Spotlight on Managing Directors: EPG clarifies the limits of personal liability for patent infringement

In the “Belkin v. Philips” decision (UPC_CoA_534/2024), the Court of Appeal of the Unified Patent Court has, for the first time across Europe, specified the conditions under which managing directors may be held personally liable for patent infringements. For company management, the ruling provides greater legal certainty—but also sets clear requirements for compliance and response obligations.

The decision by the Court of Appeal of the Unified Patent Court (UPC) in the “Belkin v. Philips” case provides, for the first time, Europe-wide clarity on the personal liability of managing directors in cases of patent infringement. This ruling is directly relevant to managing directors and board members of companies operating in the European single market.

Key Points of the Decision

The EPG Court of Appeals rejects the notion that managing directors are automatically personally liable for patent infringements committed by the company. Crucially, the mere fact of holding an executive position and fulfilling general management and organizational duties is not sufficient to establish personal liability. Liability may only be considered if the managing director

• deliberately uses the company to infringe a patent,
• or fails to act despite having positive knowledge of a clear legal violation.

A key criterion is awareness of the illegality: The managing director must know—or, through gross negligence, willfully ignore—that a patent infringement has occurred. If the managing director seeks qualified legal advice and follows it, he or she is generally protected until a court of first instance issues a ruling.

In this specific case, the EPG-Court of Appeals ruled out personal liability on the part of Belkin’s managing directors because it could not be established that they had sufficient awareness of the illegality of their actions. Liability for failure to act, disclosure, and damages rested exclusively with the companies.

Implications for Practice and Compliance

For managing directors, the decision provides some relief, but it also sets a clear expectation for how the company is organized:

• No Piercing of the Corporate Veil: Personal liability remains the exception. A managing director who fulfills their duty of care, investigates reports of potential patent infringements, and seeks legal advice minimizes their risk.
• Compliance obligations: The decision emphasizes the importance of a functioning IP compliance system. Reports of potential intellectual property infringements must be documented, assessed, and—if necessary—escalated to senior management.
• Duty to respond: In the event of specific cease-and-desist letters or court notices, it is necessary to carefully review and, if necessary, adjust business conduct. Failure to act despite clear indications may result in personal liability.
• Legal advice provides protection: Seeking and following qualified legal advice is a key protective measure for managing directors. Action to avoid liability risks is only necessary once a court has found a patent infringement.

Analysis and Outlook

The decision by the EPG Appeals Court establishes a uniform, Europe-wide—and ultimately rather restrictive—standard of liability for managing directors. It is thus in line with previous German case law, but goes a step further in clarifying the protective mechanisms (legal counsel, compliance). For corporate practice, this means:

• Managing directors are not without protection, but they must take compliance and documentation seriously.
• Companies should regularly review and adapt their processes for handling intellectual property warning letters and for documenting reviews and decisions.
• D&O insurance policies should be reviewed in light of the new liability risks.

Conclusion:
The EPG Appeals Court’s “Belkin/Philips” ruling does not impose stricter requirements on managing directors; rather, it provides legal certainty and a clear framework for action. Those who prioritize compliance and seek professional advice are well protected—personal liability remains the exception for serious breaches of duty.