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17 September 2019Big PharmaSarah Morgan

CJEU hands down Bayer damages decision

The Court of Justice of the European Union (CJEU) last week issued its decision in a case concerning whether a ‘launch at risk’ bars compensation for a wrongfully issued preliminary injunction.

On Thursday, September 12, the CJEU concluded that article 9(7) of the IP Rights Enforcement Directive (which gives the authority to order compensation for any injury caused by provisional measures that have been revoked) doesn’t preclude national rules which prohibit compensation where the defendant has failed to comply with the obligation to avoid or reduce harm.

However, according to the court, the national rules must also allow the judge to take account of the circumstances of the case, including the conduct of the parties.

Case background

Pharmaceutical companies Richter and Exeltis began marketing their contraceptive products in 2010, the same year that Bayer obtained its patent (EU number 22,72,07), which covers a pharmaceutical product containing a contraceptive active substance.

In November 2010, Bayer asked the referring court, the Budapest Capital Court (Fővárosi Törvényszék), to prohibit Richter and Exeltis from placing the products on the market. This request was rejected, with the court finding that the plausibility of infringement hadn’t been demonstrated.

Soon after, Richter and Exeltis asked the Hungarian Intellectual Property Office for the revocation of Bayer’s patent.

The following May, Bayer lodged new applications for interim measures before the national court and then brought infringement proceedings against Richter and Exeltis. While waiting for a final decision to be reached on the validity of Bayer’s patent, the national court prohibited Richter and Exeltis from selling their products in the interim.

In 2014, Bayer’s patent was found to be invalid. Subsequently, Richter and Exeltis requested that Bayer be ordered to pay compensation for the damage which they suffered as a result of the provisional measures.

According to Richter and Exeltis, the national provisions should be interpreted in the light of article 9(7) of the Enforcement Directive, so they would be entitled to compensation.

In response, Bayer argued that, because the defendants had “intentionally and unlawfully introduced counterfeit goods into the market long before the patent was annulled”, they were not entitled to compensation under the Hungarian rules.

The Budapest Capital Court then referred the case to the CJEU. It asked the CJEU whether it is up to the individual EU member state to define its own rules where an entity (Richter and Exeltis) asks to be compensated for damages caused by provisional measures of patent litigation when the patent was subsequently invalidated.

Richter and Exeltis argued that the national provisions should be interpreted in light of article 9(7) of the Enforcement Directive, so they would be entitled to compensation.

‘Appropriate compensation’

Last week, the CJEU concluded that article 9(7) sets out the principle of “appropriate compensation” in the case of unjustified preliminary injunctions, but that member states can set out the specific conditions and methods for the calculation of compensation and even deny compensation where the defendant has failed to act to minimise damages in a way that would be generally expected.

However, this makes the whole system of security under article 7(2) of the Enforcement Directive, whereby member states must ensure that the applicant lodges adequate security to ensure compensation for any prejudice suffered by the defendant, “needless”, said Zsófia Lendvai, head of IP at Baker & McKenzie in Hungary.

If member states can put rules in place to deny compensation, then a security for compensation is not required.

Lendvai added: “Therefore it is not really clear how the court come up with this conclusion (especially when you compare it with the advocate general’s (AG) opinion).”

In April 2019, the AG said that it is for each member state to determine the law governing a party’s right to compensation for damage “suffered as a result of the adoption of provisional measures” to prohibit the sale of a particular product.

While AG Pitruzzella said that member states must decide the rules of substantive law on the conditions and calculation, he also added that national rules must ensure that the aggrieved party can obtain compensation.

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More on this story

Big Pharma
11 April 2019   An advocate general has advised the Court of Justice of the European Union on damages in a case between Bayer and pharmaceutical companies Richter and Exeltis.

More on this story

Big Pharma
11 April 2019   An advocate general has advised the Court of Justice of the European Union on damages in a case between Bayer and pharmaceutical companies Richter and Exeltis.