Fujifilm v Kodak – long-arm jurisdiction of the UPC, or just connecting the dots

This case has created a lot of commotion on LinkedIn, from "BREAKING NEWS" to long essays. But all the UPC have done is apply the old rule that: 

you can sue 
a defendant in the country of their domicile
for infringing activities in several countries

So first, a little background...

This rule was there before the UPC came about. It's the basic rule in the Brussels Regulation (Recast), Article 4(1) and it was confirmed in Owusu¹ and deployed in patent context, e.g. in Solvay:²

1. Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State.

This rule applies to the UPC in the same way it applies to national courts of EU Member States. By virtue of recent amendments to the Brussels Regulation, the UPC is a 'common court' (Article 71a), which has jurisdiction, wherever a court of the Contracting Member State would have jurisdiction in a matter governed by the UPC agreement (Article 71b). So if it was possible to do this before, it is possible to do this now.

However, as with every general rule, there are exceptions. Most pertinently for patent litigation, the Brussels Regulation includes Article 24(4), which provides:

The following courts of a Member State shall have exclusive jurisdiction, regardless of the domicile of the parties:

(4) in proceedings concerned with the registration or validity of patents…, irrespective of whether the issue is raised by way of an action or as a defence, the courts of the Member State in which the deposit or registration has been applied for, has taken place or is under the terms of an instrument of the Union or an international convention deemed to have taken place.

Notably, Article 24(4) does not extend to infringement, even though the Brussels Regulation was amended after the 2006 ruling in GAT³ case to codify the finding that this article should apply "irrespective of whether the issue is raised by way of an action or as a defence". Also, contrary to what some commentators are saying, GAT did not extend the scope of Article 24(4) to infringement either. Consequently, a patentee may bring infringement proceedings in the Member State of the defendant's domicile by reference to Article 4(1) of Brussels Regulation, for infringements of a patent in other Member States.⁴

Nevertheless, the amendment underlined above means that, as soon as validity is raised, the court seised of the infringement proceedings must decline jurisdiction as far as validity of the foreign designation is concerned. However, the matter does not end there - that court is also facing a dilemma of the "should I stay or should I go now" type:

1) Should we stay our infringement proceedings in respect of the foreign designation, pending the outcome of the validity challenge? Note this will only happen if the defendant in fact starts the revocation in the relevant forum, so such a stay should really be conditional on the defendant's filing a revocation action in the country of registration. Or

2) Should we go on with our proceedings and rule on infringement of all designations, but without commenting on validity of foreign designations – and perhaps make the infringement ruling in respect of the foreign designations subject to outcome of the validity challenge?

These are the main options, at least following the first opinion (of the two) of AG Emiliou in BSH Hausgeräte v Electrolux (C-339/22), where we are awaiting judgment. AG Emiliou additionally thinks that whether a stay is granted should depend on seriousness of the invalidity challenge, to prevent 'torpedo' invalidity defences.

For completeness, there were two further options:

The third one was the preferred approach of the UK courts (and for that reason may not be preferred by the CJEU):⁵

3) Should we leave the infringement of foreign designations to the court of the country of registration, since they will be dealing with validity anyway?

The fourth one is, much to the dismay of AG Emiliou, excluded as between EU Member States because of the GAT judgment:

4) Should we just rule on validity as an incidental question to deciding infringement? It's only going to have an inter partes (not erga omnes) effect anyway.⁶

Right, but this article was about the UK…

Yes, what really seems to excite the legal public about the Fujifilm v Kodak judgment, is that the UPC court ruled on infringement of the UK designation, when the UK is not part of the UPC regime.

How dare they.

The UK is no longer part of the EU, and therefore is not bound by the provisions of the Brussels Regulation. Furthermore, the UK is not party to the 2007 Lugano Convention, which is an international treaty that establishes an equivalent regime for jurisdiction and recognition of judgments between the EU countries and Iceland, Norway and Switzerland. The UK applied to join it after Brexit, but its accession was denied by the EU.⁷

Ouch. Which regime then applies as between the courts of the UK and the EU?

The answer is that since nothing has been specifically agreed,⁸ it falls on the courts on each side to decide how they will proceed. This very issue is also being reviewed by the CJEU in BSH and, left to their own devices, it looks like the EU courts might just fall back on the Brussels Regulation.

Wait…What?!

Brussels Regulation is a quid pro quo between the EU Member States. One might think it should not have much effect on third states, but it does establish jurisdiction of the courts of EU Member States by virtue of defendant's domicile. Article 4(1) is clear: if you live here, you are subject to our jurisdiction.

This rule is pretty key: in Owusu, the CJEU told the English court (back when UK was still in the EU) that they cannot apply the common law doctrine of forum non conveniens to decline jurisdiction they would otherwise have under (now) Article 4(1). The only permissible derogations are those set out in the Brussels Regulation, so CJEU.

On that basis, AG Emiliou in BSH is happy that courts of Member States can rule on infringement of third-state patents.⁹ And, in light of the CJEU caselaw, this makes sense.

Let's also not forget that this basic rule in the Brussels regime has allowed the English courts to assert jurisdiction in respect of damages claims (e.g. arising from environmental pollution) occurring in non-EU countries.¹⁰ If it worked for other tortious claims, it should work in the same way for patents, at least for their infringement.

But surely not validity?

Surely not, but the question is how to make it work.

In Owusu, the CJEU said: no derogations from (now) Article 4(1), other than those described in the Regulation. Fortunately, CJEU did not contemplate the question of where the case is closely connected to a third state, as would be the case for patents or rights to real property.

AG Emiliou's opinions in BSH provide two solutions.

The first one is the "reflexive effect theory". The courts of Member States can decline jurisdiction in a case involving a third state, where, had there been a similar situation concerning a Member State, the court seised would have had to relinquish jurisdiction under mandatory jurisdiction provisions in Articles 24 and 25 of the Brussels Regulation.

One might ask: why should the courts of the Member States afford third states, the same treatment they afford to each other? Wouldn't that be a big freebie for the UK after Brexit and not particularly consistent with EU's refusal to let the UK join the Lugano Convention? Not really, because the types of proceedings reflexive effect theory would cover would be limited to those over which Member State courts don't really want to take jurisdiction anyway: validity of patents, rights over real estate, choice of court agreements.

Nevertheless, given that the Brussels Regulation was not really designed for dealings with third states (save for limited rules on lis pendens), a far simpler solution would be to conclude that this is not an area where EU law has been harmonized. This would permit Member States' courts to decide this according to their national rules.¹¹ In fact, this is how AG Emiliou suggests the reflexive theory would work in practice:

In practice, that… would allow those courts to use the powers provided for in their national law (whatever they may be, including those deriving from their rules of private international law) to decline to give judgment.

However, the point of the reflexive theory is that it would only allow a Member State court to do that in cases affecting third states where the Brussels Regulation itself derogates from the basic rules in Article 4(1).

The second solution is ingenious, if implausible. AG Emiliou says: let's just interpret Article 4(1), in light of its context and customary international law, as giving the courts of Member States no jurisdiction to hear and determine actions concerned with registration or validity of third-state patents. There is nothing about this in Article 4(1), but never mind. Again, it seems to be attacking the point that relationships with third states is not an area where EU law has been harmonized, but narrowing the CJEU's judgment to patents and leaving other issues (like rights in rem) for another day.

Either way, it seems safe to say that Member State courts won't adjudicate on validity of third-State patents.

What about when validity arises by way of a defence?

This is where it might get interesting. AG Emiliou is not a fan of GAT, and the CJEU is not bound by this precedent, nor the revised Article 24(4) when it comes to third states – unless they go for the reflexive effect theory. The AG also says "it would not, in principle be contrary to customary international law for the courts of a Member State seised of a claim … concerning the infringement of a third-State patent, to rule on the validity of that patent as a preliminary or incidental question."

It might help to consider that in some EU countries, e.g. Germany (and it seems Sweden too) the infringement and validity proceedings are, by design, bifurcated. Where there is a validity challenge, sometimes the infringement proceedings are stayed. On other occasions, validity is dealt with as a preliminary question on the basis that it serves only to determine infringement, and such ruling has only an inter partes (as opposed to erga omnes) effect.

Wait, this sounds familiar…

Right? It's almost as if the UPC panel in Fujifilm v Kodak read AG Emiliou's opinions, even though they concluded that "in view of the scope of the revocation action [where Kodak did not include the UK designation] the outcome of the pending BSH [case] is not decisive". As they noted elsewhere: "Since revocation [in the UPC action] is not sought for the United Kingdom, there is no situation in which the Court has to decide whether it has jurisdiction to revoke the UK-part of the patent in suit."

The UPC then confidently decided it "has competence to hear the case with respect to the infringement action for the United Kingdom." The result for the UK designation was that it was deemed not infringed by the UPC, on the assumption it was invalid like the German designation. In doing so, it seems the LD Dusseldorf (sort of) followed option (4), which AG Emiliou identified in his first opinion as a historically 'German' approach: they dealt with validity of UK patent as an incidental question to deciding infringement without purporting to invalidate the UK designation as such. From the legal point of view, the UK designation is not affected.¹²

Where does it leave us?

It looks like the UPC might just get away with ruling on infringement of UK patents.

Still, it remains to be seen if Fujifilm v Kodak gets appealed. Or if Fujifilim dares to assert the same patent in the UK in the hope it's valid there. If that happens, it will be interesting to see what the English Court will make of the UPC's judgment on infringement of the UK designation - will it recognize it as res judicata?

Even more thrillingly, if Fujifilm v Kodak stands as is, will the UPC be as bold where they find the patent is valid and infringed? Would that injunction be recognized by UK courts – and if not, is the claimant then restricted to pursuing monetary penalties for non-compliance through the courts of Contracting Member States? Would those courts oblige?

What next?

If you wonder how you could get a UPC infringement ruling covering the UK, or if you are worried about the UPC proceedings affecting your UK market share, please get in touch. There are a few things we can do about it.

Key case references:

Fujifilm v Kodak - UPC Düsseldorf LD (UPC_CFI_355/2023)

BSH Hausgeräte v Electrolux – CJEU (C 339/22)

^{1 Owusu v Jackson, CJEU (C-281/02).}

^{2 Solvay v Honeywell, CJEU (C-616/10).}

^{3 GAT v Luk, CJEU (C 4/03).}

^{4 First AG opinion in BSH paragraph 30.} 

^{5 First AG opinion in BSH, paragraph 37. Use of Latin serves a purpose, please read on.} 

^6 Ibid.

^{7 Ensuring Efficient Cooperation with the UK in civil law matters.}

^{8 Following the end of the Brexit transitional period, whether or not the grand-mother of the Brussels Regulation, the Brussels Convention 1968, could be revived, was a hotly debated topic. There were reports that at least the UK Government considered itself not bound by it, which prompted criticism from the legal commentators by reference to the Vienna Convention on the interpretation of international treaties. However, it seems the EU considers it was replaced by subsequent Brussels Regulations and is specifically excluded by UK Brexit legislation so everyone seems to agree the Brussels Convention no longer applies (Ensuring Efficient Cooperation with the UK in civil law matters).}

^{9 AG's second opinion in BSH, paragraphs 6 and 12.}

^{10 e.g. Vedanta Resources v Lungowe [2019] UKSC 20 and Obkabi v Royal Dutch Shell [2021] UKSC 3.}

^{11 One could envisage a distinction between treatment of foreign patents and European Patents. While preferential treatment can't be inferred in relation to the former, the latter states have consented to patents for their countries to be evaluated by the European Patent Office. In this context, the arguments along the lines of: an invalidity action is essentially asking the court if the 'relevant State authority' 'did its job' correctly, ring a bit hollow, as the 'relevant State authority' really is the EPO. Nevertheless, as the Brussels Regulation proceeds on the basis that grant of a patent is still a sovereign decision of the relevant Member State, it is even more the case for third states, bound by EPC or not. So that is a dead end.}

^{12 Consistent with the first AG opinion in BSH, paragraph 62.}