AG Emiliou Confirms His First Opinion in BSH Hausgeräte: Article 24(4) of Brussels I bis Has Reflexive Effect

The author of this post is Lydia Lundstedt, who is an Associate Professor and Senior Lecturer at Stockholm University, and currently a STINT fellow at the University of Botswana. In the interest of transparency, the author makes known that she previously wrote an expert legal opinion on behalf of BSH Hausgeräte.

On 5 September 2024, Advocate General (AG) Emiliou’s second opinion on the interpretation of Article 24(4) of Regulation (EU) No 1215/2012 (Brussels I bis) in BSH Hausgeräte (C-339/22) was published. See here for a brief synopsis of the facts and the questions referred and  here for a review of the first opinion.

As reported by Marta Requejo Isidro earlier on this blog here, after the AG’s first opinion was published, the case was reassigned to the Grand Chamber and a new hearing was held focusing solely on one question. In his second opinion, the AG expands upon his earlier reasoning for the answer to this question.

The issue is, as the AG puts it, “whether, under that regulation, the courts of the Member States also lack jurisdiction to rule, either principally or as an incidental question, on the registration or validity of third-State patents”.

Just like before, his answer is that Article 24(4) of the Brussels I bis Regulation

must be interpreted as meaning that that provision does not apply in respect of the validity of a patent registered in a third State. However, the courts of the Member States, where they have jurisdiction under another rule of that regulation, are entitled to not adjudicate on that issue.

Before reaffirming this conclusion, the AG: (1) rejects the proposition that Article 4(1) of the Brussels I bis Regulation is unconditionally applicable; (2) reiterates the reflexive effect solution he previously advocated for in his first opinion; and (3) examines a third way.

Unconditional Application of Article 4(1)

The AG rejects on two grounds the unconditional application of Article 4(1), pursuant to which the Member State court where the defendant is domiciled, would be required to rule on the registration or validity of third-State patents, regardless of whether the validity issue is raised principally (erga omnes), or as an incidental question (inter partes).

First, he observes that “a clear principle of customary law” holds that one State cannot order an Intellectual Propery office of another State to amend or delete an entry in their patent register, or even make an erga omnes declaration as to the validity of a patent in that register. The AG clarifies however that “it would not, in principle, be contrary to customary international law for the courts of a Member State, seised of a claim against a ‘local’ defendant and concerning the infringement of a third-State patent, to rule on the validity of that patent as a preliminary or incidental question.”

Second, the AG rejects a literal and systematic interpretation of the Regulation whereby a Member state court that is seised with a dispute on the basis of a rule in the Brussels I bis Regulation would be obligated to exercise jurisdiction unless another rule in the regulation (i.e. Articles 33-34) permitted it to decline jurisdiction in favour of the courts of the third State.

The AG opines that the Regulation must be interpreted in its context, which is to distribute jurisdiction in civil and commercial matters between the courts of the Member States.

In addition, he rejects the argument that because the EU legislature specifically regulated when a Member State court could decline jurisdiction in favour of a third state court for lis pendensand related proceedings situations (Article 33-34), but did not for situations where the subject matter falls within the exclusive jurisdiction of a third State, that the EU legislature intended that in the latter case, the Member States were prohibited from declining jurisdiction.

Lastly, he notes that an unconditional application of Article 4(1) would not be consistent with the sound administration of justice because an invalidity judgment issued by a Member state court would not be recognised in the third state, and could subject persons established in the European Union, who are holders of third-State patents to face, before the courts where they are domiciled, invalidity proceedings that are ineffective or even abusive.

Reflexive Effect

Pursuant to the AG’s reflexive effect interpretation, Article 4(1) of the Brussels I bis Regulation gives the Member State courts jurisdiction to adjudicate disputes involving the validity of patents registered in third States, but permits them to not exercise that jurisdiction in accordance with their national law.

The AG suggests that the Member States courts could use their national law to reflect the solutions that follow from Article24(4), namely (1) to decline to adjudicate a claim that has as its object the validity of a third-State patent (erga omnes) and (2) to refuse to rule (inter partes) on an invalidity defence raised in an infringement action and stay that action while waiting for the authorities in the third State to rule on validity.

The AG observes that the courts of the Member States “are not completely deprived of jurisdiction” because they have “a degree of flexibility to take into account the circumstances of each individual case and, where appropriate, to exercise that jurisdiction where the parties would not receive a fair trial before the courts of the third State involved, in order to avoid a denial of justice”. The AG therefore rejects the argument that this solution would “call into question the ‘unified and coherent’ nature of the Brussels regime” on the ground that the issue is governed by the Brussels regime with only a “partial and circumscribed reference to the national law”. The AG opines that this interpretation would contribute to the coherence of the Brussels regime because “it would ensure that, within that framework, similar solutions are applied to similar situations”.

In addition, the AG rejects the argument that this interpretation would jeopardize legal certainty and foreseeability because the Member State courts have only “narrow discretion to refrain from ruling on certain matters, where that ‘would reflect’ the solutions applicable under Article 24 of the Brussels I bis Regulation”. Lastly, the AG also notes that the uniform application of the Brussels I bis is not jeopardized because it is widely recognised, in all Member States, that national courts should not adjudicate on the invalidity of another State’s patent.

A Third Way

The AG states that a third way is to interpret Article 4(1) in the light of its context as an instrument to allocate jurisdiction between the Member States, and customary international law, to mean that it does not give the Member States jurisdiction to rule on the registration or validity of third-State patents with erga omnes effect, but does give them jurisdiction to rule on the validity of such patents with inter partes effect, such as when the issue is raised as a defence in an infringement action.

While the AG finds this interpretation to have several merits, and he rejects or at least minimizes the potential criticisms against it, he does not ultimately adopt it. First, the AG states that interpreting Article 4 in such a way that it does not give jurisdiction to the Member States to invalidate third-State patents with  erga omnes effect follows logically from customary international law. Second, he states that this interpretation would ensure a degree of consistency between the solutions applicable to intra-EU disputes and those applicable to relations with third States, while respecting the text of Article 24(4). He adds that it would also reflect the solutions already adopted under the law of the Member States. Third, he notes that this interpretation would offer predictability because it derives directly from EU law and gives a uniform solution that would apply throughout the European Union.

The AG also raises, but refutes, three points of criticism against this interpretation. First, the AG states that as Article 4 is based on a personal link to the defendant and does not itself contain limits on the subject matter, the third way interpretation would be in conflict with the logic of Article 4. The AG notes however that Article 24 limits the subject matter of Article 4 with respect to patents registered in other Member States so it would simply be a matter of recognising implicit limitations, dictated by international customary law, in disputes involving third State patents.

Second, the AG notes that several sources, namely, the official reports on the Brussels instruments, Opinion 1/03, and recital 24 of the Brussels I bis Regulation suggest that the courts of the Member States do in fact have (unconditional) jurisdiction under Article 4(1) to adjudicate claims relating to matters such as the registration or validity of patents, where a third State is involved. The AG notes however that the reports are not binding, the passage in Opinion 1/03 could be regarded as obiter dictum, and the tension with recital 24 of the Brussels I bis Regulation would be very limited.

Third, the AG states that this third way would mean that the Member State courts would be prohibited under EU law from ruling with erga omnes effect on the registration or validity of third-state patents, even if the courts of that third State do not offer the guarantees of a fair trial. Again, the AG refutes this criticism because “the Member States would exceed the limits set by customary international law if they were to make an erga omnes declaration on the invalidity of a third-State patent even for reasons of ‘necessity’ … , and their judgment would still have no real practical value”. Moreover, the AG notes that pursuant to this third way interpretation, Article 4 gives the Member State courts jurisdiction to adjudicate on validity with inter partes effect if the issue is raised as an incidental question in an infringement action or in an action for a declaration of non-infringement, which is sufficient to protect the interests of the parties.

Comment

After reading the AG’s analysis of the third way, I am surprised that he does not suggest it. First, it “avoids extending to the international sphere” the “excessive solution” adopted for intra-EU disputes, which he encourages the EU legislature to abandon. Second, as he notes, the third way offers predictability and uniformity throughout the EU because it offers a solution grounded in EU law rather than a mix of EU and Member State law.

The reflexive effect solution, if adopted, is likely going to raise questions on the extent of the Member State courts’ discretion. For instance, I am still not completely clear whether a Member State court has the discretion to adjudicate an invalidity defence as an incidental question, even when there are no denial of justice concerns. While the AG emphasises the Member State courts’ “narrow discretion”, he also states that this solution “does not oblige the courts of the Member States not to rule on such a plea. They may do so where they consider it appropriate…”) (footnote 42). This begs the question whether it is only appropriate when there otherwise would be denial of justice.

The AG notes that it is widely recognised that the Member States’ national courts should not adjudicate on the invalidity of another State’s patent. While this is certainly true when it comes to erga omnes rulings, it is not clearly the case for inter partes rulings. Before GAT, C-4/03, where the CJEU ruled that “all proceedings relating to the registration or validity of a patent, irrespective of whether the issue is raised by way of an action or a plea in objection”, fell within the exclusive jurisdiction of the courts of the Member State where the patent was registered, some Member States (and Switzerland) did in fact make inter partes rulings on the validity of foreign patents in infringement actions. In addition, Article 2:401(2) of the principles adopted by the European Max Planck Group on Conflict of Laws in Intellectual Property (CLIP) and Section 212(4) of the American Law Institute, Intellectual Property: Principles Governing Jurisdiction, Choice of Law, and Judgments in Transnational Disputes (2008) advocate for limiting exclusive jurisdiction to situations where the validity is raised ergna omnes.

The real reason (I believe) for choosing the reflexive effect interpretation and not the third way is to avoid tying the CJEU’s hands in a subsequent case concerning choice of court agreements referring to the courts of third States, where a more flexible solution might make sense. The AG notes that the application of the Brussels I bis to relations with third states “is delicate, long-standing and, what is more, cross-cutting”. That said, the situations involving exclusive jurisdiction over the matters closely related to another State (e.g., patent validity) and choice of court agreements are not completely congruent and may require different solutions. The first situation, as the AG rightly observes, raises issues of customary international law, while the latter raises issues of party autonomy.

Regardless of how the CJEU ultimately rules, the decision is likely to have a significant impact on cross-border IP infringement disputes as well as private international law in general.