The Court of Appeal (CoA) of the Unified Patent Court (UPC) addressed a request for suspensive effect of an appeal and ruled that managing directors of an alleged patent-infringing company cannot be held liable as “intermediaries” under Article 63 of the Agreement on a Unified Patent Court (UPCA). Koninklijke Philips NV v. Belkin GmbH, UPC_CoA_579/2024, ORD_53377/2024 (UPC CoA Oct. 29, 2024) (Rombach, J.)

In contrast to German law (for example), appeals before the UPC generally do not have suspensive effect (See Article 74(1) of the UPCA). Thus, first instance decisions are immediately enforceable under Article 82 of the UPCA and Rule 354 of the UPC Rules of Procedure (RoP), which can have significant economic implications, particularly in the context of injunctions against the affected companies. To mitigate such effects, an application for suspensive effect may be filed under Rule 223.1 of the RoP.

In the present case, Philips initiated an infringement action against the Belkin Group before the Local Division Munich (CFI_390/2024), targeting not only the Belkin Group but also its subsidiaries’ managing directors. In its first instance decision, the Munich court ruled in favor of Philips and granted an injunction against Belkin and its subsidiaries’ managing directors, classifying the latter as “intermediaries” within the meaning of Article 63(1), Section 2 of the UPCA. Belkin appealed and requested suspensive effect under Rule 223.1 of the RoP.

The CoA partially granted this request, ordering suspensive effect with regard to the injunction against the managing directors. The CoA ruled that the suspensive effect of an appeal is an exception that can only be ordered in special circumstances. This involves determining whether the appellant’s interest in maintaining the status quo until the decision of the appeal exceptionally outweighs the respondent’s interest in enforcement. The CoA clarified that such circumstances exist where the decision being appealed is manifestly wrong. Whether this is the case – and whether there is, therefore, an evident violation of the law – is assessed on the basis of the factual findings and legal considerations of the first instance decision. If these findings or legal considerations prove to be untenable on summary examination, suspensive effect must be ordered.

In the present case, the CoA found a manifest error of law in the classification of the managing directors as “intermediaries” within the meaning of Article 63 of the UPCA and Article 11 of Directive 2004/48. It reasoned that managing directors, acting in their official capacity, represent the company itself and are not external to it. Therefore, the appellant company cannot be a “third party” in relation to its CEO. Accordingly, liability under Article 63(1), Section 2 of the UPCA as an intermediary cannot arise solely from the CEO functioning as a managing director.

Consequently, the CoA granted suspensive effect for the injunction against the managing directors but dismissed the application for suspensive effect in all other respects.

Practice Note: Practitioners should carefully consider the rule exception framework when applying for suspensive effect before the UPC. To be successful, a convincing, case-specific justification [...]

Continue Reading