Germany’s top court holds the future of the European patent system in its hands

The UPC, the EPO and now FRAND. The German Constitutional Court is currently deciding on central issues concerning the patent market. The guardians of the German constitution have both the power to plunge the European patent system into a deep crisis - or to correct its defects.

13 August 2020 by Mathieu Klos

German constitutoinal court The judges of the German Constitutional Court have received again complaints against the UPC. It's yet unclear whether they will decide on them or not. ©picture alliance/dpa/Uli Deck

Patent experts usually avoid the German Constitutional Court in Karlsruhe. In patent law, the expertise of constitutional judges is naturally limited. Only in rare cases have parties or courts submitted patent issues to Karlsruhe for clarification on their compatibility with the German constitution.

Last week, Chinese mobile phone provider Haier complained to the Constitutional Court that a Federal Court of Justice ruling violates its constitutional rights. The ruling in the dispute against non-practising entity Sisvel was the court’s first landmark decision on the controversial issue of how SEP holders and potential licensees must conduct themselves, in order to conclude a licence agreement under the relevant FRAND rules.

Constitutional court concerns

The question is crucial for licences in the global mobile communications sector. However, it also impacts all future connectivity issues in the economy, such as networked driving. In 2015, the CJEU established guidelines on how to deal with the FRAND rules. Many patent courts are struggling to implement the rules in national law. Now, Haier’s appeal has the potential to block FRAND decisions in Europe until the courts clarify their positions.

The FRAND rules are a hot topic in patent law due to their high economic importance. But Haier’s constitutional complaint is also noteworthy in other respects. The year 2020 could be a turning point for the European patent system.

Important questions concerning the European patent system have arisen at the German Constitutional Court. In March, the court cast doubt on the future of the Unified Patent Court. The UPC was supposed to be a central pillar of Europe’s patent system. However, the Constitutional Court said the German Bundestag did not vote properly on the German UPC ratification laws. Now, the Bundestag must repeat the vote.

Meanwhile, the Constitutional Court is signalling that it will soon decide on the future of the Boards of Appeal at the European Patent Office. Four complaints allege the EPO court provides inadequate legal protection. However, the complaints criticise not only the work of the court, but also the structure of the EPO as a whole.

If the Constitutional Court finds that the Boards of Appeal do not comply with German constitutional principles, Germany would have to demand changes to the overall organisation. This would result in complicated diplomatic negotiations between 38 European states. The office could be paralysed.

A European dimension

Experts agree that the European patent system functions well. It seems the German constitutional judges are responsible for ensuring that this remains the case.

But the system is by no means perfect, as patent lawyers throughout Europe are well aware. For many years, members of the patent community have criticised the European Patent Office. Some claim that the EPO has disregarded principles of the rule of law in patent case law. Others are unhappy with the operative management of the office. Patent experts also criticise the fact that German patent judges have yet to harmonise FRAND case law.

With their UPC ruling, the German constitutional judges have already dealt the patent system a huge blow, even if it does not mean the UPC is dead and gone. The judges must now take extreme care in ruling on the other two issues. But time is of the essence. After all, patents are an important constitutional right. Patents are the right of ownership of economically-important goods.

However, this right can only be guaranteed by a functioning European patent system with a high international standing. The stakes are high.