In a recent order dated September 18, 2024, the Court of Appeal (CoA) of the Unified Patent Court issued some clarifications on procedural and jurisdictional issues concerning preliminary objections and Rule 361 of the Rules of Procedure (RoP), about an “action manifestly bound to fail”. This decision arose from a series of cases involving Network System Technologies LLC (NST) and Audi AG, where NST accused Audi of infringing upon multiple patents.
Procedural Context
NST initiated infringement actions based on patents that had previously been opted out of UPC's jurisdiction by their original owner, Philips, and were later withdrawn from opt-out by NST post-acquisition. Audi raised preliminary objections challenging NST's right to sue for past infringements and the jurisdiction of the UPC, especially concerning the validity of the opt-out withdrawal and damages claimed for actions in the UK and Northern Ireland.
The Court of Appeal
The CoA emphasized that Rule 361 RoP is not intended for a detailed examination of the case’s foundation but for dismissing actions that clearly lack legal basis. NST’s substantiation of claims in response to Audi’s challenges was deemed acceptable, as the rule allows for amendments and further substantiations throughout the proceedings.
The CoA found that the UPC did have jurisdiction to hear the case, dismissing Audi’s argument about the improper withdrawal of the opt-out. The UPC's rules permit changes in representation and do not require explicit evidence of a mandate unless specifically challenged and ordered by the court.
Regarding claims for damages occurring in the UK and Northern Ireland, the court held that it was within the first instance court’s discretion to postpone decisions on jurisdictional challenges to later stages of the proceedings. This aligns with the procedural flexibility intended by the RoP to manage cases efficiently.
The CoA underscored that while the UPC’s procedural framework is designed to be front-loaded—to ensure that cases are presented comprehensively from the start—this does not preclude parties from providing further details or evidence as the case progresses.
Specifically, the court addressed concerns raised by Audi regarding the adequacy of NST’s initial filing and whether the Rule 361 RoP barred NST from substantiating its claims further after the initial statement of claim. The court decisively rejected this notion, affirming that the UPC procedures are designed to accommodate subsequent elaborations or additions to the claims as necessary, particularly in response to defences raised by the opposing party.
This clarification from the court reassures participants in UPC proceedings that while initial filings should be as complete as possible, the rules are not so rigid as to prevent the natural evolution of a case through its procedural journey.
As an interesting side note, the CoA clarifies that for “branched-off” proceedings – as the present one - which do not conclude the action the Court of Appeal will not issue an order for costs. However, the outcome of the appeal must be considered when, in the final decision on the action at hand, the Court determines whether and to what extent a party must bear the costs of the other party because it was unsuccessful within the meaning of Article 69 UPCA.
Key takeaways
