Unified Patent Court Issues Injunction; Directors Not Liable for Infringement

Europe’s Unified Patent Court (UPC) has issued its first injunction in a case involving Standards Essential Patents (SEPs).

The case is Philips v. Belkin (German original). (An English machine translation of the decision can be read here.)

The UPC is a court with judges from all participating Member States of the European Union (EU). It rules on the infringement and validity of both Unitary Patents (that apply across the EU) and classic European Patents (issued by individual member states).

UPC cases are decided relatively quickly, unlike other EU (or US) courts, with disputes resolved within 12-14 months. It is also generally cheaper to litigate at the UPC rather than in other EU courts (or in the US). The UPC also requires the loser to pay at least some of the winner’s costs.

In this case, Philips sued Belkin GmbH, Belkin International Inc., and Belkin Limited, two Belkin directors, and one Belkin managing director in the UPC’s Munich Local Division for alleged infringement of European Patent 2 867 997.

This patent is for two-way communication and negotiation phases in inductive power transfer systems for charging portable electronic devices, including the role of an “acknowledgement” signal.

The patent has been declared essential to the Qi wireless charging standard. I.e., it’s an SEP.

As the World Intellectual Property Organization (WIPO) explains,

A standard-essential patent (SEP) is a patent that protects an invention that is crucial to the implementation of a particular technology standard. These standards are critical to ensuring the safety, interoperability, and compatibility of products and services from various companies.

SEPs include:

• Wi-Fi (IEEE 802.11)
• USB (Universal Serial Bus)
• Advanced Video Coding (MPEG-4 Part 10/H.264)

As WIPO explains,

When patent owners contribute their protected technical solutions to a standard, they commit to license their relevant patents to implementers, in accordance with the SO’s IP policy. This usually means a commitment to license openly under royalty-free terms or, more commonly, under Fair, Reasonable and Non-Discriminatory (FRAND) terms. These commitments may be of a general nature, without listing individual patents, or limited to individual patents or patent families specified by the SEP owner.

Once a technology standard is adopted, SEP owners generally become liable to license their SEPs to implementers under FRAND terms.

As the International Center for Law & Economics elaborates,

Standard-essential patents (SEPs) exemplify the dual nature of intellectual property, which is both national and international. While standards have a global dimension, patents confer territorial rights, thereby constraining their implementation geographically. As technical standards are a strategic tool, countries have developed national standards strategies that prioritize securing technological leadership. Unsurprisingly, SEPs have become a geopolitical issue and a significant factor in international tensions.

In this case, Philips sought injunctions, damages, disclosure, and product recall.

Under Art. 63 UPCA,

Where a decision is taken finding an infringement of a patent, the [UPC] may grant an injunction against the infringer aimed at prohibiting the continuation of the infringement. The Court may also grant such an injunction against an intermediary whose services are being used by a third party to infringe a patent.

Belkin counterclaimed for revocation of the patent.

The Munich court found that Belkin had infringed and that the directors were also liable—not as infringers but as intermediaries under Art 63(1) UPCA.

The Munich court issued a permanent injunction against Belkin in Sweden, Belgium, France, Germany, the Netherlands, Italy, Finland, and Austria, requiring it to refrain and desist, provide information, and pay damages.

The court ordered Belkin to provide Philips

with information relevant to the calculation of damages, including: information relating to the origin and distribution channels of Belkin’s infringing products, names and addresses of Belkin’s suppliers and commercial customers, quantities of products delivered, received or ordered, and the prices paid for the products concerned.

Months later, Belkin produced the requested information – on paper in 16 boxes.

Philips complained that the information wasn’t provided electronically, making it impossible to analyze. But the court decided there was no applicable penalty for providing the requested information on paper because Philips hadn’t initially requested it in electronic format.

The UPC Court of Appeal (CoA) confirmed that the patent at issue was valid.

However, the CoA overturned the Munich decision against the directors and dismissed the claims against them.

As WIPO reported,

an 'infringer' is also someone who does not himself carry out the infringing acts but to whom the infringing acts of a third party are attributable because they are an instigator, accomplice or accessory to the infringing acts.

The CoA found that merely holding the position of managing director doesn’t necessarily make a person an instigator, accomplice, or accessory to the company’s patent infringement. Instead, to be liable, a director must go beyond the typical duties of a director – for example, if the director uses the company to infringe or knows the company is infringing and fails to stop it.

Also,

Suppose the managing director seeks legal advice on the matter. In that case, he/she can generally rely on that advice until the Court of First Instance issues a decision establishing the company's patent infringement.

The CoA also affirmed that corrective measures can include an injunction, and that it was the infringer’s responsibility to show that such measures are disproportionate or to make the infringing products non-infringing. The CoA found Belkin hadn’t done this.

Compared with US federal courts, UPC judges have greater discretion in deciding whether to grant injunctions in patent cases. For instance, a UPC judge doesn’t need to find that a patent owner will suffer irreparable harm before it grants an injunction. In comparison, other EU courts have the power to issue automatic injunctions.

The UPC’s decisions are mainly binding only within its member countries. However, UPC decisions can influence other jurisdictions (including the United States) and create leverage in global licensing negotiations.

Also, if the UPC has proper jurisdiction and venue over a company located in a UPC member state, an injunction in such a case could be binding on the company, no matter where the infringing activity occurred or might occur in the future – even if that activity was outside the EU.