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Milan's Court of Appeal's recent decision tackles frequent issues arising in patent litigation:

Including: disclosure, interface between the court and the EPO, contributory infringement and damages

09 September 2020

On 14 May 2020, the Court of Appeal of Milan handed down its decision on a complex but fascinating dispute between two producers of coffee-capsule technology. The case, which took seven years to be decided, included a number of the major issues which arise in patent disputes, some of which were settled in novel ways.

Relationship between judicial proceedings and EPO opposition proceedings

Very often in patent infringement proceedings before the Courts, a defendant counterclaims that the patent the subject of the dispute is null and void. Sometimes, such a claim may have already been brought as an opposition to the registration of  the patent before the competent IP Office, and this claim is then repeated in the  court proceedings as a defensive claim once an action has been started by the  patent holder. 

In the case at hand, both the court proceedings and the opposition to the patent registration were pending (and they were both at second instance, respectively before the Court of Appeal of Milan and the EPO Board of Appeal). For this reason, in the Court of Appeal of Milan proceedings, the defendant requested the suspension of the proceedings until the EPO Board of Appeal reached its decision. 

Article 120, Section 1, of Italian Legislative Decree no. 30/2005 (the “IP Code”) provides that, pending a patent registration before the ‘Ufficio Italiano Brevetti e Marchi’ (“UIBM”, the Italian IP Office), the Court cannot settle a case on the validity or infringement of a patent until the UIBM has granted that patent. However, no similar rule is currently in force with regard to the EPO procedure. 

For this reason the Court of Appeal of Milan rejected the suspension request. The Court found that under Italian law there is a ‘concurrent’ relationship, without any supremacy or preliminary link between Court and EPO proceedings. It held that EPO proceedings are not properly judicial in nature and are administrated by a ‘sui generis’ body, not comparable to the UIBM, so that article 120, section 1, of IP Code could  not apply.  

As a consequence, the Court retained full discretion in granting the suspension and, in the case at hand, decided not to grant it (the Court was also influenced by the fact that the opposition ended with a dismissal of the first instance opposition).

A confidential disclosure is not a disclosure for the sake of the novelty requirement

Generally the disclosure of an invention before the filing of a relevant patent precludes the necessary requirement for ‘novelty’ in the patent application, preventing the invention from being patented. But not all types of disclosure amount to the sort of disclosure which trips the novelty test wire. 

In particular, as confirmed by the Court of Appeal of Milan, the disclosure of the invention to a limited number of persons does not destroy the novelty requirement, if the recipient party is bound by a non-disclosure obligation. 

In the case at hand, some representatives of the inventor-company disclosed the invention to one of its customers, providing a test machine, before the filing of the patent application. The delivery was combined with proper confidentiality undertakings. Later, the defendant-infringer – a supplier of the same customer – saw the test machine, but in a meeting which was itself covered by non-disclosure obligations. 

The defendant objected in Court that this constituted a disclosure of the invention which therefore lacked novelty. The Court of Appeal of Milan however found that all the persons involved in the reported disclosure were obliged to confidentiality, which prevented the disclosure from being made towards an unlimited and undetermined number of persons. The disclosure therefore was not in fact a disclosure from the patent perspective.

It shows once again the importance to consider secrecy and patenting as integrated tools of protection rather than as alternatives when it comes to protecting proprietary technology and innovation. 

Contributory infringement and territorial scope of patent protection 

A patent is an exclusive right to exploit and take benefit from an invention and prevent anyone else to do so within the territory of the country which grants that patent (article 66 of the IP Code). Based on that, the defendant tried to argue that supplying the infringing technology (or part of it) outside Italy (in this case, in Canada) did not constitute a violation of those rights to exclusivity. 

The Court of Appeal disagreed with the defendant and based its interpretation on the notion of ‘contributory infringement’. The defendant offered, from Italy, the tools to replicate the patented invention in Canada, and received the benefit of this action (i.e., the profits) in Italy.

The defendant counterargued that the ‘contributory infringement’ has been introduced in Italian patent law only recently (with the Italian Legislative Decree no. 214/2016), after the alleged infringement occurred. Again, the Court of Appeal did not uphold the argument, stating that the doctrine of ‘contributory infringement’ has been applied by Courts even before its codification in patent law and that, in any case, article 66 of the IP Code (fully in force at the moment of the infringement) generally prevents third-parties to ‘take benefit’ from the invention, encompassing the supply of the infringing technology abroad. 

Based on this interpretation, the codification of ‘contributory infringement’ in 2016 did not extend the scope of the ‘ordinary’ perimeter of patent exclusive rights but rather specified it.

Damages: (punitive?) disgorgement of infringer’s profits even where there is no loss of profits by the patent holder

Lastly, the Court of Appeal overturned the first instance decision with regard to the quantum of damages awarded to the patent holder. At first instance, the Court of Milan excluded from the calculation of damages the profits that the infringer made in supplying the technology to its Canadian customers, because the patent holder would not have been able to realise any such profits itself, already having in place an exclusive agreement with another customer for the Canadian territory. In other words, according to the Court of Milan, the patent holder did not suffer a loss of profits in that regard and so damages could not be sought. 

On this issue, the Court of Appeal of Milan upheld the appeal of the patent holder emphasizing that Italy, in implementing Dir. (EC) 48/2004, introduced the disgorgement of infringer’s profits among the items for the Court to consider in the calculation of damages, if the patent holder expressly requested such (article 125, section 3, of the IP Code).

This decision is particularly remarkable because it is one of the first decisions where the disgorgement of the infringer’s profits has been granted in calculating quantum even where such could have not been awarded as ‘ordinary’ loss of profits by the claimant. It is an application of article 125, section 3, of the IP Code which emphasizes the ‘punitive’ nature of the damages, rather the compensatory nature which governs ordinarily Italian tort law.