Long-arm jurisdiction: how remedies can extend to non-UPC states
Published on 7th Feb 2023
UPC jurisdiction may be broader than it first appeared but questions remain about its reach over third-state defendants
Beyond the usual jurisdiction rules applicable to the Unified Patent Court (UPC), the recast Brussels Regulation makes provision for so called "long-arm jurisdiction". This means that the UPC is able to impose provisional, including protective, measures (such as preliminary injunctions) as well as damages relating to infringement of Unitary Patents (UPs) and non-opted out European Patents (EPs) on certain defendants located outside of the EU.
Users of the European patent system should be aware of the implications of the UPC's long-arm jurisdiction so it can be used or avoided as required. Unfortunately, however, questions about its exact scope remain and clarity is unlikely to be provided until the UPC is up and running.
These questions of scope are likely to be a particular focus in the coming months as the much-anticipated UPC is expected to become operational on 1 June 2023. Potential defendants located outside of the EU should be aware of the UPC's potentially expansive powers to grant provisional measures against them.
General rule for defendants domiciled in a third state
As per article 6(1) of the recast Brussels Regulation, the general rule for a defendant domiciled in a third state outside of the EU is that jurisdiction is ascertained according to rules of national law. This is subject to certain exceptions, the most relevant here being the exclusive jurisdiction of a state to determine patent validity for patents registered or designated there.
However, this general rule is not appropriate in the context of the UPC because the core purpose of the UPC project is to move away from applying the national jurisdiction laws of participating states to a central, unified, system. In order to accommodate this, article 71b(2) of the recast Brussels Regulation provides that, for actions in the UPC, where the defendant is not domiciled in the EU then chapter II of the regulation (which would normally only apply to parties domiciled in an EU Member State) applies as appropriate regardless of domicile.
This means that the UPC has jurisdiction over defendants domiciled outside of the EU in certain cases:
- Where patent infringement takes in territories covered by the UPC (article 7(2)).
- Disputes arising out of the operations of a branch, agency or other establishment (article 7(5)).
- Disputes concerning multiple defendants and a close connection (article 8(1)).
- Counterclaims arising from the same facts (article 8(3)).
Interestingly, article 71b(2) also provides that the UPC can grant provisional measures (including preliminary injunctions) with respect to such third-state domiciled defendants, even if the courts of a third state have jurisdiction as to the substance of the matter.
There has been much debate about the scope of this provision, which appears to suggest that the UPC would be able to grant provisional measures in respect of behaviour occurring in other EPC contracting states outside of the EU and Lugano area. This could result in cross-border preliminary injunctions being issued by the UPC against defendants domiciled in non-EU and non-Lugano EPC countries such as the UK or Turkey. Could this present the UPC as a one-stop shop for preliminary injunctions in Europe?
The exact scope of the UPC's jurisdiction and the extent to which the court will exercise its discretion to make use of any such discretion are presently unclear – and are unlikely to be clarified until the UPC starts hearing cases. If the UPC does begin to order provisional measures in countries such as the UK, applications for protective measures such as anti-suit injunctions appear bound to follow.
In addition to the above extension of the UPC's jurisdiction, article 71b(3) provides that: "where [the UPC] has jurisdiction over a defendant under [article 71b(2)] in a dispute relating to an infringement of a European patent giving rise to damage within the Union, that court may also exercise jurisdiction in relation to damage arising outside the Union from such an infringement".
This power is subject to the qualification that such jurisdiction can only be established if the defendant has property located in any state participating the UPC system and the dispute has a "sufficient connection" to that participating state.
The precise scope of the jurisdiction conferred by article 71b(3) has also been subject to debate. If this provision simply to operates to enable a claimant to claim damages suffered outside of the EU but caused by an act of infringement within a UPC Contracting Member State, it is unlikely to be controversial.
An alternative interpretation, however, is that this long-arm jurisdiction would also apply to infringement – and not just damage – that occurs outside of the EU. This interpretation appears to be supported by the travaux préparatoires concerning the amendment to the regulation that introduced article 71b(3). If that is so, might the UPC seek to rule on infringement of a UK patent, under English law and decide upon the damages that flow from that infringement?
Once again, it is uncertain at this stage how the UPC's jurisdiction under article 71b(3) will operate. Even if it has the power to rule on infringement of non-EU/non-Lugano EPs, that jurisdiction is expressed to be discretionary, and UPC judges may decline to rely on it for reasons of international comity. If the UPC does take an expansive approach to the long-arm jurisdiction, protective measures from the courts of non-participating states are likely to follow.
Regardless of the debate about its scope, it is clear that this provision is applicable only where the dispute relates to infringement of an EP that does give rise to damage within the EU. It is also clear that the defendant must have property located in one of the UPC participating states. These limitations may provide a potential escape route from the grasp of the UPC's long arm in some cases.
However, it is unclear whether the property requirement includes both tangible and intangible property. Although article 71b(3) does not shed further light on the nature of the property needed to establish jurisdiction, recital 7 to Regulation 542/2014 (which amended the recast Brussels Regulation to include the UPC) states that the UPC should have "regard to the value of the property in question", that it "should not be insignificant", and it should "make it possible to enforce the judgment, at least in part". It will be interesting to see how this is interpreted in practice.
The provision also notes that the dispute must have a "sufficient connection" to the state where the property is located. Recital 7 to Regulation 542/2014 again gives some more (non-exhaustive) insight into what this might mean. It states that a sufficient connection might be because the claimant is domiciled there or evidence relating to the dispute is located there. It is unclear at this stage what other factors might be taken into consideration. Again, it will be interesting to see how this plays out in practice.
Notably, defendants domiciled in Lugano Convention states will not be subject to the UPC's long-arm jurisdiction as provisions equivalent to article 71b(2) and (3) have not been included in the convention. The position of defendants domiciled in Switzerland, Norway and Iceland is principally similar to that of defendants domiciled in EU member states that are not participating in the UPC system.
Osborne Clarke comment
The UPC's long-arm jurisdiction is an extension of the more limited scope that was initially perceived for the UPC. However, clarity on the exact scope is needed. Elements of the long-arm jurisdiction are discretionary and, therefore, it remains to be seen how they might be exercised by the UPC.
On the one hand, the UPC might wish to position itself as the "go to" court, especially if it makes expansive use of its long-arm jurisdiction to become a one-stop shop for preliminary injunctions. However, on the other hand, such an expansive interpretation might lead to retaliative protective measures, such as anti-suit injunctions, from non-participating states. It might also encourage third states to test the limits of their own jurisdictional rules.
The UPC's long-arm jurisdiction with respect to damages could be a useful additional tool for patentees and exclusive licensees, helping to streamline the process of bringing multi-jurisdictional infringement proceedings.
Conversely, potential defendants domiciled in third states will need to consider the location and quantity of their assets in UPC participating countries. It is possible that the desire to avoid the UPC's jurisdiction might position countries such as the UK as important centres for locating assets such as production and research facilities.
The next article in this series will look at jurisdictional issues that might arise during the UPC's transitional period, including exploring whether to exercise the option to opt out of the UPC's jurisdiction.
This article is the second in our series on the jurisdictional issues relating to the UPC, including international rules and issues arising out of the transitional period, including the opt out option.