BREAKING: European Commission preparing potential new regulation and/or directive on standard-essential patents

This is yuuuge. The European Commission just added a very important item to its list of published initiatives. The title is "Intellectual property -- new framework for standard-essential patents."

This is what the summary says:

"A patent that protects technology essential to a standard is called a standard-essential patent (SEP). Patent-holders commit to licence their SEPs to users of the standard on fair, reasonable and non-discriminatory terms and conditions. However, the system for licensing SEPs is not transparent, predictable and efficient.

"This initiative will create a fair and balanced licensing framework and may combine legislative and non-legislative action."

I'm sure there are many companies and other entities who would agree, as would I, that there are important issues to be addressed in connection with SEPs. It's just that some will say the current situation is unfair for licensees ("hold-out") while others will say licensors get overcompensated ("hold-up").

The "type of act" specified is "[p]roposal for a regulation." The summary refers to a potential combination of legislative and non-legislative action." I believe one possible direction this may take is an EU directive (which would then have to be transposed into national laws by the EU'S 27 Member States) on SEP licensing and enforcement.

It's not totally surprising as something like this was mentioned, inter alia, in the 2020 IP Action Plan. Now they're going to start with the public consultation (likely after the summer break) and their initial impact assessment, and they're shooting for a Commission adoption (i.e., a decision by the College of Commissioners) in the fourth quarter of next year. A Commission Regulation would take immediate effect, but if the Commission adopted a proposal for a directive, the process would just start as the EU Council and the European Parliament would then act as co-legislators.

Major SEP holders like Ericsson and Nokia have enormous political clout in Europe. If net licensees sought to capitalize on this process to weaken SEP enforcement, they'd face an uphill battle (of the kind they just lost in Germany, where the patent injunction regime is going to be the same as before, just more costly for defendants).

The outcome of this process is going to impact the case law of the Unified Patent Court, which is likely going to commence its operation sometime next year.

Just last week, President Biden signed an executive order on antitrust enforcement, which included one paragraph on SEPs. So there's a lot happening now in SEP policy on both sides of the Atlantic. And there are developments in Asia, too, particularly in Japan.

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Federal Council approves German patent bill -- just one more formality (signing into law) needed, but new injunction statute dead on arrival

Today the upper house of the German legislature, named Bundesrat (Federal Council), waved the new patent legislation (which the Bundestag, or Federal Parliament, had voted on two weeks ago) through. This PDF document says that the Federal Council does not attempt to veto the bill. It would have been highly unusual to say the least if the Federal Council had exercised its veto powers in this case. Not only is the hurdle very high but this bill is simply too uncontroversial and, actually, unimportant.

Now the bill is awaiting the Federal President's signature. Unlike the President of the United States, the German head of state has a purely ministerial function unless a bill raises constitutional issues, which this one obviously doesn't. There's no question that this legislative measure will take effect during the summer, which formally requires its publication in the Bundesgesetzblatt (Federal Law Gazette).

As I had explained before, the injunction "reform" is dead on arrival. The legislature made it unmistakably clear that it's not meant to change a thing. The judiciary has already said so, not "in the name of the people" (which is how German judgments formally begin), but via anonymous quotes by the Juve Patent website, which I picked up and commented on.

It would be incorrect to say that the ink wasn't even dry on the new law when the judges already explained that the injunction regime was still the same. It happened before the bill was even sent to the Federal President, so there wasn't even any ink on it in the first place.

The new injunction statute merely codifies the case law of the Federal Court of Justice, as both the executive government and the largest parliamentary group clarified. At least after the Wärmetauscher (Heat Exchanger) decision by the Federal Court of Justice, no German court hearing a patent infringement case denied that injunctive relief might be an overreaching remedy under the most egregious of circumstances--but defendants failed to establish that their case was quite so exceptional.

Whenever a licensing offer is on the table that isn't completely absurd, the courts won't even have to take a closer look at proportionality. And if it's a SEP case, the defendant is entitled to a license on FRAND terms anyway, with no additional proportionality defense as some judges have clarified. Third-party interests won't tip the scales. They'll be irrelevant where there is a licensing option, and where there is not, the standard will be equivalent to that of a compulsory license, of which there have been only two in the entire history of post-war Germany, one of which was overturned.

About half of my readers are in the U.S., so I'd like to explain the situation with a fictitious analogy: a U.S. patent injunction reform bill. It's actually not 100% fictitious as some vested interests would like to overturn eBay v. MercExchange by means of new legislation, just that in Germany the pressure came from net licensees and in the U.S. it comes from net licensors.

So, let's imagine that Congress added the eBay language with the four factors to 35 U.S.C. § 283--the U.S. equivalent to Germany's § 139 PatG. And let's furthermore imagine that the majority in both Houses of Congress made it totally clear that this is a ringing endorsement of the Supreme Court's case law in this field.

What would the courts do? The same as before. They'd have no reason to decide differently. Same old same old.

Defendants will try to get mileage out of this, but even lawyers who more often represent defendants than plaintiffs don't really expect different results.

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German patent judges dispel any doubts that might have existed: injunctive relief continues to be readily available to prevailing patentees

An international IP-specialized publication that I've mentioned on a variety of more positive occasions was totally off-base with the following headline on June 11: "Germany's automatic injunction regime for patent cases looks set to end"

That headline is just as wrong as Dewey Defeats Truman was back in the day. There was a procedural juncture last September when I thought the pendulum had swung against the automatic patent injunction regime, but that impression didn't last long. By the time the German federal parliament held its final vote, we were long past the point at which one could doubt what the impact of the amended injunction statute (§ 139 PatG) would be.

I've never seen a reporter from that publication in or near a German courtroom. That may explain this misconception. To be fair, the second sentence below the headline at least nuanced the fundamental misconception by noting that "[this] does not mean that major changes in practical terms are guaranteed." That portrayal of the situation is not spot-on either, but a lot closer to accuracy than the headline.

I explained the fallout from the legislative decision the morning after the vote; in a podcast I published on Monday, you can hear from two very experienced and knowledgeable German patent litigators and from comparative patent remedies expert Professor Tom Cotter; and yesterday I translated a variety of quotes from the case law and, especially, the parliamentary process to show that the legislative intent is clear: there should be and will be no departure from the (near-)automatic patent injunction regime that made Germany the most popular jurisdiction among patentees seeking to enforce their rights against infringers.

If you still needed to see something more that would eliminate any residual doubt, let me point you to today's Juve Patent article entitled German patent judges predict few changes to automatic injunction.

Juve Patent anonymously quotes judges from the divisions hearing patent infringement cases in Munich, Mannheim, and Dusseldorf. They all basically tell the same story: in order for proportionality arguments to matter, you have to make a showing that your case is a very rare exception.

The Juve Patent article is recommended reading. Rather than quote excessively from it, I'd just like to highlight it because it's the final nail in the coffin of the spin doctoring some have engaged in, and the misconceptions a few have had, since the final parliamentary vote. But I do wish to add something to the quote of an unnamed Munich judge who said that a grace period prior to the actual enforcement of an injunction "should only be granted in extreme situations" such as "when banknotes can no longer be printed or no one can make phone calls." First, even in such cases they're not really thinking of the denial of an injunction, but mostly just a workaround period. Second, like in the Heat Exchanger opinion by the Federal Court of Justice, the availability of a license will be held against the infringer (unlike in the U.S., where it would weigh against inadequacy of monetary relief). And third, the scenario of no more phone calls normally means that it's a SEP. In a SEP case, however, implementers are entitled to a license under the antitrust laws anyway, and there won't be a proportionality defense on top of FRAND. So even delayed enforcement is going to be a very rare exception--and the wholesale denial of an injunction is probably not going to happen even once unless and until the law is amended again.

Don't believe the wrong sources. Some are clueless, and some just try to portray something as a political success within their organizations that's actually a complete lobbying failure. I've been telling it like it is, in a relentless pursuit of the truth, and I'm happy to have been vindicated by multiple judges who spoke to Juve Patent about this matter.

Come September, the new FOSS Patents Premium service will provide complete coverage of how the case law in Munich and Mannheim evolves. Plaintiffs and defendants alike will have to be prepared. Some things will change, but prevailing patentees are going to get their injunctions as long as they make a licensing offer that isn't facially absurd.

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Legislative intent couldn't be clearer: availability of patent injunctions not compromised by new German legislation

Two renowned German patent litigators stated in the podcast I published yesterday that patent injunctions would remain just as available as before the German patent "reform" bill that was adopted earlier this month by the Federal Parliament. Dr. Dietrich Kamlah of Taylor Wessing pointed to the high hurdle that "disproportionate hardship" represents. Dr. Christof Augenstein of Kather Augenstein highlighted that the legislation is merely meant to codify the case law of the Federal Court of Justice, a court that rejected a proportionality argument in the only case of this kind it ever decided (Wärmetauscher, or Heat Exchanger).

In case you missed it, here's the podcast again:

Arguably, Daimler has lost that Heat Exchanger case--in which defended itself against an inventor--a second time by not achieving a German patent injunction reform that would make a practical difference. But perseverance sometimes pays off, and maybe they will succeed on a third attempt, if they and their allies figure out how to win a patent policy battle.

As Mr. Augenstein said in yesterday's podcast, the Federal Court of Justice told Daimler that it could still make cars--convertibles in that case--even without the "Airscarf" feature. I'd like to add something that relates to my previously-published explanations of a "Keep It Simple, Stupid" test, which checks whether a patent holder can simply pre-empt any proportionality arguments by making a licensing offer. In that Heat Exchanger decision, the Federal Court of Justice also pointed to the availability of a license. Twice, in fact--and both references to licensing are found on page 25 of the decision:

"Dass keine oder keine angemessene Lizenzierungsmöglichkeit bestanden hätte, ist nicht aufgezeigt."

Unofficial translation: "Defendants have not pleaded that a license was unavailable, or not reasonably available."

"Von der Möglichkeit, den Gegenstand des Streitpatents in Lizenz zu nehmen, haben die Beklagten keinen Gebrauch gemacht."

Unofficial translation: "Defendants did not avail themselves of the possibility to take a license to the patented invention."

The plaintiff in that case was an inventor, and he was interested in getting paid--not in shutting down factories. So there was a licensing offer on the table, and Daimler argued that the lower courts had not identified an infringement.

Not only do the new injunction statute (§ 139 PatG) and the official rationale stated by the German federal government (which made the original legislative proposal) suggest continuity, but the conservative CDU/CSU group in the German parliament, which consists of parliamentarians from Chancellor Merkel's CDU as well as the CDU's Bavarian sister party, the CSU) made its legislative intent clear at every single juncture of the process.

German courts do not analyze the legislative intent as systematically as their U.S. counterparts do. But statements by lawmakers always provide potential guidance to the judiciary.

On June 2, after the CDU/CSU group had reached a political agreement with its coalition partner, the center-left SPD, on the patent bill, the legal affairs spokesman of the CDU/CSU group, Dr. Jan-Marco Luczak a member of parliament from a Berlin district), placed the emphasis on the intent to keep patent enforcement in Germany as strong as before. Here are some passages from what he said, and my translations:

"Ein starker Patentschutz ist für Deutschlands Wirtschaft zentral, um unsere enormen Potenziale bei Innovation, Kreativität und Erfindergeist zu heben."

Unofficial translation: "Strong patent protection is paramount for the German economy in order to exploiit our enormous potential in innovation, creativity, and inventorship."

"Diese Innovationskraft zu schützen, das stand bei der Reform des Patentgesetzes für uns als Union im Mittelpunkt. Deswegen haben wir im parlamentarischen Verfahren sichergestellt, dass das hohe patentrechtliche Schutzniveau mit einem robusten Unterlassungsanspruch erhalten bleibt."

Unofficial translation: "For our parliamentary group of the CDU/CSU, it was the central objective in connection with this patent reform bill to protect this innovative capacity. Therefore we have ensured in the parliamentary process that the high level of patent protection would be preserved in the form of a robust right to injunctive relief."

"Damit kodifizieren wir die Rechtsprechung des Bundesgerichtshofes [...]"

Unofficial translation:"This way we codify the case law of the Federal Court of Justice [...]"

I've found another statement by the CDU/CSU group that plaintiffs seeking injunctions can point to (if needed at all, which is doubtful). The plenary of the Federal Parliament voted to adopt the Legal Affairs Committee's report. That was the lead committee on this bill. The CDU/CSU statement I mean starts on page 59 of the committee report, and ends after five lines on page 60. I'll quote and translate it sentence by sentence:

"Die Fraktion der CDU/CSU betonte, dass die Synchronisierung der Verletzungsverfahren vor den Zivilgerichten und dem Nichtigkeitsverfahren vor dem BPatG gerade in Fällen des Missbrauchs von Patentrechten zu einer erheblichen Verbesserung beitrage."

Unofficial translation: "The CDU/CSU group stressed that synchronization infringement proceedings before the regional and higher regional courts with nullity proceedings before the Federal Patent Court brings substantial improvement particularly in cases of patent abuse."

"Hinsichtlich der Verhältnismäßigkeitsprüfung im Rahmen des Unterlassungsanspruchs bekräftigte sie, dass in der Änderung des § 139 Absatz 1 PatG in der Fassung des Änderungsantrags der Koalitionsfraktionen keine Aufweichung der geltenden Rechtslage zu sehen sei."

Unofficial translation: "With respect to the proportionality test relating to injunctive relief, [the CDU/CSU group] stressed that the modification of § 139 para. 1 PatG as proposed by the government coalition is not to be interpreted as a dilution of the legal status quo."

"Vielmehr werde die Rechtsprechung des BGH für besondere Ausnahmefälle kodifiziert."

Unofficial translation: "Much to the contrary, the case law of the Federal Court of Justice concerning rare exceptions is codified."

"Die Einbeziehung von Drittinteressen in die Verhältnismäßigkeitsprüfung bedeute kein Hinausgehen über die Wärmetauscher-Entscheidung."

Unofficial translation: "The consideration of third-party interests with respect to the proportionality test does not mean to go beyond the Heat Exchanger decision."

"Der BGH habe sich nur deshalb nicht mit Drittinteressen befasst, weil an dem Rechtsstreit kein Dritter beteiligt gewesen sei."

Unofficial translation: "The Federal Court of Justice did not address third-party interests [in its Heat Exchanger opinion] because no third party was involved with that dispute."

"Selbstverständlich umfassten die Grundsätze von Treu und Glauben jedoch auch Drittinteressen."

Unofficial translation: "It goes without saying that the obligation of good faith also extends to third-party interests."

"Auch in Zukunft könne der Unterlassungsanspruch nach den ausdrücklich normierten Grundsätzen von Treu und Glauben nur in absoluten Ausnahmefällen nicht durchgesetzt werden."

Unofficial translation: "Just like before, enforcement of the right to injunctive relief will be precluded only in absolutely exceptional cases in accordance with the explicitly stated principe of good faith."

"Ein Patentrechtsinhaber, der bspw. einen Impfstoff entwickelt habe, werde diesen auch zukünftig exklusiv nutzen und Dritten untersagen dürfen, ihn zu produzieren oder ohne Lizenz zu nutzen."

Unofficial translation: "A patent holder who invented e.g. a vaccine is still going to be able to exclusively use the invention and to prohibit third parties from making or using it without a license."

"Selbst noch so starke Drittinteressen, wie bspw. die Betroffenheit der gesamten Allgemeinheit, führten nicht zur fehlenden Durchsetzbarkeit des Unterlassungsanspruchs; anderes sei nur in absoluten Ausnahmesituationen denkbar."

Unofficial translation: "Even the strongest third-party interests one can imagine, such as when the entire general public is affected, do not render the right to injunctive relief unenforceable, except under absolutely exceptional circumstances."

"Bei Vorliegen einer solchen außergewöhnlichen Situation bestehe ein Anspruch auf angemessenen Ausgleich."

Unofficial translation: "Should such an unusual situation arise, there will be a right to adequate compensation."

"Insoweit werde die grundsätzliche Ausschließlichkeit des Unterlassungsanspruchs nicht angetastet."

Unofficial translation: "Therefore, the fundamentally exclusive nature of the right to injunctive relief is not compromised."

Tbe above statements are also found, in an almost identical form, in the speech that Ingmar Jung, the member of parliament who was the CDU/CSU group's rapporteur on this bill, filed on June 10. You can find his speech on page 274 of this PDF document.

Some may still delude themselves into believing that German courts would deny prevailing patentees, on proportionality grounds, the injunctions they request. Neither the statute nor the well-documented legislative intent support that view. Heat Exchanger has a simple message: take a license. There's absolutely no way that a statute that isn't meant to change the situation would result in non-SEP enforcement all of a sudden being more difficult than, or even just equally difficult as, SEP enforcement. That would be a nonsensical outcome.

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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 ça 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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Automotive, consumer electronics companies lose German patent reform battle: injunctions still near-automatic under deform-not-reform statute

One step forward, two steps back. That's how I would summarize the setbacks the German automotive industry (and its allies among smartphone and other consumer electronics companies) have suffered on the patent policy front in recent days:

1. First, Daimler caved to Nokia, which will result in the withdrawal of the preliminary reference procedure over component-level licensing of standard-essential patents (SEPs) and the application of the Huawei v. ZTE guidance after the Federal Court of Justice of Germany vitiated the ECJ case law in two Sisvel v. Haier cases. Earlier this week I reported on the way courts now pressure implementers of standards to take a pool license lest they be considered unwilling licensees.

2. Meanwhile it has become known that the parties of the German government coalition--who had hit a temporary impasse--agreed to adopt (at next week's legislative session) a patent bill that is more accurately described by the word "deform" than by "reform" as far as patent injunctions are concerned. The part meant to address the injunction gap is also fundamentally flawed, but in this post I'm just going to focus on the injunction statute itself.

The new statute is as unwieldy as it is unhelpful. It's nothing anyone can be proud of. And it confirms the prejudice--or maybe I should just call it a perception--that Germans are not particularly pragmatic. There's this German saying that translates as "why make it easy if you can make it complicated?" That one also applied to the Dusseldorf Regional Court's prolix questions to the ECJ, with one grammatical sentence spanning 13 lines in the English translation. No one at the ECJ will miss that preliminary reference for linguistic reasons...

More than seven months after the German federal government put foward its official proposal, all that changed in the first sentence of § 139 of the Patent Act since that governmental proposal is the redundant and ridiculous insertion of the universal principle of good faith (in bold-face letters):

"Der Anspruch ist ausgeschlossen, soweit die Inanspruchnahme aufgrund der besonderen Umstände des Einzelfalls und der Gebote von Treu und Glauben für den Verletzer oder Dritte zu einer unverhältnismäßigen, durch das Ausschließlichkeitsrecht nicht gerechtfertigten Härte führen würde."

My translation:

"The claim [to injunctive relief] is excluded to the extent that, under the special circumstances of a singular case and considering the principle of good faith, its enforcement would result in disproportionate hardship on the infringer or third parties beyond what is justified by the exclusionary right."

What is this good for? Absolutely nothing.

It's a too-many-cooks-in-the-kitchen situation where everyone threw their ingredients into a soup that is anything but tasty, much less healthy.

There's this saying that a camel is a horse designed by a committee because it's neither at a level with a horse when it comes to riding, nor can it "compete" with cows on milk production, nor with sheep on wool. But a camel is at least moderately useful in each of three respects. That's a lot more than the above deform statute can say. It has everything in there, but it's indigestible. A recipe for stomach pain.

Even the most implementer-friendly German patent judge, Judge Dr. Thomas Kuehnen (Presiding Judge of a patent-specialized senate of the Dusseldorf Higher Regional Court), clearly says that there won't be any proportionality defense on top of a FRAND defense. Presiding Judge Dr. Matthias Zigann (Munich I Regional Court, Seventh Civil Chamber) already told me the same when I asked him a question at the Munich court's celebration of the 10th anniversary of its Patent Local Rules.

Let's talk about non-SEPs and perform the "Keep It Simple, Stupid" ("KISS") test I already discussed last year and, again, in March. The short version is that we have a plaintiff (the patent holder) and a defendant (which for the sake of the argument is deemed by the court to be infringing the patent-in-suit). The patent holder asks for $2 per unit (sold of the infringing product), while a market rate would more likely be in the range from $0.05 to $0.10. What's going to happen if the defendant makes a proportionality argument? An injunction will issue, just that more time and money will be wasted to get there. Here's why:

First, the plaintiff will note that according to what lawmakers said throughout the process (press releases, parliamentary debates, hearings), they didn't want to change anything. The reasons stated by the government for this measure say the very same thing: it's just about codifying the case law by the Federal Court of Justice in Heat Exchanger.

Second, the statute itself makes it clear that injunctions shall continue to be the norm. The word "Einzelfall" could just mean "a given case", but then it would be meaningless as any law serves to adjudge individual cases. Its other meaning has a low-frequency connotation, which is why I translated it as "singular case". The combination of the term with "special circumstances" clearly suggests that meaning. The patent holder will argue that this case here is not that rare (like "one in a million") case where the court should deviate from the principle of near-automatic injunctions. It's just your average patent infringement case where an infringer doesn't want to pay the "inventor" (or the inventor's legal successor) a royalty. And an offer is on the table: the $2 per-unit royalty demand.

Third, no German regional court will want to be the first one to deny injunctive relief on proportionality grounds because it's a given that the first court to do so will immediately be skirted by many plaintiffs. The same applies to the regional appeals courts: if they make injunctions harder to obtain in their circuit, it won't take long before they'll run out of patent cases. A recent IAM survey showed that Germany is by far and away the world's most popular patent jurisdiction because of its near-automatic injunctions. German courts can't transfer cases between districts, unlike in the U.S., and cases can typically be brought in any one of the courts designated to hear patent cases, as the allegedly infringing products and services are usually offered nationwide. So there is fierce competition between the courts, and this injunction deform statute won't stop the race to the bottom.

Fourth, the principle of good faith doesn't help anyone as it doesn't have to be stated to apply to any creditor-debtor situation, including tort creditors and debtors like here.

Fifth, the defendant may have paid a fortune to an expert (which doesn't even count as a witness in German proceedings) to establish a major hardship, but the exclusionary right at issue (the patent) is considered so fundamental by German patent infringement judges that they don't have to read lengthy expert reports, much less would the court have to appoint an expert (court-apppointed experts would have the status of a witness). There is a licensing offer on the table. If the defendant is a car maker, it doesn't have to shut down a plant; if it's a telecommunications company, it doesn't have to switch off its network. The defendant simply has to take a license to avoid all of that.

Therefore, even the question of any hardship caused to third parties is irrelevant: third parties won't suffer if the infringer takes the damn license. Also, Judge Dr. Klaus Grabinski of the Federal Court of Justice already explained a few months ago that the reference to third-party hardship in the reform proposal wouldn't change a thing.

Now, the infringer will argue that the licensing offer shouldn't count because it's like 10 or 20 times higher than a market rate. The defendant can pay the same economic expert or another one to underpin that claim. It won't matter. Unless the court finds a rate absurd, it's not going to delay the decision by another year (to have more back and forth between party experts and a court-appointed expert). The injunction will issue. "Take the damn license, infringer." That's going to be the message.

For chemical and pharmaceutical companies, however, it's going to be an annoyance at best and a source of legal uncertainty at worst.

That's because in cases where they are not interested in a license deal--not even in the slightest--but want to get a plagiarist enjoined, there won't be a licensing offer on the table. They will then get into a debate over third-party interests, and with even the U.S. federal government recently talking about how COVID vaccine patents should be waived, that's not going to be pretty.

On the bottom line, this disastrous bill won't help the ones it's supposed to help, but it will hurt the ones who are not in any way responsible for the problems facing automotive and consumer electronics companies. What a mess. What a failure. And what a waste.

It isn't appreciably better than the very first draft by the Federal Ministry of Justice back in January 2020. The only significant change that theoretically could make an injunction less likely is the reference to third-party hardship, but again, that will play a role only in cases in which no licensing offer is on the table--and the most prominent patent judge of the Federal Court of Justice has already explained that the hurdle will be just as high as for a compulsory license. Only twice has a compulsory license been granted in the history of post-war Germany, and one of those decisions was overturned.

Just like with component-level licensing, net licensees have to start all over again. But it will be easier to get another preliminary reference to the ECJ over component-level SEP licensing than it will be to move the needle in patent licensing negotiations. For now, there is no reason why patent holders would ask for lower royalties. And there won't ever be (unless a better statute--a true reform--is enacted at some point further down the road).

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Patent injunction reform may not happen in Germany as Federal Parliament nears end of legislative term: only two more plenary weeks left

"For patent plaintiffs, Germany is the world's top jurisdiction, exclusive IAM survey finds"--that's beyond reasonable doubt. It's equally beyond reasonable doubt that this is not going to change anytime soon.

I've been skeptical of the German patent injunction reform effort for quite some time. There was a silver lining last September, but it lasted only a few weeks. The first plenary debate in the Bundestag (Federal Parliament) was a sweeping victory for those opposing reform, and a parliamentary hearing confirmed that pro-reform lobbying efforts had failed miserably.

The pro-reform camp didn't even do its homework. German automotive companies and their allies thought they could persuade politicians with anecdotal evidence, such as the Broadcom v. Audi dispute. If you have only one case like that to show, politicians won't be persuaded, as it could be an outlier and in a single case all sorts of things can happen, including mistakes by parties, counsel, or judges. I find that story representative of the problem and symptomatic of the injunction (and injunction gap) problem in Germany, but how could the actual decision-makers reach that conclusion? I've attended hundreds of patent trials and hearings over the last 10 years, so I know what happens, and I also know how one could produce hard evidence--and numbers and lists as opposed to anecdotes. The pro-reform forces don't. They also failed to build the kind of support from academics that would have borne weight with political decision-makers.

It would have taken professional, competent, and strategically clever efforts to be in a position to win. And it would have taken a budget about ten to twenty times larger than what those pro-reform companies and organizations had available between all of them. They brought butter knives to a gunfight (a quote from a document that surfaced in the recent Epic Games v. Apple trial). At least one Big Tech company (that wasn't as controversial when the process started as it is by now) approached German policy makers and legislators directly instead of figuring out a way to mobilize more German companies and contribute funding and expertise to their efforts.

There were people dabbling in patent policy because it was a welcome distraction from their everyday routine in the office. The French word "amateur" (like its Latin root) means that people do something because they love to do it--as opposed to being really good at it. "Amateurish" is a pretty good description of what they did for the most part, and if they had done nothing at all, could they have achieved less?

That is now the question. It's now literally about whether there'll be a useless "reform" undeserving of that label (though there will always be someone trying to give it a spin)--or simply nothing at all.

Time is ticking away. The Federal Parliament's calendar has only two more weeks marked with a magenta stripe before the September elections: the week of June 7, and the one of June 21. At the time I am writing this (weekend), there is a packed agenda on the Bundestag website for the week of June 7, and patent reform is not on that list.

Theoretically, things can change on ultra-short notice. They could hold a committee vote on one day and the plenary vote on the next. But in order to be able to do that, they need a political agreement between the government coalition parties (Chancellor Merkel's Christian Democratic Union, its Bavarian sister party named Christian Social Union, and the Social Democratic Party). Then they can work out the details with help from the Federal Ministry of Justice, which has an IP policy department.

Like all legislatures around the globe, the Bundestag has had to deal with a number of issues since last year that wouldn't have arisen if not for the pandemic. As a result, there are now numerous legislative projects and other policy issues competing for one of the coveted slots during the final voting week of the term.

This means the opponents to meaningful reform have won either way. There isn't enough time left for anything major. So the three options are now the following ones, and we'll know soon which one of the three materializes:

1. The most likely outcome is still that they pass something into law that also touches on injunctions, for the sake of having something to show in that area, no matter how useless it will be.

2. The second-most likely outcome is that they enact a reform without the most controversial part (injunctions) and possibly also without the second-most difficult one (stays; here the idea is just to demand faster preliminary opinions from the Federal Patent Court, and it's not going to work the way some people imagine and may even lead to fewer stays and weaker invalidity contentions). There's a lot of totally non-controversial stuff in there that is of an editorial nature. They might just adopt the bill so that the job is 99% done in quantitative terms, even if that's only 1% in qualitative terms.

3. The least likely possibility is that the entire package gets postponed into the next term.

As none of the three possibilities leads to a solution, the discussion will continue. In the first scenario, the pro-reform movement will find it politically most challenging to get another reform effort started. It would take a lot of time presumably. And effort. And money. And the strategy would have to be way better than last time.

It's unpredictable right now what particular multi-party coalition will be in power in Germany after the September elections. Polls are volatile. With every single party from the far right to the far left opposing meaningful injunction reform, it won't be easier. But the reason it went wrong during this legislative term (which is already certain as the only thing that won't happen in June is a reform that actually moves the needle) is simply that those who wanted reform were C-L-U-E-L-E-S-S, but thought they knew how to win. Actually, I suspect one or more of them even wanted to sabotage the effort. Then, it's easy for the saboteurs to fool the amateurs.

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German patent injunction reform bill fails "Keep It Simple, Stupid" efficacy test: automotive industry, smartphone makers won't save license fees

In any legislative context, a reform proposal will be described as overreaching by its opponents, while its supporters will typically ask for more. However, there's a wide corridor to which this applies. In a section of that corridor, there may be room for a reasonable compromise. At its margins, only one camp is happy and the other merely pretends to be not, and later one or even both sides may claim victory.

Sadly, there's also another possibility: the proposal may really suck to the extent that both sides, if the bill was adopted, would be worse off than before. This rarely happens, but the German patent injunction reform process has gone so wrong that this is precisely where things stand.

It's not specific to the German patent policy debate, but the same thing in other jurisdictions, that the pharmaceutical and chemical sector opposes any weakening of intellectual property enforcement. Even if a bill was carefully crafted so as not to affect that part of the economy, they'd use their influence to avert any legislative change that would move the front line closer to them.

Those seeking to preserve the status quo not only outnumbered but also outperformed the pro-reform camp at last week's parliamentary hearing. In late 2019 and early 2020 I met many of those begging the German government for patent injunction reform, and by and large I saw people who just didn't have what it takes to win in terms of skills, expertise, strategic thinking, and forcefulness. Worse still, there may even be saboteurs at work, which would serve to explain the "singularity" ("Einzelfall") non-starter.

The problem surfaces in patent policy all the time: different industries deal with patent enforcement under different parameters, but lawmakers seek to avoid sectorial rules.

Owing to those sector-specific parameters, the proposed patent injunction statute unnecessarily creates uncertainty and complications for the enforcement of pharmaceutical and chemical patents while automotive companies and smartphone makers won't save a single cent in license fees (they're just going to spend more on lawyers and experts).

That's why my advice is to shelve that part of the reform. It's counterproductive, so politicians should just adopt the package without it, then go on the campaign trail (this is an election year for the Federal Parliament), and look at patent injunctions again in a future legislative term.

Let's apply a Keep It Simple, Stupid type of test to the reform proposal in order to gauge its efficacy for the purposes of the information and communications technology industry (also including connected cars):

• The patent is objectively worth a per-unit royalty somewhere between $.05 and $.10.

• The patent holder is a troll, operates in a different industry (example: Nokia makes base stations, not cars, but sues Daimler anyway), or may even be a direct competitor but doesn't consider this patent to be key to product differentiation. In all those scenarios, it's just about money.

• The patent holder demands $2.00 per unit and proposes a written license agreement, as a binding offer and for the court to see, in time for the trial.

• The damages from the enforcement of a Germany-wide injunction would easily amount to several times that amount.

What would happen in that scenario?

1. Under the U.S. eBay standard, the court would deny injunctive relief. The licensing offer would indicate that monetary relief isn't inadequate, so one of the eBay factors would simply not be met. It wouldn't even take that specific licensing offer for the court to arrive at that conclusion: prior offers to, or agreements with, third parties would also have that effect. The injunction is denied.

2. Under the current German framework, the injunction would simply issue, and the licensing offer wouldn't be considered. The injunction is ordered.

3. Under the proposed reform statute, the defendant would argue that the cost of shutting down a car factory or of stopping the sale of smartphones constitutes intolerable hardship.

   The court, however, would say that those doomsday scenarios miss the point: this is just another run-of-the-mill patent case in which an infringer doesn't want to pay, and there is a licensing offer on the table, so the alternative is not to shut down, but to sign the agreement.

   The defendant would say that $2.00 per unit is excessive. The actual value is a few cents per unit.

   The court would then say: look, we want to decide this case quickly, so we're not going to bring in a patent valuation expert. We don't know, and don't even want to know, what the right number is. Maybe $2.00 is too high, but without the expert we don't want to bring in we can't rule out that it's more or less a reasonable demand. The injunction is ordered.

The difference between the second scenario and the third is not the outcome: it's an injunction either way. In one case, they at least get there efficiently. In the other case, the defendant has probably paid more to lawyers and experts, but to no avail: the license offer that U.S. courts hold against plaintiffs would be held against the defendant in Germany if the proposed reform bill was adopted.

That Keep It Simple, Stupid test describes exactly the scenario that the automotive industry is complaining about. It is, however, not the one the pharmaceutical and chemical sector is concerned about.

Pharmaceutical and chemical companies are interested in exclusivity. They want to shut down counterfeiting operations.

Pharmaceutical and chemical companies typically won't make a license offer like a (software or semiconductor) patent troll.

They don't want to get into a debate over whether they're entitled to an injunction. They don't want to waste time and money on additional expert reports. And they criticize that the reference to third-party interests in the current proposal might hurt them the most, as even willful infringers would argue that there are ill people who need those (counterfeit) medications.

By contrast, even Deutsche Telekom wouldn't get mileage out of third-party interests. While telecommunications networks are obviously critical infrastructure, the Keep It Simple, Stupid test presupposes a plaintiff who is not stupid. Therefore, there will be a licensing offer on the table. It may be overpriced, even usurious, but unless the court can safely rule out that it might be remotely acceptable, the defendant's doomsday scenarios--and their impact on third parties--just won't matter.

It doesn't make sense to adopt a statute that will hurt some but won't help anyone, except in cases in which plaintiffs are so unsophisticated as to not make a formal licensing offer. I already explained this problem based on the original draft bill early last year (1, 2). Unfortunately, the current proposal has the same structural shortcoming, but pharmaceutical and chemical companies are now worried about the impact of the consideration of third-party interests on their cases. The draft injunction statute belongs into the dustbin of patent policy history.

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Automotive industry falls into political trap, allows patent reform opponents to portray concerns over injunctions as single-industry issue: German parliament hearing

The short version of what happened at yesterday's patent reform hearing in the German Bundestag (Federal Parliament) is that the positions taken by the seven panelists were materially consistent with how I had summed them up in advance, but the overall perception was even worse for the cause of patent injunction reform.

The video recording of the two-hour meeting of the Legal Affairs Committee became available today. If those seeking to preserve the status quo had scripted the hearing, it wouldn't have been less balanced.

The lone voice--among seven "experts" (who in a U.S. Congressional hearing would be sworn in and called "witnesses")--in favor of a proportionality defense to injunction claims was, as expected, the VDA (German automotive industry association). That fact alone supported the anti-reform camp's narrative, but politicians and co-panelists alike capitalized on the situation and reinforced their portrayal of proportionality as the cause of the German automotive industry plus a bunch of foreign infringers.

There actually is a reasonably broadbased coalition of companies who consider the near-automatic injunction regime unsustainable. That movement comprises not only car makers but also telecommunications service providers, Internet service providers, and even adidas. While the ip2innovate group succeeded in bringing a diversity of companies together, it has failed miserably to advocate the cause. It's been amateurish beyond belief, and the state of affairs in the legislative process speaks volumes--as does the fact that ip2innovate wasn't represented on the panel.

The pro-reform camp should have declined to participate in this farce. They should have demanded a more balanced composition of the panel. Failing that, they should have focused on delegitimizing the event. But they've been strategically misguided all along.

The performance of the automotive industry group's representative was uninspiring. He had prepared some talking points, and given that he's not an IP expert, this could have gone worse. Still, the fact that his understanding of the issue lacks breadth and depth became clear on some occasions. For example, when asked by a member of parliament to compare the German patent injunction regime to the situation in other jurisdictions, he just claimed that courts in other countries could order monetary compensation instead of injunctions, but wasn't able to substantiate this in any way. He didn't even explain the difference between common law and civil law jurisdictions.

When I listened to the anti-reform panelists' statements and, even more so, the parliamentarians' questions, it felt like watching something that must have happened in a parallel universe. It was all completely detached from the reality of patent litigation in Germany. Politicians probably didn't know because the pro-reform movement is too incompetent and uncapable to properly and convincingly explain the situation to them, and to debunk certain smokescreens. The anti-reform panelists described the world out there as one in which patent infringement is avoidable, and the scope of a patent is clear by reading its claim 1--when in reality even reasonable people can easily disagree on claim construction, and most patents aren't valid as granted, so they're either invalid or the valid scope is narrower. But in a field of technology where keyword searches aren't nearly as targeted as in chemistry, the problem is already where to start with patent clearance.

Two female patent attorneys stole everyone else the show: Dr. Alissa Zeller of BASF, speaking on behalf of the vci (German chemical industry association), and Dr. Renate Weisse, a Berlin-based patent attorney in private practice. I disagreed with virtually everything Dr. Weisse said, and when referencing her client base she conveniently omitted that it also includes large corporations and "institutions" (presumably patent troll Fraunhofer). Dr. Zeller's views just didn't reflect the reality of the information and communications technology industry; some of what she said may very well apply to her own industry. But the way they advanced their agenda was first-rate.

Dr. Weisse was far more aggressive and outspoken, but Dr. Zeller, too, came across as very assertive, effectively argued in favor of the status quo, and described the potential implications of the current proposal (notwithstanding the Federal Court of Justice already having stated clearly that near-automatic injunctions are here to stay) as if the world was about to descend into chaos.

The two of them could have faced any ten representatives of the pro-reform camp (as opposed to just one) and would have eaten them alive. Their statements at the hearing could be used for any video tutorial on effective IP advocacy.

By contrast, those advocating proportionality just don't have what it takes to win. Their objective--less leverage for patent holders in negotiations--could only be achieved through a systemic departure. But how can they be revolutionaries in the political arena if their own organizations don't even let them act outside 20th-century structures, such as industry associations?

More than a year ago I explained to them what it would take to win. I also created a chart to put the anti-reform camp's talking points into perspective (click on the image to enlarge):

What you see in that chart is the story that was told during yesterday's hearing.

I'm already looking past that reform bill (while still keeping an eye on the process) and profoundly concerned that Nokia and Ericsson may win the pan-European lobbying battle over component-level SEP licensing. In the worst case, the CJEU will even lower the bar for preliminary injunctions (over any category of patents, ultimately also SEPs). But for now I still hope that those who botched the patent reform effort will learn from their mistakes and do better next time. "Next time" is now.

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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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Ericsson VP's dissent from European Commission's expert group report on standard-essential patents draws mockery

On Wednesday, the European Commission finally published the report furnished by its group of experts on licensing and valuation of standard-essential patents (SEPs). As I noted in my commentary, it's not binding on the Commission or anyone else, and it's a collection of different perspectives and proposals. Given that it is what it is, it came as a bit of a surprise that Ericsson vice president Monica Magnusson wrote a dissenting opinion that was published along with other materials accompanying the report. I like the fact that U.S. judges write dissents and concurrences to express minority views, but the expert group report in question was so inclusive that everyone can find something to like and something to disagree with, which should render it unnecessary to distance oneself from it. The report is equidistant from the two camps.

Nevertheless, Mrs. Magnusson wrote her dissent, "with sadness" and despite holding her "fellow Expert Group members [...] in high esteem." The reason she views the expert group's as a "lost opportunity" is that it "lack[s] a common position on the current situation and future challenges" (which Reuters also noted). And she criticizes that the numerous "opinions and suggestions are often not accompanied by any empirical evidence and often include methods broadly rejected by courts." I wouldn't confuse an expert group for a research team, and in my observation, patent monetization-focused companies like Ericsson believe that the conclusion of license agreements under the threat of injunctions or in connection with commercial agreements constitutes "empirical evidence" of the reasonableness of certain licensing models.

Politico Pro accurately notes that Ericsson's dissent is driven by a desire to protect its patent licensing stream (actually, they want to grow those revenues), and goes on to question whether this kind of "drama" was needed.

As I disagree with Ericsson on substance, I'm glad to see that Ericsson got much less out of its participation in this expert group than it hoped--and I wouldn't have known for sure if not for that dissent. It's at least debatable whether a dissent was needed from a paper that doesn't take a side, though it may very well be that Ericsson was concerned about some of the suggestions in the expert group report potentially impacting litigation (if one of Ericsson's adversaries used them as persuasive authority and pointed to Ericsson's own participation). At any rate, I don't fault Ericsson for its fighting spirit. I wish some of the organizations I agree with on substance--such as certain automotive companies--were just 10% as aggressive as Ericsson.

For example, last April there was a conference call on German patent injunction reform, and the member of parliament hosting the call summarized his position and gave everyone one chance to contradict if he didn't accurately describe a certain consensus. What that politician said was very much against the interests of the pro-reform entities on the line, but none of them had the guts to object. On the 24th, the German parliament's legal affairs committee will hold a hearing on patent injunction reform, and the list of panelists is outrageously lopsided. If those advocating reform were committed to their cause, and not as weak as they are, they'd protest and even refuse to let a representative of the German automotive industry association (whose knowledge of IP policy is limited) participate. Faced with the choice between the two extremes, Ericsson simply does a far better job than certain losers, and I respect that fact, though I respectfully disagree with Ericsson's positions.

There is, of course, also a middle ground between those two extremes. The only other write-up about the expert group report by a member (other than Ericsson's dissent) that I've found so far is an SSRN paper by Professor Damien Geradin. His positions on component-level licensing are not aligned with Ericsson's, and in that paper he shares "some personal thoughts" such as that the expert group meetings were "a complex, time-consuming, and on occasion frustrating exercise." But unlike Ericsson, Professor Geradin "enjoyed [his] interactions with the other members, and [] learned a lot."

With respect to component-level licensing (the particular topic my first post on the expert group report focused on), this passage is particularly important:

"[The report makes] a distinction between have-made rights with conditions (which correspond to what is generally understood by have-made rights) and have-made rights without conditions (which would allegedly satisfy the licensing needs of component makers). The trouble is that there is no evidence that such unconditional have-made rights are recognized by courts, and thus I am sceptical that such rights could address the licensing needs of component makers. Other solutions must be found to ensure the component suppliers’ freedom to operate."

No matter how often Ericsson, Nokia, Qualcomm etc. stress that cellular SEPs are typically licensed at the level of handsets and not chips (because of those companies and others doggedly refusing to license baseband chipset makers, except that Qualcomm is more equal than others and secures such licenses for its own baseband chips), the natural choice would still be to license as high up in the value chain as possible. That's the natural way because patent exhaustion works top-down, not bottom-up.

That paper discusses a variety of topics covered by the expert group report. So far I've focused on component-level licensing, though I may find the time next week to discuss some other SEP issues, and in that case I might also quote Professor Geradin's paper again. I believe he struck the right tone, providing additional explanations and making constructive suggestions as opposed to venting frustration or discrediting the expert group report.

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These should be the top five priorities for those organizations seeking to promote balanced patent policy

Things haven't recently gone too well for those opposing patentee overcompensation in the information and communications technology sector and trollish litigation tactics. The German patent injunction reform effort is now at a point where even communists demand strong intellectual property protection. To turn that one around, with the end of the term approaching fast, is like trying to win a chess match after losing too many pieces. But there are five other contexts in which the camp that is making itself completely ridiculous in the German reform process could still bring about really positive developments. The following order does not indicate the relative importance of each item, but is related to how soon one would have to take action:

1. Ericsson v. Samsung now involves multiple antisuit injunctions (Samsung obtained an A1SI and A3SI in China, and according to rumors the Chinese court even entered an A4SI for good measure, while Ericsson won an A2SI that is being appealed). Ericsson has announced significant amicus brief activity. This dispute could become the next Microsoft v. Motorola in terms of its importance for U.S. antisuit injunctions in standard-essential patent (SEP) cases. It won't be hard for Ericsson to find many allies who argue that U.S. courts should enjoin, enjoin, and enjoin--just to have as much patent litigation in the U.S. as possible. But that's not going to be constructive because other countries, such as China in this case, could take the same attitude.

   It's key to help decision-makers at all levels understand that AxSI injunctions are merely a symptomatic escalation ("bring the popcorn"), but the underlying problem is territorial overreach courtesy of the Supreme Court of the UK. Escalation doesn't solve the problem. Deference and restraint are needed. It may take an international treaty to ensure patents will be litigated jurisdiction by jurisdiction, including SEP valuation. I know some patent monetization-focused companies (trolls and others) don't like that, but it's the only way out of this mess. In the Ericsson-Samsung dispute you now have a Swedish company that wants to litigate in Texas and a Korean company that asked a Chinese court for a global FRAND determination. Plus, the Swedes say that they'd be open to arbitration, but that always favors patent holders making unreasonable demands (because its results gravitate toward the middle between the parties' positions, and while you can always go higher, you can't counterbalance an excessive royalty demand by offering a negative royalty).

   It would be desirable for some amici to support Samsung's opening brief (due later this month) and to explain to the Federal Circuit that what Ericsson seeks to accomplish isn't ultimately even going to be good for the U.S. economy.

2. SEPs again: The Dusseldorf Regional Court's referral to the Court of Justice of the EU of certain component-level SEP licensing questions is certain to be affirmed by the regional appeals court. Nokia, Ericsson, Qualcomm, and other net patent licensors who prefer to shake down end-product makers are going to be lobbying all across the EU. The CJEU doesn't accept amicus briefs from companies or industry associations. You must get support for your positions from the European Commission and from the governments of EU member states. Daimler's IP lobbying capabilities are unproven to put it diplomatically for a change. More sophisticated organizations with an interest in component-level licensing should play an active role and talk to EU member state governments (to all of them) and figure out how to steer the Commission's position in the right direction.

3. Another CJEU referral, but not SEP-related: the Munich I Regional Court made a smart move from its perspective by asking the top EU court to lower the standard for preliminary patent injunctions. But every referral creates an opportunity to achieve a different outcome than the one the referrer would like. I'm not suggesting that one could or should "hijack" this referral, but it is perfectly legitimate to raise the issue of proportionality (EU Intellectual Property Rights Enforcement Directive) in this context. Maybe this referral is not only the first but also, due to group pressure on German patent judges, the last opportunity for many years to challenge the German near-automatic patent injunction regime at the EU level. In terms of what it takes, see the previous item.

4. Access to injunctions is also an issue on the other side of the Atlantic. The case law is good, but some politicians would like to overrule eBay v. MercExchange through new legislation. During the last term it turned out that Senator Thom Thillis (R-N.C.) was having second thoughts. Still, don't underestimate the risk here, and do your lobbying job on Capitol Hill before it's too late.

5. Another Congressional challenge: the aforementioned Senator Thillis does still seek to do away with Alice (invalidity of abstract patents). He actually appears to be obsessed with that one--as is equally re-elected pro-patent-troll Senator Chris "Looney" Coons (D-Del.). This is going to be a bigger challenge than preserving the eBay standard!

The above handful of policy issues are likely the most important ones this year and next with respect to patents. Should the Federal Trade Commission file a cert petition in the Qualcomm case, that would make it six (precisely 50% of which would be SEP matters). The deadline is late next month, and I heard from DC circles that this depends on new nominations of FTC commissioners by President Biden. Even if that didn't work out, it's key to at least ensure that the Biden Administration's positions on SEP enforcement will be more like those of the Obama Administration.

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