Monday, November 18, 2019

German patent reform discussed at Brussels conference: automatic injunctions contravene EU law

Apologies for being a bit slow to report on my own conference (held last week). On Friday I published all seven slide decks and an abstract. But there's so much going on that I have quite a backlog, which besides the component-level licensing parts of last week's conference also includes a DOJ amicus brief and a couple of SEP-related position papers as well as the Supreme Court's grant of certiorari in Oracle v. Google.

Not only have I received plenty of positive feedback to last Tuesday's conference from attendees but there was also an unmistakable sign: even though we were running one hour behind schedule, the room was still almost full at the end of the day. That speaks to the way the conference as a whole was received, and also to the popularity of the "bonus session" (as I called it because it wasn't exactly about component-level licensing, and not even SEP-specific, apart from Bram Nijhof's highly informative overview of the evolution of case law since Huawei v. ZTE) at the end of a long day.

Edmund Mangold, patent counsel at BMW and personally very much involved with the German patent reform debate at the level of industry bodies, provided an introduction. After Taylor Wessing's Bram Nijhof's case law overview, Cleary Gottlieb's Maurits Dolmans made an unequivocal statement in the title of his presentation: "We Need Proportionality Review for Patent Injunctions under German Law"

It's no secret that I couldn't agree more. Having observed well over 100 German patent trials this decade (SEP and non-SEPs alike), I've seen too many situations in which injunctions came down that probably--and sometimes most probably--wouldn't have been granted in other jurisdictions. All too often it's easy for an experienced litigation watcher to figure that some plaintiffs are playing the lottery by asserting a bunch of mostly dubious patents in Germany (typically, the most questionable ones are selected for complaints brought in Munich) in hopes of a lucky punch that allows the winner to take it all: a favorable settlement.

What we learned from Mr. Mangold was that the German government had originally planned to put forward a proposal by now, and that in his observation there was some political momentum toward closing the injunction gap, which is due to the fact that infringement cases are adjudicated much faster than nullity actions before the Federal Patent Court.

But what most companies in the automotive industry, but also the mobile communications industry, would like to see is a reform that would update Germany's Patentgesetz (Patent Act) to the effect of requiring a proportionality analysis--in each individual case--prior to ordering an injunction.

Mr. Dolmans--just like all the other speakers, expressing his personal views and not those of any particular client--had a nice analogy to the issue of royalty stacking in his presentation [Update] After the conference, Mr. Dolmans thankfully made a German-language version of the slide deck available, too. [/Update]: at some point there were so many robber barons along the Rhine river, with each of them imposing his tax on boats passing by, that transporting goods over long distances became economically unviable on that particular river.

Compared to what Preu Bohlig's Professor Christian Donle had said on the first panel of the day (he likened SEPs to railroad station toilets--not that nice, but you need to use them; I'll report on that panel in another post), this was still a flattering comparison.

The focus, however, was on proportionality, and how clear-cut both the EU's Intellectual Property Rights Enforcement Directive (IPRED) and the Court of Justice of the EU's case law are.

To bookend the day, I asked the three panelists questions with a particular focus on the German reform process. They all had very interesting answers (for an example, Mr. Nijhof explained to what extent courts in other jurisdictions do or do not believe that Huawei v. ZTE inherently takes care of proportionality), but I'll highlight two soundbites from Mr. Dolmans with a view to the further debate:

  • When I asked him whether the European Commission could take Germany to task in case the forthcoming reform fails to incorporate the proportionality principle into German patent law, his answer was clear: yes, if the Commission wanted, it could. It could even impose fines on Germany.

  • In response to my reference to one of Germany's highest-ranking judges arguing that German patent remedies are inherently proportionate because difficulties in obtaining damage awards counterbalance easy access to injunctions, Mr. Dolmans said: "Structural is nice, but you need individual justice in each case." His co-panelists agreed as far as I could see. And (now Lord) Justice Richard Arnold from the UK also made this very clear, without naming Germany, earlier this year.

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