Friday, December 18, 2020

Patent injunction reform in Germany: next lobbying defeat for pro-reform forces as Federal Council speaks out against proportionality

Yesterday there was good news for those advocating a balanced approach to patent injunctions, as the Munich Higher Regional Court increased the amount of the collateral to be provided by Nokia in a standard-essential patent (SEP) case against Daimler by a factor of almost 100 to over $2 billion. That was to be expected after a similar decision in a Conversant v. Daimler case.

But today there's been a political setback that I had predicted as well: one of Germany's two legislative institutions, the Bundesrat (Federal Council), today adopted its Legal Affairs Committee's recommendation for a statement on patent reform (PDF, in German).

The Federal Council is not realistically going to exercise its veto right (which a supermajority of the Federal Parliamnet could overrule anyway). But its position is going to bear significant political weight in the further process, particularly among the governing coalition parties' parliamentary delegations from various influential federal states.

In a nutshell, the Federal Council tells the Federal Parliament to preserve the status quo of near-automatic patent injunctions no matter how disproportionate, except under the most egregious of circumstances where even the Federal Court of Justice said in its Heat Exchanger decision that an injunction might have to be tailored, even if only slightly so and only in cases that are few and far between.

The Federal Council even issues a stern warning that any reform going further than existing case law--such as by taking third-party interests into account--would jeopardize Germany as a patent jurisdiction.

This reform process is on the wrong track. There was a glimmer of hope a few months ago, but at each of the key procedural milestones this year--the first draft by the Federal Ministry of Justice, the official proposal by the Federal Cabinet, and now the Federal Council's advisory opinion--went wrong, so unless there's a huge surprise, this legislative process simply isn't going to bring about any such thing as serious change. The courts will continue to hand down injunction after injunction, and while lawyers will be able to bill their clients for pages and pages of argument over proportionality, the courts won't really reach that point except once a year or so. Most of the time the courts will quickly determine that a case isn't quite so exceptional as to justify a deviation from the longstanding principle of automatic injunctions.

For parts of the German economy, the current situation is unsustainable, but change just isn't coming. Only political amateurs would believe that you can achieve reform the defensive way, by asking for almost nothing and contenting yourself with even less than that. It's like starting a revolution by kowtowing to the king. Just won't work.

If professionals had been at work, it actually wouldn't have been too hard to get the Federal Council to speak out in favor of injunction reform. It would have been feasible to get support from multiple influential states (especially some with many automotive jobs), and while the two most populous ones (North Rhine-Westphalia, which operates the Dusseldorf court system, and Bavaria, which is home to large parts of the European patent law industry) would have been hard to win over, one could at least have created a situation in which one or both of them would have declared themselves neutral.

But what you can you expect when the broadest-based pro-reform lobbying group, ip2innovate, is totally misguided? Google, SAP, and Daimler simply botched the organization's statutory proposal, and the likes of Microsoft, BMW, and Deutsche Telekom incompetently and foolishly followed their lead.

When this process is over, they're all going to get just the same bad decisions from the courts as before. They'll merely have to spend more money on attorneys' fees.

The end of the legislative term is approaching fast. The parliamentary decision won't take more than a very few months. It will be extremely hard, if not next to impossible, to put patent injunction reform on the agenda again in 2022 or 2023. A historical opportunity will have been wasted, despite my efforts to educate some people while there still would have been the chance to play it smart.

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