The Unified Patent Court (UPC) began to issue its first decisions on the merits in July 2024. Since then, much of the focus has been on the court’s handling of injunctions, which are notable in part for their possible scope—as a single claim can result in an injunction spanning up to all 18 UPC member states. However, the UPC can also issue damage awards with that same reach, covering a market nearly the same size (by population) as the US. Now, the breadth of available damages could increase further due to a new ruling from the Court of Appeal. On January 16, the appellate body decided that not only does the UPC have the power to hear a damages-only claim based on a merits judgment from a national court, it may also award damages reaching back before the UPC’s start date—in this case, all the way back to 2016.

The litigation below stemmed from a dispute over equipment used in the electrolytic production of aluminum, under which patent owner Fives sued defendant REEL in the Regional Court of Düsseldorf. That court issued a judgment of infringement in August 2022, awarding damages of €250K for each act of infringement. The judgment was preliminarily enforceable at a value of €2.5M against a security provided by the defendant, though the parties have since sparred over the extent of the defendant’s obligation to provide certain information on its acts of infringement. In May 2024, the Higher Regional Court of Düsseldorf apparently decided to impose a penalty on the defendant for its resistance to providing some of the requested information. However, the defendant did not appeal the underlying merits judgment.

Meanwhile, in August 2023, as that German appellate battle proceeded, Fives also filed an action for determination of damages with the UPC’s Hamburg Local Division (Hamburg LD). The patent owner sought €6.5M in damages and approximately €1.3M in interest for infringing conduct in Germany as determined by the August 2022 judgment from the Düsseldorf Regional Court.

In November 2023, the Hamburg LD upheld a preliminary objection filed by REEL and dismissed the case, agreeing with the defendant that the UPC could not issue damages based on a final judgment of infringement in a national court. The court held that the UPC Agreement (or UPCA, the treaty that established the UPC) does not give the UPC jurisdiction to set damages based on national court judgments: Rather, in relevant part, the UPCA only allows the UPC to award damages based on infringement actions brought before the UPC (under Article 32(1)(a)) and based on the provisional protection offered by a published application for a European patent (Article 32(1)(f)). The latter provision does not apply, the Hamburg LD ruled. As for the former, the court interpreted Article 32(1)(a), read in light of certain UPC Rules of Procedure, as establishing that the UPC only has jurisdiction to determine damages for patent infringement after the UPC has already determined infringement in an action before it. The Hamburg LD further held that under res judicata, the UPC lacks jurisdiction to hear infringement claims for the national part of a European patent that has already been the subject of a final judgment by a national court.

While acknowledging that the Rules of Procedure cannot be used to interpret the UPCA, the Hamburg LD justified its reliance on them by stating that the rules governing certain details of UPC proceedings still indicate how the legislature understood the UPCA. The Hamburg LD also rejected a counterargument by the plaintiff that focused on the UPC’s transitional period, during which the UPC shares jurisdiction with national courts over traditional European patents (meaning, those that existed before the UPC’s creation and consist of bundles of national rights, rather than the unitary patent over which the UPC has sole domain). The plaintiff had argued that under the position adopted by the lower court, the end of the transitional period would create a “loophole” where no court would have jurisdiction to determine damages arising from a final national infringement judgment. Rather, the court held that under that circumstance, national courts would retain jurisdiction over such claims under UPCA Article 32(2), which establishes that national courts shall “remain competent” to hear patent actions that are not within the UPC’s “exclusive competence”. Given its holding on jurisdiction, the court found that the issue of claims arising before June 1, 2023 (the UPC’s start date) to be “irrelevant” and did not otherwise address them.

On appeal, defendant REEL largely echoed the points raised by the Hamburg LD with respect to jurisdiction, arguing in part that the UPC can only award damages as a dependent step to patent infringement proceedings already before the court; and that a national court’s final judgment as to a national component of a patent deprives the UPC of jurisdiction over that portion of the patent.

In contrast, plaintiff Fives argued that Article 32(1)(a) gives the UPC jurisdiction over all actions based on the underlying infringement of a patent, including a separate claim for damages. Fives contended that this is not changed by the issuance of a national court judgment, and that the existence of such a judgment does not impact jurisdiction but rather falls under laws governing conflicting judgments under res judicata/lis pendens. Moreover, the plaintiff asserted that the only act by a patent owner that can deprive the UPC of jurisdiction over a patent is to explicitly opt that patent out under the court’s transitional regime.

Fives also argued that the Rules of Procedure cannot substantively change the scope of the UPCA, thus contesting the underlying basis for key parts of the Hamburg LD’s decision. It further claimed with respect to pre-June 1, 2023 damages that the UPC has the power to adjudicate infringement claims for all patents not expired on that date, and since those patents convey certain rights from the publication of the underlying application, this means that all claims arising from those patents—even those predating the UPC’s launch—can be addressed. Per the plaintiff, this is further supported by the fact that when the UPC invalidates patents, it affects all rights stemming from that patent going back to the date of publication. Fives additionally argued that it would be incompatible with the objectives of the UPC if it were to only have the power to address claims arising after the court’s launch, given that acts of infringement “often extend over several years and several countries” (per the Court of Appeal’s summary).

The Court of Appeal issued its resulting judgment on January 16, beginning by holding that the controlling source of law for the UPC is the UPCA, which is to be interpreted according to the “ordinary meaning” of its terms, or based on the wording of the provisions at issue; and as viewed “in the light of its object and purpose”, with relevant context including other UPCA provisions and relevant law. Noting that the Rules of Procedure “seem to proceed from a narrow understanding of when and how damages may be claimed before the UPC”, the Court of Appeal underscored that if the rules conflict with the UPCA, they should either be interpreted in accordance with the UPCA, or the UPCA controls.

The court’s “ordinary meaning” analysis focused on certain UPCA provisions cited by the Hamburg LD and the defendant as supporting the lower court’s ruling: Article 56, which lays out the UPC’s procedures and establishes that they are subject to conditions in the Rules of Procedure; Article 68, which covers damages and was read by the lower court as not supporting an independent damages claim; and Article 83, covering the transitional period of shared jurisdiction with national courts. These provisions, the Court of Appeal found, “are not determinative as interpretative tools since they all come into play only when the UPC has jurisdiction”. However, the court did find it useful to address the relationship between Article 32(1)(a), which addresses competence over infringement; with Article 32(1)(f), which explicitly allows standalone damages claims based on provisional protection. The court noted that the latter provision both refers to the past and does not establish any requirement that the UPC first determine liability. As a result, the court found, “[i]t is difficult to see any underlying logic in treating damages for patent infringements differently from damages derived from provisional protection in this respect”.

The Court of Appeal also found that certain other applicable EU law does not undercut the UPC’s jurisdiction to determine damages based on a national court judgment. In particular, it found no such obstacles under the Brussels la Regulation (i.e., the Brussels I Regulation 1215/2012), which provides in part that the UPC is deemed a “member state” alongside EU countries and therefore has no need to follow special procedures to recognize judgments from those countries’ courts. Additionally, while the Court of Appeal found that under CJEU caselaw there is no need to address the question of applicable law for questions of jurisdiction, the court still found it to be “of interest” to assess whether the UPC’s exercise of jurisdiction in this context would, from a choice of law perspective, lead to any “adverse consequences” that would undermine the UPC’s “object and purpose”. To that end, the court observed that the UPCA establishes both that the UPC has own substantive law on patent infringement (Articles 25-30) and that the UPC’s decisions have effect within all participating EU member states (Article 34). The Court of Appeal found that the purpose of Article 34 would not be “attained” if the UPC were required to make separate factual and legal analyses for each member state, and thus held that there was “good reason” to revisit the UPCA provision governing damages, Article 68.

The court then turned to the Rules of Procedure, in particular to provisions that treat applications for damages as “ancillary” to infringement actions. Here, the court addressed two possibilities for the intent behind this structure: Either the rules seek to replicate the procedures in the national courts of certain UPC member states that allow patent owners to file a patent infringement action first and then request a damages determination second, in the name of procedural efficiency; or they were crafted solely with the unitary patent in mind, in which event the issue of a preceding national court judgment would not be possible (since only the UPC can decide infringement of unitary patents). Whichever the case, the Court of Appeal nevertheless found that the relevant UPCA provisions must be interpreted as allowing separate actions for damages to account for cases where infringement is undisputed. Since the court found no reason to treat “the present case differently”, it held that this type of claim can “be subject to a separate action”.

The Court of Appeal also briefly addressed—and rejected—the defendant’s claim that its decision would enable forum-shopping. While it found that such concerns were “not entirely without merit”, the court determined that such a system (allowing parties to move from one legal system to another to resolve their claims) was permitted under the EU’s IP Enforcement Directive, which requires effective legal remedies for IP infringement but also “provide[s] for minimum harmonisation” of laws governing IP enforcement, such that variations on procedural or substantive law among member states are expected. Indeed, the Court of Appeal noted that the “possibility of different outcomes is however accepted already as a result of the transitional regime”, under which the UPCA contemplates that national courts may apply different law for the UPC during the transitional period where they share jurisdiction with the UPC.

Finally, the Court of Appeal held that the UPC has jurisdiction to make decisions on acts of infringement that occurred before the court’s June 1, 2023 start date. The court found that there is nothing that supports an inference to the contrary in either Article 3(c) or Article 32(1) of the UPCA, finding that the only rule is that (per Article 3(c)) the asserted patent must have been in force as of that date.

The court then concluded by finding that this case presented an “exceptional circumstance” sufficient to refer the lawsuit back to the Hamburg LD for further proceedings under Rule 242(2)(b).

Looking forward, it of course remains to be seen how litigants will respond to this decision—in particular, whether the potential for damages reaching further back in time will lead to additional litigation. The same goes for the Court of Appeal’s ruling that UPC plaintiffs can seek damages based on national court infringement rulings, in part due to the fact that this case only concerned damages over the German portion of the patent-in-suit. However, IP Fray has speculated that “sooner or later”, a plaintiff could seek “multi-country damages” based on a national court ruling—possibly even in this case.

For more on the UPC’s handling of other key issues, as well as other important trends in the US and other venues, see RPX’s report on the fourth quarter and 2024.