Friday, June 11, 2021

German legislature just voted to amend patent injunction statute -- jurisdiction as attractive as ever to patent holders bringing infringement lawsuits

A few hours ago, at midnight local time, the German Bundestag (Federal Parliament) voted to amend the country's Patentgesetz (Patent Act). The plenary rubberstamped the version of the bill (PDF, in German) that came out of the legislature's Legal Affairs Committee on Wednesday.

Munich and Mannheim will remain the world's top venues for patent injunctions. If you're not worried about the new bill, you can also sue in Dusseldorf, where the appeals court likes to take extreme outlier positions (including public statements on this legislative measure) that are at odds with any other German court; if you don't want to take any risks that you can avoid taking, go to Munich or Mannheim (your "Swiss francs" of patent enforcement in Germany).

As I announced last week, FOSS Patents will offer a premium subscription service with a focus on those two venues and access to injunctions over standard-essential patents (SEPs) and non-SEPs alike. I'm going to monitor developments closely for my paying subscribers. There will be some new questions coming up in those cases; my prediction about the answers is known, but litigants will need to be prepared, and I'll help my customers in that regard. For SEPs, the legislature changed nothing in the opinion of some of the most prominent judges. My first (and free) advice to non-SEP enforcers is not to forget to make a formal licensing offer (almost as if you were asserting a SEP) in time for the trial. That's going to weigh against any claims of "hardship" on the defendant(s) or on third parties. Unlike eBay, a licensing offer won't be held against you: inadequacy of monetary relief is not, and after last night's vote still won't be, a requirement in Germany.

With a view to my future premium service, I've already had some good initial conversations with parties on both sides of the patent enforcement debate, and some more calls and video conferences have been scheduled. In a jurisdiction where there are no transcripts (and as one of my counterparts accurately noted, even transcripts of U.S. court proceedings sometimes miss important information such as demonstratives), and where there is no PACER for downloading the pleadings, one simply has to send someone to a courtroom to find out what happens. In addition to systematic coverage of the injunction-related aspects of each and every Munich and Mannheim case, I may also offer special reports for individual clients. Those special reports might also address the technical aspects of a case, provided that I receive the information I need to properly prepare. Law firms have asked me to do this on some occasions (as early as 2012).

Also, I will very soon produce a one-off podcast to discuss this amendment to the Patent Act, the evolution of SEP injunction case law in the wake of two Sisvel v. Haier cases, and the Munich I Regional Court's preliminary reference to the European Court of Justice concerning preliminary injunctions over battle-untested patents. I've invited three panelists who would represent a wide spectrum of opinions particularly on the amended Patent Act. I will merely be the facilitator and steer clear of voicing my own opinions on that occasion.

My perspective on this "patentDEform" bill is no secret. Rather than reiterate it, I'd like to just add a few observations here:

  1. A few years ago, Volkswagen's chief patent counsel Uwe Wiesner brought up the problems his organization experienced with patent holders' unfettered access to injunctions in Germany. That presentation started the whole debate. Without Mr. Wiesner's initiative, it's doubtful anything would have been undertaken by now. At the time, it was the next best thing to heresy by the standards of the German patent law community to call into question the #1 feature that makes Germany such a popular litigation venue: the ability to shut down an infringer's sales in such a large market.

    Seen in that light, it's very significant--and back then it would have been considered a dream or a miracle--that § 139 (the injunction statute) was touched at all.

  2. On the bottom line, however, defendants to patent infringement claims are even worse off now (even after that legislative measure) than they were when the process started. A couple of years ago, it still seemed that SEP injunctions were under control thanks to Huawei v. ZTE, and that companies could afford the luxury of addressing non-SEP issues. Now there is a bill that changes nothing about SEPs and, I predict, non-SEP injunctions will continue to be granted, just that there'll be some additional discussion with an outcome that is a foregone conclusion unless a patent holder makes a terrible mistake. SEP injunction case law, however, has gotten out of hand with the two Sisvel v. Haier rulings (the lower courts are simply doing what the Federal Court of Justice fully intended). And the Munich court's preliminary reference may very well lower the bar for preliminary patent injunctions.

  3. In § 83 of the Patent Act, the Federal Patent Court is now asked to hand down preliminary opinions after six months. Theoretically, that could lead to more stays. But it's merely an objective, not a hard requirement. If the court can't deliver, it can't--and that it takes more time won't be a defense to an infringement complaint.

    Even if that goal is met (which it may or may not be in any given case), it will come at the expense of thorough prior art search. Defendants will have to identify their prior art references and define their invalidity contentions extremely early. If a patent is ridiculously weak, that won't be an issue. But sometimes it takes a lot of work, and there have been patents (such as one of Microsoft's File Allocation Table patents) against which it was not easy to field suitable prior art (in the end, an email posted by Linux inventor Linus Torvalds to a mailing list turned out to be the strongest one, but by the time someone unearthed that prior art reference, the patent was already on the verge of expiration).

  4. There is some unfinished business here: the six-month goal applies to nullity actions before the Federal Patent Court, but "fresh" patents will firstly be challenged in opposition (revocation) proceedings before the European Patent Office (EPO) or the German Patent and Trademark Office (DPMA). That's going to be a big issue in, for example, 5G litigation, where patents will be asserted pretty shortly after they issue. The non-binding six-month target is then simply not going to come to bear.

    The incoming government after the September elections will be informed by the Federal Ministry of Justice that this problem still needs to be addressed. And the moment they touch the Patent Act again, it's likely that at least one "camp" will seek a further amendment to the injunction statute. My prediction is that net licensees are going to conclude that this a case of "plus ├ža change" and that something more is needed. In that scenario, they will try to build on the ultrafine crack in the shell that last night's modification of § 139 (which is officially meant to endorse the case law of the Federal Court of Justice) represents.

  5. When the rubber hits the road is what matters. We'll get there shortly, as the formal publication of the amended law is going to happen in a matter of days, weeks, or a couple of months at the most. It must be signed by the Federal President, but unlike the President of the United States, he merely notarizes laws unless they raise clear constitutional issues, which won't be the case here.

  6. In this new phase, my focus is not on what I believe went wrong last time, but on what exactly the courts and the lawyers make of it. I'm open-minded. I have no problem with concluding that this here does help defendants should it actually happen. I don't have a crystal ball. I can't imagine it today, simply because I can't see how non-SEP holders--who have neither an antitrust duty to deal nor a FRAND licensing pledge to honor--would be treated worse by the courts (if they make a licensing offer) than SEP holders. It was far harder for some German courts (and took them a few years) to vitiate Huawei v. ZTE than it will be to continue to grant injunctions under the new § 139, also considering that the official rationale for the bill (and the indisputable legislative intent, as documented by speeches given and press releases issued throughout the process) has more to do with continuity than with anything else.

  7. Let's come full circle back to Volkswagen, the company that started this. In a Handelsblatt article earlier this week (when it was clear what lawmakers were going to do), Volkswagen is quoted as welcoming this "clear signal" to patent trolls and important step toward a German patent law less prone to abuse, but very realistically notes that judicial practice will have to show whether the courts "seize this opportunity" to deny injunctions in certain cases.

    Of all the statements I've read in recent days, that one appears most balanced to me. A wait-and-see approach. I'm going to wait and see very actively. I'll track the developments for my future customers so they can get the best result under whatever the circumstances will be.

[Update] Heise online, Germany's leading information & communications technology news website, has a great headline: it translates literally as "Federal Parliament puts pebbles [using the diminutive of "stones"] in patent trolls' way." [/Update]

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