UPC Milan Local Division gives its first main action decision

In its first main action decision (as first instance decisions on the merits are being referred to by the UPC) the Milan local division of the UPC has found the patent infringed and has granted an injunction in respect of Italy and Germany.

In Oerlikon Textile GmbH & CO KG v Bhagat Textile Engineers UPC_CFI_241/2023 (4/11/2024) (published by the UPC in the language of the proceedings, Italian), patent EP 2145848 B1 entitled "false twist texturing machine" was held to have been infringed by promoting and offering an infringing item at the ITMA trade fair in Milan in June 2023. Proceedings between the parties started with one of the first clutch of orders granted by the UPC, handed down by the Milan court on 13 June 2023, allowing Oerklion to gather evidence at the fair.

The decision has some interesting elements:

The defendant did not bring an invalidity counterclaim but requested that the court use its residual powers of stay (under RoP 295(m)) to stay these proceedings pending the outcome of ongoing proceedings involving the same claimant and patent but a different defendant (Oerklion v Himson Engineering CFI 240/2023) in which the patent's validity has been challenged.  The court did not agree that this was an appropriate use of its discretion in a context where the defendant had already recognised the validity and infringement of the patent and had also not intervened in the other action in support of the invalidity claims.

The form of the permanent injunction was considered and whether it should extend to inhibiting future conduct that had not been established. The court discussed the two enforcement elements of a permanent injunction: (a) in enjoining the repetition of the conduct already established (i.e. the promotion and publicising of the infringing machine); and (b) in inhibiting future conduct that had not been established here but could be integrated into a potential infringement (marketing and distribution). The court held that:

• In the allocation of the burden of proof, it is not for the plaintiff to prove the risk of repetition of the infringement, but for the defendant to eliminate this presumption. In general in relation to permanent injunctions, the Milan court confirmed that with respect to infringing conduct that has already been ascertained, it is up to the infringing defendant to prove that there is no risk of repetition – a mere undertaking not to continue the infringement is not sufficient. With respect to future conduct, the burden of proof lies with the plaintiff to show objectively that actions such as unambiguous elements preparatory to the infringement have occurred, and to show subjective elements also with respect to the defendant's intention to proceed with the infringement.
• The proof of the non-repetition in the future of conduct under a) had not been achieved by the defendant and, therefore, the permanent injunction should be granted.
• Moreover, a mere undertaking not to continue the infringement is not sufficient. In this case evidence had been adduced only of the promotion at trade fairs of the infringing machines but not also of the marketing, conduct to which the application for an injunction was requested to be extended.
• With respect to conduct under (b) above, the Court observed that the future risk was to be commensurate with the likelihood of recurrence, and was to be assessed on the basis of: 
  • objective elements, in light of the degree of certainty of future injury, including the unambiguity of the preparatory acts with respect to the infringement.  Here, the defendant - an entity based in India - had not denied producing the disputed machinery. What was at issue was marketing in the European area and, in particular, in the territory of the Contracting Member States UPC where the patent in suit was in force (Italy and Germany). The court commented that promotion is obviously conducted contiguous to commercialisation and is instrumental to it; 
  • subjective elements, relating to the defendant's willingness to engage in the interfering activity. In this respect, the collaborative conduct of Baghat in this case was relevant, although certain statements made to the press might have implied otherwise.

​The court concluded that the risk of repetition of promotion and advertising was "persistent" and the risk of marketing and sale was also imminent and granted an injunction.

Although an injunction was granted, an order for definitive withdrawal from the market was not given. We have seen other cases at the UPC where the recall of products from commercial channels was required by the court (including at the preliminary injunction stage). This is one of the three remedial measures provided for in Art 64(2b) UPCA. The grant of this is dependant on an assessment of the proportionality between the seriousness of the infringement and the remedies to be ordered (Art 64(4) UPCA). There was no evidence of infringing items being distributed in the markets identified by Oerklion for an order for withdrawal by Bhagat – an interview with a newspaper by a member of the defendant's company stopped short of this in actual terms, giving a mere declaration of intent to penetrate the market. In light of the principle of proportionality, the court therefore considered that the application should be rejected. Similarly a request for an order to provide information on infringing conduct was also deemed unnecessary and proposed instead in the event of a judgment for damages.

Order for (interim) damages. Bhagat insisted that it had not sold any items in the market and there had been no damage to the patentee but the UPC held that there should be an interim award of damages of 15k euros which included elements for reputational damage.

Costs were split 20% to be paid by the patentee: 80% to be paid by the infringer.  The defendant was partly successful in its argument that there were exceptional circumstances and thus the equity exception provided for in the UPCA should apply (Article 69(1) UPCA says that "Reasonable and proportionate legal costs and other expenses incurred by the successful party shall, as a general rule, be borne by the unsuccessful party, unless equity requires otherwise [emphasis added], up to a ceiling set in accordance with the Rules of Procedure"). In giving its reasons for applying this exception in part the UPC considered that the following elements were relevant in this case: 

1. In the course of negotiations where Baghat made itself available to pay a significant amount for litigation costs, albeit not exhaustive, as is normally the case in settlements;
2. Oerlikon's modification of the objective perimeter of the settlement proposal as negotiations progressed, demanding that the non-marketing commitment be gradually extended to countries other than UPC, thus making an amicable settlement difficult; and 
3. Baghat's co-operative behaviour both in the course of the execution, before the commencement of the proceedings on the merits.

Penalty: Penalty payments have been set at 12K euros, to be paid to the court for every incident of breach of the injunction. Section 63(2) UPCA provides that, when deemed appropriate by the court, the remedy of a penalty, to be paid to the Court as a discretionary measure aligned to a permanent injunction, can be considered in light of the dual nature - penalty and deterrent - of the penalty, to be quantified taking into account the principle of proportionality.