Sunday, October 4, 2020

Justice Kennedy's eBay v. MercExchange concurrence and Judge Kuehnen's take on German patent reform proposal: striking transatlantic parallels

Despite having the word "patents" in its name, this blog has recently talked more about the antitrust injunction Epic Games is seeking against Apple in the Northern District of California, but today I wish to discuss patent injunctions again.

Injunctive relief is the most bitterly-fought part of the patent reform package the German government will soon present to the patent litigation hotspot's legislature. Those advocating reform are much happier than last time, but resistance from those opposing any reform is stiffer than ever.

For a recap, the draft injunction statute unveiled about a month ago translates like this:

"The claim [to injunctive relief] is excluded to the extent that, under the special circumstances of an individual case, compliance [with its enforcement] would result in disproportionate hardship on the infringer or third parties beyond what is justified by the exclusionary right. In this case, the patentee can seek monetary compensation to the extent this appears reasonable. The damages claim pursuant to para. 2 remains unaffected."

Those who said that this wasn't materially different from the January proposal are either ignorant or propagandists (or both, as that combination has its advantages).

Not only did the feedback the Federal Ministry of Justice and Consumer Protection received from stakeholders clearly show that what has changed is significant but Germany's most prominent patent judge, Presiding Judge Dr. Thomas Kuehnen ("K├╝hnen" in German) of the Dusseldorf Higher Regional Court and author of the leading German reference work on patent infringement litigation, has recently laid out in an ExpertenKolloqium video conference how he would interpret the above statute should it be enacted.

While Judge Dr. Kuehnen is generally in favor of the exclusionary nature of a patent, he would consider the "collateral damage" from an injunction over a patent covering a minor feature of a complex multifunctional product to constitute "special circumstances" under which to deny injunctive relief (click on the image to enlarge; this post continues below the image):

That passage translates as follows:

"A fact pattern becomes 'special' if the alleged infringement is part of a complex, inseparable salable unit, as a result of an injunction over which there would be substantial collateral damage (going beyond the patented technique, which is the sole subject of the exclusionary right)."

In his famous and highly influential concurrence in eBay v. MercExchange, Justice Kennedy had already expressed, back in 2006, his concerns over enjoining a complex, multifunctional product over a minor invention.

In the spirit of eBay, Judge Kuehnen also notes that patent trolls aren't per se precluded from seeking injunctive relief (which isn't even the case in the United States), but their business model may weigh against an injunction (click on the image to enlarge; this post continues below the image):

That passage translates as follows:

"The fact that a plaintiff is solely a non-producing licensing entity is not in and of itself sufficient [to deny injunctive relief], may however play a certain role in the overall analysis (interest in enforcement)."

There still would be fundamental differences between eBay and that particular interpretation of the proposed German patent injunction statute, the most important one being that Judge Kuehnen believes a defendant should not be entitled to a proportionality defense on top of a FRAND-based antitrust defense. I disagree, but Judge Kuehnen's take on FRAND is far more balanced than that of the Munich I Regional Court and at least one of the two patent litigation divisions of the Mannheim Regional Court: Judge Kuehnen initially analyzes whether the standard-essential patent (SEP) holder's offer was FRAND-compliant before potentially turning to the implementer's counteroffer; he expects a rather comprehensive disclosure of comparable license agreements; and he doesn't deprive component makers of their right to an exhaustive SEP license on FRAND terms.

Another difference is that even a defendant's likely bankruptcy wouldn't matter to Judge Kuehnen. But at least he recognizes that leverage to a patentee from an injunction that does logistical damage way beyond the intrinsic value of the invention can be a serious issue in some cases.

It's still too early to predict that German patent law will actually close a significant or even substantial part of the gap between the country's current (near-)automatic injunctions and eBay:

  1. For now this is just a draft statute and not even the definitive proposal by the German federal government yet. The government coalition is divided, with highly influential conservative politicians--including my best ally in the conservative party on the subject of software patents (that was 16 years back and I haven't been in contact with him in a long time)--seeking to preserve the status quo. Judge Kuehnen's interpretation of the proposed statute will, if anything, just strengthen the resolve of anti-reform forces to water the statute down--and with the end of the legislative term approaching, that's a real risk as the point will be reached soon at which there won't be any time left for further wrangling and wordsmithing.

  2. Justice Kennedy's concurrence isn't binding on anybody, but the per curiam in eBay is. By contrast, whatever Judge Kuehnen may decide in the future won't be formally binding on anyone, and will be influential only in his own circuit (Dusseldorf). It's hard to imagine that Mannheim and Munich would interpret the statute the same way, though they all read and cite to his book when it suits them.

  3. Judge Kuehnen's court won't have the final say, and the Federal Court of Justice of Germany has a patent law division whose decisions like Sisvel v. Haier are sometimes blown out of proportion, but which generally promotes the cause of making or keeping Germany an attractive venue for patent litigation as opposed to advancing the public interest in balanced patent law.

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