Towards the end of last year, the Court of Milan issued a decision in a high-profile trade secrets case whereby it granted a one-year “grace period” for a final injunction to take effect (Court of Milan, 29 October 2019, Heraeus v. Biomet available on darts-ip). The Court did so by explicitly acknowledging the need to take into account the proportionality principle when awarding injunctive relief.

This was the first time the proportionality principle was applied in Italy to tailor the effects of an injunction. As many readers will know, Italian courts – not unlike German courts – tend to grant final injunctions rather automatically. Whether or not this decision and the principle it set will have an impact beyond the trade secrets perimeter remains to be seen.

The case

In a nutshell, the case regarded a misappropriation of trade secrets for the production of a particular kind of bone cement, with multiple parallel cases across Europe and the U.S.

In any event, the substance of the case is of no interest for present purposes and we can focus on the part of the decision concerning remedies. Here, in tailoring the perimeter and the temporal application of the injunction, the Court states as follows, citing the new provision of the Italian IP Code (Legislative Decree n. 30/2005) implementing the Trade Secret Directive (EU 2016/943):

With regards to the temporal efficacy of the injunction, the proportionality principle must be taken into account, and the measures designed to protect trade secrets must conform to such principle. And this in particular in the case at hand, in light of the interests of third party operators and of the impact that the injunction may cause to public or private health institutions, in light of Article 124(6-bis) of the IP Code and the balance of interests.

The existing agreements between Biomet and third parties and in particular hospitals cannot prevent the grant of an injunction, but only affect the timing of its enforcement. A so called “grace period” should be set in respect of some specific conducts, safeguarding the continuity of ongoing supplies to public administrations and hospital facilities. Said continuity must only be allowed for a limited period of time, equal to one year, which is considered sufficient to allow third parties to resort, for example, to urgent public tenders for the purchase of equivalent products and to train their medical staff” (emphasis added).

Interestingly, the Court also expressly awarded damages in lieu of an injunction for all infringing sales during the “grace period”. Such damages on future sales, together with the damages deriving from past sales, will be awarded through separate proceedings.

A few key points must be highlighted to better understand the potential impact of the decision on future Italian IP practice:

  1. As mentioned, Paragraph 6-bis of Article 124 IP Code, relied upon by the Court in the decision, results from the recent implementation of the Trade Secrets Directive and only refers to trade secrets.
  2. At the same time, the Italian IP Code includes another provision setting out a proportionality test of general application. The provision in question is the second period of Article 124(6), which was introduced when implementing the Enforcement Directive (2004/48/EC) and provides as follows:

In applying the remedies, the judicial authority must take into account the necessary proportion between the seriousness of the infringement and the remedy, as well as the interests of third parties.”

  1. Article 124(6) has however never been applied. The decision of the Court of Milan in Heraeus v. Biomet remains, so far, isolated, as the only known Italian precedent where a proportionality test was applied when issuing a final injunction. Given the interests at stake, one could even argue that the matter was more a question of the right to health taking precedence over economic interests (in line with settled case law – see e.g. Court of Appeal of Milan, 16 May 2006, Soc. Terna v. Busnelli). It is hence difficult to predict the impact that the decision will have in cases requiring a strict application of the proportionality principle where the conflict concerns rights of equal constitutional status, even if the decision is certainly a first step in such direction.

From a comparative perspective, the ruling might remind many readers of the 2018 decision by Justice Arnold (as he then was) in Edwards Life Sciences LLC v Boston Scientific Scimed Inc (available here), where the High Court granted a one year “grace period” based on similar considerations, with the right to health of third parties overcoming economic interests for the sake of the proportionality principle (a decision which, it must be reminded, was recently “reviewed” by Justice Birss, in Evalve Inc & Ors Edwards Lifesciences Ltd – available here, adopting a more restrictive approach).

The considerations behind the decision of the Court of Milan are however slightly different, as the focus was exclusively on the need to ensure continuity of the ongoing supplies to hospitals (to avoid disruptions due to the inevitable delays imposed by procurement procedures) and to allow medical staff to be properly trained with the new cement. This of course eased the test for the Court, which did not need to focus on the need of a permanent carve out from the injunction, deriving from intrinsic different qualities of the infringing product, with no substitutes.