CJEU: strict liability for wrongful preliminary patent injunctions compatible with the EU IP enforcement directive

In a judgment handed down on 11 January, the Court of Justice of the EU (CJEU) determined that EU legislation governing the enforcement of intellectual property (IP) rights provides scope for individual member states to impose a strict liability regime providing for compensation for wrongful injunctions issued in the field of IP law. It considered that it is not necessary for fault or abuse by the rights holder to be shown for wrongfully injuncted parties to qualify for compensation under such regimes.

Injunctive relief can be an important remedy for patent holders in cases where pharmaceutical patents are being infringed, prohibiting infringers from manufacturing, supplying or distributing rival products that infringe patent rights.

Preliminary injunctions provide the added protection for patent or supplementary protection certificate (SPC) holders in that they keep the potential infringer off the market until the full proceedings on infringement, and validity if in issue, are determined. They can be sought and ordered very quickly in many European jurisdictions – within a matter of days or weeks – including under the new Unified Patent Court system.

The CJEU was asked by a court in Finland to consider whether strict liability compensatory regimes in respect of wrongful preliminary IP injunctions are compatible with the EU IP Enforcement Directive. The answer is relevant to an underlying dispute before the Finnish court involving pharmaceutical companies Mylan and Gilead.

A Finnish court granted Gilead a preliminary injunction against Mylan in 2017 in response to claims raised by Gilead that Mylan had infringed a supplementary protection certificate (SPC) Gilead had earlier been granted in Finland. SPCs serve to extend the life of a patent for pharmaceutical products by up to a maximum of five years and are provided for in EU law to compensate businesses for the period of patent protection during which they are prevented from commercialising their products owing to the lengthy regulatory approval process for new medicines. The SPC in this case pertains to a medicine used for treating human immunodeficiency virus (HIV), sold by Gilead under the brand name Truvada.

In 2018, the CJEU clarified criteria applicable to the granting of SPCs. This led to the preliminary injunction issued against Mylan being lifted by the Finnish court in April 2019 and, in line with other rulings elsewhere across Europe in the aftermath of the CJEU’s judgment, Gilead’s SPC for Truvada being ruled as invalid in Finland in September 2019. Mylan subsequently claimed €2.3 million from Gilead in damages for losses arising from the imposition of the preliminary injunction.

Similar to the law in other EU countries, Finnish law provides that a party obtaining a preliminary injunction “unnecessarily” must compensate the other party for the losses caused by the effect of that injunction without the need for the injuncted party to show that the claimant to the injunction had committed a fault or an abuse, which can often prove quite difficult. This liability regime is often referred to as a strict liability regime – in contrast to the general liability regime in civil law jurisdictions which requires the demonstration of a harm, a fault and causal link between the two.

However, before ruling on Mylan’s claims for compensation against Gilead, the Finnish court decided to seek the CJEU’s view on the scope for strict liability regimes under the IP Enforcement Directive in light of a 2019 ruling by the CJEU in the so-called ‘Bayer Pharma’ case.

In its Bayer Pharma ruling, the CJEU was asked whether Hungarian law on liability, which includes a duty to mitigate – that being a party’s obligation to make reasonable efforts to limit the harm they suffer from another party’s actions, for instance by avoiding taking unreasonable risks – was compatible with Article 9(7) of the EU IP Enforcement Directive. That article provides that the defendant should receive “appropriate compensation” for injury caused by provisional measures where it is subsequently found that there has been no, or no threat of, infringement or the IP rights are found to be invalid.

The CJEU said the Hungarian regime was compatible with the directive but in doing so left some commentors with the impression that the launch at risk of a rival pharmaceutical product could be considered as presenting a perceived risk of irreparable harm for the rights holder such that a preliminary injunction could still be viewed as having been justified at the time it was granted, even if it is later revoked, and therefore that compensation of the wrongly injuncted party would only arise if the applicant had committed an abuse.

In its new judgment, the CJEU clarified that interpretation is incorrect and that strict liability regimes such as the one provided for in Finnish law are compatible with Article 9(7) of the EU IP Enforcement Directive.

Pharmaceutical patent law expert Jules Fabre of Pinsent Masons said: “The CJEU considered that the EU IP Enforcement Directive only imposes a minimal standard and the decision of whether to opt for a strict liability regime or not is within the competence of national legislators, meaning national legislation across the EU can enable a wrongfully injuncted party to seek compensation without there first needing to be a finding of a fault or abuse by the rights holder. This is not in line with the non-binding opinion of the advocate general that had considered the issue in this case on behalf of the court – they proposed that, on the basis of the CJEU’s interpretation of Article 9(7) of the directive in the Bayer Pharma case, strict liability was not permitted, and that compensation should require the finding of an abuse.”

Fabre added: “The CJEU, however, did account for the fact that under Finnish case law a court seized with a damages claim based on strict liability can reduce the amount of damages to be awarded when the defendant has made it possible for the harm to be caused or failed to mitigate it. It is however left to national courts to assess under which circumstances that is the case. For instance, it is unclear whether a decision to launch a product at risk should always be considered as such or whether additional circumstances are required – such as a decision to launch at risk despite a first instance or foreign court finding that the relevant patent is valid. In addition, whilst the CJEU said that when implementing Article 9(7) member states must require courts to take into account all circumstances, including the behaviour of the parties, it has not clearly said whether it would determine whether other strict liability regimes that do not take mitigation into account when deciding on the amount of damages, in the same way as Finnish courts do, are compatible with the IP Enforcement Directive. As the CJEU was only asked to interpret Finnish law, it did not specifically answer this question or address other forms of strict liability regimes.”