Not a single patent injunction has been denied or tailored by German courts based on two-year-old 'reform' statute, but plaintiffs need to adjust to new reality of preliminary invalidity opinions

A certain June 11, 2021 press release by industry body ip2innovate didn't age well:

"'German patent law has finally arrived in the 21st century. We welcome the fact that the Bundestag has passed a balanced reform' said Ludwig von Reiche, chair of the German group within European trade group, IP2Innovate.

"The reforms adopted during an overnight session of the Bundestag this morning will for the first time enable courts to apply the principle of proportionality in cases where injunctive relief would represent a disproportionate hardship to the alleged infringer or third parties as well as to substitute compensatory payments for injunctive relief, instead of courts automatically handing out injunctions.

"'After consulting widely with science, industry and the judiciary, a change in the law is now being implemented that for the first time takes into account the complexity of modern products in the digital age,' says Mr von Reiche."

Mr. von Reiche and his allies may have to await another century before actual change kicks in. The supposedly game-changing injunction statute has been in force and effect for more than two years without having made an impact in a single defendant's favor.

The press release I just quoted from was issued right after the German parliament's vote. Subsequently, the Federal Council (which has co-legislative powers but would have needed a supermajority to influence the outcome of this process) decided not to object; the Federal President signed the bill into law; and on August 17, 2021 the modified patent statute was published in the Federal Law Gazette (click on an image to enlarge):

I have consistently explained why the statutory language was not going to make a difference. It turns out that I was right and some others were wrong. They were too optimistic and they way overestimated their abilities.

Out of an abundance of caution, I asked many people about a week ago whether anyone was aware of a single German patent case in which the new Art. 139 language made a difference. Silence.

Incredibly, that June 2021 press release by ip2innovate even argued that other EU member states should follow suit:

"Unfortunately, like Germany so far, many other EU countries also fail to respect the proportionality principle.

"IP2Innovate and its members will keep a close eye on the implementation of the reforms and will continue to push for a modern and balanced patent system across Europe which respects the proportionality requirement."

If IP Europe has indeed "[kept] a close eye on the implementation" of that statute, then no one can come up with any excuses anymore. Not after two years. To people who know how things work, including Germany's best patent litigators, it was already clear two years ago. And not long after the new law entered into force, judges explained at different conferences that nothing was going to change in the end.

By now, all eyes are obviously on the Unified Patent Court. But patent holders still have access to German national courts as the UPC continues to be optional on a patent-by-patent basis.

While the lobbying failure of the anti-injunction movement is beyond reasonable doubt, a different aspect of the reform bill actually has moved the needle in defendants' favor, and it appears to me that patent holders seeking to enforce their rights in Germany have yet to adjust to that new reality. The Federal Patent Court is not absolutely required to hand down its non-binding preliminary opinions within six months of the filing of a nullity suit, and it could meet that target simply by outlining the issues in the case without giving a thumbs up or thumbs down. But what happens now in most cases is that a negative preliminary opinion is provided, which massively complicates enforcement.

German patent injunctions are every bit as near-automatic as they always used to be, and those who thought otherwise should be ashamed of their incompetence--but their second priority was to close the injunction gap (i.e., enforcement of an injunction prior to an actual validity determination), and the situation has indeed changed in that regard.

The validity-related statutory change took effect in May 2022, and after more than a year, it's clear that plaintiffs trying to get leverage in Germany must act more forcefully or they're not going to get their way.

Conventional wisdom would say that a license deal is preferable over litigation; that short-lived disputes are preferable over protracted ones; and that it's better to prevail on only a small selection of patents than to come across as very aggressive by asserting, say, 10 or more patents at the same time.

That conventional wisdom no longer applies in a situation in which the Federal Patent Court declares patent after patent invalid on a preliminary basis. In the past, suing over 3 or 4 patents was normally enough. For instance, when Microsoft and Motorola were suing each other in Germany over a decade ago, they started with just a few patents each. Same with Apple-Motorola. Samsung initially sued Apple over three standard-essential patents (and lost all three cases).

There are two things that plaintiffs must do differently or their German enforcement campaign are going to fail for lack of critical mass:

1. Assert more patents. If you have a reasonably large portfolio, I don't think it makes sense to assert fewer than 7 or 8, and I would recommend 10-12 patents-in-suit at the start. You just have to factor in that the Federal Patent Court will render negative opinions on the vast majority of them. If you only sue over a few patents, there's a high risk of none of those cases giving you near-term leverage. Legal fees for a quick and successful campaign over 10 patents will be less than for a protracted one over a smaller number. And in the latter case you'll get license fees while in the former your effort may just be a waste.

2. Harden your portfolio. Engage in patent Darwinism. Nokia has lost quite a number of patents in recent years, but they've also managed to identify a few killer patents that they can assert against defendant after defendant after defendant until they expire. It can be frustrating to have to litigate against a party over the course of more than two years (such as Nokia v. Daimler, and now also Nokia v. OPPO). But if you assert many patents, even some of those patents that the Federal Patent Court prematurely deems potentially invalid may survive, even if in a modified form. You then have some proven winners in your portfolio that you can leverage again and again--and that will, in fact, help you get more license deals because potential defendants will know what's going to happen if patent A is asserted in Munich or patent B in Mannheim.

Fortune favors the brave. And the bold.

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Non-practicing entities have easy access to patent injunctions in Munich: court provides guidance on insufficient proportionality defenses and implications of antisuit injunctions for licensee's (un)willingness

The Munich I Regional Court has recently made three judgments public that provide helpful guidance to litigants concerning the legal standard applied by the world's first and foremost patent injunction venue to

• proportionality defenses in standard-essential patent (SEP) and non-SEP cases, and

• the implications of the pursuit of foreign antisuit injunctions for the determination of whether a defendant is an unwilling licensee.

I'll start with the second item because it's shorter and simpler than the other items:

In case no. 7 O 13016/21, the Seventh Civil Chamber under Presiding Judge Dr. Matthias Zigann (who has since been promoted) adjudicated on September 15, 2022 a SEP assertion by a Japanese licensing firm (probably IP Bridge) against a Chinese implementer (the name is redacted; maybe Xiaomi, but doesn't look like OPPO). I obtained a redacted copy of the judgment from the court.

In the same dispute, the court had entered an anti-antisuit injunction based at least in part on the defendant's prior action of obtaining a Chinese antisuit injunction against a different patent holder, Conversant. The plaintiff then argued in the infringement litigation that the defendant was an unwilling licensee for the same reason. The Munich court clarified that the defendant's prior pursuit of an anti-enforcement injunction against a third party may very well give rise to the entry of a pre-emptive anti-antisuit injunction, but has no bearing on whether the defendant is a willing or unwilling licensee vis-à-vis the relevant plaintiff. In other words, the court bases its (un)willingness determination exclusively on the conduct exhibited in the dealings between the two parties in question. If the defendant had sought an antisuit injunction against this particular patentee, it might have been deemed an unwilling licensee--and its products could have been enjoined--for that reason alone.

Whether or not one agrees with the notion of pre-emptive anti-antisuit injunctions, the distinction between that type of relief and the (un)willingness determination in the infringement action undoubtedly makes a lot of sense.

The court's 21st Civil Chamber (Presiding Judge: Dr. Georg Werner) has meanwhile published (on a website run by the Bavarian state government) two Nokia v. OPPO decisions (see my battlemap). The public redacted versions don't reveal the parties, but the missing bits and pieces can be deduced from the claim language and dates.

On August 5, 2022, the court granted Nokia two SEP injunctions against OPPO. At around that time, the smartphone maker left the German market, presumably due to the enforcement of a 4G SEP injunction that had previously been ordered by the Mannheim Regional Court. Meanwhile it has become known that Nokia had brought a couple of contempt motions that resulted in fines being imposed on OPPO, but the fact that OPPO withdrew from the German market shows an intent to comply. By now the more interesting question is when OPPO will obtain a German patent injunction against Nokia's mobile base stations. Nokia is challenging OPPO's patents-in-suit.

The Munich court's August 5, 2022 SEP ruling (German text) addressed a mix of FRAND and proportionality questions. A March 2022 hearing that mostly took place behind closed doors (JUVE Patent reported) was about the FRAND issues in all Nokia v. OPPO cases pending in Munich at the time. It is not known whether OPPO's proportionality defenses were also discussed on that occasion or only as part of the patent-specific infringement trials.

The August 5, 2022 decision starts with a syllabus that lays out four key principles that I'll summarize below:

1. The fact that a patent--with no distinction being made here between a SEP or a non-SEP--is being asserted by a non-practicing entity (NPE) does not suffice for a proportionality defense to succeed.

   In this case, Nokia argued (as the judgment also notes) that it is not an NPE, but makes network infrastructure and has licensed its smartphone brand to HMD (of which Nokia is a minority shareholder). The Munich court held that even if Nokia were to be deemed an NPE, that finding wouldn't enable a proportionality defense to succeed.

2. This one actually has two parts that relate to interdependencies between the FRAND defense and the proportionality defense:

   • The court says it can't be held against Nokia in the proportionality context that it offered a SEP license to OPPO, given that this is part and parcel of Nokia's FRAND obligations. In other words, the fact that this dispute is just about money and not about excluding a competitor is simply attributable to Nokia's FRAND obligation and does not, in and of itself, call into question its entitlement to injunctive relief. I already said during the German patent "reform" process that the reform would prove useless without the equivalent of eBay factor #2 (inadequacy of monetary relief)...

   • The Munich court also rejects the notion that a SEP injunction is disproportionate because the patentee sued prior to the definitive failure of FRAND licensing negotiations.

3. The third guideline rejects the notion that an injunction should not be available against a complex product. At first sight, it looks like this would apply to SEP and non-SEP cases alike. The judgment itself suggests that the Munich court may generally view a complexity argument skeptically (i.e., Munich may disagree with the reasoning in Justice Kennedy's eBay concurrence), but focuses specifically on SEP cases and notes that an implementer is entitled to a license on FRAND terms and cannot raise a proportionality defense on top. If an implementer is deemed an unwilling licensee under SEP-specific case law, there is no proportionality defense according to the court.

   As I'll show further below, the same court has meanwhile clarified that this reasoning concerning complex products applies to non-SEPs, too.

4. Finally, Nokia was not faulted for allegedly having failed to explain in detail the calculation of the royalty rate it demanded. the Munich court says that "reasonable parties" do not care about the underlying calculation or a disaggregation of the total royalty.

A few months later, the Munich court granted Nokia a third injunction against OPPO. The patent-in-suit in that case (case no. 21 O 12142/21) was EP1728352 on "secure data transfer" (such as contacts that are already stored in the cloud being downloaded when setting up a new device). That one is a non-SEP as I already noted at the time.

In its November 25 (Black Friday) decision (German text), the court made reference to--and reaffirmed the key takeaways from--its August 5 SEP ruling.

Here's my summary of the guidelines found in the syllabus:

1. The court reminds everyone of the fact that a proportionality defense will succeed only in rare exceptions (with the infringer having to plead the relevant facts and bearing the burden of proof). That is actually an understatement. Thus far, the proportionality defense has not succeeded in a single German patent case--and the so-called reform entered into force approximately 1.5 years ago. It's a monumental lobbying failure, and the fundamental problem was the lack of ambition: the pro-reform camp thought that a minor legislative change would make an impact. It has not moved the needle and I believe it never will. Near-automatic patent injunctions are alive and kicking. It would have taken a more incisive statutory amendment to bring about change (if such change is desirable, which is a separate question I'm not talking about in this post).

2. The second guideline reaffirms what the court held in the August 5 SEP decision: a patentee's NPE status does not per se make the pursuit of a patent injunction disproportionate.

3. The complexity of the enjoined product(s) does not make an injunction disproportionate either.

With a view to OPPO's German countersuits against Nokia, this means that the debate will be all about FRAND and not at all about (dis)proportionality.

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Standard-essential patent injunctions in Germany unaffected by amended statute: academic papers can't paper over reform advocates' abysmal failure to achieve anything useful

This blog has been relentlessly explaining for well over a year now that the Emperor isn't wearing clothes when it comes to German patent injunction "reform." Two recent decisions by different divisions of the Dusseldorf Regional Court show that German judges will effectively apply a "willing licensee" standard akin to what we see in standard-essential patent (SEP) cases all the time--even where a proportionality defense is raised in a non-SEP dispute.

There was a little bit of a discussion after the IP Bridge v. Ford injunction in May over whether the efficacy of last year's "reform"--which included an amendment to Art. 139 Patent Act, Germany's patent injunction statute--can be judged by what happened in a SEP case in which the defendant's Huawei v. ZTE FRAND defense failed. But that was just an attempt by those who made the wrong strategic decisions to explain away the failure of their reform effort:

1. SEP injunction arguments were indeed made during the legislative process by lobbying fronts for the same types of companies that also backed ip2innovate's and the German Automotive Industry Association's (VDA) patent "reform" efforts:

   • On March 10, 2020, ACT | The App Association--which deceptively claims to defend small app developer's and IoT companies' interests, but is in fact mostly funded by Apple--submitted a statement (PDF) to the German government that specifically mentioned SEPs. At the top of page 7, ACT asked the German government to ensure that a proportionality requirement in Art. 139 Patent Act should "ensure that SEP holders cannot seek or obtain injunctions and other exclusion orders with very rare exceptions [...]". One of the exceptions mentioned relates to that of an "unwilling licensee"--but if ACT had just wanted the ECJ's Huawei v. ZTE to continue to apply, it wouldn't have had any reason to lobby for an amended German patent injunction statute. Also, even at the time when the letter was written, injunctions were the norm in German SEP cases--and by now it's practically impossible for implementers to avert them.

     Six months later, ACT followed up with another submission (PDF). On page 3, that one specifically points to the Mannheim Regional Court's Nokia v. Daimler injunction--a SEP case in which Daimler was deemed an unwilling licensee. It could hardly be clearer that the reform effort was also about SEPs, even if a very few companies such as Volkswagen may at some point have stated the opposite (such as at a May 2019 roundtable).

   • The Fair Standards Alliance (FSA) is not an astoturfing operation like ACT, as I've made clear in connection with an Ericsson v. Apple ITC discovery dispute. And in my recent post on the so-called Computer & Communications Industry Association, which is actually just an unprincipled Cash & Carry Industry Association, I noted that the FSA has a clearly defined mission: it represents net SEP licensees. There can be no doubt that the FSA is just about SEP policy, not about non-SEP injunctions. Its members include the likes of Apple, Google, Intel, as well as various automotive industry players (car makers as well as suppliers), and Deutsche Telekom. The FSA, like ACT, made one submission to the German Federal Ministry of Justice in March 2020, and another (PDF) six months later.

2. Not only has the supposed "reform" been totally useless in SEP cases but has equally failed to make an impact in even a single non-SEP case, as Juve Patent reported in August (and I knew it, too).

3. As the Dusseldorf decisions I mentioned further above show, patentees can easily create a SEP-like situation by simply making a licensing offer: all it takes is one short letter. But the only "use case" for the amended statute was to combat patentee overcompensation. It was never ever about cases in which, say, a pharmaceutical company wants to shut down a counterfeiter and absolutely positively won't grant a license. So in all those cases in which it's just about money, the patentee can unilaterally pre-empt the proportionality defense with just one short letter.

4. Lest we forget: there is nothing in the statute or the officially stated reasons (comparable to recitals of EU legislation) that carves out SEP cases.

From a practitioner's point of view, German patent reform simply failed. I agree with Juve Patent that at some point the question will be whether the courts even read any proportionality defenses attentively.

Academic papers won't impress the judges either. Earlier this week, Professor Thomas Cotter (University of Minnesota) recommended on his excellent Comparative Patent Remedies Blog two recent papers on the proportionality defense in German FRAND cases in light of the 2021 legislative amendment. One was authored by Professor Peter Georg Picht (Zurich and London) together with Professor Jorge Contreras (Utah), and the other by Professor Martin Stierle (Luxembourg) together with Professor Franz Hofmann (Erlangen-Nuremberg). I have great respect for all four of these researchers, and have met three of them. But with the greatest respect, those papers won't change a thing because the judges will do their thing.

Those academic writings just show that a meaningful proportionality requirement would also apply to SEP cases. It's just that the one enacted by the German legislature last year is useless, and that's because of a strategic failure. Those pushing for a legislative measure may have done the right thing initially when they told the German government they were really just looking for a narrow exception. However, the moment that there was hope of Art. 139 Patent Act being modified, they'd have had to shift gears and propose statutory language that would have made an impact. In SEP cases as well as in non-SEP cases where a licensing offer is on the table, a narrow exception for cases of extreme hardship was never going to make a difference. Never. It was so foreseeable--I explained it in early 2020: Without eBay factor #2, German patent reform movement is left with nothing but Kremlinology, spin, and self-delusion: licensing vs. injunction . I explained it again the following year (a few months prior to the vote): German patent injunction reform bill fails "Keep It Simple, Stupid" efficacy test: automotive industry, smartphone makers won't save license fees.

I never once disputed--and in various conversations acknowledged--that the requirement of the inadequacy of monetary relief would have been a radical departure from the status quo. There would have been an undeniable risk of not getting anything in the end--but with their misguided approach, those reform advocates ended up "not getting anything in the end" and never even had a chance to bring about actual change. In the end, they thought they were realists in the sense of realpolitik--but they weren't: they were just dreamers because they expected an endorsement of the existing caselaw to produce different results. Federal Court of Justice judge Fabian Hoffmann told a webinar audience about a year ago that they can't expect the judges to make different decisions when the bill itself says (in the official reasons) that the objective is continuity.

As others have said before me, insanity is trying the same thing over and over again but expecting different results...

What the "reform" movement did was insane. At minimum, it was a non-starter. The alternative would have been to make a massive push for a more ambitious legislative proposal, not the inadequate effort that was undertaken by people who were no match for the policy departments of major net licensors and the pharmaceutical and chemical industries. At the parliamentary hearing, the "reform" movement was absent apart from a non-specialized automotive lobbyist who was basically eaten alive by the other camp.

For me personally it was actually better that it worked out this way. While my preferred jurisdiction in which to follow patent infringement cases is the United States, I obviously benefit in different ways from the not only continuing but even increasing importance of German courts, especially the ones in Munich and Mannheim, as injunction hotspots in major technology patent disputes.

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In SEP and non-SEP cases alike, unwilling licensees have no proportionality defense to patent injunctions in Germany: Dusseldorf court ruling also clarifies need to seek compulsory license first

There's an expected but nevertheless interesting development here that is of interest to those litigating patent infringement cases in Germany's national courts and/or its local divisions of the Unified Patent Court (a new judiciary scheduled to go into operation next year). A couple of judgments by two different divisions of the the Dusseldorf Regional Court that have recently been published contain passages on the narrow (actually, next to non-existent) applicability of the proportionality defense to patent injunctions under last year's amendment to Germany's patent injunction statute (§ 139 PatG, Art. 139 Patent Act):

• On June 30, 2022, the court's 4b Civil Chamber (Presiding Judge: Dr. Daniel Voss ("Voß" in German)) enjoined an automotive supplier

  from making sunroofs. The patent-in-suit was set to expire two months after the judgment, so any grace period would have been tantamount to ordering no injunction at all. The impact on downstream customers like BMW was deemed tolerable, especially given how short the relevant period was.

• One week later, the court's 4c Civil Chamber (Presiding Judge: Sabine Klepsch) enjoined pharmaceutical company Gilead from making a hepatitis C medication that infringed a NuCana patent. Juve Patent reported on July 21, and now the Kluwer Patent Blog has published a redacted version of the judgment (PDF).

As Juve Patent noted on August 17 on the occasion of the first anniversary of the entry into force of Germany's amended patent law, and as I've been predicting for a long time, "nothing has changed." Not a single case is known in which the proportionality defense made even the slightest difference. That was, by the way, the legislative intent--and if there had ever been any doubt, Germany's chief patent judge eliminated it speaking at a Chinese conference in October 2021.

The same two Dusseldorf judges who handed down the two decisions I'm talking about now already outlined their thinking in January 2022. No surprise there either. The only way anyone can be surprised now is if one listened to the wrong "experts."

While the Unified Patent Court Agreement (UPCA)--not the German Patent Act--is the statute governing the UPC, defendants will try to raise proportionality defenses there a well. As per Art. 62 (2) UPCA, "[t]he Court shall have the discretion to weigh up the interests of the parties and in particular to take into account the potential harm for either of the parties resulting from the granting or the refusal of the injunction." The UPC will have to develop its case law from scratch (while complying with applicable EU law), and competitive dynamics between the UPC and national courts during a transitional period will force the UPC to be reasonably patentee-friendly: otherwise patent holders will avail themselves of national courts for as long as possible, and the UPC won't take off for some time.

These are my take-aways from the proportionality-related passages of the two Dusseldorf judgments:

1. Either of those judgments places the emphasis and, especially, the burden on defendants. The net effect is that a "willing licensee" standard applies, whether the patent-in-suit is a FRAND-pledged standard-essential patent (SEP) or a non-SEP. I'm not saying it's going to be an absolutely identical willing-licensee standard, but should there be any differences, they'll be minor. Patentees enjoy broad discretion as they make their demands, while infringers will be enjoined if they make the smallest mistake. For instance, the sunroof ruling contains a sentence that I interpret as saying that the patent holder is in its right to demand that the infringer take a portfolio license as opposed to a license covering only the particular patent-in-suit. No one ever doubted that a non-SEP holder could take that position, but this is now another parallel to Germany's FRAND caselaw.

2. In either case, the patent holder was willing to grant a license. I've been saying for a long time that patent holders will be on the safe side if they offer a license. And I explained even prior to the formal adoption of that patent bill that the amendment failed a 'Keep It Simple, Stupid' test. Almost three years ago, I said the situation in Germany wouldn't change without an equivalent of eBay factor #2. There you have it. Those advocating proportionality always said that the pattern they were concerned about was just the one of patentee overcompensation--and not the kind of case in which a company truly seeks to enforce exclusivity to combat counterfeiting or to maintain a competitive advantage. But a patentee that pursues royalties rather than exclusivity can easily make a licensing offer.

3. In the pharmaceutical case, the Dusseldorf court bases its rejection of Gilead's proportionality defense on a doctrine according to which a defendant making a public-interest (here, harm to patients) argument has to seek a compulsory license in the Federal Patent Court (Art. 24 Patent Act) in the first place, and the proportionality defense under Art. 139 Patent Act is merely "subsidiary" to that one (meaning that if there are issues left to be addressed after the compulsory-license proceeding, some minor adjustments to an injunction, such as a use-up period, may be an option). However, the court also explains that even without that hard-and-fast doctrine, the proportionality defense would have failed anyway if the overall conduct of the parties--particularly also that of the infringer--is considered.

   So, you can be deemed an unwilling licensee for all sorts of reasons anyway, but if you don't seek a compulsory license, that fact in and of itself calls into question your willingness to take a license and fairly compensate the patentee. Whether proportionality is a "subsidiary" defense or whether your failure to bring a compulsory-licensing action goes into a Sisvel v. Haier-style behavioral analysis, the outcome is the same.

   The new injunction statute's reference to the interests of third parties (which I simply equate to the public interest for the purposes of this analysis) was misperceived as a major breakthrough for the pro-reform movement. In early 2021, Judge Dr. Klaus Grabinski of the Federal Court of Justice (and soon of the UPC) took an even patentee-friendlier position: he essentially wrote that a proportionality defense based on third-party interests would have to meet the exact same standard as a request for a compulsory license.

   We're now probably going to see more and more compulsory-licensing cases under Art. 24 Patent Act--as if the Federal Patent Court wasn't busy enough already. And those cases usually go nowhere. In the entire history of the Federal Republic of Germany, only two compulsory licenses were granted, and one of them was overturned on appeal.

   The UPCA refers defendants to national courts if they seek compulsory licenses (even with respect to the future Unitary Patent). This is a built-in asymmetry: patent holders can obtain a multi-country injunction from the UPC, but compulsory-licensing cases would have to be brought in multiple countries in parallel.

4. Those two Dusseldorf non-SEP decisions that nevertheless apply a SEP-like standard show that some of those who were seeking to reform Germany's patent injunction framework are wrong when they say that SEP decisions (such as in the Ford and OPPO cases) were always outside the intended reform's scope. That makes no sense because any non-SEP holder, by doing what it takes to be considered a willing licensor (such as by making a formal licensing offer), can immediately be in at least as strong a position as any SEP holder vis-à-vis a proportionality defense. Arguably, a non-SEP holder can even argue that its position should be stronger as there is no FRAND licensing obligation under antitrust law (even non-SEPs can be subject to antitrust rules, but those cases are few and far between).

   Post-Sisvel v. Haier, no defendant has been deemed a willing licensee except for one case in which a particular patent pool's duplicative-royalties policy was at issue. Apart from that outlier, Philips was the last SEP holder to be denied an injunction in Germany despite prevailing on the merits, and about five years have passed since then.

   As I've been saying for a very long time, unless you have the equivalent of eBay factor #2 (meaning that an injunction will issue only if monetary relief is inadequate), you won't get different outcomes in cases where the patent holder has an obligation or expresses a will to grant a license. All you get then--and that's what we can see happening now in Germany--is a total waste of money (by raising the additional defense and pursuing compulsory-licensing actions in the Federal Patent Court).

5. Both Dusseldorf judgments make it clear that a defendant firstly has to meet its own obligations to avoid harm to third parties (be it BMW or hepatitis C patients) before it can raise a defense centered around third-party interests.

6. Companies who were advised by outside counsel in early 2020--when the German government's first official draft patent reform bill was made public--that the law would make a difference should ask themselves whether they asked the right professionals. That early draft was no defendant-friendlier than the version that was finally adopted (it didn't even recognize third-party interests as an element of a proportionality defense, for instance). And the results are clear now. So whether some lawyers intentionally overstated the future impact of the measure in order to dissuade their clients from seeking meaningful reform or whether they were unrealistic, their opinions were wrong, as the course of events has meanwhile shown.

Another element of last year's legislative amendment took effect earlier this year: the six-month target for preliminary opinions by the Federal Patent Court. And it's doomed to be no more than marginally more useful than the modified injunction statute.

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Nokia placing transparent bet on German injunction gap with non-standard-essential WiFi patent against OPPO in Mannheim

Tomorrow (Tuesday, May 31) the Mannheim Regional Court's Second Civil Chamber (Presiding Judge: Dr. Holger Kircher) will hold its second Nokia v. OPPO trial. As I already reported last summer, the patent-in-suit in case no. 2 O 73/21 is EP1704731 on a "method and apparatus for indicating service set identifiers to probe for." I was clear all along that it's a WiFi patent. What I have meanwhile researched is that this patent hasn't been declared essential to WiFi (IEEE 802.11).

On the first of this month I expressed skepticism regarding the impact of the new Art. 83 of the German Patent Act, which calls on the Federal Patent Court to provide a preliminary summary of the issues in a nullity case within six months of service of the complaint. It's illusory to expect the court to reach a preliminary conclusion after six months on virtually 100% of all challenged patents when it so far needs years to form such an opinion in only about half of all cases. However, in some outlier situations such as tomorrow's Mannheim case (to which the new rule doesn't apply; it only affects cases filed this month or later) the Federal Patent Court would indeed be able to tell quickly and easily that a patent has serious validity issues.

I want to be clear and fair: Nokia has invested, and continues to invest, a lot in innovation. The company deserves respect for that, and respect for IP ultimately means royalty payments. But this doesn't mean that Nokia wouldn't also take an opportunistic win over a patent that is rather unreflective of its substantial investments in innovation. EP'731 is the technically thinnest European patent I've ever seen in litigation, even less technical than a patent Qualcomm asserted against Apple's Spotlight search in Munich (a fitting analogy as Qualcomm is one of the most innovative companies in the entire technology sector, yet sought leverage from partly underwhelming patents).

The number one reason why true innovators like Qualcomm and Nokia resort to patent assertions of that kind is that Germany's bifurcated patent litigation system and the "injunction gap" it entails encourages deep-pocketed plaintiffs to just play the lottery. The "German gamble" is that you assert--additionally or alternatively to more serious patents--a bunch of patents that should never have been granted in the first place. The hit rate may be low, but if you prevail on one or two such patents, you may get leverage--and, at a minimum, a news cycle about your adversary using your "intellectual property" without a license.

While we're on the subject of "intellectual", let's take a look at what that patent is all about. Obviously a page count alone doesn't answer the question. Sometimes an incredibly good idea can be described briefly. Here, however, even nine pages is epic when considering what the claimed invention amounts to:

In a nutshell, some WiFi networks identify themselves proactively by broadcasting an "I'm here" message while some others will only respond if a device asks "are you [stating a specific network name] around?"--and what the patent "teaches" is that you shouldn't ask that "are you around?" question with respect to a network that proactively tells you "I'm here" (just with respect to those that wait to be asked).

The alleged technical effect is that you save bandwith and power by not asking unnecessary questions. In light of worldwide efforts to combat climate change, energy efficiency is undoubtedly relevant. However, the starting point--"don't ask if it tells you anyway"--is obvious, and what's also obvious is that a device would use a "flag" (which is typically a 0/1 binary value). It would be a different story if this patent taught a particularly efficient way of doing this. But what it does is to cover all implementations. It says: use a binary flag, or some other data point--just store the information that a certain WiFi network will identify itself and doesn't have to be asked.

In light of how unbelievably uninventive that patent is, I'm not going to attend the Mannheim trial. The Nokia v. OPPO/OPPO v. Nokia dispute is generally very interesting. For instance, Nokia's EP'103 was successfully asserted against Daimler, though OPPO has dug up an Excel table that is part of the specification of the standard and, in my view, renders the patent non-essential. Whether or not I'm right about non-essentiality, EP'103 is a patent to be reckoned with. Also, an OPPO patent that is being asserted against Nokia in Munich was described as a groundbreaking innovation that enables low-latency 5G network communications. By comparison, I very strongly doubt that there will ever be an injunction against any defendant over EP'731. It's a lottery ticket, and even if it worked out, it could be worked around by simply checking for the presence of all WiFi networks on the list, even those that self-identify. That workaround would result in unnecessary carbon emissions--and there might be some logistical challenges if a chipset had to be replaced with a modified one. But it could be done.

The odds are long against this lottery ticket winning Nokia the jackpot, especially before judges that have a pretty good feel for what constitutes true innovation. I was really impressed with how easily Judge Dr. Kircher identified the non-technical nature of Qualcomm's "amended" claims of a patent relating to electromigration. That Qualcomm patent was actually rocket science compared to EP'731...

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New § 83 of German Patent Act entered into force today, requiring Federal Patent Court to hand down preliminary opinions within six months: foolish and pointless 'reform'

The most stupid piece of patent legislation I've ever seen--apart from bills that never got enacted--is PatMoG2, last year's German patent "reform." Most of it entered into force in mid-August 2021, and 8 1/2 months later there still hasn't been a single case in which the "proportionality" language inserted into § 139 made a difference. What those advocating for stronger defendants' rights pursued as their #2 priority was a plan to mitigate the effects of bifurcation (invaliditation proceedings typically taking much longer than infringement cases). In that regard, too, the only clever and honest way to deal with it would have been for those "reform" advocates to tell politicians--politely, but clearly--"thanks, but no thanks." Instead, they contented themselves with crap, hoping that it would enable them to falsely claim victory without changing a thing in practice.

It was a win-win-win situation in the sense that patent holders preserved the status quo, "reform" advocates had something to show (though anybody who knows how patent litigation in Germany works wouldn't expect different outcomes), and politicians could make it look like they had solved a problem.

Short of abolishing bifurcation (as Judge Pichlmaier suggested in his comments to Juve Patent), the only thing that would have helped net licensees is a lower hurdle for getting cases--or the enforcement of injunctions--stayed. Oddly, a lower standard for staying the enforcement of injunctions during an appeal was even proposed as a solution by certain lobbyists representing key net licensors. But the misguided and incompetent "reform" camp didn't take the deal, and got nothing useful in the end.

All they achieved was that the German legislature inserted language into § 83 PatG (Patentgesetz = [German] Patent Act) that calls on the Bundespatentgericht (Federal Patent Court) to hand down its preliminary opinions on nullity complaints within six months of service of a given commplaint on the patent holder. That new § 83 PatG entered into force only today as a grace period was needed so the Federal Patent Court could adjust. Today is a Sunday (plus, a national holiday (Labor Day)), but if you are patent holder and a nullity complaint is served on you anytime now, then the six-month target applies.

Yes, it's merely a target, not a rule. You can't get an infringement case stayed only because the Federal Patent Court takes longer. And six months is typically quick enough for main proceedings, but doesn't solve any problem in fast-track preliminary-injunction proceedings.

If a patent is less than nine months old, it can still be challenged before the patent office (usually the European Patent Office). In that case, one cannot file a nullity suit yet. It is an oversight--due to incompetence by too many of the people involved--that the "reform" bill doesn't address this problem. The Federal Ministry of Justice realized this when it was too late, so the measure got enacted anyway, but there is a plan to publish a "bugfix" at some point.

Even in those cases in which the six-month target applies, what good it will do? I'm very, very skeptical.

I actually have a lot of sympathy for the judges over at the Federal Patent Court. Those "reform" advocates complained about how long it takes until those nullity complaints get adjudicated, but that's because of the court's caseload. Granted, the Federal Patent Court could decide more cases if it reduced the number of judges on a nullity panel from 5 to 3 and/or didn't require every single judge to write an opinion for internal purposes only the per curiam gets published in the end). But that's not the judges' fault either.

Defendants to infringement lawsuits must present their nullity action at the time of responding to the infringement complaint (in order for the infringement court to consider it). From service of the nullity complaint, patent holders have two months to respond in defense of their patents. That period was often extended, sometimes up to five months, and now the Federal Patent Court is going to be extremely reluctant to grant extensions. That will also apply to the reply briefs that nullity plaintiffs submit.

The Federal Patent Court will, therefore, have a pretty developed record in front of it early on. But will it then actually render preliminary opinions that are going to help the infringement courts as they have to decide on whether to stay a case pending a parallel nullity action?

Even the six-month target isn't legally binding, but time is at least measurable. What simply cannot be measured is the quality of what the Federal Patent Court will deliver at that early stage.

That court won't all of a sudden have far more judges. It can't do magic just because of that new § 83 PatG setting an insanely ambitious target. With the old timeline, about half of all cases never reached the point at which the judges even had to seriously assess the merits: disputes often got settled before. Now the court has to form an opinion--albeit only a preliminary one--on virtually 100% of all cases, and on a very short timeline.

The predictable net effect is that the Federal Patent Court's preliminary opinions will simply be less helpful than in the past (where they came down at a much later stage). There is no hard and fast requirement that those preliminary opinions must actually indicate in which party's favor the court is inclined to rule. In fact, the very § 83 PatG merely says that the court shall inform the parties at the earliest stage possible of "aspects that will foreseeably be particularly relevant to the decision or serve to focus the oral hearing on the outcome-determinative questions." In other words, those preliminary opinions don't have to be opinions. Acctually, they aren't even called preliminary opinions in German: the more literal translation of "Hinweis" is closer to "notice."

All that the Federal Patent Court has to do in order to reach the (non-binding) six-month target is to lay out the agenda. It doesn't have to decide on claim construction at that stage, nor does it have to express an opinion as to whether the challenged patent was anticipated by a given prior art reference or doesn't involve an inventive step over a combination of prior art references. The court can just identify what questions are in dispute between the parties. That's it.

Those advocating "reform" wanted fast food, and fast food--not gourmet food--they shall get.

Is that going to assist the infringement courts (which are in a position to identify the bones of contention by themselves)?

Is that going to result in more stays of infringement proceedings?

Are the judges of the Federal Patent Court going to be forever grateful to the automotive industry and Big Tech for having called into question their efficiency and for having lobbied for something that just puts unreasonable pressure on them?

No, no, and no.

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Great news for standard-essential patent holders: Munich court looking to streamline multi-patent SEP disputes through unified FRAND hearing in 'lead case' and sequencing of trials

Case management matters. While procedures may be a dry subject, they do have serious business implications. I've learned about developments in Munich that will not only save court resources but also make standard-essential patent (SEP) holders money.

The world's leading forum for patentees seeking injunctions--the Munich I Regional Court--has for more than a decade prided itself on its "Münchner Verfahren" ("Munich Procedure"), which would be called "Patent Local Rules" in U.S. federal district court (here's an example from the Northern District of California). Those rules are characterized by two hearings (the second one of which is a trial typically followed by a decision), page limits, and other rules that enable an efficient and correct adjudication of patent infringement actions.

Two years ago, the court also promulgated--just before a Nokia v. Daimler hearing, and after many months of deliberations and discussions with stakeholders (many of you had the chance to hear from Presiding Judge Dr. Matthias Zigann at conferences, even at an ETSI meeting)--its Standard-Essential Patent Local Rules on top of said Patent Local Rules. The court's emphasis on a licensee's genuine willingness to take a license was--by extension--affirmed that same year by the Federal Court of Justice in Sisvel v. Haier I. Later that year, Sisvel v. Haier II, while having the same case-specific outcome (in favor of plaintiff Sisvel), provided further clarification and, as part of that effort, promoted a certain degree of symmetry.

At a Nokia v. OPPO/OPPO v. Nokia hearing held by the Munich court's 21st Civil Chamber (Presiding Judge: Dr. Georg Werner) last month, it crystallized that the court's SEP rules were still evolving, for reasons including--but not limited too--the guidance provided by Sisvel v. Haier II. As I noted in my commentary (the post I just linked to), there's no reason for SEP holders to worry about whether Munich is a great venue for enforcing their intellectual property rights against unwilling licensees. It still is. But both parties to a litigation must act constructively through the process, all the way up to (and including) the trial.

I can see why some were shocked to find that the court had removed its SEP Local Rules (and its general Patent Local Rules) from its website. But that doesn't mean a change of direction. There was also concern over whether those development signaled divergence between the court's three patent-specialized divisions. No worries: a reasonable degree of continuity and maximum consistency between the court's divisions are ensured. The court issued a press release today with the following explanations (this is my summary, not a translation):

• The three Munich patent litigation divisions--the 7th Civil Chamber under Presiding Judge Dr. Matthias Zigann, the 21st under Presiding Judge Dr. Georg Werner, and the recently-created 44th under Presiding Judge Dr. Anne-Kristin Fricke--jointly defined an updated set of Patent Local Rules late last month. There hasn't been a major change to them. It's more of a routine update that clarifies, for example, that one has to raise any proportionality argument in the answer to the complaint. Proportionality arguments against injunctive relief are made more frequently as a result of last year's German patent "reform" bill, but in my opinion they remain very unlikely to result in a denial of injunctive relief unless a plaintiff blunders or tries to shut down the country's most essential infrastructure without making a reasonable licensing offer. If last year's legislation matters at all, it has more to do with the part protecting confidential business information. In fact, the law on confidential business information ("GeschGehG") is mentioned ten times in the new Patent Local Rules, while "PatMoG" (the acronym of the patent reform bill) doesn't come up even once (only the disproportionality defense, in the purely administrative fashion I just explained).

  All of this is just typical of a necessary update that doesn't represent a departure from the court's rules. The two-hearing structure remains in place, as are many other signature elements of Munich's Patent Local Rules, such as rigid deadlines.

• Counsel will automatically receive the rules in force at a given procedural juncture (or can request a copy). I've seen the document as well.

• The court chose email over web simply in order to be able to revise the rules more flexibly. This way the judges can update the document without the administrative hassle of requesting an update to the court's website (which is a subdomain of the website of the Bavarian (State) Ministry of Justice).

• Now, there currently is no document describing the court's SEP Local Rules. That, however, doesn't mean that the court distances itself from its past case law. The key factor here appears to be that SEP disputes are, more often than not, multi-patent litigations. The court's press release notes that SEP cases will be organized individually for the sake of judicial economy. The court is now experimenting with a new approach to certain sets of (related) SEP cases. The press release notes that the court may actually promulgate new SEP guidelines further down the road.

I've done some further research and found out what approach to SEP cases the court is presently contemplating (all of which remains in flux). The first step is to identify a "Leitverfahren" ("lead case") among a set of related SEP actions. In the lead case, the parties exchange four pleadings (two per party) and then spar with each other at a first hearing exclusively dedicated to the compulsory-licensing defense, i.e., it's exclusively a FRAND hearing. That's what apparently took place in Nokia v. OPPO/OPPO v. Nokia last month.

If the parties can't reach an agreement and the case has to proceed to trial, there will be a second hearing--the actual trial--for that lead case. At that stage, it's not only about FRAND but also about the technical merits (infringement and the possibility of a stay pending parallel validity proceedings).

What about the other cases (than the lead case) that are part of a multi-case dispute?

They don't get two hearings (just written pleadings ahead of the trial), and the trial will be held only after the lead case has been resolved.

The objective is to explore the possibility of a settlement based on the lead case. The remaining cases will proceed to trial only if the lead case fails to bring the entire dispute to an end. I could imagine scenarios in which a defendant lets the lead case come to judgment and plaintiff loses. It's also conceivable that a plaintiff obtains an injunction, but the patent can be worked around (this may sound like illogical for a SEP, but "essential" is not "essential-essential").

Above all, I could see cases in which a plaintiff maybe asked for an excessive royalty in the lead case, but then has the chance to optimize its FRAND demand in time for a subsequently-adjudicated case. That scenario actually favors plaintiffs. They get another bite at the apple (an apple that in some SEP cases is spelled with a capital A) if they file multiple cases and prevail on more than one patent-in-suit. If a defendant makes a mistake in the lead case, it will be enjoined, which often means it's game over and it doesn't help to be wiser after the event. A SEP holder, however, can actually take its chances in the lead case and if the demand was supra-FRAND, it could still fine-tune its position next time, with guidance from the court's prior ruling involving the same parties. The court will decide each case based on the full FRAND negotiations record as of the end of the trial in a given case. If the SEP holder is granted an injunction later, it may still be better off than if it had asked for too little the first time.

Three major benefits to SEP holders

If you ask me, the envisioned strategy for managing multi-SEP disputes actually makes Munich an even more attractive SEP enforcement venue--quite the opposite of what some feared last month. I see there reasons, which are closely related and arguably even overlapping:

• One of the three aspects is what I explained above: SEP holders can take their chances in the lead case and still obtain an injunction in a subsequently-decided case.

  In principle, plaintiffs already had the opportunity to optimize their FRAND story after each trial or decision. But now they have an absolute guarantee that the court will firstly provide them with the necessary guidance in a lead case before any other case is even taken to trial. At last month's Nokia v. OPPO/OPPO v. Nokia FRAND hearing, Judge Dr. Werner placed the emphasis on the court judging each party by the entirety of its negotiation conduct from the first infringement notice to the trial. In a multi-case one-way dispute ("one-way" meaning the defendant isn't countersuing), a SEP holder that is confident of its ability to prevail sooner or later, and which is not in financial dire straits, can afford a "maximalist" strategy. Don't leave money on the tabe, as the saying goes. "You win some, you lose some" doesn't apply because the SEP holder just needs one decisive victory. It's like "win once and take all."

• While the FRAND hearing provides guidance to either party based on which it can optimize its FRAND position with a view to the trial, the practical implications aren't symmetrical. If a defendant learns at the first hearing that it has to meet a plaintiff's demands or it will be enjoined, and if it can't risk being shut out of the German market, the patentee will get what it's looking for. In the other scenario, however, where a patentee learns that it has to accept an implementer's offer or it won't win an injunction, the SEP holder can still choose: it can choose the bird in the hand over two birds in the bush, or it can simply bet on getting leverage in other jurisdictions such as the ITC, the UK, the Netherlands, maybe even in an exotic country. Put differently, the SEP holder can walk, but the implementer will remain under pressure as long as the SEP holder has cases pending that may lead to injunctions. That already benefits SEP holders within the lead case.

• Previously the Munich court focused only on claim construction and the infringement analysis at a first hearing, even in SEP cases apart from exceptions that were few and far between. Early first hearings with a purely technical focus can give patentees leverage in non-SEP cases, with defendants often realizing their fate will likely depend on their motion to stay pending a validity determination. In multi-SEP disputes, however, guidance on FRAND is more critical than on infringement. It's hard to magine that a Nokia, Ericsson, or InterDigital wouldn't at some point prevail on at least one SEP-in-suit out of several asserted patents. Whether it's the first, second, or third case where it proves a SEP to be actually essential is less important than obtaining guidance on FRAND at the earliest opportunity, for the reasons discussed before.

  I believe we'll see more settlements of multi-SEP disputes after Munich first hearings now. Previously, defendants who saw at a first hearing that they were on the losing track with respect to infringement (as a SEP appeared to be truly essential to the standard) could tell themselves that "not all is lost" because there's still FRAND. Now, the FRAND part gets addressed at an earlier stage. If a defendant is on the losing track with respect to FRAND, it's only a question of when, not if, it will have to take the license.

Note that this is all preliminary; it's just being contemplated; and it's highly case-specific, so the court may adopt different rules for different disputes.

Single-patent vs. multi-patent cases: best of both worlds

I completely understand the court's judicial-economy considerations here because I follow cases in the U.S. and Germany, so I see the difference between multi-patent cases (be it in U.S. district court or in the ITC) versus single-patent (or at least single-patent-family) cases in Germany. What the Munich court wants is to leverage synergies between related SEP cases, ideally yielding the best of both worlds:

It's simply a requirement in Germany to adjudicate each patent (family) separately. A party can bring a complaint over five patents from five different families, and can almost literally set its watch by the court severing those additional claims, resulting in five cases (which is why German courts don't want parties to file multi-patent cases in the first place: they ask them to assert each patent (family) in a separate complaint).

Either approach (single-patent vs. multi-patent) has an upside and a downside:

For the purely technical aspects of unrelated patents (if they're not from the same patent family, they cover unique inventions), there aren't any non-negligible synergy effects other than a single jury selection process and maybe having to explain an accused product only once. Then, U.S. jury trials aren't just about the technical merits. They practically always involve damages claims, and then there are overlapping elements concerning the accused products.

German patent infringement cases are very technical, making them patent-specific. Damages are practically relegated to subsequent proceedings (in almost all cases, parties just seek a determination that they're entitled to damages, but don't actually sue for damages until after they've proven an infringement of a valid patent and are entitled to an accounting that enables them to calculate their damages claim).

Multi-SEP cases are different. The FRAND determination is almost always about a (global) portfolio license (if not even a global pool license). The patent-specific question is whether an injunction will issue against an unwilling licensee, but the rate is unrelated to the strength or commercial value of a particular patent-in-suit. It would be inefficient and rulings could theoretically be inconsistent if different divisions of the court adjudicated parallel SEP cases involving the same portfolio. In Nokia v. Daimler, most cases were pending before the 21st Civil Chamber (then under Presiding Judge Tobias Pichlmaier), but one was assigned to the 7th Civil Chamber (Presiding Judge: Dr. Matthias Zigann), which had previously looked at that patent when Nokia was asserting it against Apple. The 21st Civil Chamber enjoined Daimler, and before the 7th Civil Chamber adjudged its case, the parties settled. Nothing went wrong. But it was a dispute involving several patents, two different panels of judges were involved, and it would indeed have made sense to identify a "lead case" for the purpose of a de facto consolidation of the FRAND part, and to firstly decide that one before taking the other cases to trial.

For SEP holders it still makes sense to assert multiple SEPS, hedging their bets not only with respect to the technical merits but also with a view to FRAND. The court, however, can use its scarce resources most efficiently to give guidance to the parties to SEP disputes enabling them to overcome their disagreements on licensing terms.

I'm pretty optimistic that what is currently just being contemplated won't disappoint when it's reduced to practice.

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Patent holders don't have to be afraid of proportionality defense to injunctive relief in Dusseldorf, much less in SEP cases: judges outline their thinking

I have good news for patent holders who like to enforce their rights in Germany, and not only in Munich and Mannheim but (at least in some cases) also in Dusseldorf. Based on what two of the three judges presiding over patent-specialized divisions of the Landgericht Düsseldorf (Dusseldorf Regional Court) said in a joint presentation today, patent injunctions are going to be just as available in Dusseldorf as before last year's "reform" bill. This was certain for Munich and Mannheim, but I must admit there were some residual doubts on my part concerning Dusseldorf, which in some contexts made defendant-friendlier decisions in recent years than other German courts. Not anymore after today's presentation.

Other than the risk of outlier decisions in Dusseldorf, the situation was already clear last year:

• Patent injunctions remain the norm in Germany, judges from Federal Court of Justice and Karlsruhe Higher Regional Court clarify

• Germany's chief patent judge: amended injunction statute is merely a 'clarification and consolidation of the case law'

Today the Heidelberg Academy, a major organizer of patent conferences, hosted a webinar on the hypothetical disproportionality of patent injunctions in particular cases. The two speakers were Presiding Judge Dr. Daniel Voss ("Voß" in German) of the Dusseldorf court's 4b Civil Chamber and his counterpart from the 4c Civil Chamber, Presiding Judge Sabine Klepsch. I've mentioned both judges very recently: Judge Klepsch and her side judges made a landmark decision against the Access Advance video codec patent pool (from which Access Advance is not really drawing the appropriate conclusions), and I thought Ericsson was fortunate to have two patent infringement complaints against Apple assigned to Judge Dr. Voss, whom I described as particularly patentee-friendly and jokingly called "Dusseldorf's answer to the Munich and Mannheim judges."

The joint presentation by those two judges left no doubt whatsoever:

• The new injunction statute is materially consistent with the Federal Court of Justice's Heat Exchanger case law.

  There may be some exceptional cases (which have yet to be identified) where use-up or workaround periods are warranted.

• An outright denial of injunctive relief is, however, next to inconceivable. The presentation said: "Dauerhafter Ausschluss des Unterlassungsanspruchs nur in absoluten Ausnahmefällen" (translation: "permanent denial of injunctive relief only in absolutely exceptional cases")

• Third-party interests are realistically only going to be relevant if some patients' lives depend on pharmaceutical products or if a fundamental threat is posed to critical infrastructure. Even in such cases, third-party interests are not a get-out-of-jail-free card for infringers: they have to act reasonably. In practice, this means "license or die." Take a license and no third party is harmed. It's what I've been saying for a long time: the "Keep It Simple, Stupid" test.

  Third-party interests ultimately won't matter in the vast majority of cases (in which the patent holder just wants to get compensated and doesn't really want to shut down infrastructure or remove products from the market). Where there is a licensing offer on the table, there is no hardship unless the terms of the license are downright insane.

• In standard-essential patent (SEP) cases there's a FRAND defense, which is all about an infringer's access to a license. There is no disproportionality defense on top of the SEP-related antitrust defense as the implementer can simply take a license.

  If a declared-essential patent turns out not to be actually essential (i.e., in a case involving an overdeclaration) and if, as a result, the implementer is not deemed to be entitled to a license on FRAND terms, the disproportionality defense may come into play (with the hurdle then being as high as previously discussed).

  I've talked to a Dusseldorf-based patent litigator with tremendous expertise in SEP cases, and what I learned is that since that German patent "reform" bill entered into force in mid-August 2021, the Dusseldorf Regional Court has consistently declined to entertain a disproportionality defense on top of a FRAND defense. So those judges not only talk the talk, but actually walk the walk.

One of the things I've been telling people in the legal community and the technology industry for about two years is that the first German court to deny an injunction on disproportionality grounds is going to scare away all plaintiffs. They're just going to sue elsewhere, and that court can close its patent divisions. The Dusseldorf court is not going to be an outlier. Just like Munich and Mannheim, it's going to stay the course. German patent litigation is all about leverage from injunctions.

It's been more than five months since the "reform" bill was published in the Federal Law Gazette. Not a single case has been reported from any German patent infringement case in which the outcome was impacted in the slightest by the reworded injunction statute. The ones who advocated reform would have had to push for a true paradigm shift. That effort could have failed. It would have seemed exceedingly ambitious. But at least it would have been worth fighting for. What those losers got out of the whole reform process--by contenting themselves with a solution that fails to address the actual problem--was editorial in nature. In legal terms, they got nothing other than making it even more expensive to defend.

Today's presentation by the Dusseldorf judges also validates what I stated in an article I contributed to a recent Wolters Kluwer publication.

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Contributed article to Wolters Kluwer publication and discussed practical implications of German patent 'reform' on licensing negotiations

Only intermittently do I author articles in German--and it's more or less unprecedented for me to adopt a quasi-academic style with proper citations because it would just slow me down when adding content to this blog. But the rare exception has just occurred, and a German-language Wolters Kluwer publication very recently published a German-language article of mine, with various citations in the footnotes.

A few years ago Wolters Kluwer's Licensing Journal asked for permission to reprint a FOSS Patents post on a Qualcomm-BlackBerry licensing dispute that was resolved through binding arbitration. I gladly authorized it. Now, the November 2021 edition of Wolters Kluwer's Zeitschrift für das Recht der digitalen Wirtschaft (which I would translate as "law journal for the digital economy") has come out with a slight delay, and on pages 407-410 (the content of the November edition starts with page number 401) subscribers can find my article entitled Unterlassungsanspruch bleibt Hebel der Patentinhaber in Lizenzverhandlungen ("entitlement to injunctive relief continues to give patentees leverage in licensing negotiations").

The ZdiW's editors are professors Bernd Hartmann and Mary-Rose McGuire, both of the University of Osnabrueck in Northern Germany. Professor McGuire was a witness at a parliamentary hearing on patent injunction reform, frequently comments on patent enforcement rules, and under her auspices, Maximilian Schellhorn (now practicing law at Hoyng Rokh Monegier) authored a doctoral thesis that took a critical perspective on the proposal for German patent injunction reform that was on the table at the time and subsequently adopted in an almost identical fashion.

I thank the editors for the invitation to contribute, and I am also honored to see my piece published in an edition whose distinguished contributors include, among others, Munich law professor Ansgar Ohly (who was interviewed about three aspects of German patent injunction reform) and Noerr partner Professor Sebastian Wuendisch.

You won't find the views expressed in my article surprising if you've previously read my commentary on that botched reform effort on this blog and/or considering the headline: I strongly caution licensing negotiators against false hopes connected to last year's "reform," which is a typical case of plus ça change.

Here's a quick overview of the article:

I. Yes on reform, no on change: while there is some spin doctoring for political or career reasons, those who way overstate the impact of the bill are not going to hold anyone harmless who bases decisions on unrealistic expectations.

II. Still the same high hurdle for a disproportionality defense: it would have taken a fundamentally different statute to bring about change, and if we want to be good democrats, we must accept that lawmakers favored continuity.

III. Third-party interests: the courts will seek to take shortcuts rather than spend years hearing court-appointed and party experts on the economic implications of the enforcement of a hypothetical injunction on third parties. It is predictable that in most cases the patent holder will make a licensing offer, thereby effectively precluding a defense based on third-party interests as the conclusion of a license agreement will avoid that third parties are harmed. I reiterate in the article my opinion that it would not make sense to hold owners of non-standard-esential patents ("non-SEPs") to a higher standard than those seeking to enforce their SEPs (and who have to overcome a dolo agit defense).

IV. SEPs: defendants with an unavailing FRAND defense are not going to win on the basis of an alleged disproportionality a battle they've already lost.

V. Monetary compensation for ongoing infringement: while it appears rather hypothetical that an injunction will be denied in practice, the German equivalent of "ongoing royalties" in the U.S. will likely exceed a royalty for punitive reasons and for the sake of deterrence of unlawful behavior.

VI. Higher legal fees: for professional liability reasons, defense counsel (in-house as well as outside) will have to put some significant effort into a propoertionality defense, but the courts will likely reach their conclusions on that part on a summary basis.

VII. Summary: I don't see how defendants are in a stronger position in non-SEP cases now, and with respect to SEPs they are actually under more pressure than ever due to recent developments in FRAND case law. I urge companies to carefully analyze the practical effects of the new patent injunction statute and to base their decisions related to licensing negotiations on a realistic assessment of the situation rather than the wishful thinking of those who failed to bring about true reform.

I'll add a few observations here. There is a total consensus among judges (who make the decisions) and commentators (who, like me, strive to make accurate predictions). Judge Fabian Hoffmann of the Federal Court of Justice said that it would have taken a different statute to get different outcomes (true!). Presiding Judge Klaus Bacher of the same division of that court said it was merely a consolidation of the existing case law (true!). Presiding Judge Andreas Voss ("Voß" in German) of the Karlsruhe Higher Regional Court's Sixth Civil Senate told an audience not to underestimate the "resilience" of the judiciary in this regard (good advice!). Other judges likewise predicted continuity. As for specialized media outlets, Juve Patent has consistently concluded that patent injunctions will remain the norm in Germany (precisely!), and IAM recently wrote that the reform bill could change things in theory but won't in practice (spot-on!).

Meanwhile I've come up with a new analogy to explain the failure of that "reform" effort. Those advocating reform opposed what they considered a largely binary approach. Now, in the binary system, 10 + 10 = 100 (in the decimal systems: 2 + 2 = 4). If you don't want 10 + 10 to amount to 100, you're not going to achieve it within the binary numeral system. You can theorize about it all you want, but in the end you'll get the same outcome again and again and again. You don't necessarily have to switch from binary to decimal, where 10 + 10 = 20. Even a ternary, quaternary or other numeral system might give you an outcome that looks different from 100. But if you need a different numeral system, you must make that departure from the binary system your political demand. Instead, those advocating "reform" thought or pretended they could solve the problem while staying binary, and some of them were simply not smart enough to figure it out while others didn't care about whether anything would change in practice: they just wanted a symbolical success in order to tell their superiors they had achieved something. It was easy for politicans to figure them all out, and to give them something of zero value.

Let there be no doubt about it: the hurdle would have been extremely high to depart from the binary numeral system. There would have been a huge risk of not getting anything in the end--but by contenting themselves with no practical change, those "reform" advocates defeated themselves. Those seeking to preserve the status quo declared themselves in opposition to any statutory rewording, and that made tactical sense: by way overstating the impact of whatever the pro-"reform" camp proposed, they enabled politicians to say, as parliamentary rapporteur Ingmar Jung did, that "when one side complains it doesn't go far enough, while the other says it goes too far, you've probably struck a great compromise." That rule of thumb is nonsensical, and that politician made it clear throughout the process that he was in favor of keeping patent enforcement strong.

In early June, after a political agreement among the then-coalition parties ahead of the plenary vote in the Bundestag (Federal Parliament), only formalities remained. Parties who had upcoming trials were already able to hire and instruct economic experts. Then, in mid-August, the bill was formally published in the Federal Law Gazette, with the part on injunctions taking immediate effect. By now, almost five months have passed and not a single case is known in which the injunction "reform" statute made even the slightest difference. Just a waste of time, money, energy. And it's going to stay that way forever in all likelihood. Should there be any deviation from the past standard, such as by a regional appeals court, the Federal Court of Justice will be sure to set the record straight in no uncertain terms--and a patentee who's prevailed on the merits but has been denied an injunction has a strong incentive to exhaust all appeals.

One company whose IP department occasionally spouts nonsense that overstates the impact of that patent injunction "reform" is Deutsche Telekom. Then, they also brought an "antitrust case" against licensing firm IPCom that is probably the greatest lunacy I've ever seen in patent litigation and was exposed as totally meritless by the Mannheim Regional Court. Whatever Deutsche Telekom says, defendant after defendant will fail to prevail on a disproportionality defense in German courts. That's why we still haven't heard, and most likely won't hear, about any case where the new statute actually strengthened a defendant's position.

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Germany's chief patent judge: amended injunction statute is merely a 'clarification and consolidation of the case law'

This is a quick but important follow up to my two previous posts on the CIPLITEC conference on Germany's recently-enacted patent "reform" bill:

• STUNNING: High-ranking German judge publicly states that patent law may do more harm than good, but critics would have to lobby for fundamental reform

• Patent injunctions remain the norm in Germany, judges from Federal Court of Justice and Karlsruhe Higher Regional Court clarify

The final part of the conference provided definitive clarity. First, Presiding Judge Dr. Matthias Zigann of the 7th Civil Chamber of the Munich I Regional Court said that it's his task to apply the law as it is, and it's clear that this year's amendment to the German Patent Act is designed to ensure continuity. In other words (my words), there's nothing disruptive or revolutionary there.

During his closing remark, Munich-based law professor Ansgar Ohly shared the latest information he had just received from a co-worker. At a Shanghai conference, Presiding Judge Klaus Bacher of the 10th Civil Senate of the Federal Court of Justice--the highest-ranking German patent judge--reported said that the 2021 patent bill is merely "a clarification and consolidation of the case law" (i.e., Heat Exchanger).

Let that sink in. It's game over for all those who thought infringers could avoid patent injunctions in Germany. There's not going to be any change on the bottom line. What the judiciary is concerned about is the potential for delay of some proceedings, and I'm not even worried about that: the courts will figure out shortcuts.

Germany's chief patent judge has spoken, as have several other important judges these days (Judge Fabian Hoffmann of the 10th Civil Senate of the Federal Court of Justice, Presiding Judge Andreas Voss ("Voß" in German) of the 6th Civil Senate of the Karlsruhe Higher Regional Court, and Presiding Judge Dr. Matthias Zigann of the 7th Civil Chamber of the Munich I Regional Court and soon--most likely--of the 6th Civil Senate of the Munich Higher Regional Court).

This is a hard reality check for the patent "reform" movement. On June 11, lobby group ip2innovate celebrated the German Federal Parliament's adoption of the "reform" bill with a press release that was as triumphant as it was detached from reality (or maybe we should just call it "spin"). Nvidia's Ludwig von Reiche said that "German patent law has finally arrived in the 21st century" and that "a change in the law is now being implemented that for the first time takes into account the complexity of modern products in the digital age." I'm not at all blaming Mr. von Reiche for trying to give the new statute a certain interpretation. But his interpretation doesn't matter. Nor does mine. What matters is what the judges say. And that just happens to be consistent with what I've been saying for a long time.

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