Injunctions in UK Patent Cases: hints for UPC practice?
Significant comment was made in the Unitary Patent Court (UPC) Rules of Procedure consultation on permanent injunctions. Specifically, some commentators sought the inclusion of criteria similar to those in the US, which come from the eBay Inc. v MercExchange, LLC case.
In eBay the Supreme Court set out a four part test for the grant of a permanent injunction under which the plaintiff must show:
- That it has suffered an irreparable injury;
- That remedies available at law are inadequate to compensate for that injury;
- That considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and
- That the public interest would not be disserved by a permanent injunction.
The consultation revealed a divergence of views across Europe. In some countries, injunctions are viewed as an automatic right. In others, such as the UK, injunctions have always been discretionary, albeit in patent cases they are the norm. Regardless of traditional approaches, there are mandatory provisions in the Enforcement Directive which require EU courts to consider reasons not to award an injunction. Those provisions will apply in the UPC, regardless of what the rules say. It does not appear however that the UPC Rules Committee is in favour of eBay type provisions, preferring to leave the court to apply the provisions of the Enforcement Directive and its discretion. It appears the English Court has a similar view.
In the recent case of HTC v Nokia, Arnold J was asked not to award an injunction against HTC, who had lost on infringement and validity of a Nokia patent. The patent, which was not a standards essential one, covered part of the circuitry of component chips in various HTC phones, including HTC's flagship product, the HTC One. On its face, here was a decision finding infringement by part of a part of a complex and widely sold composite product, a situation in which damages instead of an injunction might prima facie appear appropriate. After hearing nearly a day of argument, however, Arnold J ordered a permanent injunction, although it was stayed in relation to the HTC One pending appeal. His reasoning is interesting, and perhaps informative as to how the UPC might also approach the same question.
The judge first reviewed the English authorities on injunctions generally. In essence, these say that an injunction might not be granted where the injury to the claimant is small, it can be compensated in damages and, crucially, where an injunction may be oppressive to the defendant. In IP cases, the courts have refined the last of these by saying that an injunction may not be granted if it were "grossly disproportionate" to do so. Reference to the eBay test was made in argument but it did not much interest the judge, and it is not referred to in the judgment.
Notably, Arnold J said that the time had come for the issue to be approached through the eyes of Article 3(2) of the Enforcement Directive. This provides that remedies necessary to ensure the enforcement of IP rights shall be "effective, proportionate and dissuasive...". The CJEU has repeatedly held that Article 3(2) requires courts to consider the proportionality of injunctions in IP cases. However, Arnold J added two further factors relevant for patents.
First, he noted that patents include the right to withhold consent to use the invention. Hence, damages in lieu of an injunction are inherently less effective and dissuasive than injunctions.
Secondly, TRIPS and, in the UK, Section 48A of the Patents Act 1977, provide limited circumstances in which a compulsory licence can be obtained. He was concerned that damages in lieu should not amount to a compulsory licence in circumstances where one cannot be obtained under the legislation.
Taking everything together, he concluded that the approach should be that the party resisting an injunction must demonstrate that an injunction is disproportionate. He noted that this is a heavy burden.
Having determined an overall approach, he went on to consider the facts of the case. In so doing, he took into account more than a dozen factors raised by the parties, some of which were specific to the case. Of more general relevance, he considered the fact that the patent covered only part of a component of the phones in question was not persuasive. Nor was he impressed by the fact that a royalty on that part might therefore be small. Of greater significance were the harm to the value of the patent by refusing an injunction and the difficulty assessing damages by way of future royalties.
The most important factor in his view however was the availability and cost of non-infringing alternatives. It is difficult to assess how commercially viable these were in this case, largely because it seems HTC did not reveal much detail in evidence (something which seemed to count against them with the judge). On the evidence before him however, Arnold J found that HTC could switch to non-infringing alternatives given time and could have begun doing that long before trial. Given the heavy burden on HTC to prove disproportionality, the lack of evidence on contingency plans and non-infringing alternatives meant that HTC could not discharge that burden. On the other hand, the impact on the patent and Nokia was significant and justified an injunction.
If Arnold J's approach is an appropriate one under the Enforcement Directive, then since that also applies in the UPC this is perhaps indicative of what might happen in that court too. In any event, it illustrates a significant difference between an eBay approach and one under the directive: under eBay, the onus is very much on the claimant to establish a need for an injunction. However, at least under the directive-based approach in HTC v Nokia, the burden is very much on a defendant to show that an injunction is disproportionate. If that is right, calls for eBay-like provisions for the UPC seem unlikely to succeed.