Does a “Launch At Risk” Automatically Exclude the Right to Appropriate Compensation for a Wrongfully-Issued Preliminary Injunction?

A wrongfully-issued preliminary injunction (PI) is a case where a PI is given, only to be later revoked, typically because the underlying right turns out to be invalid or not infringed. The latest referral to the European Court of Justice (C-688/17, opinion of AG Pitruzzella available here in French) under the Enforcement Directive (2004/48/EC) addresses the intriguing question of whether a “launch at risk” (i.e. the commercialization of a product without first suing for cancellation of any relevant patents prior to market entry) should exclude any compensation in the event that a PI is wrongly issued. 

Lunch at risk

The Case

Per a request by Bayer, the Metropolitan Court of Budapest (Fővárosi Törvényszék) ordered defendants Richter Gedeon (RG) and Exeltis to cease and desist from distributing a contraceptive drug containing a combination of ethinylestradiol and drospirenone. The court issued preliminary injunctions against both defendants. After 57 and 52 days, respectively, the PI was lifted on appeal and the underlying Hungarian patent was eventually declared invalid. RG and Exeltis are now suing Bayer for the loss suffered as a result of the wrongful PI.
Bayer disputes any obligation to pay damages, in particular by referring to the fact that RG and Exeltis have launched their products at risk, i.e. without clearing the way first by suing for the cancellation of Bayer’s patent. Bayer thus argues that RG and Exeltis are responsible for the loss they have suffered, referring to provisions of Hungarian law that exclude damages if the aggrieved party failed to “act as a reasonable person in the same circumstances would have”. 

The Questions Referred to the Court of Justice

The Metropolitan Court of Budapest has referred two questions to the EU Court of Justice. The first question relates to whether Art. 9(7) of the Enforcement Directive merely guarantees the principle of appropriate compensation, leaving the conditions and amount of the compensation to the Member States, or does the Directive already provide for the conditions and rules for the calculation of such compensation. The second question relates to whether it is acceptable for a Member State to exclude any damages to a party aggrieved by a wrongfully-issued PI, if such party has not acted in conformity with “what can generally be expected of a reasonable person in the same circumstances”. 

A Directive is a Directive

AG Pitruzzella suggests answering the first question by confirming that the Enforcement Directive only sets forth the principle of “appropriate compensation” for wrongfully-issued preliminary injunctions, but leaves to each Member State the rules of substantive law on the conditions and calculation. The AG adds, however, that such national rules must ensure that the aggrieved party can indeed obtain compensation. At the same time, national rules should not discourage IP right holders from requesting a preliminary injunction in the first place. 

Launching At Risk Should Not Exclude Appropriate Compensation

The second question relates to whether it is acceptable under the Enforcement Directive to exclude any kind of compensation, should the party aggrieved by the wrongfully-issued PI fail to “clear the way” (request the cancellation of relevant patent rights of third parties) prior to the commercial launch.
Based on the wording and the goals of the Enforcement Directive, the AG strongly argues that such a strict rule would not be compatible with the Directive. First, Art. 9(7) of the Enforcement Directive explicitly mentions the case where “it is subsequently found that there has been no infringement”. The invalidity of the relevant IP right is necessarily found “subsequently”, i.e. after the preliminary injunction has already gone into effect. The provision also explicitly covers compensation “for any injury” caused by the wrongfully-issued PI, thereby not excluding any particular categories of injury from compensation claims.
Second, the Enforcement Directive intends to balance two objectives: the protection of the interests of right holders and the preservation of legitimate trade against unjustified obstacles. If the defendant could simply point to the formal existence of its right at the time the PI was issued to avoid liability for a wrongfully-issued PI, neither of these objectives would be served. Neither an IP right (that was invalidated and so longer exists), nor legitimate trade, would be protected by such a rule.
Third, holding that the alleged infringer must either “clear the way” or lose its claim to an adequate compensation for a wrongfully-issued PI, would substantially lower the risk of resorting to preliminary injunctions and thus encourage abusive PI requests. 

The Fővárosi Törvényszék in Budapest

Wrongfully-issued preliminary injunctions force parties to deal with the fact that court orders are enforceable even when, retrospectively, they turn out to be unjustified. As pointed out by the Hungarian courts, because the liability foreseen by Art. 9(7) Enforcement Directive does not relate to liability for “unlawful acts”, general tort law does not necessarily provide the right tools to deal with the loss caused by the compliance with the injunction.
The question before the CJEU can be understood as asking whether the general principle that one cannot claim damages for a loss caused by one's own behavior is applicable to liability for a wrongfully-issued PI. In the view of this Kat, the AG is correct to answer this question in the negative. The opposite answer would lead to excluding compensation in the vast majority of cases for a wrongfully-issued PI.
Perhaps the more interesting question is whether the “launch at risk” can be taken into account as a factor to lower the compensation awarded to the aggrieved party (by considering that a launch at risk constitutes some form of “contributory negligence”). The AG explicitly leaves this door open by stating that--
such conduct may nevertheless be taken into account by the national court, together with other relevant circumstances - such as, for example, the characteristics of the patent and the market - when determining the compensation to be awarded to the defendant, which, in accordance with Article 3 of that Directive, must be effective, fair and equitable.
It will be interesting to see whether the CJEU will follow the AG on this last issue or it will prefer leaving this question unanswered (it was not asked to rule on it by the Hungarian court). 

Right picture by V.Mariann provided under CC BY-SA 3.0
Does a “Launch At Risk” Automatically Exclude the Right to Appropriate Compensation for a Wrongfully-Issued Preliminary Injunction? Does a “Launch At Risk” Automatically Exclude the Right to Appropriate Compensation for a Wrongfully-Issued Preliminary Injunction? Reviewed by Peter Ling on Monday, May 13, 2019 Rating: 5

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