One of the most important milestones in the patent space last year was the June launch of the Unified Patent Court (UPC), a European Union (EU) venue for infringement and validity actions with jurisdiction over 17 participating EU member states. The UPC has the authority to impose not just damages but also both preliminary and permanent injunctions spanning all 17 countries. While the potential scope of such injunctive relief makes it a powerful tool for plaintiffs, recent developments concerning injunctions have not been uniformly positive for patent owners. Though the court issued its first preliminary injunction in September, ruling in the process that NPEs are eligible for such relief, it overturned that injunction on February 26 due to concerns that the underlying patent is invalid. Nonetheless, a companion ruling addressing the impact of defendant NanoString Technologies's related bankruptcy, along with another notable NPE joining the fray with its first UPC case, provide clues about how such plaintiffs may use the EU's new court to gain leverage in multijurisdictional disputes.
Amidst Setbacks Elsewhere, NanoString Gets Both Good and Bad News from the UPC
The underlying dispute has involved a series of lawsuits filed against NanoString by competitor 10x Genomics and certain partners, including the President and Fellows of Harvard College (Harvard), variously targeting two of NanoString's flagship RNA detection products: its CosMx Spatial Molecular Imager and its GeoMx Digital Spatial Profiler, together responsible for most of its revenue. The dispute first hit the courts in the US in May 2021, when 10x sued NanoString in the District of Delaware, adding a second complaint against the company in February 2022. 10x next sued NanoString in the Munich Regional Court the following month. On June 1, 2023, 10x then became one of the first companies to utilize the UPC with another suit against NanoString, the first to ever assert a unitary patent. (A European Patent with unitary effect, or unitary patent, is a new type of patent covering all EU member states that have joined the UPC, over which the UPC has sole jurisdiction. In contrast, a "traditional" European (EP) patent, available prior to the UPC, is really just a bundle of national patent rights effective in countries selected by the applicant; the UPC will share jurisdiction over EP patents with national courts during a transitional period.)
NanoString saw significant setbacks in each leg of this multinational campaign last year. In late April, NanoString filed a motion in the second Delaware case that asked the court to bar coplaintiffs Harvard and 10x "from continuing to pursue or enforce a potential injunction in Germany"—i.e., a request for an anti-suit injunction (ASI)—alleging that Harvard (as patent owner) and 10x (as exclusive licensee) were obligated to license the patents on an "open and non-exclusive basis" because Harvard had used a grant from the US government to develop the technology. However, just one day later, the Munich court issued an anti-anti-suit injunction (AASI) that barred NanoString from pursuing the Delaware motion any further. This marked the first time that a German court had issued an AASI in a life sciences case; such orders have been more common in disputes over standard essential patents (SEPs). That same May, the Munich court then issued a ruling of indirect infringement against NanoString, imposing a permanent injunction barring the defendant from selling its products in Germany.
The next bit of bad news came from the UPC: In September 2023, the court issued its first-ever decision granting a preliminary injunction, enjoining NanoString from selling its products in all 17 EU member states participating in the UPC. In granting that injunction, the UPC's Munich Local Division rejected an argument by NanoString that Harvard, as an NPE (albeit, one filing alongside an operating company licensee), lacks a "legitimate interest" in enforcing a preliminary injunction because as a licensor it only sought monetary damages. Not so, countered the UPC, holding that the relevant provision of the UPC Agreement "shows that the status as an NPE in itself has no significance for standing to file an application" for preliminary relief.
Another setback soon followed in Delaware: In November, a jury issued a $31M infringement verdict against NanoString, causing its stock price to plummet. The verdict pushed NanoString to file for bankruptcy in February, the company announcing that it had filed Chapter 11 proceedings in Delaware due to the "unusually large magnitude of the damages awarded by the jury". NanoString stated that this filing would allow it to "[s]tay all ongoing patent litigation against the Company worldwide", implicitly invoking the general principle followed by US courts that the automatic stay imposed when a company seeks Chapter 11 protection applies extraterritorially. To that end, both it and 10x filed a motion to stay in the UPC appeal with respect to the preliminary injunction in that case.
On February 27, the UPC Court of Appeal reversed the preliminary injunction, determining that the Munich Local Division applied an overly narrow interpretation of a key claim limitation and that it had been wrong to reject some of the defendant's arguments related to invalidity. In particular, the Court of Appeal found that the patent is likely invalid for lacking an inventive step (or, in US parlance, that it is likely invalid as obvious), based on which the injunction could not stand. NanoString confirmed in a press release that the ruling would allow it to "immediately resume sales of all CosMx products in 16 impacted UPC member countries"—with sales in the remaining member state, Germany, still subject to the aforementioned national injunction.
That said, the Court of Appeal's companion ruling that denied the parties' motion to stay was less positive for the defendant, though it left some key substantive questions unanswered. The court noted that UPC Rule of Procedure 311.1 requires it to "stay the proceedings for up to three months if a party is declared insolvent under the law applicable to the insolvency proceedings". However, while the court found that Delaware law applies here and acknowledged the bankruptcy court's order on automatic worldwide enforcement, it declined to determine whether the filing of Chapter 11 proceedings constitutes a "declaration of insolvency" under UPC Rule 311.1. Here, the court noted that in analogous rulings, Germany's Federal Court of Justice has treated the filing of a Chapter 11 petition as requiring a stay under German law, whereas the European Patent Office does not impose stays based on Chapter 11 proceedings. Rather than resolve that split, the Court of Appeal held that the stay should be denied on procedural grounds: Under applicable caselaw, it ruled that a stay should be denied where insolvency proceedings were initiated after the oral hearing, finding that denying a stay would be the fairest to both parties under the circumstances.
NPEs Test the UPC Waters—Most Recently, Atlantic IP
One of the most powerful aspects of UPC litigation is the potential for an injunction spanning up to 17 EU member states, as noted above. While the threat of such a sweeping injunction would ostensibly convey leverage no matter what the plaintiff's business model is, such a prospect is of particular relevance to NPEs. Although such plaintiffs lack a direct interest in getting an operating company's products pulled from the market, UPC actions (and their threat of injunctive relief) may provide a strong incentive to settle—meaning that they could play a similar role in filing strategies as actions filed before the US International Trade Commission (ITC), where NPEs do file even though injunctions (in the form of exclusion orders) are the only available relief.
Of course, unlike the US ITC, damages are also available at the UPC. Previously, the need to litigate in multiple national venues, with damages pursued on a country-by-country basis for smaller individual markets, deterred NPEs from litigating in Europe. However, the UPC could change the game significantly, enabling such plaintiffs to file one suit and potentially collect damages for infringement in 17 countries simultaneously. That large addressable market has caught the eye of multiple well-known NPEs; for instance, Acacia Research Corporation's Chief IP Officer, Marc Booth, told Managing IP before the UPC's launch that while his company had mostly avoided Europe in the past due to the need for piecemeal national litigation, the UPC's reach will make litigating there much easier—and would even make Europe its second choice, behind the US, for litigating its SEP portfolio. Others expressing interest in the UPC's large market include monetization firm Harfang IP Investment Corp.; its president, Christian Dubuc, has said that while Harfang was already interested in Germany, the UPC's larger market makes Europe "much more enticing".
NPE activity at the UPC could be further encouraged by a parallel surge in third-party funders' interest in the new court, again due to its combined market and the potential for damages spanning all UPC member states. Robin Davis, the chief US investment officer at Woodsford in New York, has said that this unified venue is a "big deal": "To have one single venue in the EU where one could potentially bring patent litigation that's funded in addition to or instead of the US is a big deal . . . It's very exciting".
Funders could play an even more critical role due to the higher cost of litigating before the UPC. Law firms will need to ramp up their European teams to adapt to the UPC, which means greater legal costs: Some estimate that UPC litigation could be five to ten times more expensive than litigating in a single country—and funders could very well fill that gap. Stephanie Southwick, investment manager and legal counsel at Omni Bridgeway, has remarked that costs will rise, and says that as a result, there is "going to be a much larger need for funding"—especially since many European attorneys cannot take contingency fees.
Despite the double draw of broad injunctive relief and damages, NPEs adopted a wait-and-see approach in the early days of the UPC, as RPX has previously covered. However, multiple NPEs have since dipped their toes into UPC waters—including more than one plaintiff known to have received litigation funding, at least for their US activity. As recently noted by JUVE Patent, inventor-controlled ICPillar LLC filed suit against ARM at the court's Paris Local Division in late December, after suing the same company in the Western District of Texas in March 2023. Also targeting semiconductor technology were a series of UPC cases filed in early January by another NPE plaintiff, Network System Technologies LLC (NST), against Audi, Volkswagen, and Texas Instruments—all defendants in the US leg of NST's litigation campaign. Public records indicate that NST is controlled by patent monetization veterans associated with multiple prior campaigns asserting former operating company patents—and they also point to the involvement of third-party litigation funding.
The latest NPE to file with the UPC is Lionra Technologies Limited, an affiliate of patent monetization firm Atlantic IP Services Limited, which on February 14 sued Cisco at the court's Hamburg Local Division. The filing marks another instance of an NPE targeting one of its existing defendants at the UPC, as Lionra had already sued Cisco twice in the Eastern District of Texas prior to filing this case—launching a third case against the company in East Texas the day before bringing the UPC suit. While the full UPC complaint is not available, the asserted networking patent—EP 2 201 740—is related to the sole US patent (7,738,471) that Lionra has asserted in its most recent East Texas complaint against Cisco, in which certain networking switches and fabric extenders are at issue.
Atlantic IP Managing Director Gerald Padian has spoken publicly about Lionra's new case, stating that there will be "more and more" NPE filings at the UPC going forward. In a recent interview with IAM, Padian echoed comments from other NPE principals, including Acacia's Booth, touting the value of the UPC's single addressable market—saying the court is a "critical" tool for that reason: "[T]he difficulty in Europe is the size of the markets. The Unified Patent Court helps tremendously. It makes it much more economical to license your technology in those areas. In the past, when infringement was happening around Europe and Asia, it just wasn't cost-effective to go after those infringers. Instead, you license the United States and be satisfied with it". Padian also hinted that Atlantic IP may soon use the UPC to kick off new campaigns instead of the US: "We're looking at bringing UPC-only campaigns without a US component first, and then go to the US second".
Since late 2018, about a dozen plaintiffs associated with Atlantic IP and armed with former operating company patents have initiated multiple litigation campaigns in the US, many of them with the explicit backing of Magnetar Capital, a hedge fund reporting $13.8B of assets under management (and described as an investor by Atlantic IP). For background concerning that relationship, the persons behind the web of Atlantic IP NPEs, and the US assertion efforts of those entities, all in the context of ever more third-party litigation funding backing patent litigation, see "Late 2021 Sees New Third-Party Backed NPE Campaigns" (January 2022). More on Lionra's most recent US complaint against Cisco can also be found here.
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