Clifford Chance

Introduction

As is widely known, one of the most important remedies that intellectual property rights confer on their owners is the ability to apply for provisional measures aimed at preventing, with immediate effect, the actual or imminent infringement of their exclusivity rights (article 9.1 (a) of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights (“Directive 2004/48”)).

Preliminary injunctions typically forbid the marketing of products allegedly falling within the scope of protection of the asserted intellectual property rights, thus preventing the defendant from obtaining benefits from said banned activities while the preliminary measures remain in place. In order to compensate the defendant for the harmful effects caused by preliminary injunctions if they are later revoked, they lapse or if it is subsequently found that there has been no infringement, article 9.7 of Directive 2004/48 establishes that the judicial authorities of the Member States will have the authority to order the applicant, upon request of the defendant, to provide the defendant with appropriate compensation for any injury caused by those measures.

One of the most debated questions regarding this provision is what kind of liability this article imposes on the applicants. Is it of a strict nature, so that the applicant must compensate the defendant regardless of any other circumstances? Or is it a fault-based liability, according to which the applicant will only compensate the defendant if it is first found that the applicant acted negligently, in bad faith or abused the preliminary injunctions when applying for the provisional measures?

The Directive is silent on this question and EU Member States do not have uniform liability regimes. While some Member States apply strict liability regimes in these cases, others allow their national Courts to consider the circumstances of the case before the applicant is, if applicable, ordered to compensate the damages suffered by the defendant. Needless to say, this is a relevant question for the holders of intellectual property rights as it directly impacts their risk assessments before deciding whether or not to request provisional measures.

Against this background, the Finnish Market Court referred some questions to the Court of Justice of the European Union ("CJEU") for a preliminary ruling on the interpretation of article 9.7 of Directive 2004/48 and, in particular, regarding the compatibility of strict liability regimes with said provision.

Background of the case

The facts of the case heard by the Finnish Court may be summarised as follows. The pharmaceutical company Gilead Sciences Inc. (“Gilead”) held a Supplementary Protection Certificate (“SPC”) protecting a combination of two active ingredients. Mylan AB (“Mylan”) obtained a marketing authorisation for a generic product comprising said combination of active ingredients in Finland. On 15 September 2017, several companies of the Gilead group applied for preliminary injunctions against

Mylan for infringement of their SPC. The Finnish Market Court ordered the requested provisional measures on 21 December 2017, prohibiting Mylan from marketing its generic product in Finland. Subsequently, said SPC was found to be invalid in proceedings on the merits and the provisional measures were revoked.
Mylan filed a claim requesting the Finnish Court to issue an order requesting Gilead to pay compensation for the damages caused by the provisional measures. According to Finnish national case-law, the Finnish legal framework establishes a strict liability regime in cases where provisional measures are ordered on the basis of patents subsequently invalidated. This should have led the Finnish Court to automatically order Gilead to compensate any damages caused to Mylan by the provisional measures.

However, the Finnish Market Court noted that the CJEU had handed down a judgment on 12 September 2019 (Bayer Pharma; C-688/17) in which the CJEU interpreted that a national liability regime where compensation of damages should not be granted if losses were incurred as a result of the defendant’s conduct and the applicant had acted as would be expected of a person in that situation (i.e. a non-strict liability regime) was compatible with article 9.7 of Directive 2004/48/EC. In particular, the CJEU found that (i) launching at risk was not acting as might generally be expected in order to avoid or mitigate the defendant’s losses and that (ii) applying for a provisional measure on the basis of a patent in force to prevent the marketing of an infringing generic product should be regarded prima facie as a justified response in those circumstances. Quite interestingly, it may be inferred from said CJEU judgment that the fact that the validity of the asserted patent had been challenged before the application for provisional measures was filed would make no difference in the assessment of whether or not the application was justified.

Although the Bayer Pharma case addressed questions referred by a Court called to apply a fault-based liability regime, the findings of the CJEU generated doubts about the compatibility of the Finnish strict liability regime and Directive 2004/48, so the Finnish Market Court referred the following questions to the CJEU for a preliminary ruling:

‘(1) Is a compensation regime based on strict liability, (…) which is in force in Finland, to be regarded as compatible with Article 9(7) of the Enforcement Directive?

(2) If the first question is answered in the negative, what then is the nature of the liability for compensation on which the liability under Article 9(7) of the Enforcement Directive is based? Is that liability to be regarded as a form of liability based on fault, an abuse of rights, or some other ground?

(3) In relation to the second question, what circumstances must be taken into account in assessing the existence of liability?

(4) In particular, as regards the third question, must the assessment be made solely on the basis of the circumstances known at the time when the provisional measure was obtained, or is it permissible to take into account, for example, the fact that the intellectual property right on whose alleged infringement the provisional measure was based was subsequently, after that measure was obtained, found to be invalid ab initio and, if so, what significance is to be attached to that circumstance?’

Key aspects of the opinion of the Advocate General

The Advocate General analysed the first question in light of the Bayer Pharma decision. According to the Advocate General, the CJEU established in Bayer Pharma that national courts should be able to analyse all the circumstances of the case before ordering an applicant to compensate damages. It followed that this finding would be incompatible with a strict liability regime, where the applicant is deemed automatically liable for any damages caused by the adoption of the provisional measures and Courts are not allowed to take into account other relevant circumstances of the case before ordering (or not) the compensation.

He added that a liability regime where the mere revocation of a provisional measure automatically triggers the applicant’s liability would discourage the holders of intellectual property rights from availing themselves of the provisional measures established in article 9 of Directive 2004/48, this being contrary to one of the Directive’s objectives (ensuring a high level of protection of intellectual property). To balance the interests of the defendants, the Advocate General stressed the need for the national Courts to assess properly the merits and proportionality of applications for provisional measures before granting them.

The Advocate General proposed replying to the second question in the sense that article 9.7 of Directive 2004/48 does not impose any specific liability regime, so it is for the Members States to define it insofar as the national Courts are allowed to consider all the circumstances of the case before ordering or denying compensation.
As regards the third and fourth questions, the Advocate General declined to provide an exhaustive list of circumstances which might be taken into consideration to assess if an application for preliminary measures is unjustified. Rather, relying once again on the Bayer Pharma decision, he referred to some principles aimed at offering general guidance.

In the first place, he stated that the justified nature of an application should be assessed in light of the existence and legitimacy of irreparable harm should the provisional measure not be put in place. This analysis should encompass both the circumstances existing at the application date, but also subsequently as regards the maintenance, extension or renewal of the measures, as the risk of a irreparable harm could be different in those moments.

Secondly, the Advocate General considered that the subsequent revocation of the patent, or a finding of non-infringement in proceedings on the merits, could also be taken into account to assess the justified or unjustified nature of the application. However, these circumstances should not be interpreted automatically as indicia that the application was unjustified (ex post facto analysis), but rather they should be analysed fairly through the prism that the applicant had at the application date.

Finally, the Advocate General added that an abuse of the provisional measures should be regarded as an unjustified application and give rise to compensation.

Literally, the Advocate General proposed to answer the referred questions as follows:

“(1) 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 must be interpreted as precluding national legislation providing, in the situations referred to in that provision, for a liability regime for the applicant for provisional measures that does not allow the court hearing an action for compensation of the loss caused by those provisional measures to take into account – in addition to the premises of that liability set out in that provision – other relevant circumstances of the case in order to assess whether or not to order such compensation.

(2) The court hearing an action for compensation for losses under Article 9(7) of Directive 2004/48 must take into account, in order to assess whether or not to order such compensation – in addition to the premises of that liability set out in that provision – other relevant circumstances of the case, both before and after the application for the provisional measures at issue, which allow it to assess the justified nature of that application in the light of the risk of irreparable harm caused to the applicant in the absence of such measures.”

Conclusion

Intellectual property right holders will likely welcome the opinion of Advocate General Mr Szpunar following the fault-based liability approach taken by the CJEU in the Bayer Pharma case and questioning the compatibility of strict liability regimes with the provisions of Directive 2004/48. Strict liability regimes could discourage patentees and other exclusivity right holders from protecting their assets by having recourse to provisional measures, so the interpretation of article 9.7 of the Directive proposed by the Advocate General, if followed by the CJEU, may pave the way for more applications for provisional measures.

Likewise, if the CJEU replies to the questions referred by the Finnish Market Court in the sense proposed by the Advocate General, the national Courts of many Member States may need to revisit in detail their traditional approach to damages claims arising from the incorrect grant of provisional measures in intellectual property cases.