AUDI AG v. Network System Technologies LLC

Network System Technologies LLC (NST) initiated three parallel infringement actions against Audi AG before the Munich Local Division of the Unified Patent Court, based on three European patents (EP 1 875 683, EP 1 552 399, and EP 1 552 669). NST had acquired these patents from Philips, which had previously opted them out of UPC jurisdiction; NST subsequently withdrew those opt-outs. NST sought damages for alleged patent infringements that occurred prior to its acquisition of the patents, and also claimed damages arising in the UK and Northern Ireland. NST alleged infringement by a very large number of embodiments but provided a detailed claim chart and infringement report for only one embodiment.

Audi filed preliminary objections under Rules 19 and 20 RoP and requests under R.361 RoP (action manifestly bound to fail). The Munich Local Division rejected the R.361 requests in full, rejected the preliminary objections in part, and deferred the remaining part for decision in the main proceedings. Audi appealed.

Audi's arguments on appeal included: (1) the UPC lacks jurisdiction over damages suffered in the UK and Northern Ireland, and this objection should have been decided immediately rather than deferred; (2) the UPC lacks jurisdiction because the opt-out withdrawal was invalid, as it was filed by an attorney of Simmons & Simmons who was not a registered representative and no valid power of attorney was submitted; (3) NST lacks standing to sue because the Statement of claim contained no allegation or evidence of NST's entitlement to damage claims for past infringements; and (4) the Statement of claim lacked sufficient substantiation, as only one embodiment was detailed, which contravenes R.13.1(n) RoP and the principle of efficiency.

NST countered that: the jurisdiction question regarding UK and Northern Ireland damages was for the Munich LD to decide at its discretion; the opt-out was validly withdrawn without need for a power of attorney; R.361 RoP serves only to bar proceedings evidently lacking cause of action and should not unduly restrict access to justice; NST as patent proprietor is entitled to bring the infringement action and claim damages for past infringement; and the scope of the proceedings was sufficiently clear and in accordance with standard practice in national courts of Contracting Member States.

The Court of Appeal, composed of Presiding Judge Rian Kalden and Judges Ingeborg Simonsson and Patricia Rombach, rejected all of Audi's requests. On the preliminary objections, the Court held that the Court of First Instance has discretion to either decide on a preliminary objection as soon as practicable or to defer it to the main proceedings, and Audi did not demonstrate that the Munich LD's exercise of discretion was erroneous. On the R.361 requests, the Court held that proceedings under R.361 RoP should not result in a full exchange of arguments and evidence but must be reserved for clear-cut cases, as indicated by the word 'manifestly.' The Court further held that the question of whether claims have been sufficiently argued and substantiated in the Statement of claim is not a matter to decide under R.361 RoP but is for the Court of First Instance to decide in the main proceedings. The Court also found that a Statement of claim that sets out in detail why one infringing embodiment infringes the patent and includes a list of further embodiments with similar structure allegedly infringing for essentially the same reasons does not result in an action manifestly lacking any foundation in law. The Court rejected NST's request for a cost decision, holding that R.242.1 RoP means the Court of Appeal will not issue a cost order when its decision is not a final order concluding the action, but noted that the Munich LD should include the costs of these appeal proceedings in its cost assessment in the main proceedings, bearing in mind that Audi was the unsuccessful party.