Can SEPs be enforced in PI proceedings at the UPC?

Since its entry into force, the UPC has now conducted multiple PI proceedings, and the first two cases in 10x Genomics vs. Nanostring before the Munich local division suggest that the UPC assumes a wide room for its assessment and discretion in PI proceedings. Could the UPC’s approach be so liberal that we may even start seeing the enforcement of Standard Essential Patents (SEPs) through PI proceedings? In this article, we explore this question, first taking a brief look at the prevailing opinions toward PI proceedings in key UPC member states and the UK, as the Rules of Procedure are also influenced by UK common law.

The Current State of SEP Enforcement in Europe

At present, enforcing SEPs in PI proceedings seems to be a challenging endeavour across Europe. Countries like Germany and France generally consider these disputes too complex for ordering preliminary legal remedies. In addition, German courts set high standards for the prima facie validity of the patent, even after the ECJ’s Phoenix Contact v Harting decision. In contrast, England focuses on unquantifiable damage pending the main trial, balance of interests and maintaining the status quo. As the main remedy sought is royalties under a FRAND licence, there are no unquantifiable damages. Further, SEP disputes often relate to products already on the market, and the normal outcome would be to allow these products to remain available. In Italy, there have been multiple attempts, and PI’s have been rejected for various reasons, including reasons similar to those that would be held relevant in the UK. The Court of Rome in 2011 held that a PI application should be denied because the damage to the SEP holder did not meet the requirements of urgency (as it was quantifiable).

The Netherlands generally stands out as one of the more liberal jurisdictions in Europe concerning patent disputes in PI proceedings, but even there it currently seems impossible to enforce SEPs in PI proceedings. About a decade ago the Dutch courts had no issues with dealing with SEP claims in PI proceedings, but in recent years the doors have been shut. In Sisvel vs Xiaomi in 2019, 2020, Dutch courts held that it could not deal with the enforcement of one of Sisvel’s SEPs in PI proceedings, citing the complexity of the case, irreversible consequences for Xiaomi, and the fact that Xiaomi had posted a security bond. Even in instances where non-FRAND behaviour had been established in parallel main proceedings in Germany, as in Nokia vs Oppo, the Dutch court considered the case unfit for PI proceedings due to its complex nature.

Given these considerations, the two recent rulings of the UPC Munich local division in 10x Genomics vs. NanoString provide a new perspective. Its views on urgency and the appropriateness of summary proceedings seem to significantly differ from the national courts across Europe, raising the question: could SEPs, in fact, be enforced in PI proceedings at the UPC?

Background and Context of the first PI proceedings in 10x Genomics vs. NanoString

10x Genomics had sued NanoString on the first day the UPC opened its doors for infringement on a Unitary Patent that had just been granted and requested provisional measures. The broader dispute between the two companies had been ongoing for some time, and a previous injunction had already been granted in Germany in favour of 10x Genomics for infringement of another patent by NanoString.

On Urgency: Timing of the Proceedings

Except in a few rare countries such as France, one of the key elements in awarding an injunction in PI proceedings across Europe is the concept of “urgency”. That also applies to the UPC. According to the relevant rules, the UPC must have regard to any unreasonable delay in seeking provisional measures. In this case, 10x Genomics appeared to be aware of the infringing activities by NanoString already for some time, at least since 2022, while 10x Genomics only filed their UPC action on June 1, 2023. However, the Munich local division placed significant weight on the fact that 10x Genomics could not have initiated these proceedings earlier since the unitary patent in suit could not have been asserted before the UPC opened its doors. According to the Munich local division, there was thus no delay in filing the application.

This is a point of interest for SEP holders with large patent portfolios with pending patent applications. Unitary patents can often be granted relatively quickly, making swift action in summary proceedings a viable option. Another perspective that could be adopted by the court in a FRAND context would be that enforcement was not possible earlier because the FRAND framework inherently requires that parties first resolve the issue through negotiations and can only proceed to enforcement when dealing with an unwilling licensee.

Validity of the Patent: Preponderance of Probability

As a further requirement for a PI measure to be granted, the UPC rules stipulate that the court may require the applicant to provide reasonable evidence to satisfy the court with a “sufficient degree of certainty” that the patent in question is valid. The rules provide no further guidance on what “sufficient degree of certainty” means. The decision between 10x Genomics and NanoString provides guidance on how the Munich local division interprets this. It said that a probability close to certainty cannot be demanded, but that a “preponderance of probability” is needed. According to the Munich local division, this means that it must be more probable that the patent is valid than that it is invalid. Moreover, and in contrast to German practice prior to the ECJ’s Phoenix decision, the Munich local division ruled that this is not necessary that the validity of the patent has been tested in inter partes proceedings. This could benefit SEP holders wanting to act in summary proceedings, since the bar of validity appears to be set lower in the UPC than in some national courts such as in Germany.

UPC’s Consideration: Complexity and Financial Damage

As indicated above, an argument that SEP holders often face in national PI proceedings is that the case is too complex to be handled in such proceedings. A FRAND defence by the alleged infringer typically involves complicated issues such as antitrust law, defences that a licence already exists, applicable law, and economic valuations. Although no SEP was at stake, similar complex issues were addressed by the court in the 10x Genomics versus NanoString case. As part of their defence, NanoString brought up US law, antitrust law and a licence defence. These subjects were all addressed by the Munich local division, explicitly noting in the judgment that the UPC should be suitable to deal with cases where issues of that kind are involved in proceedings for provisional measures.

Another argument that pops up in national litigation when implementers have been accused of SEP infringement, is that a PI should be denied because any damage to a SEP holder, often in the case of a non-practising entity (NPE), is only of a financial nature. A similar argument was also brought by NanoString against the patent holder, which is President and Fellows of Harvard College. The Munich local division however indicated that financial damage can also justify an injunction. This offers SEP holders an additional incentive for acting against alleged infringers in PI proceedings.

Second PI proceedings between 10x Genomics vs. NanoString

In the second PI proceedings between 10x Genomics and NanoString, again at the Munich local division of the UPC, 10x Genomics invoked a standard European patent without Unitary effect. This time, the claim was dismissed. However, what was interesting to see is that the Munich local division again gave its judgment on all points in dispute. This seems to be because it believes that all relevant factors should be weighed in the balance when deciding whether to issue an injunction, but it could also have to do with arrangements within the UPC that the Court of Appeal wants the court of first instance to do so. Be that as it may, this is currently not the case in many European countries. In England, it does happen, due to the way appeals work, but in countries like Germany, France, and the Netherlands, it does not. There, in principle, you only get a judgment on the point that led to the dismissal.

Views of Judge Kalden

Judge Kalden is a central figure in FRAND case law and presides over the second panel of the Court of Appeal at the UPC. She has been instrumental in shifting the focus in FRAND disputes towards the willingness of the implementer, through her landmark rulings in the Netherlands in cases like Philips v. Wiko and Philips v. Asus. This approach was later also adopted in Germany by the German Supreme Court in Sisvel / Haier I and II. Notably, Judge Kalden recently hinted at a pre-UPC seminar that the UPC may be open to granting PIs in SEP cases. These were, of course, her own personal views and not those of the UPC.

Conclusion

The first PI decision of the UPC Munich local division in the dispute between 10x Genomics and NanoString suggests that the UPC provides room for granting an injunction in summary proceedings involving SEPs. With considerations on urgency, the validity of the patent, and the potential for issuing PIs in complex cases, this ruling may open up new possibilities (with accompanying challenges) for SEP holders and their legal teams.

While this ruling is not about SEPs, not binding on other UPC divisions and still appealable, it does offer an interesting precedent and insight into how the UPC might handle SEP cases in PI proceedings. This potentially reshapes the legal landscape surrounding SEPs, with implications for all parties involved.

It is now a matter of waiting to see whether the Court of Appeal follows the suggested approach, and if so which SEP patent holder will try this first at the UPC. It could significantly expedite dispute resolution with an implementer, but if the claims are rejected then it would have been a costly exercise, especially since proceedings on the merits at the UPC also progress relatively quickly (but may still take a year longer than PI proceedings). On the other hand, both PI decisions in 10x Genomics v. Nanostring, may show that the UPC always weighs in the balance all relevant factors before reaching a final conclusion. In other words, it seems to be giving a preliminary view on all relevant issues. So even if a PI in a SEP case were to be denied (e.g. based on a weighing of interests), it would be worthwhile for both parties to hear the preliminary views of the UPC on validity, infringement and a possible FRAND defence. That too could get a stalled negotiation back on track.