In today’s interconnected world, cross-border supply chains have become a fundamental aspect of European commerce. These supply chains arise in numerous ways, from the vehicles we drive, to the smartphones on which you may be reading this. Each comprises components sourced from multiple countries, assembled in another, and shipped to your local retailer. Elsewhere in the pharmaceutical industry, raw materials, intermediates and finished products are moved across borders to ensure the timely delivery of essential medicines. In each case an intricate web of production and distribution exists across Europe.

For the holders of patents directed to products including components that travel across borders, (and for their competitors), the inception of the Unified Patent Court (UPC) in June 2023 significantly altered the legal landscape for patent infringement. We look at why it might be prudent to reassess enforcement strategies and freedom to operate because a key aspect of indirect patent infringement has changed. At its heart, the extended territorial reach of the UPC means European patents are no longer restricted to providing their protective effect within the legal frameworks of the individual contracting states. Rather, cross-border indirect infringement scenarios may now arise.

This article provides a high-level recap on a key aspect of the indirect infringement provision, how that provision can be applied at the UPC in infringement scenarios for cross-border supply chains, and where some of the risks may lie.

Understanding indirect infringement

Indirect infringement relates to acts undertaken by one party that enable another party to directly infringe a patent. Consider a patent that protects a device that must have elements A and B. The patent holder can sue a competitor who sells or offers for sale a device having both elements A and B for direct patent infringement, when that competitor acts without authorisation in a country within which the holder has patent rights.

However, what about a supplier, who supplies element A to the competitor but has nothing to do with element B? That supplier makes a future direct patent infringement possible, but has not directly infringed the patent themselves because they do not deal in a device having both elements A and B. In such a scenario, the patent holder might seek relief for indirect patent infringement by the supplier of element A, without ever pursuing the direct infringer themselves (for example, if an end user is the direct infringer).

Double territoriality

There are multiple parts to the indirect infringement provisions across Europe. However, one consistent criterion for an indirect infringement claim is a double territoriality requirement, a need for the supply of the means (e.g., supply of element A) and the direct infringement (e.g., the sale of the device with elements A and B) to occur within the same territory.

It is not difficult to see the relevance of the double territoriality to cross-border scenarios. For example, if an unauthorised third-party supplies element A to an end user in the Netherlands, who then assembles a device comprising elements A and B across the border in Belgium, an indirect infringement claim against that third-party that supplies element A is likely not possible under either Belgian or Dutch law, because the supplier and direct infringer are not acting in the same country. The double territoriality requirement is not met, even if the patent proprietor has independent patent rights arising from the European patent in both Belgium and the Netherlands.

It’s a UPC world

With the inception of the UPC, the framework of indirect infringement substantially changed. Under Article 26 UPCA, the relevant territory is no longer the same country, but rather, the supply must be “within the territory of the Contracting [UPC] Member States in which that patent has effect” and be with the purpose of “putting it [the invention] into effect therein [i.e. in the territory of the Contracting UPC Member States]”. From this provision, it would seem that the cross-border nature of the purchase and assembly in the above scenario may no longer save the unauthorised third-party suppling element A, because the relevant territory is the “Contracting [UPC] Member States”, which includes both Belgium and the Netherlands.

The above represents a substantial expansion of the reach of the indirect infringement provisions, and further, that reach would seem to apply even where the European patent was granted prior to the start of the UPC (and validated in the relevant states), if that European patent has not been actively opted out of the court’s jurisdiction. Although the Dusseldorf LD raised the question of the territorial extent of Article 26 UPCA in Kaldewei v. Bette (UPC CFI 7/2023 3rd July 2024), it proved unnecessary to decide the extent of the territoriality of Article 26 UPCA in that case, since the alleged supply and alleged direct infringement occurred in the same country. Hence, we have yet to receive clarity on how the territoriality requirement will be applied.

A summary table below outlines the double territoriality requirement in its broadest application, prior to and after the start of the UPC. The key distinction lies between scenario 2 and scenario 6, which arises through nothing more than the start of the UPC in 2023 and does not require any action by the parties involved.

Check out the opt-out

In contrast to the national courts, the framework for indirect infringement claims appears substantially widened. Since the UPC has competence over classical European patents by default, the risk is that a party previously taking comfort because the supply of a component occurred in a different country to a later direct infringement, may instead need to investigate and monitor the opt-out status of the relevant European patent. The safety of the ‘same country’ requirement may not be enough to sidestep Article 26 UPCA. Crucially, these UPCA provisions would seem to apply even if the European patent was granted and validated in the relevant countries prior to the start of the UPC, if no action has been taken by either party.

Patent proprietors should consider the increased reach of the UPC in cross-border scenarios and may wish to remain within its competence, despite the risk of central revocation, with the benefit of avoiding being pinned out and to create commercial risk for third parties. If the patent has already been opted-out, a proprietor might also consider the timing of the withdrawal of the opt-out to take advantage of the UPC’s greater territorial extent.

We have yet to see the application of the potentially expanded double territoriality requirement at the UPC, but what is apparent is that the legal landscape in respect of cross-border indirect infringement has changed, and previous freedom to operate and enforcement strategies may need to be reconsidered.

Our mixed teams of European patent attorneys and litigators are ideally placed to advise on how best to use the UPC as over 90 of our litigators and patent attorneys have full UPC representation rights.

Feel free to reach out to your usual contact for any UPC related queries. Our team is here to answer any questions you may have on the UPC and opt outs.