Saturday, February 20, 2021

Federal Court of Justice of Germany issues prenatal death certificate for patent injunction reform: change is NOT coming

Earlier ths month I reported on an academic write-up by Judge Dr. Klaus Grabinski of the Federal Court of Justice of Germany, according to which third-party interests are not going to be more relevant to patent injunction decisions after the envisioned reform than they have been so far. Judge Dr. Grabinski has been traditionally opposed to any softening of Germany's near-automatic patent injunction regime. But yesterday, the German legislature published a broader statement on reform that was written by a different (and more balanced) judge of the same court, Judge Fabian Hoffmann. The context makes it pretty certain that it is not just the opinion of one judge, but a "per curiam" in terms of the court's submission to the legislature.

That pre-hearing statement starts with the following two sentences (my translation):

"It is not to be expected that the proportionality analysis envisioned by [the proposed reform statute on injunctive relief] will result in any fundamental departure from the principles of the Heat Exchanger case law. The probability of a finding or, respectively, negation of proportionality in a given case is, therefore, not going to change with respect to the underlying principles."

There you have it again: the total failure of pro-reform lobbying efforts. They wasted time, money, and energy, and the result is going to be symbolical, but the situation won't really improve. That statement by the Federal Court of Justice will be cited by plaintiffs and, ultimately, by the lower courts.

On Wednesday, the German legislature is going to add insult to injury by holding a hearing with a panel selection that represents a total disgrace for a democracy, as those advocating (essentially) the preservation of the status quo outnumber the camp seeking real reform by 6-1 if you count the number of people, and by about 6000-1 if it's about IP policy expertise.

By way of contrast, when United States Senate or House of Representatives committees hold hearings on patent policy, they typically invite two witnesses from each side of the debate. On the side favoring strong patent enforcement and a broad scope of patent-eligible subject matter, one of the two seats is typically reserved for Professor Adam Mossoff (I often disagree with him, but he's great in his way).

There's no such thing as an even split in Germany, where the Legal Affairs Committee of the Bundestag (Federal Parliament) will hold a two-hour hearing on Wednesday, February 24, with reform opponents outnumbering proponents by a wide margin. That's because the parties advocating balanced patent policy there are doing an absolutely miserable job. German automotive companies don't have a single person with much expertise in IP policy, and foreign companies who do a better job at this in other jurisdictions have problems that are specific to German politics. It would take too long to discuss this on a company-by-company basis for all those foreign organizations, but take Apple, for example: they probably made a huge mistake by talking to the executive and legislative branches of government directly, as Apple doesn't do R&D in Germany--most of its employees there have low-paying jobs at its retail stores, so unless there are some "fanbois" among politicians, there's no reason they'd care about Apple's concerns over near-automatic injunctions.

The reform process is still completely on the wrong track because of dinosaur companies relying on 20th century lobbying techniques and structures. It's time for some people to wake up because otherwise Nokia and Ericsson will win the pan-European lobbying war over component-level licensing (as the top EU court will receive submissions form the European Commission as well as the governments of many member states), and in the worst case preliminary injunctions will become widely available over patents in th EU as a result of the Munich I Regional Court's referral (with which I disagree, but it's a first-rate piece of work, which is why I urge everyone to take it very seriously).

Let's take a closer look at the list of speakers (PDF) at that injunction reform hearing. Six of them want to preserve the status quo to the greatest extent possible, differing only on nuances. They'll "square off" with an automotive industry lobbyist who'll never learn half as much about patent policy as any single one of the other six panelists has already forgotten.

  1. Judge Fabian Hoffmann, Federal Court of Justice: he's considered to be the most balanced judge serving on the patent-specialized division of that court, but he won't speak out against the institution he's going to represent. The paper I quoted further above speaks for itself.

  2. Professor Mary-Rose McGuire, University of Osnabrueck: under her supervision, Maximilian Schellhorn wrote a doctoral thesis Siemens summarized in a submission to the German government as concluding that German patent injunction law allegedly already complies with the proportionality requirement of the EU's IPR Enforcement Directive (I disagree). Professor McGuire is certain to take that same position. In her pre-hearing statement (PDF), she speaks out against the reform proposal as she's concerned there might ultimately be fewer injunctions (despite what the Federal Court of Justice has already indicated). That's the position of reform opponents: they'd rather leave the injunction statute (Art. 139 Patent Act) untouched. Oddly, at this stage I actually think it would be better to have no injunction reform than the one that is proposed, meaning that pro-patentee extremists and I are in procedural agreement, though obviously approaching this subject from very different angles.

  3. Professor Ansgar Ohly, Ludwig Maximilian University of Munich: in a submission to the German government, he commented favorably on the UK Supreme Court's Unwired Planet decision, which says everything. His pre-hearing statement (PDF) is pretty consistent with that of the Federal Court of Justice.

  4. Dr. Andreas Popp, patent attorney, representing the patent bar: He used to run chemical giant BASF's IP department and wants patents to be as strongly enforceable as possible.

  5. Dr. Kurt-Christian Scheel, managing director of the German automotive industry association (VDA): he's a jack-of-all-trades-but-no-master-of-IP lobbyist, dealing (according to his web profile) with climate, traffic, transport, economic, trade, an tax policy. IP isn't even listed there. I don't doubt he's learned a bit about it in recent years, and maybe he's been provided with a few good talking points, but there's no way he could spar with any of the other six, every one of whom is IP-specialized. To the extent that he knows beforehand what questions he's going to be asked, he should be OK. But if parliamentarians opposing reform tactically elect to ask him questions that will expose his limited understanding of the subject (such as by referring to specific legal questions), he's going to be lost.

    By having an automotive industry lobbyist as the only speaker at the hearing in support of a more meaningful reform, the anti-reform camp can not only pretend to hear both sides of the argument (never mind the 6-1 split) but also buttress its own narrative that it's basically just German car makers and foreign companies who don't want to pay patent royalties and, therefore, lobby for injunction reform.

  6. Dr. Renate Weisse, a Berlin-based patent attorney: she claims to represent lone inventors and small companies, though she acknowledges that her clients include larger organizations, too. In her pre-hearing statement (PDF) she argues that trolls are a myth: the problem is just that infringers don't want to pay inventors. Therefore, as you might already have guessed, she's in favor of automatic injunctions, and against meaningful reform.

  7. Dr. Alissa Zeller, Sr. VP of IP at BASF and speaking on behalf of the German chemical industry association's IP committee: that organization (vci) has been anti-reform all along; and it's simply done a far better job than the automotive industry and its allies.

The recording of the hearing will be made available the following day (Thursday), and I'll comment on it then. But the outcome is already clear as the deck is stacked against reform. So, once again, I want to stress that the automotive industry and others must learn from their mistakes. They've been losers. Just laughable. If they don't do a better job now that the name of the game is to influence the positions the European Commission and the governments of 27 Member States will communicate to the European Court of Justice, they'll pay a high price in terms of costly settlements.

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