UPC: Better comply with UPC judgments – first penalty payment ordered | Allen & Overy LLP

On 18 October 2023, the Düsseldorf local division of the UPC in myStromer vs. Revolt Zycling (UPC_CFI_177/2023) imposed a EUR26,500 penalty on Revolt for breaching a preliminary injunction. This is the first penalty payment decision.

This decision provides some clarification of what constitutes an infringing offer and the criteria that may be taken into account in determining a penalty.

Background of the case

On 22 June 2023, myStromer applied for a preliminary injunction against Revolt for infringing patent EP 2 546 134 B1 for a “combination structure of bicycle frame and motor hub”. The Court granted the injunction and ordered Revolt to cease and desist selling its Opium e-bikes in the Netherlands, Germany, France and/or Italy (the Order). Despite serving the Order on Revolt, Revolt continued to exhibit the bikes at the Eurobike fair (albeit with the infringing part removed), waited until the following morning to delete Instagram offers, and delivered an infringing bike to a German dealer for exhibition during an open Sunday sales event on 24 September 2023. As Belgium was not targeted by the Order, Revolt confirmed to its Belgian dealers that they could still sell the bikes in Belgium also to customers from countries where the injunction applied.

MyStromer applied for a penalty order which the court granted. In its decision the Court shed light on what is meant by an offer of an infringing product in view of Article 25(a) of the UPCA.

Offer of infringing products

The Court stated that an offer is to be understood purely in economic terms. It includes any act aimed at the commercialisation of a product that falls within the scope of the patent.

The Court considered that the continued display of the e-bikes during the Eurobike fair several hours after the Order had been served constituted an offer, as the aim of a trade fair is to raise a customer’s interest in a product, in this case the infringing bikes.

The fact that Revolt removed the infringing functional features of the bikes while continuing to display them did not affect this conclusion, as customers expect a fully functional e-bike (and without the infringing features, the bike was not functional).

In addition, delivery of the bike for the exhibition by a dealer during an open Sunday sale event in September in Germany was also an offer, even absent the conclusion of any contracts.

Regarding the confirmation letter sent by Revolt to its Belgian dealers, Belgium was not one of the injuncted countries. The Court did not consider the sale of a bike to customers from an injuncted country by Belgian dealers was an infringement, considering that Revolt could credibly claim that customers would pick up their bike personally at the Belgian dealers premises, so sales were made outside the territorial scope of the injunction and the infringing products were also delivered from Switzerland to Belgium and handed over in Belgium.

Determination of penalty

The Court considered that the infringer’s conduct must be assessed when deciding on a penalty. In particular, the following factors must be taken into account:

• the type, scope and duration of infringement,
• the degree of fault of the infringer,
• the advantage the infringer derives from the infringement,
• the danger of past and future infringement to the patentee.
• In view of Revolt’s repeated infringement of the Order, the Court fixed a €26,500 penalty, divided as follows:
• EUR1,000 for the continued exhibition at the Eurobike fair,
• EUR500 for the late deletion of the Instagram offers,
• EUR25,000 for the open Sunday sale in Germany.

Main takeaways

An offer is to be interpreted broadly as any act that may raise a customer’s interest in the infringing products. Compliance with a cease and desist order requires that the infringer acts promptly to cease any potential infringing act and communication thereon, including on social media. The display of a product without the infringing features will not suffice to avoid a finding of an infringement of a cease and desist order and may lead to a penalty being imposed if and when from an objective perspective one has to assume that the object shown fulfils all integers of the claim. The behaviour of the injuncted party is scrutinized in detail to assess whether a penalty will be issued.

The decision is interesting because it is the first decision about actual enforcement of an order of the UPC. The UPCA and the rules comprise relatively little guidance on enforcement, mainly referring to the law of the Contracting Member State “where the enforcement takes place” (Art. 82 (3) UPCA, r. 354 (4) RoP). In its initial order, the Dusseldorf Local Division already had threatened penalty payments for non-compliance with the order up to EUR250,000, according to the German law practice.

As regards the height of the penalty ordered, it becomes clear that the court considered the delays in removing the product from the exhibition booth at the fair and in removing the social media advertisements much less severe than the later provision of an infringing product for a sales exhibition (new act of infringement). While a penalty payment of EUR26,500 on first glance does not seem very substantial, this is on the higher side of what German courts would usually order for a first non-compliance with a judgment, considering that essentially one act of infringement (Sunday sales event) was concerned.

What remains somewhat unclear is, how the UPC will interpret the place of enforcement which determines the applicable national enforcement law. In the present case, this was not an issue given a German local division ordered a penalty payment for acts committed within the territory of Germany. However, whether the place of enforcement will always be the seat of the first instance local division remains to be seen. When enforcement of payment claims comes into play (e.g. for damages), seizure of assets within the territory of one of the other UPC member states might also come into play.

Read more insights at our UPC hub.

Story originally seen here