Different routes for infringement and revocation proceedings?

The application of the principle of concentration of infringement and revocation proceedings by the UPC: UPC Paris Central Division defining the term "the same parties" in Edwards Lifesciences Corp. vs. Meril Italy srl.

In November 2023, the Central Division in Paris clarified the relationship between the competence of the Central Division and the Local Division in its order UPC_CFI_255/2023.

This analysis begins with a presentation of the facts of the case (I.), before outlining the legal framework of the decision (II.) and summarizing the decision of the Paris Central Division (III.), concluding with comments on the decision (IV.).

The core provision of the order is Art. 33(4) of the Agreement on a Unified Patent Court (UPCA):

“Article 33 – Competence of the divisions of the Court of First Instance

4. Actions referred to in Article 32(1)(b) and (d) shall be brought before the central division. If, however, an action for infringement as referred to in Article 32(1)(a) between the same parties relating to the same patent has been brought before a local or a regional division, these actions may only be brought before the same local or regional division.”

Facts of the case

In the summer of 2023, the US seated Edwards Lifesciences Corporation (hereinafter: EL) filed an infringement action under the patent in suit against Indian Meril Life Sciences Pvt Ltd (hereinafter: Meril India) and its German subsidiary Meril Gmbh (hereinafter: Meril Germany) at the Munich Local Division, which is pending under case number UPC_CFI_15/2023.

Subsequently, the Italian subsidiary of Meril India, Meril Italy srl. (hereinafter: Meril Italy), filed a revocation action before the Paris Central Division of the UPC under case number UPC_CFI_255/2023 against the patent in suit of EL, which is the subject of the infringement proceedings before the Munich Local Division.

EL in turn filed a preliminary objection requesting the dismissal of the revocation action as inadmissible, since the infringement action between the same parties on the same patent was already pending in first instance before the Munich Local Division of the Court of the UPC.

The decision of the Paris Central Division on this preliminary objection concerned the question whether Meril India/Germany, who are parties to the infringement action in Munich, and Meril Italy, who is party to the revocation action in Paris, are the same parties within the meaning of Art. 33(4) UPCA, since the identity of the patent and the identity of the plaintiff in the infringement/defendant in the revocation proceedings was undisputed between the parties. If this was the case, the Paris Central Division would lack competence for the revocation action according to Art. 33(4) UPCA.

Legal framework of the UPCA on competence of the UPC Courts in first instance infringement and revocation proceedings

Art. 32, 33 UPCA structure the competence of the UPC Courts in first instance proceedings in set of rules and exceptions which include the exception applicable here pursuant to Art. 33(4) UPCA (1.). The wording, purpose and aim of the law only allow a formal definition of the term same parties according to Art. 33(4) UPCA (2.).

1. Competence of UPC Courts: rules and exceptions in case of invalidity and revocation proceedings

According to Art. 7 UPCA, the Court of First Instance comprises a Central Division as well as local and Regional Divisions in different member states, with the Central Division having its seat in Paris. In case of first instance infringement and revocation proceedings, the rules and exceptions regarding the competence of these UPC Courts are set follows:

Generally, according to Art. 33(1), 32(1)(a) UPCA, the local or Regional Divisions of the UPC are competent courts for infringement actions at first instance, whereas the Central Division is competent for revocation proceedings in accordance with Art. 33(4) first sentence, 32(1)(d) UPCA.

If an invalidity proceeding is pending before the Central Division, Art. 33(5) UPCA provides the plaintiff of a subsequent infringement action between the same parties relating to the same patent with the right to choose whether to also file the infringement action before the Central Division or to file the infringement action before a local or Regional Division, which in turn have especially the discretion to refer the infringement action to the Central Division or to suspend the action for infringement until a decision on revocation is issued by the Central Division. In case is the counterclaim for revocation is filed in the infringement proceedings, the proceedings before the local or Regional Division have priority over the revocation proceedings before the Central Division, which must generally be stayed in accordance with R. 75.3 Rules of Procedure of the Unified Patent Court (RoP). In any case, R. 295(m) RoP enables the proceedings to be stayed “where the proper administration of justice so requires”.

In the reverse scenario – pending infringement proceedings – the plaintiff of a subsequent revocation action between the same parties relating to the same patent has no right to choose, but instead the UPCA orders a concentration of proceedings: According to Art. 33(4) second sentence UPCA, a subsequent revocation action between the same parties relating to the same patent has to be brought before the local or Regional Division of the UPC.

2. The identity of the parties and patent under UPCA

The UPCA provides no indication that the term same parties must be understood in any other way but in formal terms – neither in Art. 33(4) (a.) nor in Art. 46, 47 (b.) or in its considerations (c.).

a. Art. 33(4) UPCA

While the identity of the patent, which may be an EP or EP with unitary effect according to Art. 2(g), (e), (f) UPCA, may be determined unambiguously by the respective patent number, the result of determining the identity of the parties depends on whether a normative economic or legal perspective or a formal legal perspective applies. When determining the applicable criteria for the interpretation of the term same parties, the UPCA provides the following framework:

(1) Exemptive nature of Art. 33(4) UPCA

Firstly, the UPCA governs the concentration of competence in revocation actions at local or Regional Divisions of the UPC as an exception – deviating from the basic competence of the Central Division in Paris. In order to avoid violating the legislative intent, the exceptional character of the concentration of competence must be preserved, so that a broad interpretation of the term same parties is not permissible.

(2) Purpose of Art. 33(4) UPCA

Secondly, purposes of the provision of Art. 33(4) UPCA are to serve procedural economy, but also to preserve the consistency of the legal system of the UPC and to prevent contradictory interpretations of the patent in suit in the two proceedings – infringement and revocation, whereby proceedings may be combined in the appeal instance, R. 340 RoP.

(3) The term “party” in Art. 46, 47 UPCA

Thirdly, the UPCA addresses the term "party" in Art. 46 and 47, without providing a general definition – although Art. 47 is headlined "parties". Both provisions – Art. 46 UPCA regulating the legal capacity to be a party to the proceedings before the UPC and Art. 47 UPCA regulating the legitimate interest in the proceedings – aim at admissibility to file actions. According to Art. 46, Art. 47(7) UPCA right is entitled to any natural or legal person, or any body equivalent to a legal person. The admissibility under Art. 46, 47 UPCA is governed by national law.

b. Considerations of the UPCA

The considerations on the UPCA do not provide any guidance on the interpretation of the term "same parties". In particular, the general objective under recital 6 of UPCA that the UPC “should be devised to ensure expeditious and high quality decisions, striking a fair balance between the interests of right holders and other parties and taking into account the need for proportionality and flexibility” does not provide clarification on this issue, since in particular, unnecessary procedural delays are to be avoided. This is because this objective may serve as grounds for establishing either the incompetence or the competence of the Central Division, whereby in this case an obligation to suspend the infringement proceedings or at least a non-decision prior to a decision on the validity by the Local Division would be a subject for discussion. As shown above, the normative line of the UPCA is not generally crossed when infringement and revocation proceedings differ in terms of competence, since the plaintiff in an infringement proceeding even has a right of choice according to Art. 33(5) UPCA in the reverse scenario – even if the parties are the same, especially as the Local Divisions and Regional Divisions may refer revocation proceedings to the Central Division at their discretion.

Decision of Paris Central Division

The Paris Central Division rejects the Preliminary objection and thus declared itself competent for the revocation proceedings.
Essentially, the reasoning is based on the above-mentioned considerations: literal interpretation of Art. 33(4) UPCA and reference in Art. 46, 47 UPCA and otherwise rejects the arguments of EL:

• The Paris Central Division denies the applicability of the case law of the CJEU on the normative-economic perspective in competition law enabling corporate groups being regarded as one entity (CJEU September 10, 2009, C-97/08 P – Akzo Nobel and Others v Commission), since this case law concerns the joint liability of companies within a corporate group. The same applies for the applicability of the case law of the CJEU on the normative-legal perspective of corporate groups as a unit in the context of Art. 21, 22 of the Brussels Convention in relation to the principle of lis pedens (see CJEU May 19, 1998, case C-351/96 – Drouot assurances v Consolidated metallurgical industries and others), since Art. 33(4) UPCA is not based on the lis pedens principle: The UPCA recognizes the possibility of parallel revocation proceedings and enables to combine these proceedings in the appeal instance, R. 340 RoP. It must be added that the CJEU links the identity of the parties in this case to their common interests, which must be identical and inseparable. This would be the case if the enforceability of a judgment extends to both parties.
• The Paris Central Division also rejects EL’s argument based on the “straw man” theory and considers a straw man not to be an independent legal category, but a category of cases of circumvention: Even if Meril Italy were a straw man of Meril India/Germany, this would in principle be irrelevant and only relevant if Meril Italy's conduct created a deliberate circumvention, i.e. if UPCA provisions protecting the other party were to be circumvented to the detriment of the other party. EL bore the burden of proof for the alleged circumvention, which it was unable to meet.
• Finally, the Paris Central Division rejects the argument that its competence creates the risk of an non-uniform administration of justice and undue advantage to Meril. As outlined above, the UPC Courts have the option of staying, referring and, on appeal, combining proceedings.

Comment

The decision is de lege lata the result of a consistent application of the law.

The decision evokes memories to the start of the Pemetrexed cases between Actavis and Lilly in Europe in 2012 that started with an action for declaration to the English High Court that Actavis did not infringe the UK, French, German and Italian part of Eli Lilly’s patent. However, as Actavis had not filed the suit on behalf of all relevant national Actavis entities, the Düsseldorf District Court had jurisdiction to hear Eli Lilly’s later filed infringement action against the German entity of Actavis. In that case, based on Art. 27 et sqq. EU Regulation 44/2001 (followed by Art. 29 et sqq. EU Regulation 1215/2012), as the case did not concern the same parties, the Düsseldorf Court had jurisdiction to hear the later filed infringement action. The decision of the Paris Central Division is therefore in line with the strict formal approach that is also applied with regard to the EU Regulation 1215/2012 on jurisdiction and the recognition and enforcement of judgments.

The Paris Central Division thus provides legal certainty for groups of companies seeking to strategically utilize their (existing) corporate structure. The involvement of a subsidiary as a revocation plaintiff at the Paris Central Division in the case of a pending infringement action with the participation of a subsidiary/parent company should therefore be an option worth considering for defendants. At least if (yet to be established) case law of the Paris Central Division appears to be convenient for the outcome of the revocation proceeding.

With this decision, the Paris Central Division ruled against any consideration other than a formal legal one leaving the door open for a different outcome in the event of circumvention of the rules of the UPCA. De lege ferenda, it remains to be seen whether this decision will have to be corrected by the legislator since it explicitly committed itself in any case to a revision of the UPCA in Art. 87 UPCA while nevertheless a harmonized approach with the other EU Regulations such as 1251/2012 is also necessary.