In our newsletter from March 2020, we already reported on the planned patent law reform in Germany. The official aim of the reform is to simplify and modernise the German Patent Act as well as other IP laws. According to the Federal Ministry of Justice, the reform includes clarifications in patent and utility model laws with regard to injunctive relief. Furthermore, it will optimise and better synchronise the provisions (i) on patent infringement proceedings before the civil courts and (ii) on nullity proceedings before the Federal Patent Court (BPatG). In addition to that, the reform will improve the protection of confidential information in patent and utility model litigation. Finally, the reform aims to reduce the bureaucratic burden on applicants before the German Patent and Trademark Office.
Unofficially, the patent law reform is the result of extensive lobbying, especially by the telecommunications and automotive industries, to soften the enforcement of injunctive relief in certain cases and at the same time reduce the “injunction gap” existing in the German patent system. Accordingly, the focus is now on the proportionality test for injunctive relief, which was expressly introduced into the Patent Act, and the introduction of a (soft) six-month period for the Patent Court’s preliminary opinion in nullity proceedings.
1. Proportionality test for injunctive relief
The injunctive relief in Sec. 139 (1) Patent Act will read as follows after the patent reform (bold = new):
“Any person who uses a patented invention contrary to sections 9 to 13 may, in the event of the risk of recurrent infringement, be sued by the aggrieved party for cessation and desistance. This right may also be asserted in the event of the risk of a first-time infringement. The claim is excluded if it would lead to disproportionate hardship for the infringer or third parties not justified by the IP right due to the special circumstances of the individual case and the requirements of good faith. In that case, the aggrieved party shall be granted appropriate compensation in money. The claim for damages according to paragraph 2 of this section shall remain unaffected.”
The Utility Model Act also contains a similar amendment.
The amendment now expressly provides for the possibility of excluding the right to injunctive relief if this would lead to unjustified hardship for the infringer himself or for third parties. If this exclusion takes effect, the infringer must pay reasonable compensation for the future use of the patent in addition to any damages for the past use. According to the recitals of the law, the amount of such compensation will initially be based on a royalty which is customary in the relevant market. However, it is possible to reduce or increase the compensation, e.g. depending on the legal status of the patent and the degree of negligence of the infringer.
The recitals of the law as well as prominent judges in the field of patent law emphasise that the newly introduced limitation of the right to injunctive relief will be an absolute exception. Even though in the near future most defendants will certainly argue that an injunction is disproportionate in their case, the courts will be very strict. The possibility of limiting the injunctive relief within the framework of an – unwritten – proportionality test has already existed before. Nevertheless, there has been no significant softening of the right to injunctive relief so far. And it will not happen in the future. In this context, experts often mention the ‘Waermetauscher’ (heat exchanger) decision of the Federal Court of Justice (judgement of 10 May 2016, docket no. X ZR 114/13). In that decision, the judges considered a delay for the infringer to cease and desist, but ultimately rejected such delay in that specific case.
If a defendant actually wants to have a real chance of limiting an injunctive relief, it will certainly not be sufficient to simply argue that a stop of production or sales constitutes a disproportionate hardship. This is even more true if the patentee is willing to grant a licence. Instead, the defendant will have to substantiate the allegation of disproportionality with figures and data, e.g. with business figures on the challenged product and on the defendant’s company as a whole (for example, in the case of an existential threat posed by an injunction). The question of disproportionality may also play a role in the case of a low value of a patent-infringing component, which is essential for the function of a complex product though. The exclusion of the right to injunctive relief could also become relevant in the field of public supply as well as in pharmacy and medical technology, for example in the case of a patient risk due to a supply stop if there are no alternative products on the market.
2. Streamlining the nullity procedure
Many experts criticise the long duration of patent nullity proceedings (approx. 24 to 26 months in the first instance at the Federal Patent Court). This is even more relevant in view of the fact that the civil courts usually conclude the infringement proceedings in the first instance within 12 to 18 months. In order to reduce the resulting “injunction gap” and the extra pressure on the defendant, the reform aims to shorten the nullity proceedings. According to a new provision, a nullity action shall be served upon the patent proprietor more quickly and that the patent proprietor must reply to the nullity arguments within two, max. three months. Within six months after service of the nullity action, the Federal Patent Court shall issue its “qualified note” in which the court gives a preliminary opinion on its view of the validity of the attacked patent.
The idea behind this streamlining of the proceedings is that at the date of the oral proceedings at the infringement court, a document is available in which a technical judge at the Federal Patent Court has at least provisionally dealt with the validity of the patent under dispute. This is why the preliminary opinion of the Federal patent Court will play a major role in the decision to stay the infringement proceedings, because this document is often the only neutral assessment of the validity of the patent. However, it remains to be seen whether the Federal Patent Court will try to respect the six-month time limit. It is only a soft deadline, i.e. there are no consequences if the deadline is missed. The lack of judges at the Federal Patent Court has been criticised for a long time, and this deficit cannot be compensated for by a new deadline. Against this background, it also remains to be seen what the quality of the preliminary opinion prepared within such rather short time limit will be.
In this context, it should be noted that an early draft of the patent law reform provided for the possibility to file a nullity action with the Federal Patent Court even though the opposition period was not over yet. However, this aspect was not implemented in the final reform.
3. Protection of trade secrets in infringement proceedings
A new Sec. 145a Patent Act is introduced, which reads as follows:
“In patent litigation, with the exception of independent proceedings for the taking of evidence and compulsory licensing proceedings under Section 81 […], Sections 16 to 20 of the Act on the Protection of Trade Secrets […] shall apply mutatis mutandis. All information introduced into the proceedings by the plaintiff and the defendant shall be deemed to be a trade secret within the meaning of […] the Act on the Protection of Trade Secrets.”
A provision with the same content is also introduced as Section 26a in the Utility Model Act.
The new provision will make it easier for courts to take measures to preserve trade and business secrets in patent infringement proceedings. In this way, the courts can restrict access to the court files, exclude the public from court hearings or limit access to specific documents to a certain number of reliable persons. In this way, the law responds to the need to better protect information disclosed during patent litigation (for example, information about how a defendant carries out a manufacturing process that is different from the method protected in the patent under dispute).
The second sentence of the new Section 145a (according to which all and any information introduced into the proceedings can be classified as trade secrets) was added only in the final draft. This is to clarify that not only technical information on the infringement, but also all other information may constitute a trade secret.
The exceptions provided for in Section 145a (independent proceedings for taking evidence and compulsory licensing proceedings) do not limit the protection of trade secrets in these proceedings. Rather, especially the so-called “Dusseldorf practice” during the taking of evidence remains in place. This means that the plaintiff or patent proprietor do not have direct access to the information collected during an inspection at the defendant’s premises.
