Journal

Protective letters – the first line of defence against preliminary measures at the UPC

A protective letter can be an effective tool to discourage an applicant from pursing an application for a preliminary injunction. However, it needs to be prepared carefully and thoughtfully, and it should not simply re-hash arguments previously rejected by other courts or the EPO. Sean Jauss (Associate) and Matthew Naylor (Fellow) explain.

The Unified Patent Court (‘UPC’) opened a year ago. In that time a significant number of cases have been filed – 373 cases as at the end of May 2024, of which there were 32 applications for provisional measures, in particular preliminary injunctions.

Preliminary injunctions are powerful remedies, especially if granted ex parte. The UPC has demonstrated a willingness to grant such injunctions if a case can be made out that the patent is likely to be valid and infringed, that the issue is urgent, it is proportionate and that financial compensation would be insufficient relief. Even if the Court decides to hear the application for a preliminary injunction inter partes, and the parties are summoned to an oral hearing, strict time limits mean that it can be challenging for the defendant to mount a robust defence.

Consequently, the threat of a UPC injunction being quickly granted, possibly ex parte, before the action on the merits is even started, poses a very significant business risk for the defendant, particularly in view of the number and size of the EU countries covered.

However, there is a means to defend against a provisional measure: a protective letter. A protective letter may discourage an applicant for pursing their application for a preliminary injunction. It may prevent an injunction being granted ex parte. Finally, it may also provide the defendant with a ‘leg up’ in preparing for a hearing on the application and, more generally, the action on the merits, where the time for mounting a defence and bringing an invalidity counterclaim are very limited.

The rules

The UPC Agreement (‘UPCA’) does not specifically mention protective letters. But their existence can be extrapolated under article 62 UPCA. Article 62(1) sets out the basis on which the Court can grant preliminary injunctions. It says:

‘The Court may, by way of order, grant injunctions against an alleged infringer or against an intermediary whose services are used by the alleged infringer, intended to prevent any imminent infringement, to prohibit, on a provisional basis and subject, where appropriate, to a recurring penalty payment, the continuation of the alleged infringement or to make such continuation subject to the lodging of guarantees intended to ensure the compensation of the right holder’.

Article 62(2) then says:

‘The Court shall have the discretion to weigh up the interests of the parties and in particular to take into account the potential harm for either of the parties resulting from the granting or the refusal of the injunction’.

But how can a defendant ensure that its interests are weighed up, especially if an application for a preliminary injunction is sought ex parte? And how can a defendant rebut the applicant’s requirement under article 62(4) to provide:

‘… reasonable evidence in order to satisfy [the Court] with a sufficient degree of certainty that… the applicant’s right is being infringed, or that such infringement is imminent’?

The answer is the protective letter. The right to file such a letter and what it should contain are set out in detail in rule 207 of the UPC Rules of Procedure (‘RoP’).

Who can file a protective letter?

Rule 207(1) RoP says that where

‘a person entitled to start proceedings under Article 47 UPCA considers it likely that an application for provisional measures against him as a defendant may be lodged before the Court in the near future, he may file a protective letter’. Article 47(6) says that ‘any other natural or legal person, or anybody entitled to bring actions in accordance with its national law, who is concerned by a patent, may bring actions in accordance with the RoP’.

In other words, any person, which includes a company, who concludes that (a) a third-party patent is of concern and (b) that there is a likelihood that such a patent could be asserted by way of an application for provisional measures, can file a protective letter.

When might a person be ‘concerned’ to do so? The defendant may already be aware of a patent of concern simply by having operated in the sector and knowing their competitors. This might become more urgent if the defendant is planning to launch a product or service which might infringe a competitor’s known patents. The defendant might become concerned after conducting freedom to operate analysis and identifying a potentially blocking patent. Finally, the defendant will be directly and urgently concerned if they receive a notice from the patent proprietor about the existence of the patent or a letter before claim. In all these cases, the concerned person would be advised to file a protective letter.

What should the protective letter say?

Rule 207 RoP sets out what the protective letter must include. The letter will not be accepted by the UPC Registry if these formal requirements are not met. If there are deficiencies in the letter, the Registrar will inform the defendant and allow them to correct the deficiencies.

1. The letter must identify itself as a protective letter.
2. The letter must be in the language of the patent.
3. The letter must name the defendant(s) and their UPC representative, including their postal and electronic addresses and the names of the persons authorised to accept service.
4. The letter must name the presumed applicant for the provisional measures, including their postal address and (if known) the electronic addresses for service and the names of the persons authorised to accept service.
5. Where available, the letter must identify the patent number and provide information about any prior or pending proceedings relating to that patent before the Court, the European Patent Office (‘EPO’) or any other court or authority.

The RoP says that a protective letter ‘may contain’ the following, although the letter will be unlikely to be useful if it does not do so:

1. The reasons why the patent is invalid.
2. What facts are being relied on, which may include a challenge to the facts expected to be relied on by the presumed applicant.
3. Any available written evidence relied on.
4. The arguments of law, including the reasons why the application should be rejected.

In addition, good practice suggests that they should also include the following:

1. The reasons why the patent is not infringed.
2. The arguments as to why allowing the application would be disproportionate in the circumstances – e.g. explaining why financial remedies are sufficient, why there is a lack of urgency (perhaps if there has been pre-action correspondence or earlier threats), why on the balance the interests of the defendant should be protected from unreasonable financial harm, and so on.
3. The reasons why an injunction should only be granted after an oral hearing. Some letters reference the human right to a hearing.
4. Finally, why security for compensation should be required from the claimant if the preliminary injunction is granted.

If the Registry accepts the protective letter and the official fee is paid, it will record the date of receipt and assign a number to the letter. It will provide details of the letter to all divisions. If an application for provisional measures has already been lodged, the judge(s) dealing with it will also be informed about the letter.

To maintain a protective letter on the Register, a renewal fee must be paid every six months.

Impact of the protective letter

Once the protective letter is lodged with the Registry it will remain confidential under rule 207(7). It will simply sit there (subject to payment of renewal fees) undiscoverable, like a mine, until such time as an application for provisional measures is filed in relation to the patent against one of the parties named on the protective letter. Then pursuant to rule 207(8) the Registrar will forward a copy of the letter to the appointed panel or judge together with the application for provisional measures. The Registrar will also forward a copy to the letter to applicant. At this point two further rules come into play:

First, rule 209(5) says:

‘If the patent the subject of the Application is also the subject of a protective letter pursuant to rule 207 the applicant may withdraw the Application pursuant to paragraph 4’. Paragraph 4 says: ‘If the applicant has applied for provisional measures without hearing the defendant and the Court decides not to grant provisional measures without hearing the defendant the applicant may withdraw the Application and may request that the Court order that the Application and the contents of the Application remain confidential’.

In other words, having seen the letter, if the application will not be ex parte, the applicant can decide to withdraw their application without the defendant knowing. Thus, the success of a well-crafted letter in dissuading an applicant from pursuing provisional measures and, indeed, an infringement action, may be unheralded!

Second, rule 209(2) becomes relevant – i.e. whether the Court informs the defendant about the application and allows them (a) to file an objection and (b) to attend the hearing about the application. In particular, rule 209(2)(d) says:

‘In exercising its discretion pursuant to paragraph 1, the Court shall in particular take into account – any protective letter filed by the defendant; the Court shall in particular consider summoning parties; to an oral hearing if a relevant protective letter has been filed by the defendant.’

While clearly an excellent result if a letter is sufficient to discourage an applicant from proceeding with their application (and possibly an infringement action), it is this second effect that is a particularly critical objective of the letter – i.e. to ensure that the application is at least heard inter partes, thus giving the defendant an opportunity to argue against the granting of the preliminary injunction.

Costs and filing logistics

The official Court fee for a protective letter is a modest €200. The UPC representative pays the fee when they file the protective letter. The Registrar will not formally lodge the letter until the fee is paid. The six-monthly renewal fee is €100.

The main cost, however, is in preparing the protective letter. It is likely to be time consuming, in particular if it is necessary to conduct an analysis of infringement and invalidity. That said, any work conducted previously in analysing a competitor’s patents, for example for an offensive opposition at the EPO, can be repurposed for the letter to save costs. Also, preparing the letter can save time and costs in preparing a defence and counterclaim if the patent proprietor brings an action on the merits, and of course, in relation to an objection and / or hearing on the application.

Filing the protective letter at the Registry is not easy in practical terms. The case management system (‘CMS’) is unwieldy. The letter and any associated evidence need to be saved in a PDF/A format and uploaded individually by the UPC representative along with an electronically signed covering letter. Our top tip is to allow plenty of time (at least a day) for filing – the CMS takes a long time to digest the documents being uploaded.

Can the protective letter be filed in respect of an opted-out patent?

A European patent (‘EP’) that is opted-out cannot be enforced at the UPC while it remains opted-out. However, provided the EP has not been subject to an earlier action in a national court, then pursuant to article 83(4) UPCA that opt-out can be withdrawn at any time. Withdrawing an opt-out can be done in a day, after which the patentee is at liberty to file an action with the UPC. Therefore, even with an opted-out EP, there remains an inherent risk of UPC-wide provisional measures with little or no notice.

Accordingly, it is advisable to file a letter in respect of an opted-out EP if there is a risk of the patentee withdrawing the opt-out and enforcing the patent at the Court.

Recent case law

There has been some case law at the UPC that has considered protective letters. In myStromer AG v Revolt Zycling AG a preliminary injunction was granted ex parte notwithstanding the presence of a letter. Revolt’s letter was weak and various commentators have said that, in fact, it ‘emboldened’ the UPC to disregard it. The letter failed to address validity at all, it was unconvincing in relation to non-infringement and its arguments on patent exhaustion had already been considered, and rejected, by a Swiss court. To be effective, a letter needs to be carefully and thoughtfully crafted.

A more positive effect was seen in VusionGroup v Hanshow. In this case there was an application for a preliminary injunction based on a Unitary patent (and so there was no possibility of opt-out). Although most commentary on this case has been about the Court’s assessment of non-infringement, the defendant had filed a protective letter and it seems likely that this played a part in the Court ultimately deciding not to grant the injunction.

More recently, in Dyson v SharkNinja the UPC limited the number of validity attacks in a preliminary injunction to three. Therefore, it may be prudent to likewise limit, or at least rank, the key invalidity and other arguments by strength in the protective letter to ensure that they are properly considered by the Court.

In Abbott v Sibio, there were two applications for preliminary injunctions, one based on a parent patent and the other based on a divisional. Both patents had been opted-out, but the opt-outs were withdrawn by Abbott and the applications for preliminary injunctions filed quickly. On the parent case, Sibio had filed a protective letter, arguing for non-infringement. No protective letter was filed for the divisional, but the Court decided that the divisional was probably invalid for added matter. However, even though the protective letter filed on the parent argued for non-infringement, when it came to the hearing, Sibio did not rely on those arguments, presumably because they were not strong enough. The injunction was granted. However, Sibio at least was given the opportunity to defend against the application by Abbott.

Concluding remarks

The UPC is busy. Patent proprietors are increasingly taking advantage of the availability of provisional measures, particularly preliminary injunctions. Such injunctions are powerful and are likely to have a substantial commercial impact on the defendant if granted. A protective letter is a critical tool to mitigate the risks of a provisional measures being granted ex parte or at all. But to be effective, a protective letter needs to be prepared carefully and thoughtfully, and (ideally) it should not simply re-hash arguments previously rejected by other courts or the EPO. The letter does not have to win the case, but it must avoid undermining arguments in future proceedings and it must raise sufficient doubts in the Court for it at least to demand a hearing on the application. Such care can be expensive. But set against an ex parte preliminary injunction that cost is justifiable. Further, the preparation of the letter can be very valuable when the defendant needs to quickly raise objections to an application, for the hearing of the application, and in the main action to overcome the time disadvantage the defendant faces in preparing its defence and counterclaim.

Sean Jauss and Matthew Naylor are partners at Mewburn Ellis LLP.