Grand Chamber of the CJEU hears a cross-border patent dispute

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Grand Chamber of the CJEU hears a cross-border patent dispute

04 June 2024

This article is a follow-up to the hearing conducted before the Grand Chamber of the Court of Justice of the European Union (CJEU) in the BSH Hausgeräte/Electrolux case (Câ€‘339/22) of 14 May 2024. An earlier hearing in this case was conducted on 22 June 2023 before the Fourth Chamber of the CJEU. At the request of the Fourth Chamber, the case was referred to the Grand Chamber. In this article, we will discuss some of the issues that have been raised during the hearing of 14 May 2024.

The referring questions originate from a Swedish action in which patent holder BSH brought an action claiming damages for patent infringement against Electrolux not only on the basis of parts of a European patent validated in EU Member States, but also on the basis of a part validated in a non-EU Member State (Turkey). Electrolux challenges the validity before the Swedish court of all these foreign parts. The referring Swedish Court has decided to stay the proceedings and has referred several questions to the CJEU. We have previously reported on the opinion of Attorney General (AG) Emiliou in this case (available here).

The order of 16 April 2024

By order of 16 April 2024, the CJEU invited the parties to concentrate their pleadings before the Grand Chamber on the third preliminary question as quoted below and to respond, at the hearing, to six specific questions set out in the annex to that order. The order, including the questions, can be found through the following link. The third preliminary question reads as follows:

“Is Article 24(4) of the [Brussels I bis Regulation] to be interpreted as being applicable to a court of a third [State], that is to say, in the present case, as also conferring exclusive jurisdiction on a court in [Turkey] in respect of the part of the European patent which has been validated there?”

Article 24(4) of the Brussels I bis Regulation [1] provides, briefly put, that "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 States in which registration of the patent has been applied for or has taken place "shall have exclusive jurisdiction". With its third question, the referring court wonders whether Article 24(4) is also applicable to a court of a third state, i.e., whether in the present proceedings it confers exclusive jurisdiction on the Turkish courts to consider the validity of the Turkish patent. We will discuss the arguments raised with respect to this question below.

Interestingly, the Grand Chamber has not invited the parties to plead on the other preliminary questions (questions 1 and 2) by the referring court with respect to the interpretation of Article 24(4) in respect of patents validated in Member States. Therefore, apart from the hearing before the Fourth Chamber on 22 June 2023, the Grand Chamber does not consider it necessary to hold a further hearing on this issue. This could mean that the Grand Chamber is convinced by the opinion of the AG, who opines regarding these questions – briefly put – that Article 24(4) should be construed narrowly, meaning that if the alleged infringer raises an invalidity defence with respect to a patent in another Member State, the court seized does not lose competence to hear and determine the infringement action. However, since the CJEU judgment in GAT/LuK has been codified in the (recast) Article 24(4), this rule of exclusive jurisdiction also applies to a validity defence (which AG Emiliou calls an “unfortunate decision”).

AG Emiliou therefore proposes “practical guidelines for national courts” in case an invalidity defence is raised with respect to a foreign patent validated in another Member State. A solution would be to stay the proceedings until the validity of the patent at issue has been determined by the court of the state of registration. AG Emiliou however notes that such stay should only be granted if it is proportionate and fair to do so, and those delays are ‘warranted’. A court should thus assess the seriousness of the invalidity challenge first, to limit ‘the possibility of infringers raising spurious defences as dilatory tactics’. Further, when the invalidity defence is serious enough, the court should set a deadline to bring invalidity proceedings in the state of registration before it grants a stay if such proceedings are not already pending. Moreover, AG Emiliou notes that for the duration of the stay, nothing prevents the courts from ordering provisional measures including, importantly, a preliminary injunction on the basis of foreign patents. We refer to our earlier report on the opinion of the AG explaining these practical guidelines further.

The hearing of 14 May 2024

The French Government (‘FG”) and the European Commission (“EC”) argued, in short, that pursuant to Article 4(1) the courts of the Member State where the defendant is domiciled would have jurisdiction to rule on the (damages) claim for infringement of a patent validated in a non-EU Member State. Within the context of ruling on this infringement claim, the court may consider an invalidity defence for this foreign patent. The court would even be bound to determine the case, save in some limited circumstances.

Electrolux argued that courts should exercise their powers in accordance with the principle of international ‘comity’. Courts should respect the sovereign rights and interests of third states. In view thereof, it argued that while Article 24(4) does not apply directly with respect to the issue of the validity of the Turkish patent, that provision may have ‘reflexive effect’ on the jurisdiction of the Swedish court on such issue. The Swedish court would therefore have to decline jurisdiction to rule on the (damages claim for infringement of the) Turkish patent.

Electrolux inter alia referred to the Amicus Curiae Brief of the EC in a case before the US Supreme Court (No. 21-1043), wherein the EC argued that there should be no exterritorial application of US Law to EU trademarks. One could however ask whether this is completely relevant for the case at hand since it mainly relates to applicable law issues. Indeed, also according to the position of the FG and the EC according to which a competent court may consider the validity a third state patent (e.g. Turkey), this court would have to consider the legal framework of this third state (e.g. Turkish law).

The FG and the EC argue that the ‘reflexive effect’ in respect of third states cannot be accepted. They argue that the general rules apply in disputes having connections with third states. The courts of the Member State where the defendant is domiciled are competent to hear such a dispute, under Article 4(1). This would inter alia be supported by the CJEU in Opinion 1/03 on the New Lugano Convention [2]. According to the FG and the EC, Article 24(4) would be specifically limited to EU Member States. Nothing in the wording would suggest that this article could take away jurisdiction of a court that is competent on the basis of Article 4(1) to consider the validity of a third state patent. It is inter alia observed that the ‘reflexive effect’ of Article 24(4) was not implemented when the (recast) Regulation came into force in 2012. However, it would be clear from the relevant travaux préparatoires that the EU legislature was aware of the issue surrounding the application of the Brussels regime to ‘external’ situations [3]. If the EU legislature would have favoured ‘reflexive effect’, it would have implemented it back then.

According to the FG and the EC, the courts competent on the basis of Article 4, have no discretion to decline jurisdiction on the basis of ‘reflexive effect’. Only in the specific circumstances of Articles 33 and 34 courts may stay proceedings in view of third state issues, i.e. only in the case of concurrent proceedings in third-state courts and only where the dispute was already pending before the latter when the Member State courts were seized. However, in view of the latter timing requirement, the court’s discretion to stay the proceedings on the basis of Articles 33 and 34 will likely not happen often.

The EC further noted that it agreed with point 62 of the opinion of AG Emiliou, in which the AG noted that where a court is seized with an infringement claim on the basis of a foreign patent and the invalidity of this foreign patent is raised by way of a defence a court will not encroach on the sovereignty of the third state when it considers the validity of this foreign patent in deciding on the infringement claim. According to the AG, the consequence that may ensue is the court dismissing the infringement claim. However such a ruling is concerned with the private interests of the litigants and, accordingly, generally has inter partes effects only. The EC however suggests that insofar the court’s decision would not only produce inter partes effects, e.g. decisions having an effect on the administration of the third state, then this cannot be accepted in view of the sovereignty of the third state.

Conclusion

It's clear from the hearing on 14 May that the French government and the European Commission support the position of the patent holder (BSH). In essence, they are in favour of cross-border patent enforcement before national EU courts, in particular also regarding patents validated in "third states" (i.e. non-EU Member States). AG Emiliou will now write an updated opinion on the basis of the 14 May hearing. The target date for this new opinion will be 11 July 2024. We eagerly await this updated opinion.

Authored by Gertjan Kuipers, Ruud van der Velden, and Stefan Dusault.