UPC Court of Appeal provides further guidance on its long-arm jurisdiction over non-UPC designations

The UPC Court of Appeal has delivered its first detailed guidance on how the UPC will handle infringement claims based on non-UPC designations. The decision establishes a structured framework for when the UPC will accept and how it will exercise extra-territorial jurisdiction. Patent holders and defendant group companies operating across European borders should take careful note of the guidance provided in this decision.

Background

Fujifilm Corporation is the registered proprietor of European patent EP 3 511 174 (the “EP”) concerning lithographic printing plate precursors. Lithographic printing is a technique that transfers text or images from a plate onto another material such as paper. The EP addresses the problem of unintended discoloration in plate precursors, which can occur when chemical components infiltrate an anodized film on an aluminum support and cause part of the aluminum to dissolve. The EP remains in force in Germany and the UK.

Fujifilm brought proceedings before the UPC’s Mannheim Local Division (Mannheim LD) alleging that three German-domiciled Kodak defendants had infringed both the German and UK designations of the EP. The Mannheim LD accepted jurisdiction, found infringement of both the German and UK designations, and granted injunctions covering both territories. Kodak appealed these decisions.

Court of Appeal guidance on jurisdiction

Ultimately, the Court of Appeal set aside the Mannheim LD's decisions and dismissed Fujifilm's infringement claims for both designations. This article focuses on the crucial jurisdictional analysis, which has far-reaching implications for future cases. The Court of Appeal applied the same jurisdictional analysis in a parallel dispute between the same parties but relating to another patent.

The Court of Appeal separated the assessment of jurisdiction into two steps:

Step 1: Accepting jurisdiction—does the UPC have the power to hear the case?

Kodak challenged the UPC's international jurisdiction over the UK designation of the EP, but the Court of Appeal rejected all four of its arguments, ruling as follows:

1. Article 34 UPCA does not confine UPC jurisdiction to the UPC territory. That provision clarifies that the UPC’s decisions will, as a rule, cover the territory of all contracting member states where the EP has effect, but it does not limit the court's competence.
2. The UPC is treated as a “common court” under Article 71a of the Brussels I bis Regulation (“Brussels”) so it may exercise the same jurisdiction as the national courts of its contracting member states. Jurisdiction over the Kodak entities stemmed from their domicile in Germany under Article 4 Brussels, not from the location of the alleged infringing acts.
3. Article 4 Brussels precludes the UPC from declining jurisdiction on forum non conveniens grounds—the regime applies even when a non-member state court might be more appropriate.
4. The UPC accepting jurisdiction is not contrary to the TRIPS Agreement and does not undermine the proper enforcement of IP rights.

The Court of Appeal also emphasized that patent validity is a matter to consider when deciding the substance of the infringement, not when establishing jurisdiction. Similarly, the question of whether it is more appropriate for e.g. the UK court to apply UK law on damages and consider matters of public policy, should not be considered when determining whether jurisdiction exists.

Step 2: Exercising jurisdiction—the framework—under what conditions will the UPC decide on infringement?

The Court of Appeal set out a detailed framework for exercising any jurisdiction that it has accepted, when validity of the foreign designation of the EP is in dispute, building on the CJEU’s ruling in BSH v. Electrolux. Once the UPC has accepted jurisdiction under step 1, and the defendant raises invalidity as a defense, the Court of Appeal distinguishes between:

• EU/Lugano designations (e.g. Spain): Article 24(4) Brussels grants exclusive jurisdiction over validity to the courts of the state of registration. The UPC therefore cannot rule on validity but retains jurisdiction over infringement.
• Non-EU/non-Lugano designations (e.g. the UK): Article 24(4) Brussels does not apply so the UPC, after accepting jurisdiction based on domicile (Article 4 Brussels), may only consider validity inter partes in order to decide whether relief for infringement should be granted without taking a decision that affects the validity of the non-EU designation. The principle of comity applies in this context.

The Court then outlined three possible scenarios:

1. Revocation action lodged with UPC for non-UPC designation

The UPC must declare that it lacks jurisdiction to decide a stand-alone revocation of a non-UPC designation. This is a clear boundary: the UPC can consider infringement of non-UPC designations, but it cannot entertain standalone revocation actions for those designations.

2. Patent invalid in UPC territory but would be infringed if valid

The question here is what the UPC should do with the infringement claim based on foreign designations of the EP, e.g. the UK designation, when faced with a validity challenge. In this situation, the UPC will first offer the patentee an opportunity to withdraw the claim for infringement of the foreign designations. If the patentee does not withdraw, the UPC distinguishes between the two types of foreign designation:

• EU/Lugano designations: the defendant is given time to file a revocation action in the competent national court (because the UPC should not decide the validity). If this happens, the UPC infringement proceedings are stayed until the national validity proceedings are concluded. If no revocation action is filed within the time frame, the UPC should assume the foreign designation of the patent is valid and decide infringement on that basis. 
• Non-EU/non-Lugano designations (e.g. the UK): the UPC should dismiss the infringement claim unless there are specific reasons not to do so. An example is where the claims of the extra-territorial designation are different and may be considered valid, in which case scenario 3 below applies (as if the patent were valid and infringed in UPC territory).

Accordingly, if the UPC part of the EP is invalid, the patentee is under pressure to drop the extra-territorial claims. If it does not, the UPC will either send validity to the relevant national court in EU/Lugano cases or dismiss the claim for non-EU/non-Lugano countries such as the UK. 

3. Patent valid and infringed in UPC territory

In this scenario, where the defendant raises an invalidity defense for  the foreign designation of the patent, the Court of Appeal specifies what the UPC should do. Where there is a reasonable, non-negligible possibility that the patent will be held valid by the competent national court, the UPC may, to avoid undue delay, proceed to issue an infringement decision (or preliminary injunction) covering the foreign designation. Crucially, however, that decision must be conditional upon no subsequent invalidity finding by the relevant national court for the foreign designation of the patent. The purpose is to avoid conflicting decisions: if the UPC were to find both the UPC and foreign designations of the patent infringed, but the competent national court later decides (at first instance or on appeal) that the foreign designation of the patent is invalid, the UPC's infringement finding relating to that foreign designation falls away.

If, however, the national court confirms the validity of the foreign designation, the UPC’s infringement finding and any preliminary injunction in respect of the foreign patent are confirmed and, if the decision is final, the injunction becomes permanent. For EU/Lugano countries this conditionality flows from the fact that the competent national court has exclusive jurisdiction over validity, whereas for non-EU, non-Lugano countries (e.g. the UK), this flows from the principle of comity, meaning the UPC respects the role of the foreign national court to decide the status of its own patents.

Outcome in this case

The Court of Appeal confirmed that the Mannheim LD had correctly accepted jurisdiction over the UK infringement claim. It also confirmed that the UPC (German) part of the EP (as amended by Fujifilm) was valid and would have been infringed if Kodak did not have the benefit of a private prior use defense under German law. Kodak’s counterclaim for revocation of the UK designation had been filed conditionally and, because the condition was not fulfilled, the Court of Appeal did not rule on the validity of the UK designation. In any event, the Mannheim LD had only ever considered validity as a defense to the infringement claim, not as a free-standing issue. The Court of Appeal ultimately found no infringement of the UK designation under UK law.

Key takeaways

• Jurisdiction is only half the battle: infringement must still be pleaded and proven. The key point is that the UPC may have jurisdiction over, for example, a UK infringement claim, but that is only the starting point. The harder question is how cautiously the UPC should exercise that jurisdiction, particularly where foreign-law issues arise. Even with jurisdiction established, the claim stands or falls on its merits under the applicable foreign law. The present case illustrates the point precisely: the UK claim failed not on jurisdiction or validity, but on the facts. For patentees, the lesson is clear. The UPC’s expanded reach is no substitute for a properly evidenced infringement case, one that is built and proven in each target territory.
• Domicile-based jurisdiction is difficult to challenge. Where a defendant is domiciled in a UPC contracting member state, the UPC will accept jurisdiction and forum non conveniens arguments will not succeed. The UPC may hear the action, even for infringing acts occur outside UPC territory, because jurisdiction is established by domicile, not by the location of the alleged acts.
• Extra-territorial reach is now a reality. Patent holders can obtain injunctions at the UPC covering non-UPC designations, including UK patents, even when validity of the foreign designation has not been finally determined. This significantly broadens the UPC's practical significance for multinational disputes.
• Comity constrains but does not prevent the exercise of jurisdiction. The UPC will apply international law principles, including comity, when exercising jurisdiction over foreign designations. Defendants retain the safeguard of national revocation proceedings.
• Patentees should assess EP vulnerability. If the UPC-designation of an EP appears weak, extra-territorial claims become exposed and patentees’ risk having their foreign claims dismissed or facing national revocation actions. Conversely, where the UPC part of an EP is valid and infringed, the UPC will likely issue a conditional decision that the foreign designation of the patent is valid and infringed.