Fourth patent injunction against Daimler in 11 weeks as Munich I Regional Court sides with Nokia in 3G SEP infringement case

There's no Happy Halloween for Daimler and its counsel, and the reason is not even COVID.

The notorious patentee-friendliness of certain German courts is regrettable, and an increasing burden on the country's economy. But let there be no doubt about the fact that the patent litigation firm of Arnold & Ruess has done some first-rate work for Nokia against Daimler. Today the team led by Cordula Schumacher and Dr. Arno Risse ("Riße" in German) obtained its second injunction against Daimler as the Munich I Regional Court held the Mercedes maker to infringe German patent DE60240446C5 on a "hybrid automatic repeat request (HARQ) scheme with in-sequence deliver of packets" (case no. 21 O 3891/19). The 21st Civil Chamber of the Munich court (Presiding Judge: Tobias Pichlmaier) had not indicated an inclination at the late-July trial.

On August 18, 2020, the Mannheim Regional Court found for Nokia in another standard-essential patent (SEP) infringement case against Daimler; that injunction hasn't been enforced and possibly never will be.

Several other Nokia v. Daimler cases have been put on hold over doubts concerning the validity of the patents-in-suit. Should any of those patents survive without being narrowed out of the scope of the specifications of the relevant cellular standard, they'll do even better.

Meanwhile, I'm wondering when Quinn Emanuel will get tired of losing. In the 11-week period between the aforementioned defeat in Mannheim and today's Munich ruling in Nokia's favor, Daimler and QE also lost two other cases as the Munich I Regional Court's 7th Civil Chamber (Presiding Judge: Dr. Matthias Zigann) granted Sharp an injunction against Daimler (which triggered a settlement, see 1, 2), as did the 21st Civil Chamber in a Conversant v. Daimler case just one week ago. That's four German SEP injunctions over the course of only two months and a half.

Daimler and QE could take comfort in the fact, however, that computer maker Lenovo also lost in Munich (against Nokia, but over a codec--not wireless--patent) on the first day of the month.

Three high-profile SEP injunctions (Nokia v. Lenovo, Conversant v. Daimler, and now Nokia v. Daimler) clearly make Munich by far the most attractive venue for plaintiffs, and the court is damn proud of that fact (as I noted in my report on the presentation of the results of a survey, I don't think the "evaluation" of the court's performance does the judges justice because their technical and legal competence is not an issue--only their pro-patentee application of the law is).

Just like in the Conversant case, but with far higher stakes (and so much more time and money having been spent on the Nokia dispute), Daimler now needs the appeals court to stay the enforcement of this injunction. The prerequisite collateral (for enforcement during the appellate proceedings) of little over $20 million is easily affordable to Nokia while the actual damage to Daimler would be in the billions of dollars per year. And as I noted in the Conversant context, Daimler could be roughly six weeks closer to a decision by the Munich appeals court that might set the record straight at least on the proper security amount, if not also on the application of the CJEU's Huawei v. ZTE case law, if not for Daimler's inexplicable decision to settle with Sharp in the summer.

This is now a race against the clock. We're only 13 days away from a highly likely referral of key component-level SEP licensing questions to the CJEU. The Dusseldorf Regional Court will announce its decision on November 12, and I'm extremely optimistic about what's going to happen there. But that referral doesn't automatically trigger a stay of all other cases. It may, however, bear substantial weight with the Munich Higher Regional Court. Additionally or alternatively, it would also help Daimler if the Munich appeals court simply set a reasonable security amount (i.e., in the billions of euros).

Almost two years ago, Daimler filed an EU antitrust complaint against Nokia that hasn't gone anywhere. Nokia has been able to count on support from the EU's internal market commissioner Thierry Breton even to the extent that he would spout total nonsense. But Daimler is apparently such an old-fashioned, poorly-run company that they don't even know how to press an antitrust case in Brussels. I've seen antitrust amateurs who are better at this game than them, any day of the week.

Daimler is also one of the three companies responsible for the most stupid strategic misstep in the ongoing German patent reform process, so they'll have no one to blame but their own incompetence for the German patent injunction problem probably not getting solved anytime soon. In that context, one of their key competitors, BMW, made the mistake of joining them. That's another very old company that appears unfit for the Digital Economy. There are days when I feel very un-German. Today is definitely one of them. I don't think anyone can help certain companies. They're losers and they don't even realize to what extent that is their own fault.

If I find anything in the court's written decision, which will be handed down early next week, that sets this case apart from the Conversant case, I'll write about it. But the outcome suggests the issues were just the same, except that Nokia, unlike Conversant (and previously Sharp), hasn't granted an exhaustive component-level SEP license to Huawei.

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The lemmings of patent injunction reform: Microsoft, BMW, Deutsche Telekom joined ip2innovate during German reform process

Political decision-making processes tend to be so complex that it's often very difficult to identify a clear causation between what went wrong and why. In connection with Germany's patent reform, which has been carefully crafted by the country's government to change almost nothing at all (see my initial reaction to yesterday's official legislative proposal), one can infer from publicly-accessible documents that the Brussels-based ip2innovate lobby group (Google, Daimler, SAP etc.) committed the colossal blunder that most likely condemns the reform effort to fail. "Be careful what you wish for." IP2I advocated the term "Einzelfall" that is now the central term that will render the reform ineffectual because the government's official legislative rationale clearly defines it as "hardly ever happens." Now the losers are trapped in a no-through one-way street as they can't lobby against their own proposal. They dug their own reform's grave.

Germany's leading information & communications technology news site, Heise online, quotes my analysis in an article on yesterday's legislative proposal, including my criticism of IP2I's lack of strategic sophistication. For what I know, however, chip makers Nvidia and Intel, while they're longstanding IP2I members, can't be blamed for the "Einzelfall" crap.

Were IP2I only a fringe group of the patent reform movement, the others could still combat that "Einzelfall" term effectively. But birds of a feather flock together, and lemmings famously follow other lemmings. With the sole exception of Volkswagen (the whole group including subsidiaries like Audi and Porsche), IP2I's membership directory lists practically every large German organization that demands injunction reform.

Over the course of this year, the misguided IP policy groups of three large organizations--two of them among Germany's largest corporations--joined IP2I:

• Microsoft,

• BMW, and

• Deutsche Telekom.

Deutsche Telekom's IP department habitually hurts the company's interests. They even contributed their cellular standard-essential patents (SEPs) to the abusive Avanci pool. They might have found it convenient, and maybe they thought it was "cool" to join some large patent holders in a pool, but Avanci is all about driving up licensing costs, which runs counter to Deutsche Telekom's interests. Also, Deutsche Telekom is still the only company known to have made a huge royalty payment to patent troll IPCom. They could have avoided it by simply insulating their then-outgoing CEO from the potential fallout from IPCom's patent assertions against him. Instead, they paid hundreds of millions of dollars at a time when Nokia and HTC were actually defending themselves very successfully against that same patent portfolio. Deutsche Telekom also has a reputation for having caved to other patent holders in situations in which many others wouldn't have done so.

As I already noted yesterday, Deutsche Telekom might benefit to some degree from the fact that the reform bill makes harm to third parties a factor. In Dusseldorf that might help; in Munich and even in Mannheim, it most likely won't. Those courts will tell them to take a license. If patent holders seek injunctions that threaten to shut down Deutsche Telekom's network, it's just a means to an end. The end is a costly license deal; leverage from an injunction is the means. So those patent holders will make a licensing offer, and the courts will then tell Deutsche Telekom that the harm they suffer isn't irreparable: they don't have to switch off their network infrastructure as they can take a license. I already explained based on the January draft bill how this would work.

The world's top three smartphone makers--Apple, Samsung, and Huawei--are notably absent from IP2I's membership directory. They have to defend themselves against German patent infringement complaints all the time. In order for them to be in a better position, the hurdle for a useful injunction reform statute would be considerably higher than for Deutsche Telekom (which can at least argue that third parties depend on access to its network) and German car makers, which have substantial manufacturing operations that would be susceptible to a German injunction. Again, I believe even Deutsche Telekom and those automotive companies will ultimately just be coerced into taking licenses on unreasonable terms. But at least they have far more of a hardship argument than foreign companies that export their smartphones and similar devices to Germany.

As foreign companies with limited head counts in Germany, those three would have found it difficult to make much of an impact. If Huawei had joined, it could even have been counterproductive, considering that those opposing reform (such as Nokia) would presumably have tried to politicize the debate.

Whether Apple and Samsung should have done more, in quantitative as well as qualitative terms, is a question those companies will answer for themselves when this reform process is over. Where the process stands today, the most likely outcome is that they'll just spend more money on proportionality arguments (lawyers, experts) but those suing them will have basically the same leverage in negotiations as today. There's an asymmetry here: patent trolls, or companies that practically behave like trolls by suing companies they're not competing with, only stand something to gain, and nothing to lose. They typically wield portfolios, not individual patents, and they can sue in three or more different German venues as they need leverage in only one of them.

This is frustrating to watch. It must be far more frustrating for companies to find themselves on the receiving end of those lawsuits. I warned many of them a year ago, and earlier this year. I told them what was going wrong, and how they'd have had to fix it. There was some hope last month because the previous draft looked like the government had made concessions on the statute and simply hadn't updated the legislative rationale yet. Now that the legislative rationale suggests it's easier to spot a pink elephant in your garden than a German patent case in which an injunction would be denied over proportionality considerations, and with most reform advocates being bound to IP2I's misguided March 2020 submission proposing "Einzelfall," it's extremely hard to imagine a turnaround.

Besides IP2I, there's only one other major industry group pushing for reform, and that's the VDA (German automotive industry association). They have members such as Bosch that prevent them from taking really strong positions, and they lack IP policy expertise at the staff level. So it would be a surprise if they could solve the problem IP2I has created.

I'm quite sure I'll point to yesterday's posts as well as this one many times in the coming years whenever some high-profile German patent injunctions come down or the possibility of such injunctions forces companies into license agreements. I'll be looking out for that pink elephant, and maybe I'll spot one once every while, but I won't blame the judges for what is the only reasonable interpretation of this statute in light of the official commentary: you normally don't even have to conduct a full-blown proportionality analysis because defendants will fail to distinguish their situation from that of any other defendant who has the choice of simply taking a license.

Before the Bundestag (Federal Parliament) formally receives the bill, the Bundesrat (Federal Council) will analyze the proposal and make an official statement that is going to influence the parliamentary process. Chances are that the Federal Council will either say that even this reform proposal goes too far or that it's acceptable but will warn against seriously restricting access to patent injunctions. Some conservative politicians in the Federal Parliament will almost certainly prevent any impactful reform from being passed into law, and time is on their side as the end of the legislative term is approaching (and COVID complicates everything).

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Qualcomm's next home run: Ninth Circuit denies FTC's petition for rehearing of antitrust case

See, I told you so. NOT. I have a high hit rate (including with respect to both the FTC v. Qualcomm district court decision and the appellate opinion), but I must admit I wasn't on the money in the en banc context. Given the high profile of the FTC v. Qualcomm antitrust case, I was actually optimistic that the Federal Trade Commission's petition for a rehearing en banc would succeed (while I expressed skepticism regarding the prospects of a better outcome for the FTC). It was obvious that the three-judge panel or a majority thereof was going to stand by its ruling, but I thought some other circuit judges would be interested in rehearing the matter. This morning the Ninth Circuit denied the FTC's petition (which had drawn some support from amici curiae, even including Tesla), and it gave it short shrift as no judge even wanted to hold a vote on whether or not to conduct a rehearing en banc (this post continues below the document):

20-10-28 9th Cir. Denial of... by Florian Mueller

Now the FTC will have to decide whether to file a petition for writ of certiorari (request for Supreme Court review). It's quite possible that the FTC's 3-2 majority in favor of the petition for a Ninth Circuit rehearing (consisting of the Republican chairman and the two Democratic commissioners) would also authorize a cert petition. But six of the nine justices are conservatives, three of whom were nominated by President Trump, and they would see that the Trump Administration backed Qualcomm in this dispute. They would likely also take note of the fact that two of the three judges on the Ninth Circuit panel were conservatives (and the third was a relatively conservative-leaning Democrat). But the Supreme Court also has a history of fixing issues with the patent system, particularly with the overleveraging of patents and the patentee overcompensation it leads to. That is not a partisan question, though antitrust law often is. I remember Senator Klobuchar (D-Minn.) lamenting the Supreme Court's restrictive application of the Sherman Act in a statement she made at Justice Barrett's confirmation hearing.

Relatively speaking, I'd have had more hope for the FTC with respect to a Ninth Circuit en banc. But I was too bullish then, so who knows, I may just be too bearish now.

The next major patent-related antitrust case that could reach the Ninth Circuit--and possibly even the Supreme Court--in the near term is Apple & Intel v. Fortress Investment et al.. I blogged about Apple and Intel's opposition to Fortress's second motion to dismiss earlier today and mentioned that FTC v. Qualcomm affects that one. In that particular context, it's definitely bad news for Apple that, for now at least, the panel opinion in FTC v. Qualcomm is controlling Ninth Circuit law. But in Epic Games v. Apple, it may actually help the iPhone maker. That's how it goes.

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Apple and Intel defend their amended complaint against Fortress patent troll conglomerate, announce further allegations of FRAND abuse

With respect to its App Store terms and policies, Apple is now arguably the most prominent antitrust defendant in the tech universe. Simultaneously, Apple is pressing antitrust charges--through private litigation--particularly in connection with abusive patent-leveraging practices. While the issues are very distinct, having the shoe on one foot today and on another foot tomorrow requires Apple, which is represented by different law firms (Wilmer Hale against Softbank-owned Fortress Investment, Gibson Dunn and Orrick against Epic Games and various class action plaintiffs), to espouse a more flexible approach to antitrust enforcement in one context than in the other. Case in point, a Ninth Circuit panel's wholesale acquittal of Qualcomm took a more restrictive and limiting perspective on how to apply the antitrust laws (particularly--but not only--in connection with patents), and the panel opinion contained legal statements that Apple can and does cite to as it defends itself against Epic, but complicate matters in its joint case with Intel against Softbank's Fortress.

In the summer, San Francisco-based Judge Edward M. Chen of the United States District Court for the Northern District of California granted Fortress's first motion to dismiss Apple and Intel's complaint, but also allowed the plaintiffs to amend the complaint. The absolute low of the Trump Administration's involvement with patent policy was when the Department of Justice intervened on behalf of that foreign-owned patent troll group that has been bringing many dozens of vexatious lawsuits against not only Apple, but also others, notably Google. That was the very opposite of "Make America Great Again." It was anti-American, and unfortunately the matter doesn't have the prerequisite high profile that lawmakers would have raised questions (plus, there are some Democrats on Capitol Hill who are beholden to the world's patent trolls, such as "Looney Coons").

Apple and Intel amended their complaint, and Fortress--not unexpectedly--brought a renewed motion to dismiss, on which the court will probably decide in December. Fortress alleged that Apple and Intel had failed to cure the deficiencies identified by the court in its order to dismiss without prejudice.

Last night, Apple and Intel filed their opposition to Fortress's second motion to dismiss (this post continues below the document):

20-10-27 Apple-Intel Opposi... by Florian Mueller

The #1 question here is market definition--which is just as essential to antitrust law as claim construction is to patent law. Fortress claims Apple and Intel's amended complaint still lacks the prequisite specificity, and the DOJ had also focused very much on that one earlier this year. But Apple and Intel point to how much more detailed their amended complaint is (it's 77 pages longer than the original complaint), and that it's now not just about an "Electronics Patents Market" but about 13 patent markets. And what will likely benefit Apple and Intel in this regard is that Judge Chen's order on the first motion to dismiss had states that the law doesn't require an absolutely clear-cut market definition in cases where there are very specific allegations of anticompetitive effects. "Rough countours" of a market have been deemed sufficient in such cases.

If the amended complaint survives, Apple and Intel wish to amend it as one Fortress subsidiary, VoiceAge EVS, sued Apple just after the filing of the amended complaint (no coincidence if you ask me) over five LTE patents. Apple and Intel say that the related patent transfer was made in an effort to circumvent FRAND licensing obligations.

Apple & Intel v. Fortress is not only about standard-essential patents (SEPs). Most of Fortress's lawsuits are about non-SEPs. But when Apple joined Intel (which had previously brought a complaint, but withdrew it in order to refile together with Apple), SEP-related allegations became part of the case. In that context, the Ninth Circuit's FTC v. Qualcomm panel opinion is particularly unhelpful, but the issues in the Fortress case aren't exactly the same. For instance, never did the FTC (or Apple) allege that Qualcomm sought to evade FRAND obligations by means of patent transfers.

Two organizations have filed amicus curiae briefs in support of Apple and Intel's opposition to the motion to dismiss: the Fair Standards Alliance (FSA) and ACT | The App Association. Apple and Intel are members of the FSA, and corporate sponsors of ACT. ACT claims to have thousands of smaller companies as members, though it's another question how strongly involved and committed those "members" really are, given that many years ago a professor and former White House technology policy adviser (under Clinton) told me he just filled out a web form and was accepted--no payment or anything. Also, for a long time ACT used to promote the interests of patent holders, not those of implementers. By contrast, the FSA has several dozen corporate members, of different sizes but all of them significant and some of them among the world's largest tech companies (such as Microsoft and Google). The FSA has been very consistent about SEP policy. Fortress didn't want the FSA to file an amicus brief, at least not without getting to review it beforehand, but the FSA has now filed a motion for leave and I guess the court will grant it (the document below contains both the motion for leave to file and the actual amicus brief):

20-10-27 FSA Amicus Curiae ... by Florian Mueller

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Google, SAP, Daimler (ip2innovate) botched patent injunction statute: "Singularity Killed the Reform"

If you noticed the allusion to a band name in the headline, you might have grown up in the 80s, in which case you may also remember the famous line "I pity the fool." Otherwise you might know the proverb "curiosity killed the cat". Whatever, those opposing German patent injunction reform are now on the winning track as I explained in my previous post, and in the losing camp, three companies are particularly responsible for a monumental f..kup:

Google, SAP, and Daimler.

Volkswagen deserves credit for having started the push for patent injunction reform in Germany. The three companies listed above will go down in history as the main culprits unless there's a second reversal of fortune. I'd like things to work out, but I increasingly doubt it. The anti-reform movement is just too sophisticated for a pathetic bunch of amateurs.

The documents that prove what went wrong and who's to blame are all public. So let me explain, but again, I'd like nothing more than to be proven to have been too pessimistic. Until the last moment I'll hope that the broken German patent litigation system will be fixed.

So, here's the chronology of events:

In January, the Federal Ministry of Justice and Consumer Protection published a first draft reform bill that Germany's leading patent litigators said was going to change nothing, or at least wasn't going to have significant impact. It then gave stakeholders until mid March to submit comments.

A lobby group named ip2innovate, which is based in Brussels and mostly focuses on EU patent policy, made a submission (PDF, in German) that I largely agreed with, though I expressed concerns about their statutory proposal. Back then I commented on dozens of statements, so I didn't go into detail.

Here's a screenshot of the worst blunder in this whole reform debate (click on the image to enlarge; this post continues below the image):

The first sentence of their proposed amendment to the patent injunction statute is this (in German):

"1Der Anspruch nach Absatz 1 ist ausgeschlossen, soweit die Inanspruchnahme im Einzelfall unverhältnismäßig ist." (emphasis added)

This means that injunctive relief shall be unavailable to the extent that its enforcement would be disproportionate "im Einzelfall." What does "im Einzelfall" mean? That's the problem. The term can be understood in two ways, neither of which reflects favorably on those who proposed it:

• non-judgmental interpretation: "in the individual case to be decided"

• with a quantitative connotation: "only in rare/outlier cases"

It was an utter stupidity at any rate to use a term that simply isn't a well-defined legal term. I can't remember ever having seen a German statute that contained the word. Therefore, the first thing courts will turn to when trying to make sense of the term is, besides the context, what the legislative rationale (the official commentary provided along with the law) says. I'll get to those two determinants--context and legislative rationale--in a moment.

Anyway, if the plan is to inject a new term into the law that wasn't there before, a lobby group (unless someone inside the group seeks to sabotage the effort or people don't know what they're talking about) would at least pick a term that has framing value. You'd want to use a term that has a connotation that suits your agenda. The last thing you'd want to do is shoot yourself in the foot like ip2innovate did.

Even in a neutral context and without the risk of a legislative rationale ascribing a particular meaning to the term, "Einzelfall" was the equivalent of an own goal in certain sports, or unforced error in others. That's because the non-judgmental interpretation would not be as persuasive a proposal as the quantitative one. Let's face it: the law is always used to decide individual cases. It's the single most fundamental principle of statutory interpretation (which some of the people working for ip2i's members may have learned about a loooong time ago, maybe too long) that if a term can be given one meaning that makes sense and one that doesn't, you pick the former, not the latter. Interpretation 101. With "individual case" being nonsensical, no judge could be blamed for interpreting "Einzelfall" in the sense of "rare outlier, or singularity." One could debate just how rare. But there could be no reasonable argument over whether at least some degree of rarity is implied.

To be clear, I'm not "Monday-morning-quarterbacking" here. I actually made a hands-down superior statutory proposal that I sent to a variety of companies (some of which were and are ip2i members) and select academics in January. When the German reform process is over, I'll publish it. Or maybe before. We'll see. Dozens of witnesses can confirm I shared it with numerous industry players in January 2020. So I don't just pretend to know better with the benefit of 2020 hindsight. I already did back then. And among the proposals that were officially submitted, I supported the one by the Max Planck Institute, which didn't contain any crap like "Einzelfall" either.

Now, fast forward to early September, when the ministry finally published its second draft. It already incorporated the term "Einzelfall"--and did so in connection with a reference to "besonderen Umständen." That term, just like "Einzelfall", can be interpreted in two ways:

• non-judgmental interpretation: "specific" = "under the given circumstances"

• with a qualitative connotation: "special" = "only under extraordinary circumstances"

Here, again, the non-judgmental interpretation would be devoid of any meaning as any case is decided based on its facts. And then, when you have in the very same, narrow context the combination of two terms (grammatically related to each other in the statute) that can be interpreted judgmentally or non-judgmentally, with the judgmental interpretation making sense while the other doesn't, you'd really need the legislative rationale to support a non-judgmental interpretation--or a mildly judgmental one, meaning that it would suffice for the circumstances to be somewhat special and that injunctive relief wouldn't be abolished entirely, or in a vast majority of cases.

When ip2i submitted its feedback to last month's draft (PDF, in German), it complained that "besondere" (special/specific) was "redundant" in the context of "Einzelfall". They started to realize they had botched this by proposing a term that renders the whole reform statute pointless--even without "besondere Umstände" (though even more so in that context, which basically doubles the problem).

Too late. When you're trapped, you're trapped. The proposal that the executive government adopted today (which still doesn't pass it into law, but that's what the executive officially submits to the legislature) contains the same problematic passage, has made two other terms in the statute less favorable to the interests of defendants, and the draft legislative rationale has deteriorated sharply.

On page 64 of the early September draft ("Referentenentwurf"), the ministry wrote:

"Eine dauerhafte Versagung des Unterlassungsanspruchs wegen unverhältnismäßiger Belastung des Schuldners wird hingegen nur in sehr wenigen Fallkonstellationen in Betracht kommen."

This means:

"A permanent denial of an injunction due to a disproportionate burden on the infringer will, however, only be part of the consideration in a very few case patterns."

At the time, I was being optimistic and assumed that the rationale had not been updated yet. But today's version leaves no more room for such wishful thinking:

"Eine dauerhafte Versagung des Unterlassungsanspruchs wegen unverhältnismäßiger Belastung des Schuldners wird hingegen nur in sehr wenigen besonders gelagerten extremen Fallkonstellationen in Betracht kommen. Sie setzt voraus, dass unbilligen Härten für den Unterlassungsschuldner nicht durch eine Umstellungs- und Aufbrauchfrist hinreichend Rechnung getragen werden kann." (emphasis added to highlight what was inserted in October)

Here's my translation:

"A permanent denial of an injunction due to disproportionate hardship on the infringer will, however, be part of the consideration only in a very few, specially-structured, extreme case patterns. It would be a requirement that inequitable hardship on the infringer could not be sufficiently addressed through a workaround and use-up period." (emphasis added to highlight what was inserted in October)

This is like the postmortem of an abysmal failure. With this official commentary, the bill would provide a dictionary to the courts:

• "Einzelfall" = "very rare, extreme case" ("singularity")

• "besonderen Umständen" = "there must be something out of the ordinary about the circumstances, the circumstances must stand out in a structural sense"

This means the courts will rarely even have to take a closer look at proportionality arguments--unless, as I'll say now for the last time, the pro-reform camp manages to turn this around.

The more realistic assumption is that there won't be any truly helpful developments. If any of the people representing their companies had to report to me, I'd want to know who proposed or supported "Einzelfall" and who opposed it, as that would tell me whether or not I could trust those people to vigorously defend their companies' interests.

The largest U.S. company among ip2i's longstanding members (Microsoft just joined recently) is Google. The search and Android company's European in-house patent litigator, Ralf Uhrich, may actually even benefit from this mess. While he manages Google's patent cases in other European jurisdictions as well, he is admitted to practice in Germany, and may very well return to private practice, such as to Quinn Emanuel, where he left as an associate. In Germany, becoming in-house counsel is typically a one-way street and not considered an upgrade. But Google is an American company, and the relationship between Google and QE is special. As a future QE attorney, Mr. Uhrich would be much less busy if Germany actually reformed its patent injunction regime. Near-automatic patent injunctions are a boon for German patent litigators.

Ip2i's largest European member is SAP. SAP actually hasn't been sued over patents in Germany in a long time (at least that was the case last time I checked). If SAP really had a problem with German patent injunctions, they'd presumably have entrusted someone more senior than Ina Kock, an in-house patent prosecution counsel, with this reform project. While SAP is a great employer in some other fields, it's a rather unpopular one among German patent attorneys. The company is HQ'd in the middle of nowhere, and patent attorneys at other major tech companies working in Munich (Europe's patent capital) make at least 50% more because they have more opportunities. Her background is patent prosecution, not litigation, and unlike in-house patent counsel of companies that regularly get sued, she hasn't even had the opportunity to really figure out how things actually work in German courts. Then, participating in ip2i conf calls may spice up her professional life, as she'd otherwise just be spending eight hours a day to get software patents granted in contravention of a subject-matter exclusion under the European Patent Convention. I guess that's far more important than achieving a positive outcome.

This was just come color that may explain why ip2i has performed so poorly. But I still hope they're going to get this reform effort on track, alongside some other organizations such as the German automotive association (VDA).

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German government officially adopts patent reform proposal, says new injunction statute shouldn't have much impact

One step up and two steps back.

Early last month I cheered a "spectacular turnaround" in the German patent reform process as the Federal Ministry of Justice and Consumer Protection had made substantial changes to its proposal for a new patent injunction statute as compared to its first draft, which was published in January and amounted to a non-reform proposal. And a few weeks ago I reported on Germany's most prominent (though not most powerful) patent judge's interpretation of the reform statute. Today, Chancellor Merkel's cabinet adopted a slightly revised version of the statute (PDF, in German), which will now be reviewed and commented on by the Federal Council (the legislative body that consists of the governments of the country's federal states, though the Bundesrat's role will realistically just be consultative in nature in this case, while the actual decision will be in the hands of the Federal Parliament, the Bundestag). It remains to be seen what text the legislature will ultimately adopt--if any, given that the end of the term is approaching fast.

The injunction statute (§ 139 of the Patent Act) would be amended by adding the following sentences:

"Der Anspruch ist ausgeschlossen, soweit die Inanspruchnahme aufgrund der besonderen Umstände des Einzelfalls für den Verletzer oder Dritte zu einer unverhältnismäßigen, durch das Ausschließlichkeitsrecht nicht gerechtfertigten Härte führen würde. In diesem Fall kann der Verletzte einen Ausgleich in Geld verlangen, soweit dies angemessen erscheint. Der Schadensersatzanspruch nach Absatz 2 bleibt hiervon unberührt."

I would translate it as follows:

"The claim [to injunctive relief] is excluded to the extent that, under the special circumstances of an individual case, its enforcement would result in disproportionate hardship on the infringer or third parties beyond what is justified by the exclusionary right. In this case, the patentee can seek monetary compensation to the extent this appears reasonable. The damages claim pursuant to para. 2 remains unaffected."

The editorial changes over the early-September version come down to two terms: while the previous draft referred to compliance with an injunction, the new one mentions enforcement; and "Nachteil" (negative impact, harm) has been replaced with "Härte" (hardship). Actually, I already translated "Nachteil" as "hardship" last month because, in practice, that would simply be the meaning of the term in this context. So the term has formally been narrowed, but wouldn't have been applied broadly at any rate: a minor inconvenience wouldn't have had any bearing.

The difference between "enforcement" and "compliance" does, however, make a practical difference. It suggests more strongly that courts should primarily tailor the injunction (such as by granting a transitional period for workarounds), and that is precisely what the official reasons provided by the government for this legislative measure encourage (approximately in the middle of page 63):

"Eine dauerhafte Versagung des Unterlassungsanspruchs wegen unverhältnismäßiger Belastung des Schuldners wird hingegen nur in sehr wenigen besonders gelagerten extremen Fallkonstellationen in Betracht kommen. Sie setzt voraus, dass unbilligen Härten für den Unterlassungsschuldner nicht durch eine Umstellungs- und Aufbrauchfrist hinreichend Rechnung getragen werden kann." (emphasis added)

Here's my translation:

"A permanent denial of an injunction due to disproportionate hardship on the infringer will, however, be part of the consideration only in a very few, specially-structured, extreme case patterns. It would be a requirement that inequitable hardship on the infringer could not be sufficiently addressed through a workaround and use-up period." (emphasis added)

The document also indicates that most of the time, proportionality wouldn't even have to be analyzed. And the burden of proof is entirely on the defendant. With respect to the defendant's own hardship, that onus would be a surmountable hurdle, but there's no discovery--much less third-party discovery--in Germany.

Unless the pro-reform forces persuade the ruling coalition parties' groups in the Federal Parliament (which will be an uphill battle with respect to the center-right CDU/CSU), this reform threatens to be "too little, too late."

I didn't consider the goverment's draft commentary a major issue last month, simply because it seemed like they had revised the statute but not had the time yet to update the official rationale. But now they've had enough time, and what they're proposing is a really disappointing combination of an official commentary that basically says "we don't want to change much, this is just about outliers, like some one-in-a-million kinds of exceptions" with a statute that suggests (more strongly than the early-September draft) to tailor the injunction rather than to deny one.

Only telecommunications service providers like Deutsche Telekom and Vodafone might benefit from this reform to a significant extent. They have a strong argument about harm to third parties, though the courts will likely tell them that they should meet a patentee's license fee demands, period.

The problem is that German courts are adamant about near-automatic injunctions. It's not that the judges there would welcome a potential opening to deny injunctive relief because it would allow them to do a better job. Much to the contrary, they're obsessed with "forum selling" and view near-automatic injunctions as their jurisdiction's unique selling proposition--a competitive advantage over other jurisdictions (advantage for the courts, and for lawyers, but not for the economy or for society) they're not going to dilute if they can avoid it.

Since the reform process started, German patent case law has further deterioriated. It was very bad before, but they've managed to make it even worse.

The most recent trend is that patent trolls and other plaintiffs can enforce their injunctions during an appeal without even having to provide any non-negligible collateral (see the final part of this week's post on Conversant v. Daimler; the same would apply to other cases such as Sharp v. Daimler and Nokia v. Lenovo).

As a patent holder I'd simply sue in Mannheim and Munich rather than Dusseldorf (where Judge Kuehnen has appellate jurisdiction over many cases). Should the current bill be enacted without major improvements, you could set your watches by the Mannheim and Munich judges continuing to grant near-automatic injunctions by pointing to the legislative rationale saying clearly that injunctions should typically issue. And their answer to workaround and use-up periods will be that those periods must be very short given that patents have a limited term. In a recent Mannheim case, the patent-in-suit was going to be in force for seven more years, but the limited remaining term was considered a reason to turn a blind eye to an antitrust defense.

Given how the German patent judiciary works, it would take something more forceful to bring about major change. The current proposal would create an opportunity for law firms to charge their clients for a lot of additional time spent on proportionality arguments. But the leverage that patent holders will have in negotiations would be roughly the same as before--provided they bypass Dusseldorf to be on the safe side. The statute would be suboptimal, but a huge improvement over the January draft, if--and that "if" is the largest part of the problem--the legislative rationale didn't continue to endorse the Federal Court of Justice's case law. And the patent-specialized division of that court is to German patent law what the Central Committee of the Communist Party was to the Soviet Union in the decades prior to Gorbachev's reforms.

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Munich I Regional Court's official presentation of results of "evaluation" of local patent rules puts court's pro-patentee partiality on full display

One year ago, the Landgericht München I (Munich I Regional Court) celebrated the tenth anniversary of its Patent Local Rules ("Münchner Verfahren"). On that occasion, the court announced an "evaluation" study by the Max Planck Institute in order to find out how practitioners view the court's performance. Last week, the court officially presented the results in a videoconference. As of today, access to the recording (which the court originally made available to the public via YouTube) has been restricted.

Maybe someone decided to hide the presentation because the results are all too embarrassing--and even I, as a critic of the court's exceedingly patentee-friendly decisions, disagree in some ways.

The court has even stated its pro-patentee bias in writing. The December 2016 version of a four-page document outlining its Patent Local Rules (in German) states the following (my translation):

"The objective is to provide patentees, in a fair and transparent proceeding, swift and effective protection of their rights."

In other words, they view patent holders as their "customers" and seek to satisfy them. And they're shooting for speed at the expensive of getting things right:

"Written reports by court-appointed experts or stays [pending a parallel validity determination] shall be ordered only in very exceptional cases."

By way of comparison, German courts appoint experts in far simpler cases with small amounts in dispute. For instance, if you sue a painting company because you're dissatisfied with the quality of their work, a German court will most likely see a need to ask a court-appointed expert witness to furnish a report. Then you and the defendant can ask multiple rounds of written questions. The costs of the court-appointed expert (charging by the hour) may very well exceed the actual amount in dispute. In virtually every other field of civil law, that's the way it works.

But in patent cases, which involve far more complex technical questions and have huge economic implications, German judges rarely appoint experts. Does it make sense? No. It simply stinks. It's an agenda-driven system, and the administration of justice is nowhere near the top of the list.

To be fair, the practice of adjudicating cases without hearing expert witnesses is not unique to the Munich court. In Dusseldorf and Mannheim, it's just the same. Nevertheless, the court's own outline of its patent litigation procedures is shockingly forthright.

The latest absurdity is that a patentee enforcing an injunction during the appellate proceedings just has to make a deposit of a few million dollars to do what would amount to a multi-billion dollar damage to a car maker such as Daimler, with the court arguing that the defendant should simply take a license (which would, however, end the case).

Back to that "evaluation" study of the Munich court's performance in patent cases. The responses to the Max Planck Institute's survey suggest that Munich has shortcomings with respect to the quality of its legal work and its technical understanding, where Dusseldorf and Mannheim are rated more highly, but that Munich is still a popular venue because it's a rocket docket and very plaintiff-friendly.

But should the study be taken seriously at all? Not really. There were only 65 respondents, and there is no indication of any effort having been made to ensure this small sample is statistically representative. Based on where the respondents said they filed their offensive cases over the past five years, it's at least a possibility that practitioners with a strong preference for Dusseldorf were particularly active--and seized this opportunity to make Munich look bad by comparison with their home court. It's also possible that many lawyers' understandable frustration with the ever more plaintiff-friendly approach of the Munich court--especially (but not only) when it comes to standard-essential patents--informed their ratings of the judges' competence in their field.

I believe that this "study" (if one wants to use that term at all for a survey with only 65 non-representative repondents) underrates the Munich judges. In terms of technical competence, the Mannheim judges are clearly the best with respect to wireless patents. In other fields of technology, there may not be much of a gap. What I've heard from legal practitioners doesn't suggest that the Dusseldorf judges have a better grasp of technical matters than their Munich-based colleagues.

The part about last week's presentation that worries me the most is that the court's president (chief judge), Dr. Andrea Schmidt, appeared quite proud of the fact that plaintiffs like to sue in Munich--and less concerned about, for instance, defendant's procedural rights. For example, it's simply the law in Germany that a party must be granted leave to file a post-trial brief if its adversary made a belated filing (anything that isn't filed at least a week prior to trial is considered out of time). The Munich court blames defendants for stalling if they exercise that right only because a plaintiff purposely filed its final pre-trial brief very late. Lawyers actually owe it to their clients to exercise such a procedural right. But in Munich, defendants to patent infringement complaints are second-class citizens to an even greater extent than in other German venues.

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