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IT – clarification of relationship between infringement and invalidity proceedings / Supreme Court

21 May 2019

In a recent decision, the Italian Court of Cassation (Cass. Civ. judgement no. 9500 of 4 April 2019) clarified the relationship between patent infringement and patent invalidity proceedings simultaneously pending before different courts under Article 295 of the Italian Code of Civil Procedure (“CCP”).

According to Article 295 CCP the judge orders the stay of the proceedings anytime its solution depends on the solution of another case pending before the same or another judge (so called “necessary stay of the proceedings”).

The Court of Cassation’s decision dealt with an action of infringement and unfair competition brought before the Court of Trento by Schmid Rhyner AG (“Schmid”), the owner of the European patent no. EP 1.743.707 (“EP ‘707”), against Ecosystem Costruzioni s.r.l. (“Ecosystem”). After the infringement action had been initiated, Ecosystem brought a patent invalidity action against Schmid before the Court of Milan.

In both proceedings the courts appointed a technical expert. However, while in the infringement proceedings pending before the Court of Trento the court-appointed expert considered Schmid’s patent invalid, in the invalidity proceedings pending before the Court of Milan the technical expert concluded for the partial validity of the Italian portion of EP ‘707 and therefore Schmid filed a request for patent limitation pursuant to Article 79.3 IPC.

Following the filing of the court-appointed expert’s opinion, upon Schmid’s request, the Court of Trento stayed the infringement proceedings pursuant to Article 295 CCP until the issuance of a final decision on the invalidity action pending before the Court Milan.

Schmid filed a petition on jurisdiction under Article 42 CCP with the Italian Supreme Court against the Court of Trento’s order of stay arguing that:

(i) Article 295 CCP should be interpreted restrictively, on the grounds that the principle of the reasonable length of proceedings should prevail on the opposite need to avoid conflicting judgements, and

(ii) Schmid’s request for a stay of the proceedings represented an abuse because it followed the filing of the court technical expert’s opinion considering EP ‘707 invalid for lack of novelty and inventive step (whereas the opinion filed by the technical expert appointed by the Court of Milan was at least partially favourable for Schmid).

In particular, Schmid recalled the Court of Cassation’s judgement no. 2458 of 26 October 2006, according to which, when patent infringement and patent invalidity proceedings are simultaneously pending before different courts, the court dealing with the infringement action can assess the validity of the patent incidenter tantum, ie., by issuing a decision whose effectiveness is limited to the case at stake. Indeed, there is no Italian law expressly requiring the stay of patent infringement proceedings until the issuance of a final decision on the prejudicial question on the validity of the same patent.

Reviewing its precedents, the Court of Cassation pointed out that such restrictive interpretation was followed until its overruling decision no. 158339 of 25 July 2016. The reasoning followed by the Court in that decision can be summarised as follows:

(i) if the validity of the patent is challenged before another court, the infringement proceedings shall be necessarily stayed until a final decision on patent validity has been issued by the court dealing with the invalidity action. Indeed, the court of the infringement proceedings cannot decide the question of patent invalidity incidentally in order to avoid the risk of conflicting decisions, ie., “patents invalid but infringed”;

(ii) however, in case the decision on patent infringement has preceded the decision on its validity, the former shall not have res judicata authority on the prejudicial question of patent validity (ie., the judgement on patent validity shall not be final and irrevocable). Therefore, at most it could lead to a contrast between the practical (as opposed to juridical) effects of the two decisions, expressly solved by Article 77 of the Italian Intellectual Property Code (“IPC”) with the attribution of retroactive effects to the declaration of patent invalidity, except for the enforcement actions already carried out on the basis of the infringement decision;

(iii) it is worth noting that Article 77 IPC refers only to the case in which the decision on patent infringement has preceded the one on its validity. The fact that the Legislator felt it necessary to specifically address only the case in which the decision on patent infringement precedes the one on its validity (and not the contrary) would confirm that the decision on patent validity always prevails -due to its prejudicial nature- on the decision on patent infringement. Indeed, the assessment of the validity of a patent is a prerequisite for the decision of its infringement.

On that premise, the Court of Cassation rejected Ecosystem’s petition and confirmed the principle of law established in the above-cited decision of 2016. In particular, the Court stated that:

(i) the question on patent validity is undoubtedly prejudicial to the infringement question;

(ii) as a general rule, the court of the infringement proceedings can incidentally decide the issue of patent validity, if patent invalidity is raised as a defence to patent infringement claims. However, if the patent invalidity proceedings is simultaneously pending at first instance (ie., at the same stage of the infringement proceedings but) before another court, the court of the infringement proceedings shall stay the proceedings pursuant to Article 295 CCP;

(iii) indeed, Article 295 CCP is an exception to the general principle expressed by Article 34 CCP, according to which the judge can decide incidenter tantum all the questions that are prejudicial to the solution of the case pending before him;

(iv) when patent infringement and invalidity proceedings are pending simultaneously before different courts, what is relevant under Article 295 CCP is not that in the infringement proceedings the decision on patent invalidity, raised by way of exception, won’t have res judicata authority, but the fact that in the other proceedings the question on patent invalidity has to be decided with res judicata effects.

Lastly, as to the risk of an abusive use of Article 295 CCP, the Court excluded that Schmid’s request for a stay of the proceedings constituted an abuse, because Schmid made it as soon as it noted the contrast between the court’s technical opinions issued in the two proceedings.

The Court underlined the fact that the duplication of the assessment of the validity of the Italian fraction of EP ‘707 could have been avoided, had the infringement proceedings been stayed previously. According to the Court this would further confirm the need and the opportunity, in patent litigation, to stay the infringement proceedings anytime invalidity proceedings on the same patent is simultaneously pending before another court.

This decision confirms the principle of law expressed in the aforementioned previous decision of 25 July 2016 of the Court of Cassation departing from the consolidated interpretation of Article 295 CCP. Lower courts which so far reluctantly followed such orientation will likely now abide.

It should be noted, however, that patentees will always have available the remedy of urgency proceedings, traditionally widely used in Italy also because of the generosity of courts when assessing the urgency requirement (if compared to several other European jurisdictions). Indeed, Article 295 CCP does not apply to urgent proceedings being such proceedings “ontologically” incompatible with the order of “necessary stay of the proceedings”.

A copy of the decision (in Italian) can be read here.

Headnote and summary: Luca Giove and Giulia Pasqualetto, Studio Legale Giove