Enforcement of UPC decisions

Decisions and orders of the Unified Patent Court (UPC) will usually extend to more than one country. This is clear for decisions relating to Unitary European Patents which will affect all UPC states that are subject to the unitary effect. In the case of non-unitary European Patents, it will depend on where the patent is validated and the patentee’s request for an action, see Article 34 of the UPC Agreement (UPCA). As a matter of principle, UPC decisions or orders will be directly enforceable from their date of service in any Contracting Members State (Article 82.1 UPCA). On the other hand Article 82.3 UPCA and Rule 354.1, 2nd sentence Rules of Procedure (RoP) provide that the enforcement is generally subject to the national enforcement procedures and conditions governed by the law of the Contracting Member State where the enforcement is to take place.

In the following, we will discuss the principles relating to the interaction of the UPC and national courts in the course of enforcement, and point to questions which seem yet to be open. The rules on enforcement are of relevance also to settlement and arbitral awards, as set out in our previous article on UPC arbitration and mediation.

Explicit provisions on enforcement

Article 82 UPCA and Rule 354 RoP set out the general principles for enforcement of UPC decisions and orders:

According to Article 82.1 UPCA, “Decisions and orders of the Court shall be enforceable in any Contracting Member State.” The deciding court shall append an order for the enforcement to the decision itself. Rule 354.1 RoP specifies that the enforceability shall apply from the date of service of the decision or order.

As a matter of principle the entry into enforceability for any decision including preliminary injunctions – unlike in some European jurisdictions – will be an immediate result of the service effected by the Court. For main actions Rule 118.8 RoP provides further details of the enforcement (see below).

The second paragraph of Article 82 UPCA deals with the provision of security for the enforcement of a decision. It states that where appropriate such enforcement “may be subject to the provision of security or an equivalent assurance to ensure compensation for any damage suffered, in particular in the case of injunctions.” Rule 352 RoP sets out further specifics on the provision of a security. If a decision or order requires the rendering of a security for legal costs and other expenses, as well as compensation for any damage potentially resulting from enforcement, any enforcement can only start after the security has been provided. This requirement of providing security before the initiation of enforcement flanks the potential claim for compensation which the defendant may have if, later in an action, a decision or order is varied or revoked (see Rule 354.2 RoP). We already want to point out that neither the UPCA nor the RoP set forth under which circumstances the court will require the rendering of a security and if so how the amount of the security should be calculated. It is left to the Court to find the right balance between the interest of the claimant to be able to enforce a judgement and the defendant to have a security if the judgement was wrong. We think that this assessment cannot be solely dependent on the value of the matter, but requires a fine assessment of the parties’ resources, potential damages for the defendant and the claimant’s exclusivity right.

Article 82 UPCA in its paragraph 3 further provides for the application of the national laws of UPC Contracting Member States to the enforcement insofar as it declares that, without prejudice to the UPCA and the UPC Statute, enforcement procedures shall be governed by the law of the Contracting Member State where the enforcement takes place. As will be analysed further below, this primarily refers to the last stage of enforcement, particularly the collection of payments.

The sanction for non-compliance of a party with the terms of an order of the UPC is set forth in Article 82 paragraph 4 UPCA and Rule 354.3 RoP: A party may be sanctioned with a recurring penalty payable to the Court. The RoP further adds that such a recurring penalty shall be ordered by the first instance panel of the UPC’s division in question, either upon the request of the other party, or of its own motion, Rule 354.4 RoP.

The RoP, in Rule 354.2, first sentence, further adds a provision on compensation for damages incurred through the enforcement of a decision which is later varied or revoked. Following the amendment or revocation of a patent which was found infringed in an enforceable decision or order in concluded proceedings, the court may, upon request of the affected party, order that the decision or order ceases to be enforceable, RoP Rule 354.2, third sentence.

Particular cases of enforcement

Rule 118.8 RoP deals with the enforceability of specific UPC decisions, i.e.

• the payment of damages or compensation (Rule 118.1 RoP), and
• decisions on the merits in infringement proceedings which are taken while a revocation action is pending between the same parties before the central division, or while an opposition is pending before the EPO.

For those scenarios, Rule 118.8 RoP provides that UPC orders shall be enforceable on the defendant only after

• notification of the claimant to the UPC in relation to the extent of planned enforcement,
• provision of a certified translation (if required) of the order into the language of the Contracting Member State in which enforcement shall take place,
• service of notification and translation on the defendant by the UPC registry.

Penalty payments for non-compliance with a UPC decision or order

The sanction for non-compliance with the terms of an enforcement order by the UPC (Article 82.1, second sentence) are recurring (periodic) penalty payments which the first instance division “may” decide, Article 82.4 UPCA, Rule 354.4 RoP. For a permanent injunction the UPCA uses the word “shall” (Article 63.2 UPCA). For non-compliance with preliminary injunctions, Article 62.1 UPCA refers to “may” order recurring penalty payments. The penalty payments are for the benefit of the UPC, Article 82.3 UPCA, Rule 354.3 RoP.

It is not completely clear how the chosen wording “may” is to be understood, in particular in contrast to “shall” for permanent injunctions. For reasons of effective legal protection, we would understand that the Court as a general rule will include provisions for penalty payments in decisions and orders with an enforceable content, similar to a permanent injunction. Orders and decisions without enforceable content will not include provisions on penalty payments. We would assume that also orders and decisions which oblige the debtor to make a certain payment will regularly not include provisions on penalty payments as those are directly enforceable in national procedures.

If the Court does not include provisions on penalty payments in the decision or order, what options does a claimant have? Will he need to appeal the decision or order to correct this aspect? If the claimant failed to request provisions on penalty payments during the proceedings, can he later submit such request to complement the decision, whereas in a case where the Court ruled on a request for penalty payments and did not order them, the decision would need to be appealed? In any case claimants are well advised to include requests for a periodic penalty payment in case of non-compliance.

Even more important is the question whether the UPC has exclusive jurisdiction to determine sanctions in case of non-compliance. As a starting point, the enforcement needs to be carried out within the system provided for by the UPCA which is conclusive in its ambit of application. Article 82.3 of the UPCA leaves room for the national laws of the Contracting Member States insofar as their application is “without prejudice to this Agreement and the Statute”. This underlines that the UPC has the exclusive power conferred by Rule 354.3 RoP. Thus, as a general rule, we would understand that a claimant cannot turn to the national courts to request the setting of penalty payments as part of the enforcement of the UPC’s order or decision.

However, further room for the application of national enforcement rules might exist in relation to EU Member States which have not (yet) entered the UPC system. The UPCA in its Article 89.1 refers to the Brussels Ia Regulation (1215/2012), which in turn declares the UPC to be a court of an EU Member State (Article 71a, paragraph 2a), the decisions of which would thus be treated and enforced in the same way as the decisions of any other EU Member State’s courts.

A further aspect which is not exactly spelled out in the RoP is the level of detail required in the provision on penalty payments in relation to the acts or omissions which are considered to constitute an infringement of an enforcement order and will consequently be punished with a specified amount of penalties for a certain infringement period. A cautious approach should rather have more details included in the (initial) requests. We would expect more directions on this topic in the guidelines for orders prepared by the presidium for the UPC judges. The UPC procedure in this aspect differs from some national practices, notably the Netherlands with the prohibition to infringe the patent stated in the broadest sense, by reciting the statutory provisions and leaving the assessment of an infringement, as well as the setting of a penalty or other enforcement measure, to the enforcement procedure. In our view the UPC system chooses a different approach and requests that the claimant determines in its application the periodic penalty payment it thinks appropriate upfront (which may vary according to the alleged infringing activity taking into account the severeness of the infringement). The UPC system relies on a high level of predictability in relation to the question which actions/omissions are to be considered an infringement of its decision, and which penalties shall result from such infringement.

Setting of penalty payments

If a UPC decision or order includes provisions for periodic penalty payments, and then the defendant fails to comply with the decision or order by disobeying an obligation to act and/or to cease and desist, the first instance panel of the Court’s relevant division can order penalty payments according to the decision. Such an order on penalty payments can be requested by the claimant, or the Court may act of its own motion. It will be interesting to see how strict the court will be in determining the penalty payments. Will it be more like Germany, where the penalties specified in the judgment are merely maximum amounts and an initial violation only leads to the obligation to pay a fraction of this amount, or more like in the Netherlands where the judgment specifies the actual penalty amounts per violation and a first violation can immediately lead to the payment of large sums of penalties.

It will also be interesting to see in which cases the Court might take advantage of its right to act of its own motion. In connection with the immediate enforceability of all court decisions, including preliminary injunctions, upon their service which is effected by the Court without further involvement of the claimant, in view of preliminary injunctions the situation will differ considerably from national situations such as in Germany or the Netherlands where it remains at the claimant’s choice whether to serve a preliminary injunction to the defendant and thereby initiating its enforceability.

In any case, both parties to the penalty proceedings must be heard prior to the order (Rule 354.4 RoP). An appeal of the order is possible in accordance with Rule 220.2 RoP, i.e. the order can either be appealed together with the appeal against the original decision, or if leave for appeal is granted.

The individual penalty shall be proportionate to the importance of the order to be enforced, Article 82.4, second sentence UPCA.

The UPC can only set penalty payments. It has no competence, such as foreseen e.g. in German or Dutch law, to rule on imprisonment of the persons responsible for infringing acts in order to enforce its decisions if penalty payments do not suffice for stopping the infringement.

Another interesting question will be what the UPC requires for compliance with a court decision or order. Will the injunction obligation include the obligation to act in order to undo an infringement, e.g. to instruct a third party intermediate offering infringing articles on platforms? These partially very controversial questions in national practices will certainly also be open for discussion before the UPC. In general, we expect that the UPC will take a rather strict approach in that regard. It nevertheless may be advisable to clarify the actions required from the defendant in the requests filed, subject to the guidelines for orders to be issued.

Enforcement of penalty payments and other monetary claims by the national courts

If the defendant fails to make the penalty payment which was ordered according to Rule 354.4 RoP, the payment obligation regarding the penalty can then be enforced by way of the national courts, following the national rules of enforcement. Also the collection of other monetary claims (especially damages and reimbursement of costs) must be carried out via the national courts and authorities of the respective states following national law.

In Germany, Article II, section 20, first paragraph of the German Act on International Patent Conventions (IntPatÜbkG) states that penalty payments are recovered according to the Judicial Recovery Act (Justizbeitreibungsordnung) which is also applicable to the recovery of payments resulting from national court decisions. The claimant would thus approach the locally competent German first instance court as the enforcement court and request the enforcement of the payment obligation by the measures provided for in the national law, such as seizure of property, bank accounts and claims against third parties.

This procedure is also available in France in front of the enforcement court with territorial jurisdiction, in accordance with the provisions of Articles L.111-2, L. 121-1, R.121-1 and R.121-2 of the French Code of civil enforcement procedures. The court can then order the payment under penalty and use all legally admissible enforcement measures such as seizure of assets, income, property or claims directly against third parties.

In Italy, penalty payments imposed by court orders are recoverable under Articles 474 et seq. Civil Procedure Code, according to the provisions dedicated to enforcement proceedings. Within such proceedings, the territorially competent court may issue seizures of movable or immovable property, shares, income, bank accounts or claims against third parties.

In national proceedings in the Netherlands, forfeited penalties are not payable to the court but to the claimant and are also collected by the claimant if the defendant violated the injunction. If the defendant would not voluntarily pay the penalties, the claimant can directly instruct a bailiff to have an executory attachment levied on the assets of the defendant. It would then be up to the defendant to challenge this in separate court proceedings. The Dutch system currently does not provide for a system like foreseen in the UPC, and which is already in place in Germany, France, Italy and other countries, whereby the enforcement of decisions is carried out by the courts. So until such a system is implemented in the Netherlands, it will remain unclear how penalty payments for violation of a UPC judgment would be recovered in the Netherlands.

Legal measures of protection from enforcement

As the enforcement of UPC decisions is to be carried out by the national courts, the question is how far can a debtor resort to national measures protecting from enforcement. For some cases recourse can be sought in the UPC system.

In the case of a decision by default, which is generally enforceable, the UPC can grant a stay of enforcement until it has decided on an application to set aside the decision by default (Rule 355.4 (a) RoP).

Another case dealt within the UPCA is the situation arising from the patent being modified or revoked after the end of infringement proceedings. In this case, the UPC may order upon request of the defendant that the decision or order ceases to be enforceable, Rule 354.2, 3rd sentence RoP.

Certain conflicts of competence will arise during the transitional period during in which national courts may also revoke national parts of European patents parallel to a UPC infringement procedure. In such a case, will the UPC then rule on a stop of enforceability of its decision for the one country where the patent was revoked by the national court, or can – or must? – the defendant turn to the national courts to stop the enforcement for the one Contracting Member State? If the infringement ruling is in the hands of the UPC, we would conclude that the remedies should be sought in the UPC system (see Rule 354. 3 last sentence RoP). After the end of the transitional period, due to the exclusive competence of the UPC for validity and infringement proceedings, those conflicts of competence will cease to exist.

Will national provisions for protection against enforcement be accessible for situations other than those regulated in the UPCA and RoP? National law provides a whole range of remedies which could become relevant during the last stage of enforcement when the matter is in the hands of the national courts. For reasons of consistency and predictability such remedies should be applied with extreme caution and only considered in scenarios to which the UPCA does not extend. This could be rights of third parties which were not party to the infringement proceedings at the UPC. In other cases protection should be offered within the UPC system.

These and other open questions of enforcement regarding UPC decisions will have to be decided by the courts in the coming years in order to further determine the jurisdictional relationship between the UPC and national courts, as well as the applicable legal regimes.