Short Summary
The Court of Appeal of the Unified Patent Court rejected Volkswagen AG's appeal challenging the Munich Local Division's refusal to dismiss infringement actions brought by Network System Technologies LLC (NST). Volkswagen had raised preliminary objections regarding UPC jurisdiction over damages in the UK and Northern Ireland and the validity of opt-out withdrawals, and had sought dismissal under Rule 361 RoP on grounds that NST lacked standing and that the Statement of claim was insufficiently substantiated. The Court of Appeal held that the Court of First Instance has discretion to defer preliminary objections to the main proceedings, and that Rule 361 RoP is reserved for clear-cut cases and does not require a full exchange of arguments and evidence.
Detailed Summary
Network System Technologies LLC (NST) initiated three parallel patent infringement actions against Volkswagen AG before the Munich Local Division of the Unified Patent Court, based on 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. After the acquisition, the opt-outs were withdrawn on behalf of NST. 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 with a very large number of embodiments but provided a detailed claim chart and infringement report for only one embodiment (the DRA79x SoC).
Volkswagen filed preliminary objections under Rules 19 and 20 RoP and requests under Rule 361 RoP (action manifestly bound to fail). At the hearing, Volkswagen restricted its preliminary objection to two grounds: (1) the UPC lacks jurisdiction over damages arising in the UK and Northern Ireland, and (2) the UPC lacks jurisdiction because the opt-out withdrawals were invalid, as they were filed by an attorney of Simmons & Simmons who was not a registered representative at the time, and no valid power of attorney was submitted. Volkswagen also restricted its Rule 361 request to two arguments: (1) NST lacks standing to sue because the Statement of claim contained no allegation or evidence of entitlement to damage claims for past infringements, and (2) the Statement of claim lacked sufficient substantiation because only one embodiment was detailed.
NST countered that the UPC's jurisdiction over UK and Northern Ireland damages was a matter for the Munich LD to decide, that the opt-out was validly withdrawn without requiring submission of a power of attorney, that Rule 361 serves only to bar proceedings evidently lacking cause of action, that NST as patent proprietor is entitled to bring the action, and that the scope of infringement was sufficiently clear per standard practice in national courts of Contracting Member States.
The Munich LD rejected the preliminary objections in part and deferred the remaining part for decision in the main proceedings, and rejected the Rule 361 requests in full. Volkswagen appealed.
On appeal, the Court of Appeal (Second Panel: Rian Kalden, Ingeborg Simonsson, Patricia Rombach) rejected all of Volkswagen's requests. Regarding the preliminary objections, the Court held that the Court of First Instance has discretion to either decide on a preliminary objection or defer it to the main proceedings, and that the Munich LD did not abuse this discretion. On the jurisdiction over UK and Northern Ireland damages, the Court found this was a substantive matter to be decided in the main proceedings. On the validity of the opt-out withdrawal, the Court found that a power of attorney is not required to be submitted when a withdrawal of opt-out is done by a registered UPC representative.
Regarding the Rule 361 requests, the Court held that proceedings under Rule 361 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 found that the Munich LD correctly allowed NST to comment and submit further evidence. On standing, the Court 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 Rule 361 but for the Court of First Instance to decide in the main proceedings. On substantiation of embodiments, the Court held 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 does not result in an action manifestly lacking any foundation in law.
The Court also rejected NST's request for a cost decision, holding that under Rule 242.1 RoP, if the Court of Appeal's decision is not a final order concluding the action, no cost order will be issued. The costs of the appeal proceedings were to be addressed by the Munich LD in its cost assessment in the main proceedings, bearing in mind that Volkswagen was the unsuccessful party.
Practitioner Note
This case demonstrates the evidentiary and procedural standards applied in patent matters before Luxembourg (LU). Understanding the court's reasoning in Volkswagen AG vs Network System Technologies LLC is valuable context for structuring arguments or assessing risk in similar proceedings.
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