Keeping up with Dutch patent litigation: Half-year case law review 2020

Finding it difficult to keep up with an ever-changing world in the midst of a health, environmental, social and political crisis, while keeping up with patent law?  Do not worry, the IPKat is doing a series of half-yearly "catch-ups" of the main European patent law jurisdictions before we all start a new "school year".  In this post, the Kat's friends at Brinkhof in the Netherlands in the form of Barbara Mooij and Alexander de Leeuw report on the first half of this year's patent cases in the Netherlands.  Over to Barbara and Alexander:

The Dutch Kat takes a needed break
away from her laptop

"In this roundup of Dutch patent litigation, we provide a breakdown of some of the most noticeable patent cases of the Dutch courts from January – June 2020. As a preliminary point, delays caused by the global pandemic also found its way to the Dutch courts. The delays caused by COVID-19 have led to a slight decrease in case law. However, the courts are doing their best to make up for any delays and we expect significantly more case law over the next months. The courts also had to improvise and experiment with oral hearings via video-conference, which have by now become standard practice and which these authors find worthy of a compliment.

Highlighted cases include an elucidation of the balance of interests in preliminary injunction proceedings based on a SEP as well as a Supreme Court-decision on the central limitation of a European patent pending national proceedings. Before going into that, below is a brief introduction of upcoming changes with regard to compensation of litigation costs in patent proceedings.

#1:  Compensation of litigation costs - goodbye full compensation

Based on the EU IP Enforcement Directive the winning party in patent litigation in The Netherlands is entitled to compensation by the losing party of its reasonable and proportionate litigation costs. This was always hotly debated pending proceedings (what’s more fun than picking through the other side’s cost specification, right?) and the Dutch courts tended to grant all of the costs claimed unless they were extraordinarily high or otherwise unreasonable. However, as of 1 September 2020 this practice will change with the upcoming “indicative litigation costs”. These guidelines provide fee-caps for compensation that can be awarded in different types of proceedings.

The guidelines are intended to make litigation more predictable and to allow parties to assess at an early stage the potential cost-risk involved in patent litigation. With the new rules, proceedings are divided into four categories (simple, regular, complex, and highly complex) and each is awarded a maximum amount available for compensation. Looking at recent cases, the fee-caps are relatively low compared to what is usually claimed. Hence, the authors cannot help but wonder whether the increasing height of claims for compensation also played a role in the development of these new rules.

The different categories are (there is no distinction between PI proceedings and merits proceedings at the court of appeal):

Case type	First instance PI proceedings	First instance merits proceedings	Appeal proceedings
Simple	€ 10.000	€ 30.000	€ 30.000
Regular	€ 40.000	€ 75.000	€ 75.000
Complex	€ 80.000	€ 150.000	€ 150.000
Highly complex	€ 120.000	€ 250.000	€ 250.000

So what then is a simple or a complex case? This depends on the scope of the relevant fact-matrix, the basis of the claims, the scope of the defence, the number of relevant exhibits, the financial importance of the case, and the number of lawyers and patent attorneys working on the case. In general, proceedings in the field of mechanical engineering will be classified as “regular” and proceedings in the field of pharmaceuticals as “complex”. As an example of “highly complex” proceedings, telecommunications litigation with many defences (such as FRAND) is mentioned. The guidelines mention that a case with a financial interest below € 100.000 will in principle be considered a simple case. Interestingly, the guidelines emphasize that the nature of the technology at heart of the case is not decisive, and that the classification can change from first instance to appeal.

Amounts going beyond the fee-caps mentioned above can still be awarded for compensation, but this will only occur in special cases on the basis of the specific characteristics of the case. It is also still possible for the parties to agree on the costs to be compensated (also going beyond the fee-caps) and such an agreement will, in principle, be accepted by the court. In that case filing a cost specification is also not necessary.

Will this impact your pending proceedings? The new rules will be applicable to all patent litigation pending at the courts as of 1 September 2020. Hence, it not only applies to proceedings initiated after 1 September 2020! However, cases in which on 1 September 2020 the court has already set a date for a decision will not be affected, considering that parties would then not be able to debate how the new rules should apply.

#2: Balance of interests in SEP preliminary injunction proceedings and FRAND defence

Sisvel / Xiaomi, Court of Appeal of The Hague 17 March 2020 (Judges Blok, Bonneur and Kamperman Sanders) [Dutch decision here]

Dutch preliminary relief proceedings are effectively a mini-trial on the merits in which both infringement and validity (serious chance of invalidity in merits or opposition proceedings) is debated. Apart from these substantive and often technical topics, Dutch courts also look at the balance of interests in deciding whether or not to grant preliminary relief. In a dynamic FRAND case between Sisvel and Xiaomi, the Court of Appeal of The Hague (“CoA”) elaborates on this latter aspect of preliminary injunction proceedings.

Sisvel is the owner of a standard essential patent related to a so-called EGPRS-system, which is used in the GSM telecommunication standard. Sisvel made an ETSI declaration that it will grant licenses under FRAND conditions in respect of the patent at issue. Xiaomi is a manufacturer and supplier of mobile phones, and had entered the Dutch market with its products. In preliminary relief proceedings Sisvel requested a PI against Xiaomi. This PI was rejected by the District Court of The Hague. Sisvel appealed this decision.

The CoA focussed on the balance of interests and held that, on the one hand, courts must assess the extent of the damages incurred if a PI is not issued, and, on the other hand, take into account the provisional nature of the decision and the potential far-reaching consequences of a PI. In this case, any damages on the side of Sisvel would solely be of a financial nature (i.e. lost license fees) and could be estimated relatively easily ex post facto. For Xiaomi, however, the consequences of a granted PI would be much greater since Xiaomi was still in the process of building up its market position. Xiaomi faced lost profits and damaged customer relations. According to the CoA, these potentially irreversible consequences demand caution in the granting of a PI. It seems as if this consideration has broad applicability in FRAND cases, as the potential damages for the claimant will almost always be lost license fees and therefore financial in nature.

Ultimately, the CoA confirmed the District Court decision rejecting the PI. The CoA ruled that the case was too complex for preliminary relief proceedings, because of the relatively complex technology and Xiaomi’s FRAND defence. Based on this reasoning obtaining a PI based on a standard essential patent will be more difficult, as the technology will often be complex and usually a FRAND defence is put forward. Additionally, the CoA determined that Sisvel’s interest were sufficiently accommodated as Xiaomi had provided a guarantee for the payment of any license fees by means of an escrow agreement. Hence, when facing a request for a PI it seems advisable to provide a guarantee, as this could tip the balance of interests in favour of rejecting the PI.

In parallel to this procedure, Sisvel invoked the same patent against BBK, OPPO and Wiko in proceedings on the merits (see summary below). In those proceedings the District Court revoked the patent for lack of inventive step. In the case on the merits against Xiaomi following this preliminary procedure, Sisvel relied on a different standard essential patent relating to a different standard.

Sisvel / BBK, OPPO and Wiko, District Court of The Hague 27 May 2020 (Judges Kokke, Brinkman and De Vries) [Dutch decision here]

In a case concerning the same standard essential patent, Sisvel claimed an injunction against OPPO and Wiko based on infringement of the Dutch part of the patent. Just like Xiaomi, OPPO and Wiko are both manufacturers and suppliers of mobile phones, and had entered the Dutch market with their products. OPPO and Wiko put forward two types of defences: technical and non-technical. The technical defence consisted of claiming there is no infringement, and that the patent is null and void for lack of novelty and inventive step. The non-technical defence included a FRAND defence.

The District Court extensively deliberated the technical defences, and ruled that claim 1 and 4 of the patent – on which the infringement claim was based – were not inventive. Since these claims were ruled null and void, the Court did not consider the FRAND defence. At the time of writing this overview the appeal-term was still pending.

#3:  Balance of interest in access proceedings
The Free University of Brussels and Ablynx / QVQ, District Court of Central-Netherlands 21 January 2020 (Judge Bus) [Dutch decision here]

Evidentiary seizures have become fairly common in the Netherlands. However, a seizure does not give immediate access to seized evidence. This requires separate inter partes proceedings, so-called access proceedings. In a case between the Free University of Brussels and Ablynx and QVQ, the District Court of Central-Netherlands provided guidance on the balance of interests in such access proceedings.

The Free University of Brussels is the proprietor of a patent family regarding heavy chain antibodies, the so-called Hamers patents. Ablynx is a biopharmaceutical company and has a license to the exploitation of the Hamers patents. QVQ is a company involved in the development of heavy chain antibodies. The Free University of Brussels alleged that QVQ infringed its Hamers patents, and intended to claim damages and/or relief in the form of a moratorium to remedy the damage to Ablynx's market position in follow-up proceedings. A moratorium claim is a temporary injunction, and an alternative form of damages intended to prevent an infringer from unlawfully obtaining market share and thereby compensating any damage. A moratorium can be an appropriate form of compensation when a patent has lapsed. In order to (further) substantiate their claims of infringement, damages and the moratorium in a future case on the merits, the Free University of Brussels and Ablynx conducted an evidentiary seizure under QVQ at the end of 2019.

The District Court denied access to the seized evidence as the interests of QVQ outweighed those of the claimant. QVQ’s interests in protecting confidential business information (i.e. proprietary information, know-how, experience and expertise relating to the use of the heavy chain antibodies) and other defences outweighed the University’s interests in obtaining access in preliminary proceedings. In this respect, the District Court considered that the Free University of Brussels had an insufficient interest to obtain access because the court preliminarily found (i) that Ablynx’s claims are barred by the statute of limitation, and (ii) that the chance of success of the moratorium in future merits proceedings was small. The District Court therefore dismissed the claims of the Free University of Brussels and Ablynx.

With regards to the moratorium claim, the Free University of Brussels put forward that it lost royalty income because QVQ acted without an appropriate sublicense. The District Court considered that QVQ does not put products on the market itself, and therefore failed to see why a moratorium to avoid competitive advantage was an appropriate form of compensation under these circumstances. The Court noted that a moratorium is a very unusual type of relief that can quickly become a disproportionate form of compensation. From this it seems that the likelihood of a moratorium being granted is not so high.

#4:  Proceedings at the Dutch Supreme Court: central limitation and pemetrexed

High Point / KPN, Supreme Court 14 February 2020 (Judges Streefkerk, Polak, Du Perron, Wattendorff, and Lock) [Dutch decision here].

The first half of 2020 of Dutch patent case law also includes a remarkable decision of the Dutch Supreme Court in a case between High Point and KPN. These parties have been litigating for many years now, and the latest decision focuses on what to do if a patent is centrally limited pending appeal proceedings.

High Point is the patent holder of a European patent relating to a “wireless access telephone-to-telephone network”, which was enforced against Dutch telecommunications provider KPN and its UMTS network. The District Court annulled the Dutch part of the patent as granted. High Point appealed the decision and, after auxiliary requests that were filed after the grounds of appeal were rejected for procedural reasons (which also went to the Supreme Court), High Point centrally limited the patent at the EPO. A central limitation has retroactive effect and thus the patent as granted should be deemed to never have existed. Accordingly, High Point argued that the CoA was obliged to focus the proceedings on the centrally limited patent. The CoA disagreed because it held that High Point's reliance on this central limitation was contrary to the overriding principles of due process and confirmed the lower instance decision that the patent was invalid. High Point appealed to the Supreme Court.

One of High Point's grounds for appeal was that its patent in the limited form had now been annulled without a substantive assessment of the validity. The Supreme Court rejects this ground, in essence because the annulment by the District Court was limited to the patent in the unamended form and did not also constitute an annulment of the centrally limited patent. Even though the patentee, High Point, lost the proceedings – as a result of which the decision in which its (unamended) patent was annulled becomes res judicata – the Supreme Court left open the possibility for new proceedings based on the patent in its centrally limited form, because this has not been part of previous litigation (see par. 3.5.2):

“Par. 3.5.2. […] It does not follow from all this – contrary to what the ground assumes – that the District Court or the Court of Appeal has annulled the patent in the limited form on the basis of a substantive assessment. The fact that High Point cannot rely on the patent in the limited form in these proceedings is therefore not the result of a substantive assessment and annulment of that patent, but merely results from the procedural course of this case, in particular the time at which High Point invoked the central limitation of the patent. This does not affect the fact that both High Point and KPN are in principle free to assess the validity of the patent in its limited form in new proceedings. Therefore, the ground cannot lead to cassation.”

#5:  Fresenius / Eli Lilly, Supreme Court 12 June 2020 (Judges Numann, Snijders, Kroeze, Sieburgh and Lock) [Dutch decision here]

The Supreme Court issued a decision in the Dutch pemetrexed case between Fresenius and Eli Lilly. In 2017, Eli Lilly initiated preliminary relief proceedings against Fresenius in the Netherlands. The District Court of The Hague issued a PI against Fresenius based on infringement of Eli Lilly’s patent for pemetrexed. This decision was confirmed by the CoA in 2018. Fresenius appealed this decision in preliminary proceedings to the Supreme Court.

In the appeal to the Supreme Court, the Advocate General Van Peursum concluded that the grounds for cassation (appeal) should be dismissed [Dutch conclusion of 13 March 2020 here] because the grounds relate to the ruling on the scope of protection of the patent, and to a large extent concern the factual assessment of how the skilled person would interpret the claimed salt in the patent. According to settled case law in the Netherlands, this assessment is reserved for the CoA as a court that rules on the facts. The Supreme Court followed the conclusion of the AG, and dismissed Fresenius’ complaints. The Supreme Court is not required to state the reasons for its decision as there are no questions of importance for the unity or development of the law, and hence the decision is very short.

Meanwhile in proceedings on the merits, the District Court ruled in favour of Fresenius. See for a comprehensive report on that decision of the District Court: Eli Lilly v Fresenius Kabi: a decision far from equivalent to what has been decided before. Appeal is currently pending and up for a decision (which as postponed several times).

#6:  Auxiliary requests

Biolitec / Tobrix, District Court of The Hague 15 April 2020 (Judges Bus, Bierling and De Vries) [Dutch decision here]

In a case between Biolitec and Tobrix, the District Court of The Hague considered the allowability of auxiliary requests in Dutch patent litigation. In this case, the District Court seems to take an approach to auxiliary requests which is more in line with the practice of the EPO.

Biolitec develops and produces medical laser systems and optical fibres, and holds a European Patent for a “laser ablation device for treating veins”. Tobrix operates a wholesale business in medical equipment and produces two types of radial (optical) fibres. Biolitec started an infringement suit against Tobrix, who in counterclaim claimed the nullity of the patent. Biolitec subsequently invoked ten auxiliary requests in its statement of answer in counterclaim.

In an interlocutory decision, the District Court annulled the patent, as well as auxiliary requests 1 and 2 for lack of inventive step [Dutch decision of 23 October 2019 here]. The District Court postponed the discussion on the other auxiliary requests to allow parties to further substantiate their arguments. In the final decision reported here, the District Court annuled the dependent claims of the patent as granted, annulled the remaining auxiliary requests and denies the injunction. Biolitec also put forward an alternative argument that, in case that claim 1 of the auxiliary requests was not upheld, the validity of the dependent claims of the auxiliary requests needs to be assessed. However, the District Court decided that there was no reason to accept this, because it essentially amounted to an additional auxiliary request (combining dependent claims with claim 1) for which there was no place at this late stage of the proceedings. Hence, it is advisable to consider the appropriate fallback positions early in the proceedings and simply relying on dependent claims in an already filed auxiliary request could get you into trouble procedurally.

#7:  Infringement

Novartis / Teva, District Court of The Hague 2 June 2020 (Judge Brinkman) [Dutch decision here]

In a case between the two pharmaceutical companies Novartis and Teva about liability for facilitating patent infringement by making available a market authorization, the District Court elaborated on the transfer of the market authorisation at issue after the issuance of a notification for PI proceedings regarding that marketing authorisation. The timing of the transfer suggests that it took place to frustrate legal proceedings, which could render the transfer null and void.

In the beginning of 2018, the Austrian company Ratiopharm transferred the Austrian marketing authorisation for a generic everolimus product to Teva in the Netherlands. Ratiopharm is the Austrian entity of the Teva-group. At this point, Teva was the holder of the marketing authorisation and Ratiopharm was the holder of the pharmaceutical authorisation. After Novartis announced PI proceedings against market authorisation holder Teva, it transferred the marketing authorisation back to Ratiopharm. Teva explained that the initial transfer (from Ratiopharm to Teva) was an internal mistake, and that Teva’s company policy actually sets out that the marketing authorisations and pharmaceutical authorisations concerning a specific generic product should always be kept by the same Teva-entity. This policy was substantiated with an internal memo written by the Dutch lawyers of Teva.

The District Court accepted that the transfer was an internal mistake, and added that – even if it was not a mistake – Teva was (still) at liberty to arrange its legal affairs in such a way that they correspond to its company policy. Novartis also admitted, after the Judge's inquiries, that putting the authorisations in another's hand is in itself admissible. The Court determined that the transfer of the marketing authorisation to Ratiopharm was not solely motivated by the initiating of PI proceedings, or to frustrate further legal proceedings by Novartis, since it was based on internal policy. Therefore, the District Court ruled that transfer was valid. A marketing authorisation may thus be transferred at any stage – also in the face of legal proceedings – as long as this is not merely to frustrate further proceedings, but, for example, for compliance with the internal policy of the company. The threshold for what constitutes an internal policy seems to be relatively low (i.e. it can be an internal memo written by the company’s lawyers).