UPC: the first main action decision of the Milan LD

By first instance decision dated 4 November 2024, issued 15 months after the start of the proceedings, the Milan Local Division of the UPC declared the infringement of EP2145848 “False twist texturing machine” held by Oerlikon Textile GmbH & CO KG (claimant) by Bhagat Textile Engineers (defendant). It therefore enjoined the defendant from any further marketing of infringing machinery, setting a penalty of €12,000 for any further infringement and ordering an interim award of damages in the amount of €15,000 (UPC_CFI_241/2023).

Specifically, the defendant exhibited a machine allegedly infringing the patent at the ITMA fair in Rho-Milano. Oerlikon obtained and executed ex parte an order to preserve evidence pursuant to art. 60 UPCA and rule 192 RoP, and subsequently initiated the main action for the declaration of the infringement.

In the case at issue, the defendant did not deny the infringement, hence a technical assessment of infringement was not necessary. Bhagat instead focused its defence on the following circumstances: i) it had not sold the machinery but had only exhibited it at a trade fair, therefore it had not caused any damage to the other party; ii) it had undertaken not to market the machinery in the territories covered by the patent, namely Italy and Germany; iii) it had been extremely cooperative in the execution of the order to preserve evidence and had seriously pursued negotiations with the plaintiff for the amicable resolution of the matter, which should have led to compensation of the litigation costs.

The decision, beyond the obvious declaration of infringement, contains a series of statements of interest, summarised below.

·       Stay of the proceedings under Rule 295(m) RoP

Baghat requested a stay of the proceedings under Rule 295(m) RoP until the end of parallel proceedings pending before the DL Milano between Oerlikon and a different defendant, within which a counterclaim for revocation of the patent had been filed.

The request for stay is admissible even if made for the first time during the oral hearing, since no deadline is set for it and the right to be heard by the plaintiff has been guaranteed.

The request must however be rejected since Baghat has not contested the validity of the patent and the infringement in this proceeding, hence these must be held to be true between the parties (Rule 171(2) RoP); nor has Baghat declared that it joined the parallel dispute to support the other defendant's request for revocation of the patent.

·       Injunction

Baghat has undertaken not to infringe the patent in the future. This undertaking, however, "is not suitable to remove the risk of further damage and to remove Oerlikon's interest in a definitive injunction. In fact, the Court's order is supported by a penalty and failure to comply also entails consequences under the criminal law profile. Therefore, the victim of the infringement retains a qualified interest in obtaining an injunction order from the Court, which offers greater guarantees regarding its compliance. Moreover, the out-of-court agreement can in turn be questioned before the judicial authority."

·       Penalty

The payment of a recurring penalty for breach of the injunction, pursuant to art. 63(2) UPCA, is ordered by the Court “when deemed appropriate”, which is the case here since it “allows for a better monitoring of the permanent injunction, considering that even after the execution of the order for the preservation of evidence the defendant declared its intention to market the machinery” (specifically: through a statement in a public interview).

The amount of the penalty must be based on proportionality, which requires considering: i) the type of infringement, i.e. the promotion of the machinery at an international fair; ii) the value of each machinery, equal to €750,000; and iii) the royalties applied in the reference sector, which according to the claimant amount to 6% and according to the defendant to 3%. Hence, the amount was set in €12,000 for each subsequent infringement of the patent.

·       Interim award of damages pursuant to Rule 119 RoP

Under Rule 119 RoP, the Court may order an interim award of damages in favour of the succeeding party, in an amount which covers at least the expected costs of the procedure for the award of damages and compensation.

Such order requires that proof be reached not only as to the existence but also as to the amount of the damage, "at least within the limits of the amount awarded with the interim order. (...) The minimum limit of such amount is given by the costs of the subsequent damages procedure, while the maximum is constituted by the presumed amount of damages to be liquidated in the separate procedure".

Actually, the decision does not seem to consider the costs of the procedure for the award of damages: the determination of the sum to be paid refers exclusively to the reputational damages of the plaintiff, which is calculated considering that the fair lasted 7 days, was attended by over 1,600 exhibitors from 44 countries and was visited by over 100,000 visitors. In light of this, the Court provisionally orders the payment of € 15,000.

·       Publication of the judgment

“The measure, provided for by Art. 80 UPCA, has both a specific compensatory nature, reinstating the position of the victim of the illicit act on the market, and a preventive nature, dissuading operators from working with the responsible of the infringement”;

“In the case at issue, it does not appear necessary as it is not proportionate, given the limited extent of the infringement: the certain detriment to the defendant that would derive from such publication appears in fact greater than that required by the infringement ascertained up to now”.

·       Apportionment of legal costs

Under Art. 69(1) UPCA, the costs of the proceedings are to be paid by the losing party. However, under Art. 69(2), where a party succeeds only in part, or in exceptional circumstances, the Court may order that the costs be apportioned equitably or that the parties bears their own costs.

In this proceeding the Court is not required to liquidate the actual costs, since this has not been requested by the plaintiff, but it is only required to determine the criterion for their apportionment. And the Court actually believes that there are reasons to compensate the costs for 20%, thus placing 80% of the same on the defendant, considering in particular:

i)               the progress of the negotiations, where Baghat had made herself available to pay a significant, although not exhaustive, amount for legal costs;

ii)              Oerlikon's modification of the objective perimeter of the settlement proposal as negotiations progressed, asking that the non-marketing commitment be gradually extended to other countries, other than the UPC ones, thus making an amicable settlement difficult;

iii)            Baghat's cooperative behaviour both during the execution of the order to preserve evidence and before and during the trial on the merits.

The parties may appeal against the decision within 2 months from the date of its notification.

[For an overview of unitary patents and UPC, find our posts here on this blog and our podcast here on Spotify]