Thursday, October 13, 2022

Standard-essential patent injunctions in Germany unaffected by amended statute: academic papers can't paper over reform advocates' abysmal failure to achieve anything useful

This blog has been relentlessly explaining for well over a year now that the Emperor isn't wearing clothes when it comes to German patent injunction "reform." Two recent decisions by different divisions of the Dusseldorf Regional Court show that German judges will effectively apply a "willing licensee" standard akin to what we see in standard-essential patent (SEP) cases all the time--even where a proportionality defense is raised in a non-SEP dispute.

There was a little bit of a discussion after the IP Bridge v. Ford injunction in May over whether the efficacy of last year's "reform"--which included an amendment to Art. 139 Patent Act, Germany's patent injunction statute--can be judged by what happened in a SEP case in which the defendant's Huawei v. ZTE FRAND defense failed. But that was just an attempt by those who made the wrong strategic decisions to explain away the failure of their reform effort:

  1. SEP injunction arguments were indeed made during the legislative process by lobbying fronts for the same types of companies that also backed ip2innovate's and the German Automotive Industry Association's (VDA) patent "reform" efforts:

  2. Not only has the supposed "reform" been totally useless in SEP cases but has equally failed to make an impact in even a single non-SEP case, as Juve Patent reported in August (and I knew it, too).

  3. As the Dusseldorf decisions I mentioned further above show, patentees can easily create a SEP-like situation by simply making a licensing offer: all it takes is one short letter. But the only "use case" for the amended statute was to combat patentee overcompensation. It was never ever about cases in which, say, a pharmaceutical company wants to shut down a counterfeiter and absolutely positively won't grant a license. So in all those cases in which it's just about money, the patentee can unilaterally pre-empt the proportionality defense with just one short letter.

  4. Lest we forget: there is nothing in the statute or the officially stated reasons (comparable to recitals of EU legislation) that carves out SEP cases.

From a practitioner's point of view, German patent reform simply failed. I agree with Juve Patent that at some point the question will be whether the courts even read any proportionality defenses attentively.

Academic papers won't impress the judges either. Earlier this week, Professor Thomas Cotter (University of Minnesota) recommended on his excellent Comparative Patent Remedies Blog two recent papers on the proportionality defense in German FRAND cases in light of the 2021 legislative amendment. One was authored by Professor Peter Georg Picht (Zurich and London) together with Professor Jorge Contreras (Utah), and the other by Professor Martin Stierle (Luxembourg) together with Professor Franz Hofmann (Erlangen-Nuremberg). I have great respect for all four of these researchers, and have met three of them. But with the greatest respect, those papers won't change a thing because the judges will do their thing.

Those academic writings just show that a meaningful proportionality requirement would also apply to SEP cases. It's just that the one enacted by the German legislature last year is useless, and that's because of a strategic failure. Those pushing for a legislative measure may have done the right thing initially when they told the German government they were really just looking for a narrow exception. However, the moment that there was hope of Art. 139 Patent Act being modified, they'd have had to shift gears and propose statutory language that would have made an impact. In SEP cases as well as in non-SEP cases where a licensing offer is on the table, a narrow exception for cases of extreme hardship was never going to make a difference. Never. It was so foreseeable--I explained it in early 2020: Without eBay factor #2, German patent reform movement is left with nothing but Kremlinology, spin, and self-delusion: licensing vs. injunction . I explained it again the following year (a few months prior to the vote): German patent injunction reform bill fails "Keep It Simple, Stupid" efficacy test: automotive industry, smartphone makers won't save license fees.

I never once disputed--and in various conversations acknowledged--that the requirement of the inadequacy of monetary relief would have been a radical departure from the status quo. There would have been an undeniable risk of not getting anything in the end--but with their misguided approach, those reform advocates ended up "not getting anything in the end" and never even had a chance to bring about actual change. In the end, they thought they were realists in the sense of realpolitik--but they weren't: they were just dreamers because they expected an endorsement of the existing caselaw to produce different results. Federal Court of Justice judge Fabian Hoffmann told a webinar audience about a year ago that they can't expect the judges to make different decisions when the bill itself says (in the official reasons) that the objective is continuity.

As others have said before me, insanity is trying the same thing over and over again but expecting different results...

What the "reform" movement did was insane. At minimum, it was a non-starter. The alternative would have been to make a massive push for a more ambitious legislative proposal, not the inadequate effort that was undertaken by people who were no match for the policy departments of major net licensors and the pharmaceutical and chemical industries. At the parliamentary hearing, the "reform" movement was absent apart from a non-specialized automotive lobbyist who was basically eaten alive by the other camp.

For me personally it was actually better that it worked out this way. While my preferred jurisdiction in which to follow patent infringement cases is the United States, I obviously benefit in different ways from the not only continuing but even increasing importance of German courts, especially the ones in Munich and Mannheim, as injunction hotspots in major technology patent disputes.