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On 11 January 2024, the Court of Justice of the European Union (CJEU) handed down an important decision on the allowability of the strict liability compensation regime for injury caused by a provisional measure based on an intellectual property right that is later found to be invalid.

Background to the case: Mylan AB v Gilead
Gilead was the owner of a supplementary protection certificate (SPC) covering its blockbuster HIV-1 drug TRUVADA. In 2017, based on this SPC, Gilead sought and obtained a preliminary injunction from the Finnish Market Court (Markkinaoikeus) to block generic entry by Mylan. In 2019, the SPC was held invalid by the Finnish Court, whose judgment became final in 2020. Mylan then applied to the Finnish Court for an order that Gilead pay it compensation for the damage caused by the enforcement of the provisional measures. Mylan relied on Finnish law, which provides for strict liability, i.e. liability without fault.

The question has arisen whether this Finnish legislation is compatible with Article 9(7) of Directive 2004/48/EC (the Enforcement of intellectual property rights Directive). This provision stipulates an ‘appropriate compensation’ for injury caused by the enforcement of an invalid intellectual property right. However, in 2019, the CJEU held in Bayer Pharma that the Enforcement Directive does not preclude national legislation that provides that a party shall not automatically and in any event be compensated, even if the patent in question is invalid. The CJEU invited the national court to take due account of all the objective circumstances of the case, including the conduct of the parties, in order to determine, among other things, that the IP owner has not abused those measures. Refering to Bayer Pharma, Gilead argued that the ‘appropriate compensation’ as provided in the Enforcement Directive precludes a strict liability compensation regime.

CJEU: strict liability can also be compatible with the Enforcement Directive
Although in Bayer Pharma the CJEU permitted the application of national legislation that excludes strict liability regimes, it ruled in the present Mylan/Gilead case that national legislation providing for a strict liability regime can also be compatible with the Enforcement Directive. In EU Member States that have a system of strict liability of the applicant for these measures, the courts must take into account all elements of the case in order to adjust the 'appropriate compensation'. In particular, courts should take into account the extent to which the defendant (i.e. the initial alleged infringer) has played a part in the occurrence or aggravation of the injury.

With this decision, the CJEU gives the Member States a certain level of freedom with regard to compensation for unjustified preliminary injunctions. In conclusion, a system without strict liability is compatible with the Enforcement Directive (Bayer Pharma). A system with strict liability may also be compatible with the Enforcement Directive (Mylan/Gilead), provided that all the circumstances of the case, including the role of the defendant, are taken into account.

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