By Dr Michael Wallinger
Report on the Decision of the Paris Central Chamber of 13 November 2023 UPC_CFI_255/2023
Details of the proceedings: Preliminary objection in relation to the admissibility of the action for revocation
Applicant and Patent Owner: Edwards Lifesciences Corporation, California, USA,
Respondent and Claimant in revocation proceedings: Meril Italy srl, Milano, Italy
Patent at issue EP 3 646 825
Facts and requests: On 4 August 2023, the Respondent, an Italian subsidiary of Meril India, filed a revocation action against the patent in suit with the Central Chamber in Paris. The Applicant had previously filed an infringement action against Meril India and Meril Germany with the Local Chamber in Munich on 1 June 2023, which is pending there under file number UPC_CFI_15/2023.
As part of a preliminary objection, the Applicant requests that the action be dismissed as inadmissible and, alternatively, that the proceedings be stayed until the Defendants in the Munich proceedings have submitted their defence and, if applicable, the revocation counterclaim. In the further alternative, the time limit for responding to the action for revocation should be extended by one month.
The Applicant submits (and probably also proves) that Meril Italy was only founded in March 2023, that all employees there are also employees of Meril India, that the stated registered office is the address of an accounting firm and that no business activities are carried out.
The Respondent requests that the oral hearing scheduled for 26 October 2023 be postponed to allow it to respond in writing to the Applicant’s written submission of 25 October 2023 or, in the alternative, that this submission and the arguments contained therein be disregarded.
Order: The court rejects the preliminary objection and the application for a security deposit for the legal costs.
Reasons for the Order
Postponement of the Oral Hearing
The application to postpone the oral hearing is rejected. According to the court, the possibility of submitting written submissions up to the day before the hearing serves to prepare the hearing regarding the points to be discussed and thus contributes to the efficient conduct of the hearing. In addition, the scope of the preliminary objection is determined by the original application, and nothing may be added to it, neither further reasons nor further facts. No new evidence may be submitted either, unless it concerns facts that arose after the preliminary objection was submitted.
Definition of the Term "the same parties" in Art. 33 (4) UPCA - Literal Meaning
The Applicant argues that due to the connection between Meril Italy and Meril India, the revocation action may only be brought as a revocation counterclaim before the Munich Local Division pursuant to Art. 33(4) UPCA. It must therefore be determined whether Meril Italy is the same party as Meril India or Meril Germany within the meaning of this provision.
According to Art. 46 (5) UPCA, any natural or legal person authorised to bring proceedings under the national law applicable to that person may be a party. The court then first examines whether Meril Italy is an independent party under Italian law and the case law of the Corte Suprema di Cassazione, the highest court of ordinary jurisdiction in Italy, and answers in the affirmative. The fact that the ECJ, e.g. in the ECJ decision of 10 September 2009, C-97/08, in the context of competition law, considers companies affiliated with each other under corporate law as an economic unit and attributes the unlawful conduct of a subsidiary to the parent company does not mean, in the opinion of the court, that the subsidiary does not have its own legal personality. Meril Italy and Meril India or Meril Germany were therefore not to be regarded as the same party.
According to the Applicant, the term "the same parties" in the UPCA should be interpreted broadly in light of this Regulation and the judgment of the ECJ of 19 May 1998 in Case C-351/96.
The court rejects this argument and justifies this with fundamental considerations regarding the division of jurisdiction for different types of proceedings in the UPCA. The provision according to which jurisdiction for an action for revocation brought after the filing of an infringement action is assigned to the respective local division constitutes an exception to the principle that the central division has jurisdiction to determine the legal validity of a patent. As an exception, this provision must be interpreted narrowly. Meril Italy should therefore be regarded as an independent party.
The court recognised that there was a "connection" between the two companies, but this was not sufficient to prove that there was an agreement between Meril India and Meril Italy that Meril Italy was acting in the interests of Meril India. The existing evidence was not sufficient to assume the existence of such an agreement. The fact that Meril Italy does not have its own business premises and does not carry out any business activities can be explained by the fact that the company was only founded in March 2023 and is still in a preparatory phase.
In this context, the court also refers to the decisions of the Enlarged Board of Appeal of the EPO G3/97 and G4/97, without, however, pointing out that the facts of the case there were completely different, as there was no link to any infringement proceedings filed earlier. There, the Enlarged Board of Appeal dealt with the question of whether the opposition of a straw man was admissible and answered in the affirmative, as long as the straw man was not acting, for example, on behalf of the patent proprietor.
Definition of the Term "the same parties" in Art. 33 (4) UPCA - The Argument Based on the Uniform Administration
According to the Applicant, there is a risk of contradictory decisions if Meril India and Meril Germany file a counterclaim for invalidity in the infringement proceedings. This is precisely what Art. 33 UPCA is intended to prevent. Furthermore, two chambers of the same court would then have to deal with the same legal issue, namely the validity of the patent in dispute. This would be regarded as an abusive use of the court.
The court does not consider this to be convincing and believes that contradictory decisions would be prevented by Rule 295.m RoP. This argument is surprising. Rule 295 lists 13 different grounds for staying proceedings, but the fact that a revocation action and a counterclaim for revocation are pending in parallel is not one of them, obviously because this should be excluded by Art. 33(4) UPCA. Rule 295 reads: "The court may stay the proceedings ... (m) in any other case where the proper administration of justice so requires". Why the court refers to Preamble 2 and 4 of the Rules of Procedure and the principles of proportionality, flexibility, fairness and equity mentioned therein in relation to this argument (Reasons No. 80) is not clear to the observer. The idea that this judgement could be fair does not occur to the observer.
Order of a Security Deposit
With regard to the application for an order to provide security, the court considers that the low share capital of € 10,000 and the Respondent's lack of business activities are no reason to assume that the Applicant will not be able to enforce its claim for reimbursement of costs. The court therefore rejects the application.
Criticism of the Judgement
The judgement departs from the previous pragmatic approach of the Court of First Instance and the Court of Appeal in interpreting the Rules of Procedure. It violates the case law of the ECJ and is logically incorrect.
The only substantial argument on which the court bases its affirmation of the admissibility of this revocation action is the argument that the provision under Art. 33(4) UPCA is to be interpreted narrowly as an exceptional provision. However, the court does not explain why this should be the case. It remains a mere assertion.
As is well known, the ECJ determined very early on how to proceed when interpreting legal norms. For example, in decision C 26/62, which deals with the interpretation of the EEC treaty, it is stated that, for the question of interpretation, "it is necessary to consider the spirit, the general scheme and the wording of those provisions".
Recital 6 of the UPCA states
CONSIDERING that the Unified Patent Court should be devised to ensure expeditious and high quality decisions, striking a fair balance between the interests of right holders and other parties and taking into account the need for proportionality and flexibility.
Art. 33(4) UPCA clearly serves, but is not limited to, the purpose of ensuring fast decisions. The Paris Chamber's proposal that the infringement court should stay the infringement proceedings in the event of an invalidity action pending before the central division is diametrically opposed to this legal purpose. This results in the problems that arise from the separation or bifurcation principle in German law, and which sometimes delay decisions on infringement issues for many years. This is precisely what the UPC and its streamlined Rules of Procedure are intended to prevent. However, this is not the only purpose of the law. The simultaneous treatment of infringement issues and revocation objections is also intended to prevent the so-called Angora cat paradox, namely that the patent proprietor interprets the patent narrowly in opposition and revocation proceedings, while interpreting the patent broadly in infringement proceedings, with the result that embodiments are sometimes included in the scope of protection that would have been classified as unpatentable in opposition or revocation proceedings.
The decision also contradicts the case law of the ECJ, which is also relevant for the UPC according to Art. 20 and 21 UPCA.
In the judgement of the ECJ in case C 351/96 cited by the Paris Chamber, the French Cour de Cassation referred a question to the ECJ on the interpretation of Art. 21 of the Brussels I Convention. This concerns the understanding of the term "the same parties". In the case decided by the ECJ, the parties were, on the one hand, the insurer of a ship suing the owner of the cargo and its insurer and, on the other hand, the owner of the cargo and its insurer suing the owner of the ship and its charterer. In this case, the ECJ assumes that the parties are the same if the interests of the ship's insurer and the policyholder on the one hand and those of the ship's owner and charterer on the other are identical and inseparable. The ECJ therefore does not answer the question according to whether the parties are legally different – this was undisputed – but according to whether the interests are inextricably linked. The fact that the interests of the parent company Meril india and its wholly owned subsidiary Meril Italy are inextricably linked in the present case is beyond any doubt.
In decision C 97/08, the ECJ stated in point 62 of the grounds “that it is sufficient for the Commission to show that the entire capital of a subsidiary is held by the parent company in order to conclude that the parent company exercises decisive influence over its commercial policy”. Contrary to the opinion of the Paris Chamber, no evidence is therefore required to assume that Meril Italy is acting on behalf of Meril India.
