What is the standard for preliminary injunctions before the UPC?

The AmeriKat may not be the first before the UPC,
but she is first for big eyes and cute smiles

The AmeriKat has been enjoying the almost constant stream of Unified Patent Court (UPC) posts on LinkedIn.  After the self-proclaimed heralds of being "the first" to do something in the UPC died down, more substantive content began to filter to the top as cases began their early hearings and the UPC started issuing decisions.  One of those was the 10X Genomics v Nanostring case.  The IPKat's Dutch Lion Friend, Léon Dijkman (HOYNG ROKH MONEGIER) brings readers up to date.

Over to Léon:

"When the Unified Patent Court (UPC) Munich local division handed down its decision in 10X Genomics v Nanostring a little while ago, patent aficionado’s on LinkedIn and other platforms were quick to declare it a historical moment. This is less of an exaggeration than it first seems: the first-ever injunction decision by the brand new pan-European patent court is surely noteworthy. The decision is available on the UPC’s website [here], though only in German.  [Merpel says, "If you want to attract global litigants to a new pan-European Court, not having English language translations of the first decisions is probably not the best start (nerdy comments re the UPC language rules need not apply)."].

Background to the case

The patent in suit [here] discloses methods for detecting multiple analytes in a biological sample. Defendant NanoString offers a variety of platforms for gene expression analysis, i.e., technology that allows for the mapping of genes, proteins and DNA-sequences in biological material. The patentee, 10X Genomics brought suit against NasnoString's CosMX SMI product, a machine that according to NanoString “enables rapid quantification and visualization of up to 1,000 RNA and 64 validated protein analyses” [see here].

After setting forth the parties’ arguments and addressing preliminary issues, the UPC's Munich local division decision – starting from page 48 – analyses and ultimately provisionally affirms the patent’s validity. Next, at page 71, the local division provisionally found that Nanostring’s products infringe the patent. While these parts of the decision are certainly of interest, they are not further addressed in this post.

As of page 84, the local division interprets and applies the provisions of Chapter 3 of the UPC’s Rules of Procedure [here] relevant to the grant of a preliminary injunction. This post is focused on this latter part of the local division’s decision.

The requirements for the grant of a preliminary injunction: urgency and irreparable harm

Article 62(1) UPC Agreement [here] grants the UPC the authority to order injunctions “on a provisional basis” (hereafter PIs). Rule 206 outlines the requirements that an application for provisional measures must satisfy among which, notes the local division, is that it must state “the reasons why provisional measures are necessary to prevent a threatened infringement” (section 2(c)). The local division interpreted this to mean that the mere likelihood of infringement of a valid patent is insufficient for the grant of a PI. Instead, the Munich local division held that patentees must satisfy a two-fold necessity requirement to qualify for provisional relief:

1. There must be an urgency to grant the relief, since Rule 209(2) states that, in examining the application for provisional measures, the UPC shall “in particular take into account” the “urgency of the action” (under (b)), while the UPC shall also “have regard to any unreasonable delays in seeking provisional measures” (Rule 211(4)); and
2. There must be threatened harm to the patentee that must be avoided through the injunction, since Rule 211(3) lists harm to either party as a factor “in particular” to be considered when deciding on the grant of provisional measures.

The local division found that both conditions were satisfied. As to the urgency requirement under (1), the UPC found that it was satisfied because the patentee filed its motion for a PI at the “earliest possible time” (at 85).

This was notwithstanding the fact that the patent-in-suit’s parent application could be – and had been – enforced in national courts prior to 1 June 2023, when the UPC Agreement entered into force. According to the local division, enforcement measures before national courts are not equivalent to those before the UPC so the former’s availability does not take away the urgency to have a PI granted by the UPC. In other words, whether the patentee “unreasonably delayed” its PI application before the UPC is to be evaluated from 1 June 2023 at the earliest, where no equivalent measures were available under national patents.

As to the harm requirement under (2), the local division found that NanoString’s market entry would cause the patentee “significant, particularly long-lasting harm” that would not be possible to undo (at 88). What is interesting to note here is that the local division’s analysis of the harm threatened to the patentee is fairly sophisticated and covers several indicators that U.S. and U.K. courts commonly apply when assessing “irreparable harm”.

Thus, the local division considered the relative novelty of the patented technology; the patentee’s capacity to make a profit despite the infringer’s market presence (e.g., price depression); the likelihood that customers, once lost to the infringer, would be unlikely to switch back easily to the patentee’s product (e.g., market erosion); and the relevant products’ long life cycle.

The balance of interests according to Article 62(2) UPCA

According to Article 62(2) UPCA, the UPC has the discretion to “weigh up the interests of the parties and in particular to take into account the potential harm for either of the parties resulting from the granting or the refusal of the injunction”.

It is not entirely clear from its decision how the local division embeds this requirement into the overall test for the grant of a PI: the decision’s wording in Part VIII, which is separately dedicated to the balance of interests, suggests it is a mandatory step before a PI can be granted. Plausibly, the test as a whole boils down to a requirement for the patentee to demonstrate (i) urgency and (ii) an interest in the grant of a PI that outweighs the infringer’s interest in its denial.

The local division expressly acknowledged the latter to be the case in that in this case the parties’ interests were in a sense mirrored: just as the patentee would suffer irreparable harm from the infringer’s market entry, the infringer would likely suffer a long-term setback if it were excluded from the market in a critical growth phase.

On balance, the local division found the patentee’s interest more compelling (at 90), all the more so because it found that there was a high likelihood the patent was valid and infringed (98).It therefore seems that the higher the likelihood of infringement of a valid patent, the easier it would be for the patentee to prevail on the balance of interests.  This is despite the fact that the before this decision the Rules suggested that there would not be a quasi-validity assessment.  In fact, a second PI decision between the same two parties – decided on 10 October and apparently not published yet on the UPC’s website – seems to have turned primarily on the local division’s view that the patent was not valid or infringed. Consequently, that PI request was rejected.

The decision contains a fairly elaborate analysis on the infringer’s allegation that it is entitled to a license to the patented technology, based on either (a) US or EU competition law or (b) the implied promise such a license would be granted.

As for (a), the local division found that dominance within the meaning of Article 102 Treaty on the Functioning of the EU had not been shown and was unlikely to exist, given that alternative technologies existed (at 94). Already for this reason, NanoString’s argument that the patent covered a “de facto” standard could not succeed.

As for (b), the local division analysed an agreement between the U.S. National  Institutes of Health and the patentee to which NanoString was purportedly a third-party beneficiary. Following a prior decision by the U.S. District Court for the District of Delaware, the local division rejected this argument and held NanoString’s position is not analogous to that of implementers of standard-essential technology, falling within the ambit of the European Court of Justice’s ruling in C-170/13 Huawei Technologies. The local division robustly dismissed an expert statement submitted by NanoString, raising doubts about the expert’s independence and objectivity and even about the possibility more generally of establishing a legal position through expert evidence.  

Is there room for a proportionality assessment before the UPC?

The local division did not separately apply what is commonly known in the literature as the proportionality test in European patent law, but it addressed circumstances commonly debated in this literature as part of the balance of interests assessment. 

NanoString had argued that the patent covered “a completely subordinate part of a bigger, complex product” (at 99). It is notable that the local division seriously considered this argument, though it ultimately found it could not succeed because:

1. NanoString had apparently failed to substantiate how the patented invention related to its overall product, i.e. that it was in fact a “subordinate part”;
2. NanoString had also failed to substantiate the value, independent inventive merits, etc. of the other, non-patented elements of its product that would nevertheless be affected by the injunction; and
3. Nanostring had failed to show that it had no non-infringing alternatives at its disposal.

Furthermore, the local division held that the patentee’s status as a non-practicing entity was immaterial for its entitlement to an injunction; and that in this case harm to third parties was unlikely to materialize given the alternatives available for the infringing products.

Thus, the local division found there was no ground to deny the PI. But its elaborate consideration of the infringers’ interests, and its apparent willingness to consider proportionality arguments when component patents are enforced, are worth noting.

The search for a suitable legal framework to apply the principle of proportionality is not new, but has gained new urgency as the UPC has opened its door. I hope not to offend the reader if I refer them to my proposal for such a framework, in Chapter 6 of my forthcoming book, which – for a good start – appears entirely consistent with the local division’s approach in the PI context.  ["And," chimes Merpel for a final retort, "it is in English."]