In a recent judgment from The Court of Justice of the European Union (the “CJEU”) in case C-688/17, the CJEU had the chance to provide an interpretation of adequate compensation contained in article 9(7) of Directive 2004/48 (the “enforcement directive”) and whether article 9(7) precludes a national legislation that provides that a party should not be compensated for the losses suffered by him if the rights which were the basis for provisional measures are subsequently invalidated.
The main dispute
The main dispute concerned the alleged infringement of a Bayer Pharma pharmaceutical patent by the Hungarian companies Exeltis and Richter.
Bayer Pharma initially failed in obtaining provisional measures prohibiting Exeltis and Richter from offering the alleged infringing products on the market. Exeltis and Richter subsequently filed for invalidation of the Bayer Pharma patent.
Before a final decision was rendered in the invalidation proceedings, Bayer Pharma succeeded in obtained provisional measures which prohibited Exeltis and Richter from offering the alleged infringing products on the market. After obtaining the provisional measures Bayer Pharma initiated infringement proceedings which were subsequently suspended pending a decision in the invalidation proceedings.
The Bayer Pharma patent was ultimately invalidated, and the infringement proceedings was terminated. This led to Exeltis and Richter filing claims for compensation due to the losses suffered as a result of the provisional measures.
According to Hungarian law a party which unlawfully causes harm to another must provide a remedy for that harm. A person is relieved of that obligation if it is demonstrated that the person concerned acted as would generally be expected in the circumstances in question.
The questions referred
The referring court essentially raised the question regarding the scope of article 9(7) and asked whether article 9(7) guarantees the defendant a right to compensation or whether it also defines the content of that right. Secondly, the referring court asked whether article 9(7) 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.
The CJEU examined the questions together and firstly found it necessary to define the concept of appropriate compensation in article 9(7).
The CJEU found that article 9(7) was to be interpreted as requiring national legislation implementing the directive, which enables the competent courts to award compensation for losses occurred by the defendant for provisional measures which are subsequently lifted.
Secondly, the CJEU found that the concept of appropriate compensation must be given an independent and uniform interpretation throughout the EU.
Consequently, it is up to the national courts to assess whether it is appropriate to award compensation to a defendant. If a compensation is awarded, the CJEU states that such compensation must be “appropriate”, which relies on the circumstances of the individual case.
However, and most importantly, this does not mean that the competent national courts will automatically and in any event be obliged to order the applicant to provide compensation for any losses suffered by the defendant as a result of a provisional measure which is subsequently lifted.
The CJEU states that according to the wording of article 9(7) read in light of recital 22 of directive 2004/48, in order to award compensation, the provisional measure must have been unjustified, taking into account that a provisional measure is particularly justified when any delay would cause irreparable harm to a holder of an intellectual property right.
Further, while the lifting of a provisional measure is prerequisite to awarding compensation cf. article 9(7), the lifting of a provisional measure is in itself not conclusive to whether the provisional measure has been unjustified or even a decisive factor in the decision. The inappropriateness must be considered in light of other/all relevant circumstances of the case, including if the application for a measure was filed abusively.
The CJEU notes that a different conclusion could lead to a rights holder not utilizing the measures laid out in directive 2004/48 and thus counter the directive’s objective of ensuring a high level of protection of intellectual property.
Preliminary injunctions in Danish law
Provisional measures are regulated by the administration of justice act (the “AJA”). Section 428 of the AJA states that a claimant that has obtained a preliminary injunction on basis of a right which is subsequently found not be valid must pay damages and compensation to the defendant. Thus, the claimant is objectively liable for the damages caused.
This objective liability has latest been reaffirmed in a recent ruling by the Danish Maritime and Commercial Court in the combined cases T-3-17 and T-7-17 where a preliminary injunction in appeal subsequently was lifted.
At a glance the Danish legislation concerning the claimant’s objective liability for provisional measures which are subsequently lifted seems to be at odds with the CJEU’s interpretation in case C-688/17.
A common tactic when defending against provisional measures is challenging the rights which form the basis of the measure. Therefore, the claimant must always assess the risks in filing an application, including the economic risk.
The CJEU judgment might significantly reduce the economic risks associated with applying for a preliminary injunction in Denmark, however the specific effects remain to be seen.