Towards a More Orderly Application of Proportionality to Patent Injunctions in the European Union

IIC https://doi.org/10.1007/s40319-021-01139-6 ARTICLE Towards a More Orderly Application of Proportionality to Patent Injunctions in the European Union Rafał Sikorski Accepted: 13 December 2021  The Author(s) 2022 Abstract The intensity of IP protection has traditionally been determined by assessing the criteria that need to be satisfied for the protection to be granted, as well as the scope of rights and limitations of those rights. The enforcement stage and the remedies available to right holders have for long been, if not neglected, then certainly treated with lesser attention. The rise of aggressive litigation strategies, especially in the field of patents, has brought the enforcement stage to the forefront of the discussion about the proper level of IP protection in general and patent law in particular. Injunctions provide particularly strong leverage at the enforcement stage, allowing patentees in some cases to obtain royalties that exceed the value of the protected inventions. The principle of proportionality can play an important role as a check on excessive litigation strategies by patentees. Flexibility, however, comes at the price of uncertainty and unpredictability as to the outcome of patent disputes. Therefore, it is crucial to apply proportionality in an orderly and structured manner. For that purpose, the article identifies a set of factors that may be helpful in applying proportionality in patent disputes. That set of factors is well grounded in the traditions of the laws of the EU Member States. Keywords Proportionality
Injunctive relief
Permanent injunctions
Abuse of rights
Equity
Patent assertion entities
Complex products 1 Background International treaties concerning both copyright and industrial property protection have traditionally been preoccupied with ensuring a high level of protection for R. Sikorski (&) Professor, Faculty of Law and Administration, European Law Chair, Adam Mickiewicz University, Poznań, Poland e-mail: 123 R. Sikorski creations and inventions.1 In the European Union there has also been a steady tendency to achieve ever higher levels of intellectual property protection. For many years, at both the international and EU level, relatively little attention has been paid to enforcement of intellectual property rights. At the international level this changed with the adoption of the TRIPS Agreement,2 Part III of which deals with enforcement of intellectual property rights. A decade later, the then European Community adopted a directive that incorporated TRIPS Part III provisions and was solely dedicated to intellectual property enforcement.3 Interestingly, the enforcement measures were adopted with a view to ensuring that right holders had proper tools to combat piracy and counterfeiting, especially in the field of trademark and copyright law.4 TRIPS drafters could not have predicted or comprehensively responded to all the challenges facing right holders as a result of the rise of the internet and the shift from analog to digital.5 Neither could they have predicted the excessive litigation strategies that came with the ever more complex technologies protected by numerous rights, especially patents, and the growing role of entities preoccupied exclusively with asserting their patent portfolios in order to extort royalties significantly exceeding the value of the asserted patents.6 Since being adopted, a decade after TRIPS, Directive 2004/48 seems to have addressed at least some of the concerns resulting from the rise of the internet.7 Generally, however, the enforcement of various intellectual property rights poses different challenges for the right holders, infringers and public. Thus, whereas the enforcement of copyright on the internet has posed numerous challenges related to the protection of private life,8 the right to information9 or the freedom to conduct business,10 the aggressive and often excessive enforcement strategies related to patents are seen as a significant threat to innovation.11 1 Kur and Grosse Ruse-Khan (2008), pp. 8–9. 2 Annex 1C Trade-Related Aspects of Intellectual Property Rights to the Marrakesh Agreement Establishing the World Trade Organization of 15 April 1994 (hereinafter TRIPS). 3 Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights, Official Journal L 157, 30.4.2004 (hereinafter Directive 2004/48, Enforcement Directive, IPRED). 4 For a discussion of the origins of and justification for adopting Directive 2004/48 see Strowel and Léonard (2020), pp. 5–7. The authors rightly underline that Directive 2004/48 concentrated on combatting wilful and intentional infringement of intellectual property rights, such as piracy and counterfeiting. With that perspective in mind, it was not surprising that considerations of proportionality were not at the forefront. 5 Malbon, Lawson and Davison (2014), p. 615. 6 Malbon, Lawson and Davison (2014), p. 615. 7 See, for example, Art. 11 of Directive 2004/48, which provides that Member States must ensure that right holders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right. 8 C-275/06 Promusicae, para. 65. 9 C-484/14 McFadden, para. 82. 10 C-70/10 Scarlet Extended, para. 48. 11 Miller (2018), p. 238. 123 Towards a More Orderly Application of Proportionality to… The rise in excessive litigation in the field of patents has resulted from developments in the patent landscape, particularly in industries such as consumer electronics or computer and communication technologies.12 First, products in information and communication technology (ICT) and consumer electronics markets have become highly complex. They are made from multiple components, often supplied by various independent suppliers, and the technology involved is frequently protected by hundreds or even more patents. Second, multiple patents create ‘‘patent thickets’’, making rights clearance costly and time consuming, if not altogether impossible.13 Third, large patent portfolios are acquired by entities that neither develop nor produce products and are exclusively preoccupied with asserting patents against manufacturers.14 Fourth, such entities often assert patents once the product has been designed and design costs have become sunk costs. The asserting entity can extract what is known as a ‘‘holdup value’’ for its patents, as the prospect of investments made in R&D activities being wasted enables the entity to demand higher – often excessively high – royalties.15 Finally, the right holder’s position vis-à-vis the infringer will only be further strengthened if the former is in a position to threaten the infringer with an injunction. In that case an injunction could later be used as leverage in licensing negotiations. Such an injunction would be even more painful for the infringer if it tur (...truncated)