German injunction reform: end injunction gap first say patent holders

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Siemens, Nokia, the VDMA and others weigh in on government talks around automatic injunctions and agree that more judges and perhaps a lower hurdle to stay infringement proceedings are needed at the Federal Patent Court

With the news that the German government is considering an amendment to the automatic injunction system, patent holders say they want to see an end to lengthy injunction gaps before any kind of reform is introduced.

Senior sources at Nokia, Siemens and elsewhere explain that while they may not share the same views on injunction reform as IP implementers, such as on proportionality, they agree that more judges should be hired to shorten the time between infringement and nullity proceedings.

Many companies also agree that proceedings at the Federal Patent Court could also be sped up if it were made easier for judges to stay infringement proceedings when there are doubts over a patent’s validity, and allow nullity proceedings to take place in the meantime.

At the moment, parties accused of infringement often have to wait months or years for a nullity judgment to remove a preliminary injunction imposed by a first instance infringement ruling. Businesses can lose significant revenues in this time, which is considered to be unfair if the patents in question are ultimately held to be invalid.

“The biggest problem we have is not proportionality but the famous injunction gap between the infringement and nullity proceeding,” says Beat Weibel, chief IP counsel at Siemens in Munich. “Before we introduce new concepts, we must make sure the current system runs by speeding up nullity proceedings and facilitating staying of infringement proceedings.”

He adds that these improvements could be achieved by first lowering the hurdle to stay infringement proceedings, which can only be done now if there are “overwhelming” doubts of validity, and then by providing additional resources to the court.

Clemens Heusch, head of dispute resolution EMEA at Nokia in Germany, agrees that the country’s injunction system works well as it stands but that more judges need to be hired to ensure speedier solutions to patent proceedings.

But he is less convinced that the threshold for a stay needs to be lowered. “I have never seen a case where the court denied a stay only for the patent to ultimately be invalidated. The court tends to make very good decisions.”

In terms of whether there is government and industry consensus for this kind of change, VDMA deputy head of legal Daniel van Geerenstein says everyone present at talks on injunction law between the Federal Ministry of Justice and industry representatives last month agreed that nullity proceedings should be sped up.

The VDMA is a mechanical engineering association based in Frankfurt, and is the largest industry association in Europe.

“We are very much at the beginning of those discussions,” he says. “But one idea was to suspend enforcement of a court decision while the nullity proceedings were conducted and this as something that no one objected heavily to.”

While allocating additional resources to the Federal Patent Court could be a relatively simple governmental matter, lowering the hurdle to stay proceedings could prove trickier.

The vice president of IP at an international semiconductor firm points out that the hurdle could be lowered in case law, but that the Federal Court of Justice has said that it has no cases on its agenda in which it could hand down such an opinion. The patent court’s process would thus likely have to be changed through legislation.

The debate over possible changes to Germany’s patent injunction system has emerged largely because of the convergence of technologies in products such as driverless cars and internet-of –things-connected appliances.

Automotive and some telecoms companies are fearful that the German patent system could paralyse production lines by allowing for injunctions on small parts of increasingly complex products, including autonomous vehicles, and leave them open to outlandish licence offers from non-practising entities (NPEs).

The automotive industry, of course, is an important part of the German economy, and in-house sources tell Patent Strategy that their cries are listened to by the federal government and could well lead to some sort of reform in the near future.

But Weibel says the automotive industry’s attitude to injunctions may prove to be a little short sighted.

“Automotive companies may need a strong injunction system in the future to defend themselves against incoming Asian competition. I could well imagine in the case of electric cars, for example, that you could enforce a patent on a small detail to fight against Chinese electric car imports.

“If we start to weaken the German patent system, that will only favour future competitors and weaken domestic innovative industries.”

Proportional injunctions

Some sectors have touted the concept of proportionality as a solution to preliminary injunctions being ‘unfairly’ imposed on small parts of complex products. The idea is that judges should be expected to carry out reasonable proportionality checks before issuing injunctions to take matters such as public interest, economic stakes or a patentee’s ability to replace the covered product.

“One argument under this proposed system might be that an NPE cannot replace the patented product in question on its own, and therefore monetary compensation would be good enough,” explains the semiconductor IP vice president.

He adds that the system could allow judges to consider whether a patent covers a small part of a complex product, and to consider whether said patent could be circumvented or whether an infringer should be given time to redesign the product so that it is no longer infringing.

The argument from many patentees, however, is that a judge cannot reasonably be expected to consider all arguments of proportionality because of the complexity of that process.

“Both parties will inevitably give stories saying that they might have to close a factory if the injunction is or is not imposed,” says the IP vice president. “One could argue that patent trolls will use patents to close down factories and reduce the German manufacturing economy.”

Patentees are also worried that the introduction of proportionality checks into the German patent litigation system will create an imbalance.

Unlike in the US and UK legal systems, injunctions are issued in Germany as a remedy to patent infringement, rather than a high damages award. The damages offered by the German system are only the equivalent of what a reasonable licence offer would have been.

“These systems are in themselves balanced,” says Weibel at Siemens. “But if you change the German system and introduce proportionality decisions, you mix the two and create an imbalance.”

One source says he is also sceptical of implementer arguments that the injunctions system applied to increasingly complex products will force them to shut down factories and jeopardise jobs. Complex turbines were being developed in the 19th century that incorporated hundreds of inventions, he says, and so the issue of patents covering small parts in larger products is nothing new.

He says that he has been working in his field for more than two decades and has yet to see large businesses shut down as a result of the current injunction system.

Is change coming?

On whether the talks between the Federal Ministry of Justice and industry representatives will lead to substantial changes in the law beyond additional resources being allocated to the patent courts for more judges, sources were of two minds.

One senior source at a telecoms company says that the influence enjoyed by the automotive industry as an integral part of the German economy would make reform likely.

But another says that the feeling in his industry and others that focus on R&D is that most companies do not want to see change and, for that reason, it is unlikely to come about.

“At the moment the automotive industry shouts louder than R&D. But there is a big majority that believe there is enough room in the system at the moment for it to work.

“I did not get ticket to the talks at the justice ministry but I am in close contact with the head of unit at the ministry, and just a week before these talks there was a meeting of the patent committee and at the end there was a vote on legislative change.

“Forty people were in the room and the only person who put their hand up was the Volkswagen representative.”