CJEU ruling confirms permissibility of strict liability in preliminary injunction proceedings

The CJEU’s ruling clarifies its previous ruling in Bayer Pharma (C 688/17, 12 September 2019). It confirms that certain type of strict liability regimes are consistent with the Directive on the enforcement of intellectual property (IP) rights (2004/48/EC) (the Enforcement Directive).

Background

The CJEU’s ruling provides for several interesting remarks and clarifications. The questions referred to the CJEU originated from the Market Court of Finland and concerned liability related questions when the IP right that the granted PI is based on is later found invalid.

Under Chapter 7 Section 11 of the Finnish Code of Judicial Procedure, a party who has applied for a PI, which is later found invalid, is obliged to compensate the other party for losses caused by that measure. The aim of the provision is to react to situations where the applicant of a PI is later found to have been lacking prerequisites for the granting of the PI and therefore provides for a way to balance out the interests of the parties. In the light of well-established Finnish case law, the provision has been interpreted as providing for strict liability.

In the case, Mylan requested Gilead to pay damages for losses caused by a PI sought by Gilead against Mylan. The PI was based on a supplementary protection certificate that was subsequently found invalid. Mylan argued that the PI had been sought unnecessarily which would expose Gilead to strict liability (under the above-mentioned provisions and case-law), as the IP right on which the PI was granted had been revoked.

Gilead argued that the strict liability regime was contrary to the Enforcement Directive following the CJEU’s earlier ruling in Bayer Pharma. In that case, the CJEU had ruled that the simple act of revoking the PI should not allow national courts to automatically and in any event order the PI applicant to compensate the defendant for any loss suffered.

Advocate General Szpunar supported Gilead’s view in his opinion issued in September 2023, and held that strict liability regimes are precluded by Article 9(7) of the Enforcement Directive. (This opinion is discussed in our earlier article).

CJEU ruling

The main questions assessed by the CJEU was whether the strict liability compensation regime is to be considered compatible with Article 9(7) of the Enforcement Directive.

In its ruling, the CJEU concluded that Article 9(7) does not mention the existence of the PI applicant’s fault among the conditions to be considered when assessing the grounds for compensation. The court considered that this Article should be interpreted as laying down a minimum standard for the enforcement of IP rights. The CJEU confirmed that the Article does not impose a specific liability regime for member states and therefore leaves it to each country to decide whether to opt for a strict or fault-based liability regime for the applicant.

The CJEU emphasised the importance of assessing all the circumstances when considering the damages to be paid. It also pointed out that in the context of the Finnish liability regime, the damages may be adjusted if the defendant contributed to the injury.

Key takeaways

The decision of the CJEU provides welcome clarity of the applicability of the strict liability regime, not only in the proceedings for damages following the cancellation of a PI, but also in the preliminary proceedings when considering whether the PI should be granted in the first place. This is positive news for countries that have adopted a strict liability system similar to that of Finland.

In Finland, the strict liability of the applicant has generally been considered a significant factor in the assessment of whether the PI should be granted or not. This factor has generally been thought to favour the granting of the PI, as the applicant has a strict liability to the defendant if the PI is later cancelled. If the CJEU had adhered to the Advocate General’s opinion obtaining PIs might have become more challenging, as the weighing of interests made when deciding on the granting of a PI could have been affected.

The CJEU’s decision confirms the permissibility of a strict liability system and assures that defendants will be compensated if the IP underlying the PI is revoked. However, as the CJEU emphasised, such assessment should consider all the circumstances, and the payable damages may be adjusted if the defendant contributed to the injury suffered.