A deep rift divides German industry. Some companies demand a weakening of the automatic injunction in patent cases. However, others have an opposite view. Now a second draft of a new German Patent Act is further complicating matters. In the discussion surrounding the automatic injunction, the government is caught between two sides.
18 September 2020 by Mathieu Klos
The weakening of the automatic injunction has become a question of faith. It is the sharpest weapon in German patent litigation. Any company convicted of patent infringement by a German patent court must cease misuse. The company also may no longer sell its products.
A patent judge may only waive the injunction in cases of particular hardship, for example if it hits the implementer disproportionately hard. The German Patent Act stipulates this in paragraph 139.
Some in the patent market see this provision as a guarantee that German innovations remain protected from imitations by villainous companies in faraway countries. But the stipulation also guarantees that German patent courts are appealing to patent holders that want to sue their competitors.
Therefore, the automatic injunction is an important economic factor. It is a thorn in the side of its opponents, who want more exceptions to the strict automatic injunction rule.
Two weeks ago, the Federal Ministry of Justice published a second draft of a new German patent law. In its first draft, the ministry had already slightly amended the wording of the provisions in paragraph 139.
The first draft said: “The right to injunctive relief shall be excluded if its enforcement is disproportionate because, due to special circumstances, taking into account the interests of the patentee vis-à-vis the infringer and the requirements of good faith, it constitutes a hardship not justified by the exclusive right”.
Now the ministry has had another go. It reads as follows:
“The claim shall be excluded if its fulfilment would lead to disproportionate disadvantages for the infringer or third parties due to the special circumstances of the individual case, which are not justified by the exclusive right. In this case, the infringed party may demand compensation in money, as far as this seems reasonable. This shall not affect the claim for damages under part 2″.
One Düsseldorf lawyer says, “The automatic injunction still remains the rule,” and “an exception may only be granted in very rare cases.” Another lawyer claimed that the case law will not change significantly as a result.
“The automatic injunction remains the rule”
But what initially appears a mere embellishment of the first version is now, after a closer examination of the legal text, driving parts of German industry onto the warpath.
The Association of the German Chemical Industry (VCI) includes major international names like Bayer, Lanxess and BASF. The VCI believes the current amendments to paragraph 139 could lead to legal uncertainty and a substantial weakening of patent holders’ rights. Furthermore, the amendments could compromise Germany’s importance as a major location for patent courts.
Gabriele Mohsler, vice president of patent development at Ericsson, says, “The version of paragraph 139 currently proposed has the potential for extensive reform. It is not, as originally intended, merely a clarification of the current legal situation and the decision-making practice of the courts”.
Actually, as the Federal Ministry of Justice stressed in the detailed statement of grounds for the reform, it is not about changing the paragraph. Rather, the reform is concerned with clarifying the current status quo. The Federal Ministry of Justice made the new amendments “to make the provision more precise and to condense it linguistically”.
However, from the point of view of some companies, the amendment has backfired.
Clemens Heusch, global head of dispute resolution at Nokia, warns, “Patent law has worked well in Germany for many, many years. It is one of the reasons why Germany is a leader in innovation. The proposed amendments put this at risk by creating legal uncertainty and reducing the incentive to invest in R&D”.
Nokia holds many standard essential patents. The company actively enforces its SEPs against implementers in Germany, such as Daimler – because, among other things, of the automatic injunction.
“The current changes go too far,” says Beat Weibel, head of IP at Siemens. “If the Federal Ministry of Justice only wants to state that there are already exceptions to the automatic injunction on the grounds of proportionality and based on consistent case law, it does not have to write it explicitly into the law”.
Weibel sees the current version as paternalism by the judges. “The law now excludes injunctive relief under substantive law, instead of reinforcing judges’ tried-and-tested discretion”.
Therefore, Weibel proposes simply deleting the clause, “The claim shall be excluded if its fulfilment would lead to disproportionate disadvantages for the infringer or third parties due to the special circumstances of the individual case, which are not justified by the exclusive right” from the amended version.
Instead, the proportionality should be linked to the compensation under the second amended clause. However, it would preserve the judges’ discretion.
Weibel says the exclusion of the injunction from substantive law could substantially weaken the position of patent holders in negotiations with patent infringers. This could have significant consequences for internal company compliance.
On the other hand, Weibel welcomes the legislator expressly providing for damages for the patent holder. This would be the case if a court waives the automatic injunction due to special circumstances.
Alissa Zeller, senior vice president global IP at chemical corporation BASF, says, “The weakening of injunctive relief currently under discussion would make the overall effect of patent enforcement in Germany similar to that in emerging nations”.
Ultimately, says Zeller, the enforceability of patents is made up of two components: injunctive relief and the claim for damages. In Germany, the latter is weakly structured compared to other countries.
In a joint press release with the VCI, the Association of Research-Based Pharmaceutical Companies (VFA) also considers an amendment to paragraph 139 unnecessary. Both industry associations propose making enforcement protection more flexible. Thus, the VCI refers to a ruling by Mannheim Regional Court which found Daimler guilty of infringement of a Nokia SEP. This would have impacted the production of many Daimler models.
However, the court set a security of seven billion euros if Nokia wanted to enforce the ruling, which is considered highly unlikely.
“Weak injunctive relief would make German patent enforcement similar to emerging nations”
Some in the German patent market also complain that the government is giving too-little consideration to the interests of small and medium-sized companies and inventors. These are heavily represented in the country’s economy.
Michael Wallmeyer, general manager of small technology and service provider for the biopharmaceutical industry, nanoPET Pharma, says, “[SMEs] depend on strong protection for their innovations. This includes the possibility to enforce IP rights effectively. The amendment to paragraph 139 devalues patents. This has a particularly negative effect on these companies’ deal-making ability”.
Some observers opine that the legal text’s explicit mention of third-party interests give special consideration to large-scale industry. Third-party interests always comes into play when public interest is affected, for example in healthcare or electricity supply. The public interest entails a compulsory licence.
However, Deutsche Telekom is satisfied with a stronger emphasis on third-party interest. Claudia Junker, general counsel of the company, says, “With the draft bill, the legislator is bolstering Germany as a location for innovation and production. In view of the challenges posed by digitalisation and technological progress, paragraph 139 now rightly explicitly takes the interests of third parties into account as well”.
In the discussion on the automatic injunction, Deutsche Telekom had particularly advocated for more emphasis on third-party interests.
However, Deutsche Telekom would like to see effective and balanced protection of industrial property rights and synchronisation of infringement and nullity proceedings. “In our opinion, this would require a further clarification of paragraph 139 of the German Patent Act,” says Stephan Altmeyer, head of Deutsche Telekom’s patent department.
The Federal Ministry of Justice received 35 comments after the first draft. A slight majority demanded an amendment to the automatic injunction, according to JUVE Patent’s information. The automotive industry particularly was in favour of guidelines regarding the assessment of proportionality.
The changes should satisfy major car companies headquartered in Wolfsburg, Stuttgart and Munich.
Uwe Wiesner, head of IP at Volkswagen, says, “For Volkswagen, as a driver of innovation in the automotive sector, effective patent protection is extremely important. We will examine in further partnership with the VDA whether the proportionality assessment formulated in the draft bill is actually suitable for ruling out further misuse of patent protection in the long term”.
“Changes to the automatic injunction should satisfy car companies”
The automotive industry is sure of support from many companies that tend to be implementers. These include major names, such as Google and Apple, but also Adidas and Infineon. In addition, many comments calling for a strict assessment of proportionality came from associations of companies that will have to use mobile communications standards in the future. This is due to increasing connectivity.
The Federal Ministry of Justice received input from the German Association of the Automotive Industry, the Fair Standard Alliance, the App Alliance and IP to Innovate.
A change in the automatic injunction is most strongly opposed by patent attorneys and lawyers. Some in the profession consider the current amendments a mere embellishment to balance industry interests.
Judges, too, generally see no need for change. A German patent judge told JUVE Patent, “The proportionality assessment in the automatic injunction is already today, due to case law, a form of objection and thus a right of the implementer. We do not need a general proportionality assessment. Rather, the implementer must raise the objection and submit substantiated evidence to meet the material requirements”.
The judge rejects some industry criticism that the courts do not examine proportionality enough. They say, “Before now, the objection has often failed because the defendant did not submit sufficient evidence”.
“The planned legal text does not change anything about the formation of injunctive relief or the burden of submission or proof regarding disproportionality. The only difference now is that third-party interests can also be taken into account”.
“The draft takes third-party interests into account”
However, the defendant must also submit substantiated evidence of such interests.
In any case, many opponents of the reform hope that judges, even with the new legal text, will apply the automatic injunction and rarely allow an exception.
The German patent community has said and written everything about the automatic injunction. But now the lobby machines of supporters and opponents alike will really get to work. Some want to prevent a change to the automatic injunction at all costs. On the other hand, others want to promote further strengthening of the policy to Berlin’s politicians.
Companies and interest groups have until 23 September to submit further comments. To be on the safe side, the Federal Ministry of Justice points out that the other ministerial departments have not yet agreed on the content of the second draft. This applies in particular to the automatic injunction’s proportionality assessment.
The main target for representatives will no longer be the Federal Ministry of Justice. The draft will now be substantially coordinated between other departments, especially the Federal Ministry of Economics. In most cases, this stage sees further changes being made. JUVE Patent is not yet aware of where the other ministries stand on the automatic injunction.
Once the government reaches a consensus, it can pass the law to the German parliament. Parliamentarians will discuss it again rigorously in several rounds. Opponents and advocates of the automatic injunction will spare no effort in making their arguments heard.
In the run-up to the draft legislation, members of parliament have heard industry hearings. Ingmar Jung (CDU/CSU) is a key figure in this. Jung is the responsible correspondent for the largest parliamentary group in the German Bundestag.
Speaking to renowned German business journal Handelsblatt, Jung said that the highly contrary positions must not lead to a devaluation of patent law. A high level of protection for IP is extremely important to his parliamentary group. “Therefore, not granting injunctive relief on grounds of proportionality should remain the absolute exception.” This could play into the hands of those who wish to preserve the status quo.
“Not granting injunctive relief due to proportionality to be the exception”
But an in-house lawyer for a major German technology corporation is also certain that his company has little to counter the lobbying power of the German car industry in Berlin. “We therefore rely on using technical arguments to convince Berlin’s politicians that the current automatic injunction provisions do not need to be changed”.
But the patent community cannot turn the clock all the way back. Industry interests differ too widely for this. Berlin’s politicians will have to find a compromise.