UPC Court of Appeal confirms long-arm jurisdiction but clarifies limits on its exercise

In a recent decision in Fujifilm v Kodak, the Unified Patent Court (UPC) Court of Appeal has set out a practical framework clarifying how it will exercise its long-arm jurisdiction in relation to cases concerning non-UPC European patents (EPs).

At first instance, Fujifilm brought two infringement actions against three German subsidiaries of Kodak in the Mannheim local division (LD) relating to two EPs for lithographic printing plates (EP'174 and EP'616). 

This appeal relates to the decision concerning EP'174. A second decision from the Court of Appeal on EP'616 is still awaited. EP'174 had been found to be valid and infringed at first instance but the Court of Appeal set aside the injunctive relief ordered at first instance, including the relief extending to the UK. This was a result of the Court of Appeal's assessment on the merits, rather than on the basis that the court lacked jurisdiction over the UK aspect of the dispute. However, the most interesting part of the decision was how the Court of Appeal dealt with its long-arm jurisdiction.

The Court of Appeal has confirmed that the UPC's long-arm jurisdiction is here to stay, noting that none of the UPC Agreement (UPCA), the recast Brussels Regulation (BR) nor the TRIPS Agreement act as a fetter on it. 

However, having jurisdiction and exercising it are different questions: the UPC has now moved from the question of whether it has jurisdiction to how long-arm claims are assessed. Domicile in a UPC contracting state remains a crucial jurisdictional hook for extra-territorial claims and foreign law remains relevant in long-arm litigation.

No doubt this decision will lead to more strategic wrangling in pan-European patent litigation. Claimants will need to decide whether to maintain long-arm claims and consider whether they are able to prove foreign acts, identify the entities responsible for those acts, and address issues of foreign law. Although challenging jurisdiction itself may now be more difficult for defendants, defences remain available, including in relation to attribution and failure to meet national law requirements. Defendants will also need to give early consideration to whether launching national revocation proceedings might be an option to avoid or ameliorate the UPC's long arm.

Accepting jurisdiction

The Court of Appeal acknowledged that the Mannheim LD was correct to decline jurisdiction to decide on the validity of the UK designation of EP'174. This is in line with the Court of Justice of the EU's (CJEU) decision in BSH v Electrolux, which endorsed the consideration of validity of third-state EPs insofar as invalidity is raised as a defence against the infringement claims and only on an inter partes basis.

UPC not territorially limited

The Court of Appeal rejected a territorial limitation argument from Kodak, instead finding that Article 34 of the UPCA does not confine the UPC's jurisdiction to the UPC territory only. This, it maintained, is supported by Articles 71a and 71b of the BR, which establish the UPC as a common court to several member states that has jurisdiction where national courts of a UPC contracting state would have had jurisdiction in a matter governed by the regulation. 

Notably, the court stated that there was no indication that UPC contracting states had intended the UPC to be confined to its territory and therefore it should not have a more limited jurisdiction than that of contracting states' national courts.

The court also pointed to Article 3(c) of the UPCA, which does not expressly limit the UPCA's application to EPs validated in the UPC territory, and Article 24(3) of the UPCA, which allows for the application of national law of non-UPC contracting states, as further supporting the position that the UPC's jurisdiction is not limited to its own territory.

Domicile

The domicile of a defendant in the UPC territory remains a key hook for establishing jurisdiction. In this case, the defendants' domicile in Germany established jurisdiction under Article 4 of the BR. The Court of Appeal stated that the regulation precludes a court seised under Article 4 from declining jurisdiction on the ground that a court of a non-member state would be a more appropriate forum.

The court relied on the CJEU's decision in Owusu, which was endorsed in BSH v Electrolux. Accordingly, the Mannheim LD had correctly applied Article 4 of the BR by accepting jurisdiction to hear the alleged infringement of the UK designation. Accepting jurisdiction on this basis was also deemed not to be contrary to the TRIPS Agreement.

Kodak had argued that the UPC did not have jurisdiction because Fujifilm failed to bring plausible allegations and reliable facts of each defendant carrying out infringing acts in the UK. This argument was rejected. The UPC's jurisdiction was established due to the defendants' domicile in Germany, not the location where the acts occurred. It was not necessary for the court to examine the plausibility of any acts committed in the UK for the purposes of establishing jurisdiction.

In cases where the UPC's long arm is sought to be extended even further – for example, by using an anchor defendant to extend jurisdiction over non-UPC domiciled defendants and extra-territorial acts – further clarity will be needed from the Court of Appeal as to whether the plausibility of those defendants' acts will be relevant.

Exercising jurisdiction

The Court of Appeal reiterated that when a court has jurisdiction to hear an alleged infringement of a non-UPC EP, it must apply both the national law applicable to the patent and international law principles, such as comity (by which courts respect the laws and decisions of other jurisdictions).

Structured framework

The court set out the following structured framework for dealing with validity issues raised in relation to non-UPC, EU or Lugano state designations (EU/LC designations) and/or third-state designations, which it held was "in line with" BSH v Electrolux and international law principles.

Revocation action lodged

1. A revocation action is lodged against either EU/LC designations and/or third-state designations

The court must declare that it lacks jurisdiction to decide the matter.

Infringement action, patent considered invalid in UPC territory

2. An infringement action is brought based on EU/LC designations and/or third-state designations, and the patent in force in the UPC territory is considered invalid, but there would be infringement if the patent was valid

   Firstly, the patentee will be given the opportunity to withdraw the infringement action within "an appropriate period of time".

EU/LC designations

a) If the patentee does not wish to withdraw, and a revocation action is not pending before the relevant national court, the defendant will be given the opportunity to file a revocation action nationally within "an appropriate period of time".

b) If a revocation action has been lodged or is pending, it will generally be appropriate for the court to use its discretion and/or case management powers to stay the infringement proceedings relating to the EU/LC designation until a final decision has been rendered by the national court.

c) If the defendant does not lodge a revocation action within the given time period, the court must assume the patent is valid and decide the infringement action on that basis.

Third-state designations

a) If the patentee does not wish to withdraw the infringement action, the action will be dismissed unless there is a specific reason not to do so – for example, because the claim relating to the extra-territorial part is different and may be considered valid.

Infringement action, patent considered valid and infringed in UPC territory

3. An infringement action based on an EU/LC designation or a third-state EP and the patent in force in the UPC is considered valid and infringed in the UPC territory

EU/LC designations and third-state designations

a) Where appropriate and to avoid undue delay, the court may consider there is a "reasonable, non-negligible possibility" that the patent will be held valid by the relevant national court and issue a decision under the "condition subsequent" that the patent is held to be wholly or partially invalid by the relevant national court.

b) If the national court then holds the patent to be valid, the decision and any order for injunctive relief remain in place with the condition subsequent. If the national decision is final, the injunction would become permanent.

c) If the national court (either at first instance or on appeal) holds the patent to be wholly or partially invalid (to the extent relevant to the infringement) then the condition under which the decision was issued is not fulfilled, and it and any orders for injunctive relief fall away.

d) Under scenario c), the patentee may apply to the UPC for orders consequential on such a decision within two months of the national court's decision, including a request for a stay of the proceedings until a final decision is rendered by the competent national court.

Application of national law

Under both the Rome II Regulation and the UPCA, whether a non-UPC EP is infringed is a matter of national law of the jurisdiction of registration – in this case, the UK. 

The Court of Appeal assessed Fujifilm's claims of infringement by importing into the UK and by joint tortfeasorship (noting that its jurisdiction extends to allegations of joint tortfeasorship). In both cases, the court applied UK law principles and both claims failed on the facts. The Mannheim LD's infringement decision was therefore reversed and the injunctions covering the UK and Germany (which also failed on the merits due to the Court of Appeal holding that a private prior use right existed) were dismissed.

Osborne Clarke comment

This is an important decision in a line of UPC case law tackling the issue of its long-arm jurisdiction. Here, the Court of Appeal confirmed the existence of the long arm and shifted the question from whether the court has jurisdiction to whether and how it should be exercised. The court provided structured clarity on the exercise of long-arm jurisdiction, with its operation constrained by international law principles such as comity.

Although the court noted that its structured approach was consistent with the principle of comity, it did not consider Kodak's submissions on the issue as it had found there was no infringement. In future cases if infringement is found, it may be that the court will have to actively engage with arguments concerning comity and the extent of the constraint it provides in practice.

In some respects, the UPC is seeking to have the best of both worlds: confirming that its long arm is here to stay, while moving questions of its exercise to the realm of claim withdrawal opportunities, court discretion, case management powers and the ability to grant condition subsequent injunctive relief.

Ultimately, UPC-domiciled defendants may still be caught in the UPC's cross-border injunction sights. However, this decision neatly illustrates that establishing jurisdiction does not guarantee success on the merits. Patentees must still prove infringement by the correct defendant entity under the relevant foreign law.

This decision will continue to prompt strategic decision-making from both claimants and defendants in pan-European patent litigation. Claimants will need to decide whether to continue long-arm claims or withdraw within specified periods, and defendants may wish to pursue early national revocation actions in a bid to avoid or lessen the impact of the UPC's long-arm.

In this decision, domicile in the UPC territory was key to establishing jurisdiction, but further clarity will be needed from the Court of Appeal on the limits of its extended long arm where, for example, anchor defendants are used to try to catch defendants domiciled outside the UPC territory.