Is there a trend towards bifurcation at the UPC?

Is this part of a more general emerging trend towards bifurcation at the UPC?

The case

MED-EL Electromedical devices filed on 7 November 2023 an infringement action based on its patent EP 4 074 373 (“EP 373”) against three entities of Advanced Bionics before the Mannheim Local Division. This infringement action came after that Advanced Bionics AG filed a stand-alone revocation action against EP 373 before the Paris Central Division, for which a trial hearing is scheduled on 29 October 2024. Two of the defendants in the infringement action, the German and French subsidiaries of Advanced Bionics AG, filed on 22 March 2024 revocation counterclaims before the Mannheim Local Division. The revocation counterclaims contained essentially the same grounds as in the stand-alone revocation action, except for an additional ground of insufficient disclosure.

In this interesting order, the Mannheim Local Division decided to refer the counterclaims for revocation of EP 373 to the Paris Central Division pursuant to Art. 33(3)(b) UPCA, while retaining the plaintiff’s infringement claims.

The Mannheim Local Division made clear that “it is generally appropriate for the local division also to hear and decide on the revocation counterclaim”, but “exceptionally” decided to exercise its discretion to bifurcate the nullity counterclaims in view of the specific circumstances of the case. This is notably because the Paris Central Division was already familiar with the subject matter of the nullity counterclaims due to the more advanced stage of the revocation action, such that retaining the nullity counterclaims would have been against the procedural economy principle and therefore the efficiency of the proceedings.

The defendants had brought three main lines of arguments to challenge such a bifurcation:

• First, they argued that bifurcating could lead to disparate interpretations from various Divisions of the UPC, but the Mannheim Local Division replied that such a risk already existed given that Advanced Bionics AG had decided to bring a stand-alone revocation action while the patentee could still decide to initiate infringement proceedings before a Local Division
• Second, they objected that bifurcating would lead to a late change of language regarding the nullity counterclaims, but the Mannheim Local Division also dismissed this argument since most of the translation work had already been carried out in the revocation action filed before the Paris Central Division;
• Third, they argued that bifurcating would risk to “cut off the counterclaimants’ reply”, but the Mannheim Local Division replied that the Paris Central Division would retain discretion to join the proceedings later or to keep them separate, which would not significantly increase its workload.

An emerging trend of bifurcation in case of prior revocation action

According to Article 33(3) of the UPCA, where a counterclaim for revocation is filed in the context of an infringement action, the Local Division in charge of the case has discretion to rule on both infringement and validity, to split the proceedings and refer the counterclaim for revocation to the Central Division or to refer the whole case to the Central Division if the parties so agree.

So far, bifurcation has only been granted in very specific circumstances and Local Divisions tend to rule on both infringement and validity in most cases, even when it comes to German ones although this is contrary to their established national practice.¹

However, when a stand-alone revocation action is already pending and well advanced before the Central Division on the same patent, Local Divisions are keener to bifurcate.

The present order of the Mannheim Local Division is an example of this, but a similar reasoning was relied upon by the Munich Local Division in Amgen v. Sanofi and Regeneron (UPC_CFI_14/2023, ORD_392/2024) and Edwards v. Meril (UPC_CFI_15/2023, ORD_1340/2024). In all these cases, both the timing of the revocation decision and the similarity of the grounds for revocation were considered as key factors to allow the bifurcation.

A balanced solution that could still give rise to difficulties

The issue of bifurcation has always been controversial amongst UPC stakeholders, as it may have significant consequences on the attractiveness of the Court and on the parties’ strategies. On the one hand, bifurcation results in different Divisions deciding on validity and infringement, which may lead to inconsistent interpretations, duplication of work, or unjustified injunctions against alleged infringers. On the other hand, bifurcation may also avoid unnecessary parallel nullity claims, speed up the infringement decision, or prevent forum shopping by patentees. In any case, the Court of Appeals would ultimately consolidate the case and apply the same claim construction with respect to infringement and validity as has been emphasized by it and referred to in first instance judgments already.²

It is encouraging to see that Local Divisions reject bifurcation as a principle where no specific circumstances justify it. It is also welcomed that these same Local Divisions have flexibility to refer nullity counterclaims to the Central Division when the latter is already seized of a similar and parallel revocation action. This seems to be consistent with the objectives of the UPC aiming at having efficient proceedings.

That being said, it remains to be seen if these rare bifurcated situations will cause problems in the future:

• Will Local Divisions outside Germany have a similar approach in case of prior revocation action pending before the Central Division?
• Will the Local and Central Divisions be able to issue decisions that are consistent in terms of validity and interpretation of the claims, notably when these issues are closely intertwined?
• Will the chronology of validity and infringement decisions respect the rights of stakeholders, notably in situation of potential injunction gap?

It will be interesting to follow the case law of the UPC closely to ensure that the principle of procedural efficiency so dear to the UPC do not undermine the attractiveness and quality of the system.

Footnotes

^{1. Düsseldorf Local Division, Order dated 15/04/2024, Ortovox v Mammut et al., ORD_18121/2024; Mannheim Local Division, Order dated 22/02/2024, Panasonic v OROPE et al., ORD_7452/2024; The Hague Local Division, Order dated 15/02/2024, Plant-e v Arkyne, ORD_8243/2024; Düsseldorf Local Division, Order dated 19/12/2023, Nutricia v Nestlé, ORD_589338/2023.}

^{2. UPC Court of Appeal, Order dated 11/03/2024, Nanostring v 10xGenomics, UPC_CoA_335/2023 Munich Local Division, Order dated 21/05/2024, Dyson Technology Ltd v SharkNinja, UPC_CFI_443/202.}