Airbus, Huawei and a medical device company say they would like to see German judges consider the value of patents and preliminary enforceability more carefully before they issue injunctions
While efforts to reform the German injunction system have slowed down over the summer period, complex product manufacturers that are, or may soon be, affected by the system say they are still keen to see change happen.
Unlike the UK or US systems, the German patent litigation framework does not award high damages to patentees that have had their rights infringed, but it does make it relatively easy for rights holders to get an injunction on an allegedly infringing product.
In-house counsel at telecoms, medical device and aerospace companies explain that this system is not fit for purpose when it comes to complex products, such as autonomous cars or smart medical devices, because it does not allow judges to consider proportionality.
It is unfair, they say, for a judge to place an injunction on a product that might be worth hundreds of thousands of euros when it is only infringing a patent for a small component that might only be worth €60.
“The value of a car, for example, is so much higher than that of a subsystem, and I see some mismatch in this,” says Georg Kreuz, European chief IP counsel at Huawei in Munich.
He adds that car companies implement too many components in their vehicles for them to keep track of the third-party rights that might apply to each one. It is thus unfair that the courts should block these companies from selling their products in Germany before they are given a chance to rectify the matter, especially when a judge may later hold the patent in question to be invalid.
“These patentees are now trying to block the production of a car because of this issue. It is a way of making money,” says Kreuz.
The head of IP at a medical device company in Germany adds that such businesses are similarly becoming more concerned by the German injunction framework as their products become more complex.
Sister title Managing IP reported earlier this year that medical device firms are looking at building ever more complicated products that will rely on software, hardware and communications components, such as smart orthopaedic implants that will communicate data around how the implant is coping, whether it is experiencing unforeseen stresses and how a person is responding to it.
“We are worried about the situation, but it is more of an abstract worry at the moment,” he says.
Cyrille Sevin, IP manager at Airbus Helicopter Deutschland, says he is not worried about automatic injunction law at the moment because his branch of the business is not particularly affected by patent infringement matters – or at least not in the same way as the car industry is.
But sooner or later, he adds, it is likely that the aeronautical world will have the same obligations as those of the car industry. For that reason, his business and other aerospace companies are following reform developments.
“Automatic injunction law can be a terrible concern for companies in Germany,” he says. “As usual, like for the inventor act, the law seems to really go in the direction of the inventor and patentee.
“With the new concerns of the telecoms industry, that is even more the case; with hundreds of patents involved in one item which will be compulsory, and with no alternatives.”
He adds that an amendment to German injunction law would ultimately be a good thing for patent implementers.
Sources say that part of the reason companies are calling for injunction reform now is for fear that they will soon become the target of ‘patent trolls’.
“In the US, where non-practising entities are active, those organisations take advantage of a system where everyone bears their own costs,” the medical device head of IP points out. “Patent trolls may become more interested in the German system because you have this unconditional injunction that can be taken advantage of.”
Kreuz at Huawei agrees that the system as it stands, with its long delays and thus long preliminary injunction periods between infringement and nullity proceedings, is likely to encourage some patent holders to “play games.”
The financial impact of having a product taken off the market for months or years can be enormous, and in-house counsel are worried that some patent holders might leverage the economic reality of the situation to bully implementers into accepting extortionate licensing deals.
These comments come after a meeting was held between the Federal Ministry of Justice and representatives of industry and professional associations to discuss potential reforms to the German injunction system in May, after repeated calls from the automotive and telecoms sectors.
According to Daniel van Geerenstein, deputy head of the VDMA (the mechanical engineering association), one of the biggest industry associations in Europe, little news has come out about potential reform since this meeting, and none is expected now until at least late August.
All change?
With the increasing disparity between the worth of a patent-protected component and the complex product that uses it, sources say they would like to see changes to federal legislation that would allow judges to consider proportionality.
Kreuz at Huawei says he does not necessarily agree with other implementers that judges should be allowed to consider all matters of proportionality, such as whether there is a competitor that can fill the gap in the market made by an injunction.
But he says that he would like courts to look at value before making an injunction determination and give users a chance to rectify the situation in certain circumstances.
“For some complex products, it would be good for the courts to look at the value of the product and give a product maker a chance to avoid the situation in situations where that maker has been compelled to build a technology into its product,” he says.
The head of IP at a medical device company in Germany agrees with Kreuz that judges should be given more wriggle room when it comes to issuing injunctions on various products, enabling them to consider preliminary enforcement more carefully.
“We would like the courts to have some discretion to look at the details of the case and make a case-by-case decision because the way it is currently written in statute means they don’t have much room to manoeuvre there,” he says.
“The courts should develop criteria that are dependent on the technology – so where it is a straightforward case, such as it often is in pharmaceuticals, you can go with an injunction. But where it is a chip in a car, for example, that might be reason not to issue an automatic injunction.
“Something around those lines would be reasonable.”
He and Kreuz also agree that judges should be given the power to stay infringement proceedings in some matters where it seems likely that the asserted patent will ultimately be held to be invalid.
At the least, they argue, greater resources should be allocated to the German Federal Patent Court to shorten the time between the infringement and nullity proceedings, otherwise known as the ‘injunction gap’.
“There is a hesitation to recruit more judges at the patent court because of the expectation that their workload will be less once the Unified Patent Court comes into being,” says Kreuz. “But that should not be the reason for this gap between the two proceedings.” This is even more the case now that it is increasingly uncertain whether the UPC will ever be established.
On this point, patent holders and users are in agreement.
“The biggest problem we have is not proportionality but the famous injunction gap between the infringement and nullity proceedings,” Beat Weibel, chief IP counsel at Siemens in Munich, tells Patent Strategy.
“Before we introduce new concepts, we must make sure the current system runs by speeding up nullity proceedings and facilitating staying of infringement proceedings.”
Talks of reform are far from over, and given the clout that the automotive industry holds in Germany, change to the German injunction system may well be on its way.
The trick will be to work out exactly what kind of criteria judges should apply when it comes to considering proportionality, and that will be no easy task.
