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The Unified Patent Court asserts its jurisdiction to determine damages following national court infringement ruling

The Unified Patent Court asserts its jurisdiction to determine damages following national court infringement ruling
In a landmark decision Fives ECL, SAS v. REEL GmbH on January 16, 2025, the Court of Appeal (CoA) of the Unified Patent Court (UPC) clarified the jurisdictional boundaries of the UPC. This decision has far-reaching implications because it asserts the UPC’s jurisdiction to determine damages following a national court’s finding of patent infringement.

Background of the case

The dispute concerns European Patent EP 1 740 740 B1 (EP 740), which pertains to a compact service module for installations used in the electrolytic production of aluminum. Before the UPC’s entry into force, Fives ECL SAS initiated an infringement action against REEL GmbH (and other companies) before the Düsseldorf Regional Court for infringement of the German part of Fives’ patent EP 740.

By judgment dated August 9, 2022, the German court ruled that REEL had infringed the German part of EP 740 and ordered REEL to compensate Fives for the acts of infringement committed since December 2, 2016. That decision was not appealed.

Once the UPC became operational, on August 8, 2023, Fives brought an action for the determination of damages before the UPC’s Hamburg Local Division based on the combination of:

  • Article 32(1)(a) UPCA, which states that the UPC has exclusive competence in respect of “actions for actual or threatened infringements of patents and supplementary protection certificated and related defences (…)”.
  • Article 68 UPCA, which focuses on the awarding of damages.

REEL lodged a preliminary objection, arguing that the UPC lacked jurisdiction to determine damages following a national court’s finding of infringement.

It is not clear from the decisions why Fives chose to bring its action before the UPC rather than the German court. Several speculations have been made—it could be justified by the speed of the procedure, lower legal costs, or by the fact that a UPC judge might be more willing to hear an expert than German courts to determine the amount of damages to be awarded.

Hamburg Local Division denied jurisdiction

On November 17, 2023, the Hamburg Local Division (LD) ruled in favor of REEL and denied the UPC’s jurisdiction.

The Hamburg LD considered that Article 32(1) of the UPCA provides an exhaustive list of the court’s competences, and actions for the determination of damages are not included because they cannot be considered an action for patent infringement. The infringement and the obligation to pay damages have already been established by the national court.

The LD therefore classified this action as an isolated application to determine the amount of damages pursuant to Rule 125 et seq. of the Rules of Procedure (RoP). This is a dependent procedural step of the patent infringement proceedings under Article 32(1)(a) UPCA.

Fives’ appeal

Fives appealed the decision.

In brief, Fives argued for a broader interpretation of Article 32(1)(a) UPCA and contended that “the phrase ‘for actual or threatened infringements of patents’ refers conceptually and in the normal sense of the word to all actions whose grounds are based on the infringement of a patent.” Fives also claimed that the existence of an earlier action for injunctive relief and damages raised a question of conflicting res judicata or lis pendens rather than jurisdiction. It also pointed out that the UPCA does not exclude UPC jurisdiction because of a prior national action unless the patent was opted out under Article 83 UPCA. In the case at hand, the national proceedings were concluded before the UPC became operational.

Fives emphasized the need for harmonization, particularly regarding methods of calculating damages. Finally, it highlighted the risk of not having a competent court after the transitional period if the UPC’s jurisdiction was not recognized in these cases.

REEL’s counterarguments

REEL countered by reiterating that Article 32(1) UPCA provides an exhaustive list of actions for which the UPC has jurisdiction, which does not include the current action, identified as an isolated action for the determination of damages. It also argued that, since the liability for damages was established by a national court, the amount of damages should also be determined by the national court. REEL said that the UPC lacks temporal jurisdiction since the acts of infringement occurred before June 1, 2023, and the UPCA’s substantive law does not apply retroactively. Finally, REEL warned that allowing the UPC to determine damages after a national court has established liability could lead to procedural inefficiencies and potential forum shopping.

CoA reversed UPC’s first instance order

The CoA overturned the LD’s order, asserting that the UPC does indeed have jurisdiction to determine damages even if the infringement was established by a national court:

“The Court’s competence (or jurisdiction) includes a separate action for determination of damages after a court of a Contracting Member State has established the existence of an infringement of a European patent and an obligation in principle for the infringer to pay damages.”

Implications and legal reasoning

The CoA’s decision is grounded in a detailed interpretation of the UPCA and related legal instruments.

Jurisdictional scope

The CoA endeavored to analyze the texts, recalling first that the hierarchy of norms requires that the UPCA should be considered before the RoP (acknowledging that the rules seem to limit the cases in which damages may be claimed). The UPCA should also be interpreted in good faith as provided by the Vienna Convention.

The CoA first looked for clues in other articles, namely Articles 56, 68 and 83 of the UPCA. However, these articles “only come into play for the UPC once the Court has jurisdiction."

The court thought that the wording of Article 31(1)(a) was inconclusive, and other articles were not determinative as interpretative tools. The rationale behind Article 32(1)(f) supports the

UPC’s jurisdiction for separate damages actions when the infringement has been established by a national court.

The court also specified that the Brussels Regulation is not relevant for determining the international jurisdiction of the UPC. The court considered whether there are any “apparent adverse consequences” to applying the UPCA instead of German law. It concluded that refusing to apply the substantive law of the agreement would be contrary to Article 34 of the UPCA, as the UPC’s decisions aim to go beyond the national level.

Concerns about forum shopping and forum law

The CoA also addressed the argument raised by REEL regarding the adverse consequences of forum shopping and “law shopping”. Although this argument wasn’t without merit, Article 13 of Directive 2004/48/EC only provides for minimum not total harmonization. Variations between member states are acceptable and such variations are also acceptable under the current transitional regime.

Temporal applicability

The court rejected REEL’s argument on temporal jurisdiction, stating that the UPC has jurisdiction over acts of infringement committed before the UPCA’s entry into force, provided the European patent was still valid on that date.

In fact, this question had already been decided by the local division of Munich in the Edwards Lifesciences v Meril case (UPC_CFI_15/2023). In this regard, the Munich local division pointed out that, at the end of the transitional phase, the UPC would have sole jurisdiction to hear actions relating to European patents (unless an opt-out clause is applied). It argued that it could be particularly prejudicial to decide that the UPC does not have jurisdiction to rule on acts of infringement committed before its entry because no court would have the power to rule. Such a position was not viable.

Key takeaway

By interpreting Article 32(1)(a) UPCA in light of the agreement’s object and purpose, the court has affirmed that the UPC can adjudicate separate actions for damages following a national court’s infringement ruling, provided the European patent remains valid. This ruling enhances the harmonization of patent enforcement across Europe and underscores the UPC’s role in providing a unified legal framework for patent disputes. It now remains to be seen how the local division will rule on the damages.

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