Tuesday, February 2, 2021

Another pre-emptive strike by the German judiciary against patent injunction reform: no reform at all might be the best outcome by now

It's high time that those advocating patent injunction reform in Germany--a broad coalition of companies from many countries--seriously asked themselves one question:

Wouldn't it be tactically smart at this stage to ask the Bundestag (Federal Parliament) to pass its patent reform bill without a new statute on injunctive relief unless the legislature is prepared to go far beyond the proposal put forward by the executive government?

I'm raising this question--and as you may have figured, it's a rhetorical one--in light of the latest pre-emptive strike by the German patent judiciary against the useless pseudo-reform that's on the table. The latest anti-reform torpedo was fired this month by Judge Dr. Klaus Grabinski of the Bundesgerichtshof (Federal Court of Justice), the undisputed superstar among those German patent judges who are not going to be legally required to retire in the nearest future and by far the most logical candidate for the post of Chief Judge of the future Unified Patent Court. Unfortunately, Judge Dr. Grabinski is a "hawk" with respect to injunctive relief. He makes it sound like he's balanced, and even people who disagree with his positions tend to like him. But make no mistake: if you showed him 100 cases in which retired Justice Kennedy would have denied injunctive relief, Judge Dr. Grabinski would be sure to find ways to order injunctions in 101 of them.

Judge Dr. Grabinski authored a write-up for a commemorative publication on the occasion of the 65th birthday of a likeminded proponent of patent overenforcement, Professor Dr. Peter Meier-Beck, who presided over the Federal Court of Justice's patent senate and then moved on to the antitrust senate, where he's since been able to do even more damage to German case law than in his original domain: Sisvel v. Haier. The only good thing I can say about Meier-Beck's impact on innovation and competition is that he's going to have to retire very soon. His decisions have done and will continue to do much harm to the real economy, but the statutory age limit for German judges ensures he won't get to write too many more of them.

So, on the occasion of Meier-Beck's 65th birthday, Judge Dr. Grabinski wrote an English-language article for GRUR, the leading German IP law journal, on Injunctive Relief and Proportionality in Case of a Public Interest in the Use of a Patent. The subhead ("Different Ways -- Same Result") and the introductory paragraph first suggest that it's about comparative law between UK and German jurisprudence on public-interest considerations in connection with patent injunctions. But don't be fooled: only on its surface is that article about those Edwards Lifesciences cases that are several years old. The comparative part is merely a pretext. While I've read the whole thing, you get to the gist of it by simply jumping straight to the final sentence and the related footnote:

"On this background, it is in accordance with the principle of proportionality when the infringer who claims a public interest in the availability of an invention, as a rule, has to seek a compulsory licence in lieu of requesting a stay of injunctive relief in patent infringement proceedings."

Footnote 29:

"Postscript: In contrast to a first draft, a recent draft of the Federal Ministry of Justice and Consumer Protection of 1 September 2019 for a revision of the German Patent Act (Referentenentwurf für ein Zweites Gesetz zur Vereinfachung und Modernisierung des Patentrechts) stipulates that, in addition to the interests of the infringed party and the infringer, the interests of third parties must also be taken into consideration when deciding on the disproportionality of injunctive relief in a patent infringement case (Referentenentwurf, p. 10, no 35; p. 63 seq). Such a revision of German patent law is not needed. Fundamental rights of third parties are already protected by the infringer’s right to the grant of a compulsory license as rightly pointed out in the reasons of the Ministry’s first draft (Diskussionsentwurf, p. 53) and shown in this article."

This is what it's all about: Judge Dr. Grabinski wrote this article to provide German judges with something they can cite after the envisioned patent injunction reform whenever a defendant argues that third-party interests weigh against the grant of an injunction.

It's not worth talking about whether there even is a difference between the public interest and third-party interests; should there be one, hiding somewhere in the dark, it wouldn't be outcome-determinative in a significant number of cases anyway.

So Judge Dr. Grabinski says: meet the ultrahigh standard for a compulsory patent license--or forget about your third-party interest argument in the proportionality context. And, of course, his article is all about claiming that this approach doesn't contravene the proportionality requirement under the EU's IPR Enforcement Directive.

Judge Dr. Grabinski's anti-public-interest article is already the third missile the German patent judiciary has fired at the reform before it's even enacted. Presiding Judge Dr. Thomas Kuehnen ("Kühnen" in German) of the Dusseldorf Higher Regional Court is the FRANDliest German patent judge at the appellate level, but even he says the reform bill wouldn't have a bearing on standard-essential patent (SEP) cases, as there is--just like what Judge Dr. Grabinski argues in the public-interest context--an entitlement to a compulsory license. And Judge Tobias Pichlmaier (Presiding Judge, 21st Civil Chamber, Munich I Regional Court) just sent a legal question to the top EU court that has the potential to lower the hurdle for preliminary patent injunctions across the EU.

The pro-reform movement should finally face the facts. Stop day-dreaming, folks. You've lost this lobbying fight before lawmakers even cast their decisive votes. You didn't get the German federal government to make a useful proposal--the judiciary has already vitiated it before it's even enacted. Then you failed miserably to influence the opinion taken by the Federal Council. And now the end of the legislative term is approaching fast while COVID, which is going to be a problem even beyond this year, and its indirect effects still require the legislature's attention. If the governmental proposal was any good, that would be no problem: there'd obviously be enough time left to just pass it into law. But it's not. That type of reform is counterproductive. Not only won't it improve a thing, but it will cement the status quo.

Some--or even many--players in the pro-reform movement believe it has value in itself to touch that injunction paragraph (Art. 139 of the German Patent Act) at all. You can take its virginity, but not its teeth. The additional statutory language will be applied by the judiciary in ways that just make things worse, and simply more expensive, without appreciably reducing the leverage that trolls and other patent abusers have.

You're not even going to get the courts to perform a full-blown proportionality analysis. The first hurdle is going to prove insurmountable in practice (in almost 100% of all cases): it's singularity, stupid. Unless you convince a court that your particular situation is not just another case of a patent infringer who could work around or take a license (albeit a very costly one, way in excess of the intrinsic value of the claimed invention), your lawyers and your experts can fill dozens or even hundreds of pages, but the outcome will always be the same: an injunction.

Wake up, pro-reform forces: when the reform process started, and even early last year, you thought that the CJEU's Huawei v. ZTE framework largely took care of the SEP injunction problem. At the time, German courts applied that one reasonably. But that has changed dramatically, and with Sisvel v. Haier, you actually need a SEP injunction reform more urgently than a non-SEP injunction reform. The Dusseldorf Regional Court's questions to the CJEU might improve the SEP injunction situation beyond component-level licensing, but it's not certain that the European court will even reach that second question, and even if it does, it may leave plenty of wiggle room to national courts.

A patent injunction reform in 2021 that doesn't affect SEP cases is deficient for that reason alone. Add the "singularity" crap, and look at how Judge Dr. Grabinski has effectively killed the third-party-interests defense, and what's really left? Nothing useful. Nothing helpful.

I've been watching this reform process, and it often felt like you watch a match--a chess match or maybe a soccer game--and you would like a particular team to win, but you just see how their rivals outsmart them and outperform them every step of the way. It hurts to see that. But what can you do? I did what I could, in the second half of 2019 and in early 2020. I tried to educate those who were on the losing track. They just wouldn't understand.

I have no reason to assume they're going to listen to me now, but I'll say it anyway: unless you can get the Federal Parliament to fundamentally improve the statute in the coming months (to the effect that SEP cases will be covered, proportionality will have to be analyzed in a substantial number of cases, and third-party interests will mean more than just the one-in-a-million outlier case where you're entitled to a compulsory license), no reform at all is better than this farce. The legislature could enact all the less controversial parts, and simply not touch Art. 139 (injunctions). You could revisit that one after this year's elections.

One of the various benefits would also be that the new rule putting pressure on the Bundespatentgericht (Federal Patent Court) to hand down preliminary assessments would go into effect, and people would see that it's not going to have much of a positive impact. Then, when the injunction part finally gets addressed, you can also raise the bifurcation issue again, with evidence on the table that simply telling the Federal Patent Court to work faster doesn't do the trick.

Now that the end of the legislative term is near, it's hard to imagine that you can still secure a positive outcome. But mounting resistance to a bad reform statute--again, Sisvel v. Haier alone is reason enough to oppose this one--is more doable. If lawmakers see that the injunction part is too controversial, it can be taken out now and taken up again in the next term.

What I wish to assure my esteemed readers is that I'll honestly tell you what happens in the event a reform along the lines of the current proposal gets enacted. Should there be a significant improvement in defendants' favor, I'll admit to have been wrong. But, more realistically, if the courts grant injunctions just as readily as now, I'm going to say so as well. And with a bad statute--so bad that judges were able to defang it before it even entered into force--I won't really be in a position to blame the judges for it. I criticize their pro-patentee leanings, but if pro-reform forces fail to bring about change, it's not the judges' fault. The judiciary played this smart, through lobbying, advocacy, and pre-emptive strikes. As did those companies opposing reform, who cried wolf over any reform statute, even when they knew full well that they were going to have no less leverage in court. They merely pretended, for tactical reasons, to be worried about the strength of their patents, while those who needed a far more helpful statute contented themselves with pretty much nothing. A very asymmetrical situation. The pros have trounced the amateurs all the way.

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