UPC Court Of Appeal Clarifies Rules On Directors' Liability For Patent Infringement

The UPC Court of Appeal (the CoA) has issued a significant judgment in Koninklijke Philips v. Belkin clarifying the scope of directors' liability. The court also confirmed the availability of corrective measures such as product recall, removal from distribution channels, and destruction of infringing products, unless the infringer can show that such relief is disproportionate.

Background

Philips sued Belkin GmbH, Belkin International Inc., and Belkin Limited, (Belkin) two directors and one managing director (the directors) in the UPC's Munich Local Division (LD Munich) for infringement of EP 2 867 997. The patent addresses two-way communication and negotiation phases in inductive power transfer systems for charging portable electronic devices, including the role of an “acknowledgement” signal. The patent has been declared essential to the Qi wireless charging standard. In the UPC infringement action, Philips sought cross-border relief including injunctions, damages, disclosure, and product recall. Belkin counterclaimed for revocation.

Previously, the Düsseldorf Regional Court had ruled that Belkin GmbH and Belkin Limited did not infringe in Germany, and the German Federal Patent Court had rejected a nullity action.

The LD Munich found that Belkin had infringed and the directors were liable, not as infringers but as intermediaries under Art 63(1) UPCA. The LD Munich issued a permanent injunction against Belkin in Sweden, Belgium, France, Germany, the Netherlands, Italy, Finland, and Austria to refrain and desist, provide information, and pay damages. The directors were also ordered to refrain from exercising their management duties insofar as they led to infringing acts by Belkin outside of Germany. However, the LD Munich refused an order for a product recall. Both sides appealed.

Decision of the Court of Appeal

Validity

The CoA confirmed the patent's validity. In doing so, it adopted a detailed claim construction that treated the “acknowledgement” element as a transmitted, indicative message that signals acceptance or rejection of entering a negotiation phase, without requiring the transmitter to be capable of rejection in practice.

Infringement

The court found that Belkin's Qi compliant chargers fell within the scope of the EP's claims, including the acknowledgement behavior prescribed by the current Qi standard.

“Offering” under Article 25(a) European Patent Convention (EPC) is an autonomous concept interpreted in the economic and not the legal sense. There is no need for a legally contractual binding offer. Offering includes the marketing of a product on a website, even without a price. Belkin's web pages constituted offerings in Italy, France, and the Netherlands, even where the purchase took place via third-party retail links (e.g., Amazon).

Managing director liability

The CoA overturned the LD Munich decision against the directors and dismissed the claims against them. According to Articles 63(1) and 25 EPC, an infringer could be someone to whom the infringing acts could be attributable. However, merely holding the position of managing director and controlling the risks of a company does not necessarily make a person an instigator, accomplice, or accessory to the company's infringement.

A managing director is liable only if his or her actions go beyond the ordinary professional duties of a managing director, e.g., if the director deliberately uses the company to infringe or the director knows the company is infringing and fails to stop it. Reliance on legal advice will generally suffice to negate the requisite knowledge until a first instance infringement decision has been issued.

On the facts of this case, the directors were not personally liable.

Relief

The CoA confirmed that corrective measures such as product recall, removal from distribution channels, and destruction, can be ordered in relation to infringing products under Article 63 EPC. This type of relief is the norm, and it is up to the infringer to demonstrate that such measures are disproportionate or will convert the infringing products into non-infringing products. Belkin had not done this.

The injunction did not bind Belkin GmbH and Belkin Ltd in Germany because of the previous Dusseldorf non-infringement judgment already in place. However, this did not bar UPC relief for other territories or other Belkin entities who were not party to the German proceedings. The German decision was not the same in law and fact because it concerned a different national designation of the same patent.

Key takeaways and implications

• This decision strengthens the UPC's business-practical approach to infringement. Online marketing can constitute an “offering” across multiple member states, even without a stated price or legally binding contractual offer, or with a link to a third-party supplier.
• The CoA took a narrower approach to director liability than the LD Munich. Officers are not automatically liable for corporate infringement but may be exposed where they intentionally facilitate violations or knowingly fail to intervene.
• Product recall, removal from distribution and destruction are default remedies in infringement actions. Defendants must be prepared to prove disproportionality if they wish to avoid such relief.
• The UPC was willing to come to a different conclusion to the German courts in relation to the same patent. A national ruling limits relief within that jurisdiction in respect of the parties to the legally binding judgment. However, this does not bar UPC relief against other entities in other UPC territories.

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