Munich LD gives textbook example of how to address venue competence in UPC disputes involving multiple defendants

The order addresses parallel objections by three Motorola Mobility (Lenovo) entities and Lenovo’s external distribution service provider Flextronics. In order to make it easier to follow the logic, we will refer to them as follows:

Defendant Number	Official name and seat	Our short form
1	Motorola Mobility LLC, Chicago	Moto_Parent_USA (whose parent is Lenovo)
2	Motorola International Sales LLC, Chicago	Moto_Intl_Sales_USA
3	Motorola Mobility Germany GmbH, Oberursel (near Frankfurt)	Moto_Germany
(4)	(Digital River Ireland, Ltd.)	(already dropped out)
5	Flextronics International Europe B.V., Oostrum (Netherlands)	Flextronics_NL

Headwater alleged in its complaint that defendants #1-3 (Moto_Parent_USA, Moto_Intl_Sales_USA and Moto_Germany) belonged to the same corporate group and were offering as well as selling the accused devices in Germany, France and the Netherlands. Defendant #1 (Moto_Parent_USA) was named on the product boxes as the maker. Defendant #5 (Flextronics_NL) was characterized as a logistics service provider to the Motorola Mobility group enabling and advancing the other defendants’ infringing acts, and Art. 63(1) of the UPC Agreement (UPCA) allows the court to “grant [an] injunction against an intermediary whose services are being used by a third party to infringe a patent.”

In one application, defendants #1-3 (which we’ll now refer to as the “Moto_Defendants”) sought dismissal of the complaint for lack of competence on the Munich LD’s part, and defendant #5 did so separately with respect to itself.

The most fundamental question of law that Judge Dr. Voss had to resolve was whether Headwater had limited itself in any way by basing the venue-related jurisdictional argument in its complaint only on Art. 33(1)(b) UPCA. In response to the PO, however, Headwater also invoked Art. 33(1)(a) UPCA.

Given that Art. 33 UPCA is the central statute here, let’s take a quick look at it based on a slightly shortened version that focuses only on what is at issue here:

(1) . . . actions [including infringement actions] shall be brought before:

(a) the local division hosted by the [country] where the actual or threatened infringement has occurred or may occur . . .; or

(b) [Sentence 1] the local division hosted by the [country] where the defendant or, in the case of multiple defendants, one of the defendants has its residence, or principal place of business, or in the absence of residence or principal place of business, its place of business . . . [Sentence 2] An action may be brought against multiple defendants only where the defendants have a commercial relationship and where the action relates to the same alleged infringement.

. . .

So, (a) is about the place of infringement while Sentence 1 of (b) is about a defendant’s domicile and Sentence 2 refers to a situation where there is an anchor defendant, but a common infringement.

Judge Dr. Voss clarified that Headwater did not have to anticipate the venue-related PO and that, in any event, the parties’ job is to give the courts the facts and the court, which knows the law, will decide. There are rules for when a legal argument must raised in the UPC, but it is a context-by-context determination and plaintiffs are not generally precluded from raising new legal arguments after the complaint. Here, the plaintiff’s subsequent invocation of part (a) of the statute is merely an additional legal argument based on the same set of facts and with the same aim (establishing venue competence).

The denial of the PO is then based on part (b) (domicile), which is the one Headwater addressed in its complaint anyway, and centered around a Germany-based anchor defendant, Moto_Germany, but going beyond the call of duty, Judge Dr. Voss explains that the Munich LD would be the competent UPC venue even under part (a) (place of infringing act) of the statute.

Another fundamental aspect of this venue dispute is that dismissal for a wrong venue choice would not really put the matter to rest. It would be a dismissal without prejudice as far as the wider UPC is concerned, and the same complaint could be brought again in a different venue, which is wasteful. The court therefore has to strike a balance between ensuring that obviously incorrect venue selections lead to dismissal while there are various questions that may simply have to be addressed later on the merits, such as what infringing acts a given legal entity specifically committed.

Art. 33 (1)(b) UPCA analysis

The way the decision determines that the Munich LD is the competent venue under part (b) of the statute is that first the venue’s jurisdiction over the anchor defendant (#3, Moto_Germany) is established. In that case, the domicile is outcome-determinative, and the place where an actual or imminent infringement occurs is irrelevant.

Jurisdiction over the other two Moto_Defendants (two U.S. entities) is then established on the basis that all three Moto_Defendants are part of the same corporate group, are in a commercial relationship, and the complaint relates to a unitary infringement allegation, which is where the second sentence of part (b) of the statute comes into play. The key bases for this holding are the following ones:

• The commercial relationship between the anchor defendant and the co-defendants must have a cetain scope and intensity. But, as already mentioned before, an overly exacting requirement to establish those relationships would not be good legal policy as there might have to be multiple parallel proceedings with potentially divergent decisions. Being part of the same corporate group and being engaged in connected commercial activities such as R&D, manufacturing, sales and distribution has also been deemed sufficient in other UPC cases. Whether the deendants actually did what the plaintiff says they did will have to be determined in the further proceedings on the merits.
• The requirement of unity of the alleged infringement is also met because the compaint alleges that the Moto_Defendants are collaborating to the effect of a division of labor. Their activities may differ, but there is a unitary infringement allegation.

Finally, the order reaches the question of whether the Munich LD is the appropriate venue for Flextronics_NL, which is not part of the Motorola group.

Headwater made a test purchase over the internet and received a device from a logistics center in the Netherlands. Flextronics_NL did not deny the existence of a commercial relationship with some entity in the Motorola group. It merely disputed that the scope and intensity of that relationship gave rise to infringement liability. Judge Dr. Voss does not consider it reasonable to expect a plaintiff to sue all companies of a group, only for not knowing which company (in this case, which Moto company) has the commercial relationship in question.

With respect to Flextronics_NL and the Moto_Defendants, there also is unity of the infringement allegation. The fact that Flextronics_NL disputes the infringement allegation is a question to be addressed in the further proceedings, not at the PO stage.

Art. 33 (1)(a) UPCA analysis

As a fallback that makes the decision even more appeal-proof, the order then also establishes venue competence under part (a) of the statute.

Judge Dr. Voss rejects an attempt by the defendants to read the additional requirement (unity of infringement) of the second sentence of part (b) of the statute into part (a). The structure of the statute (as evidenced by the layout we also showed further above) is clear that unity of infringement is only a requirement when venue competence is based on an anchor defendant’s domicile, but not when it is based on the place of the infringing acts.

The order explains that part (a) of the statute neither enables an infringement action against multiple defendants only one of whom has committed an infringing act in the relevant country nor does it come with any further requirements as long as multiple defendants took part in infringing acts in the relevant country. Otherwise there would be a general prohibition of multi-defendant infringement actions.

There is a higher hurdle if a defendant has neither committed an infringing act in that countr y nor is domiciled there. In that case, further justification of a joinder is required, and that is where sentence of part (b) creates an opening for a lawsuit against a group of defendants involving an anchor defendant (unity of the infringement provided).

The order notes that the UPCA adopted the same approach as EU Regulation 1215/2012 (Brussels Ibis Regulation).

Judge Dr. Voss did not grant leave for an appeal because, in his opinion, all of the relevant legal questions have already been addressed by the CoA in other cases. He did so even though he was well aware of differences between his approach and that of other first-instance divisions as far as the second sentence of part (b) of the statute is concerned. The case will go to trial in less than five months; it is hard to imagine that all defendants would indeed be dismissed from the case; and the defendants can still appeal the PO denial when they appeal from the Munich LD’s final judgment.

Counsel

Counsel for plaintiff Headwater Research: Eisenführ Speiser (lead counsel: Dr. Philipp Rastemborski).

Counsel for the Moto_Defendants: Freshfields (counsel of record: Dr. Richard Wunderlich).

Counsel for defendant Flextronic: Bird & Bird (lead counsel: Boris Kreye).