case C-688/171, the Court of Justice of the European Union (CJEU) provides guidance on the compensation parties can receive when a patent holder has enforced a preliminary injunction (PI) against them that is later revoked. According to the CJEU, compensation should be awarded when a request for provisional measures is deemed unjustified at the time the request is made. The fact that a PI is later overturned does not automatically mean the PI was unjustified and compensation should be awarded.

Referred questions

In an on-going dispute between Bayer2, Richter and Exeltis3, the Hungarian Court referred two questions to the CJEU on the compensation for a wrongful PI as claimed by Richter and Exeltis. Richter and Exeltis brought a generic oral contraceptive drug on the market, at that time Bayer was the holder of a patent application relating to a pharmaceutical product containing a contraceptive ingredient. After the patent grant, Bayer obtained PIs against Richter and Exeltis.

These PIs were later lifted on appeal, on procedural grounds. In the main proceedings, the patent was declared invalid. Subsequently, both Richter and Exeltis initiated legal action against Bayer for damages they claim to have suffered from the PIs with reference to article 9(7) of the Enforcement Directive4. The article states that Member States can order the applicant, at the request of the defendant, to provide appropriate compensation for any injury caused by provisional measures that have been revoked, lapsed or where it is subsequently found there is no infringement. Hungarian civil law does not contain a provision for this specific situation, but the Hungarian Court finds general civil law provisions must be interpreted in view of that article.

The Hungarian Court referred two questions to the CJEU on the meaning of article 9(7) of the Enforcement Directive. The first one is whether the concept 'appropriate compensation' must be interpreted autonomously or whether the Member States decide on the content, amount and methods of this concept. The second question sees specifically to awarding damages when the alleged infringer, being the subject of a wrongfully-issued PI, did not act in conformity with "what can generally be expected of a reasonable person in the same circumstances." This phrasing is used in the Hungarian civil code and no compensation for loss is awarded in that event.

Independent interpretation

In light of the aim of ensuring a high, equivalent and homogenous level of protection on the internal market, as stated in the Enforcement Directive, the CJEU finds the concept of 'appropriate compensation' must be given an independent and uniform interpretation. The Member States cannot independently determine the concept of appropriate compensation, but it is for them to assess whether the compensation is appropriate in the specific circumstances5.

The need for provisional measures

The CJEU emphasizes the order of events in this case. First, Richter and Exeltis bring their products on the Hungarian markets, then the patent is granted, afterwards Richter and Exeltis file for a declaration of invalidity and finally at the request of Bayer provisional measures are granted. The provisional measures are overturned on appeal and the patent is later declared invalid.

The CJEU finds that in these circumstances, the Hungarian Court would not allow the grant of compensation for losses caused by the provisional measures which have been set aside. Since Richter and Exeltis did not act as would generally be expected of a person in the situation concerned in order to prevent or mitigate such losses (ie they entered the market at risk and did not "clear the way"6).

In order to decide whether that is contrary to article 9(7) of the Enforcement Directive the CJEU is mindful of the position of the patent holder, Bayer. It finds that when Richter and Exeltis marketed their product there was a risk of irreparable harm if Bayer delayed requesting provisional measures. The event that the provisional measures were repealed is not by itself a decisive factor in proving the unjustified nature of the application for provisional measures7. Otherwise, the patent holder would be discouraged from requesting provisional measures and this would be contrary to the aim of ensuring a high level of protection of intellectual property.

The behaviour of Bayer, Exeltis and Richter must be viewed in light of the general obligation in article 3(2) of the Enforcement Directive. This means measures, procedures and remedies necessary to ensure the enforcement of intellectual property rights must provide safeguards against their abuse. It is for the national court to determine whether the provisional measures have been abused, taking all objective circumstances into account, including the conduct of the parties.

The conclusion of the CJEU is that article 9(7) of the Enforcement Directive does not preclude national legislation, which provides that a party is not compensated for losses suffered due to his not having acted as may generally be expected in order to avoid or mitigate his loss. In the specific circumstances, the national courts can take due account of all objective circumstances, including the conduct of the parties, to determine that the right holder has not abused those measures, even though the patent has subsequently been found to be invalid. In short: the lifting of a PI does not automatically result in an award of compensation. This judgment is contrary to the opinion of the AG8.

Opinion of the AG

The focus of the CJEU is on the unjustified nature of the provisional measures. The CJEU tests this at the moment the PI was granted, an ex ante test. However the AG found that the test was ex post, when there is a decision on validity and/or infringement. The AG takes into account the position of the alleged infringers finding that when they are obligated to clear the way or are unable to obtain compensation for an unfounded PI this could result in abuse of PI measures.The abovementioned factors are what ultimately results in the different outcome of the Opinion of the AG and the judgment of the CJEU.

This is one of the few cases where the CJEU does not follow the AG. The AG finds the national law that precludes obtaining damages for a loss caused by own behavior should not apply to this case where there is an overturned PI. The AG would award damages to the alleged infringers for the losses they suffered resulting from the lifted PI. When determining the appropriate amount of compensation the AG would take into account the behavior of the parties, including the 'high-risk' market launch and the characteristics of the patent9.

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1 CJEU 12 September 2019 Bayer/Richter, Exeltis ECLI:EU:C:2019:722

2 Bayer Pharma AG, hereafter referred to as "Bayer".

3 Richter Gedeon Vegyészeti Gyár Nyrt., Exeltis Magyarország Gyógyszerkereskedelmi Kft, hereafter referred to as "Richter" and "Exeltis".

4 Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights.

5 Para. 49.

6 Paras. 57-58.

7 Para. 64.

8 Opinion of Advocate General Pitruzzella 11 April 2019, ECLI:EU:C:2019:324.

9 Para. 59.

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Judith Krens

Judith is a partner in our Amsterdam office, specialising in life sciences patent litigation.

Emma Jansen

Emma is an associate in our Amsterdam office, specialising in intellectual property and patent law.

"According to the CJEU, compensation should be awarded when a request for provisional measures is deemed unjustified at the time the request is made."