Damages in case of unlawful preliminary injunctions – an EU Court decision

justice-2060093_1920.jpgThe European Court has issued a decision in case C‑688/17 Bayer Pharma AG v Richter Gedeon Vegyészeti Gyár Nyrt., Exeltis Magyarország Gyógyszerkereskedelmi Kft.. In brief, the case concerns when delegates can be claimed after potential unlawful preliminary injunctions.

The background of the case is as follow:

On 8 August 2000, Bayer filed an application for a patent relating to a pharmaceutical product containing a contraceptive ingredient at the SNational Intellectual Property Office, Hungary; ‘the Office’. The Office published that application on 28 October 2002.

Richter, in November 2009 and August 2010, and Exeltis, in October 2010, began marketing contraceptive pharmaceutical products in Hungary (‘the products at issue’).

On 4 October 2010, the Office granted Bayer a patent.

On 8 November 2010, Richter filed an application with the Office for a declaration of non-infringement seeking to establish that the products in question did not infringe Bayer’s patent.

On 9 November 2010, Bayer applied to the referring court, the Budapest High Court, Hungary for provisional measures to prohibit Richter and Exeltis from placing on the market the products at issue. Those applications were rejected on the ground that the plausibility of the infringement had not been demonstrated.

On 8 December 2010, Richter and Exeltis submitted an application for a declaration of invalidity of Bayer’s patent to the Office.

On 25 May 2011, Bayer submitted further applications for provisional measures before the referring court, which, by enforceable orders of 11 July 2011, entering into force on 8 August 2011, prohibited Richter and Exeltis from putting the products in question on the market, and also requiring them to provide guarantees.

On 11 August 2011 Bayer initiated infringement proceedings against Richter and Exeltis before the referring court. Those proceedings were suspended until a final decision is issued in the proceedings for the declaration of the invalidity of Bayer’s patent.

Having heard appeals by Richter and Exeltis against the orders of 11 July 2011, the Budapest Regional Court of Appeal, Hungary, on 29 September and 4 October 2011 respectively, set aside those orders on the grounds of procedural defects and referred the case back to the referring court.

By orders of 23 January 2012 and 30 January 2012, the referring court refused Bayer’s applications for provisional measures. Whilst it took into account that Richter and Exeltis had entered the market in infringement of the patent, the referring court held that, having regard, in particular, to the advanced stage of the proceedings for a declaration of invalidity of Bayer’s patent and for revocation of an equivalent European patent, the adoption of such measures could not be deemed to be proportionate. By decision of 3 May 2012, the Budapest Regional Court of Appeal upheld those two orders.

By decision of 14 June 2012, the Office granted in part the application for a declaration of invalidity in respect of Bayer’s patent submitted by Richter and Exeltis. Following a further application by Richter and Exeltis, the Office withdrew its decision of 14 June 2012 and, by decision of 13 September 2012, declared that patent invalid in its entirety.

By order of 9 September 2014, the referring court set aside the Office’s decision of 13 September 2012. It also varied the Office’s decision of 14 June 2012 and declared Bayer’s patent invalid in its entirety.

By order of 20 September 2016, the Budapest Regional Court of Appeal upheld that order.

On 3 March 2017, the referring court terminated the infringement proceedings between Bayer and Exeltis following Bayer’s withdrawal from those proceedings.

By decision of 30 June 2017, the referring court definitively dismissed the claim for infringement brought by Bayer against Richter on the grounds of Bayer’s patent having been definitively declared invalid.

Richter, by a counterclaim brought on 22 February 2012, and Exeltis, by a counterclaim lodged on 6 July 2017, requested that Bayer be ordered to provide compensation for the losses they claim to have suffered as a result of the provisional measures referred to in paragraph 21 of the present judgment.

Before the referring court, Bayer submitted that those claims should be rejected, arguing that Richter and Exeltis themselves caused the losses they claim to have suffered by having intentionally and unlawfully placed the products in question on the market. In accordance with Article 340(1) of the Civil Code, there is therefore no justification for their claim for compensation for these losses.

In that context, the referring court considers, in essence, that, in the absence of any provision in Hungarian law specifically governing the situations referred to in Article 9(7) of Directive 2004/48, the general rules of the Civil Code relating to liability and compensation must be interpreted in the light of that provision. However, the referring court first raises questions regarding the scope of the rule contained in Article 9(7) of that directive and asks, in particular, whether that provision merely guarantees the defendant a right to compensation or whether it also defines the content of that right. Secondly, the referring court asks whether Article 9(7) of that directive precludes the national court, applying a provision of the civil law of a Member State, from examining the defendant’s role in the losses occurring.

In those circumstances, the Budapest High Court, Hungary decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1) Should the expression ‘provide … appropriate compensation’ referred to in Article 9(7) of Directive [2004/48/EC], be interpreted to mean that Member States must establish the substantive rules of law on the liability of parties and the amount and method of compensation, by virtue of which the courts of the Member States can order applicants to compensate defendants for losses caused by measures which the court subsequently revoked or which subsequently lapsed due to an act or omission by the applicant, or in cases in which the court has subsequently found that there was no infringement or threat of infringement of an intellectual property right?

(2)  If the answer to the first question referred for a preliminary ruling is in the affirmative, does Article 9(7) of [Directive 2004/48/EC] preclude opposition to the legislation of a Member State by virtue of which the rules to be applied to the compensation referred to in that provision of the Directive are the general rules of that Member State on civil liability and compensation according to which the court cannot oblige the applicant to provide compensation for losses caused by a provisional measure which was subsequently held to be unfounded due to the invalidity of the patent, and which were incurred as a result of the defendant’s failure to act as would generally be expected in the circumstances in question, or losses for which the defendant is responsible for that same reason, provided that, when requesting the provisional measure, the applicant acted as would generally be expected in those circumstances?’

The Court’s decision:

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, in particular, the concept of ‘appropriate compensation’ referred to in that provision, must be interpreted as not precluding national legislation 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.

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