Germany is one of the most prominent European jurisdictions for patent litigation and remains the most frequented one. In 2018, the German patent courts recorded almost 800 new cases, which is only slightly less than in previous years. The Regional Court Düsseldorf continues to attract the highest number of cases, followed by the courts in Mannheim and Munich. German courts are known for their technical expertise and predictability. Trials are relatively fast, and the costs are moderate. The German bifurcation system (separate trials for infringement and validity) remains attractive for patentees.
ii TYPES OF PATENTS
Two types of patents are available in Germany: national patents pursuant to the German Patent Act (GPA) and German parts of European Patents according to the European Patent Convention (EPC). German law also affords protection in the form of utility models and supplementary protection certificates (SPC).
National patents are granted for inventions in all fields of technology. The teaching must be new, involve an inventive step and needs to be industrially applicable (Section 1, Paragraph 1 GPA). The GPA provides for the typical exclusions from patent protection (e.g., violations of ordre public, inventions relating to the human body, procedures for cloning and modifying the genetic identity of human beings, plant and animal varieties). Discoveries, scientific theories, mathematical methods or business models are not considered inventions.
The German Patent and Trademark Office (GPTO) grants national patents. Following their grant, anyone can challenge the validity of a patent by filing an opposition within nine months as of the publication of the grant. Thereafter, a patent can only be challenged by filing a nullity action before the German Federal Patent Court (FPC). German opposition proceedings largely correspond to proceedings before the European Patent Office (EPO), as described in the European Patent Office chapter. The term of a German patent is 20 years, beginning with the filing date.
Germany is a member of the EPC and the Patent Cooperation Treaty (PCT). Applicants can designate Germany in an EPC or PCT application. Once a European Patent has been granted, its German part is handled similarly to a national granted patent.
ii Utility models
Protection for inventions is also available in the form of utility models. The maximum term of a utility model is 10 years from the application date. The requirements for protectability and the rights afforded by a utility model are in principle like those of a patent. Method claims are, however, excluded from utility model protection.2 Novelty requirements are less strict than for patents (e.g., oral disclosures are not relevant prior art). Public prior use is only considered prior art if such use is domestic. Utility models benefit from a six months' grace period for publications attributable to the applicant. This allows securing utility model protection when patent protection would not be available.
The GPTO will review some formal requirements before registering a utility model. It will, however, not review the substantive requirements for utility model protection. As an unexamined right, a utility model can be registered in as little as three to four months. In the absence of a presumption of validity, it is more difficult to enforce a utility model than a patent. The defendant can raise lack of validity as a defence against an infringement claim based on a utility model, in addition to filing a cancellation request before the GPTO. The infringement court must be convinced of the utility model's validity before finding in favour of the holder.
The applicant can rely on granted foreign patents with the same scope to derive a presumption of validity. In such circumstances, the utility model can be an attractive and flexible enforcement option. Applicants can file a utility model divisional from a pending (national or European) patent application to quickly obtain an unexamined but enforceable right before the grant of the parent patent. A utility model can be enforced in a scope more limited than the scope of the registered claims.3 This allows 'tailoring' an infringement claim to the accused embodiment to reduce validity concerns.
iii Supplementary protection certificates
The term of protection for patents covering pharmaceutical or plant protection products that require a marketing authorisation can be extended for up to five years with the grant of an SPC. An SPC comes into force after the basic patent has expired. Regulation (EC) No. 469/2009 of 6 May 2009 applies to SPC protection in Germany as well, in addition to Section 16a GPA.
iii PROCEDURE IN PATENT ENFORCEMENT AND INVALIDITY ACTIONS
i Competent courts
Germany has a bifurcated enforcement system. Infringement and nullity proceedings are heard at different courts. Civil courts are competent to hear infringement proceedings, and the FPC decides about nullity proceedings. Judges in infringement proceedings may determine the scope of the patent for the infringement assessment. They are, however, bound by its grant and any decision of the FPC or the EPO on validity. A defendant may, therefore, not raise an invalidity defence or bring a counterclaim for invalidity in infringement proceedings. Infringement courts may merely stay the proceedings if a validity proceeding is pending.
The regional courts are competent to hear infringement proceedings in the first instance, irrespective of the value of the dispute. Appeals are heard at the higher regional court, and further appeals on questions of law are, in important cases, heard at the Federal Court of Justice (FCJ). Each federal state can determine a single competent regional court to hear patent cases in its territory. The respective courts establish specialised patent chambers to ensure that experienced judges decide patent disputes. The chambers consist of three legally qualified judges and no technical judge. The same applies for the senates at the higher regional court. The FCJ decides with a panel of five legally trained judges. The most popular courts are at the regional courts of Düsseldorf, Mannheim, Munich, Frankfurt and Hamburg. The regional court where the defendant is domiciled or where the infringement took place has jurisdiction. Infringing offers on the internet amount to an infringement in all of Germany and allow the plaintiff to choose the venue.
German infringement courts prepare the trial with a fixed schedule of written submissions. The complaint should contain all relevant facts to substantiate the alleged infringement. A defendant needs to make all possible defence arguments in its statement of defence. This includes any arguments that could warrant a stay of the proceedings. The burden of proof for infringement is on the plaintiff. The plaintiff must specifically demonstrate and substantiate infringement. German procedural law has no counterpart to court-supervised fact-finding, such as discovery.
Infringement proceedings are 'front-loaded'. They heavily depend on written submissions. Parties usually submit two rounds of briefs before the oral hearing: complaint, statement of defence, joinder and rejoinder brief. Parties often submit further briefs close to the oral hearing. Briefs after the oral hearing are rarely considered, unless the court has explicitly allowed a party to submit another brief. Oral hearings are short and focus on those issues that the chamber considers most relevant or still unclear. As a rule of thumb, hearings take between one hour in a standard case and up to three hours in more complex cases. A decision usually issues about four weeks after the oral hearing.
Infringement courts determine the scope of the patent (see Section IV.i.). The parties must present the facts and the corresponding evidence to the court. The court may then take evidence inter alia by hearing witnesses or appointing neutral experts if necessary.
Invalidity proceedings are either opposition proceedings at the EPO or GPTO respectively or nullity proceedings at the FPC. For opposition proceedings please see Section II.i.
The FPC will decide nullity actions against patents in the first instance. The senate at the FPC is comprised of five judges, two fully legally qualified judges and three technical judges. Decisions of the FPC can be appealed to the FCJ. The FCJ decides with a panel of five legally trained judges.
Anybody can file a nullity action. A specific legal interest is not required unless the patent that is challenged has already expired. The nullity proceeding is not time-bound. It can, however, only be initiated after the opposition period has lapsed or a pending opposition proceeding has been concluded.
The nullity action may be based on the following reasons:
- lack of patentability;
- insufficient disclosure;
- usurpation; and
- added matter.
The FPC will investigate the facts of the case ex officio. The claimant must substantiate the grounds of invalidity. The parties usually file one or two rounds of briefs. The patentee must formally object to the nullity complaint within one month of service. To ensure timely proceedings, the FPC shall inform the parties as early as possible on the aspects that it considers relevant for its decision in a preliminary assessment. The court can order the parties to respond to its assessment within a specific timeframe. According to Section 83, Paragraph 4 GPA, the respective party may be precluded if it submits new facts or files new auxiliary requests after the deadline set by the court. Nullity proceedings are, therefore, equally front-loaded as infringement proceedings. Oral hearings are, however, much more detailed and often last a full day. The decision usually issues immediately after the oral hearing. The written grounds are only provided two to three months thereafter.
iv Requirements for establishing standing in Germany
The patentee has standing for an infringement proceeding per se. The exclusive licensee may also assert claims resulting from patent infringement as its own right. Patent ownership or a valid exclusive licence need to be established on the day of the oral hearing. Standing to sue requires that the material owner of a patent is registered in the patent register. Such registration is, however, not necessary for effectively assigning ownership.
A non-exclusive licensee has no own standing to sue. It therefore cannot claim own damages suffered because of patent infringement. Depending on the remedy sought, the non-exclusive licensee can derive a right to bring suit for patent infringement from the patentee: the patentee needs to authorise the non-exclusive licensee to bring the claim for an injunction and other claims with an injunctive character (e.g., recall and destruction). The non-exclusive licensee must furthermore have a legitimate interest to assert the claims on behalf of the patentee. Any economic interest is usually sufficient (e.g., if the infringing acts diminish sales revenue). The claims for damages, accounting and compensation can be freely assigned. The authorisation and assignment need to be completed on the day of the oral hearing.
v Stay of proceedings
Infringement courts may stay proceedings (Section 148 of the Code of Civil Procedure (CCP)) until a decision on patent validity. A stay allows aligning the infringement proceedings with the separate validity proceedings to avoid deviating decisions. The decision to stay the infringement proceedings is within the discretion of the court. It shall consider the interest of the patentee to enforce its exclusive right even before a decision on validity and the interest of the alleged infringer of not being wrongly enjoined because the patent is later found to be invalid. The patent right must not be undermined. Courts are, therefore, reluctant to stay the infringement proceedings in first instance.
Courts will stay the infringement proceeding in first instance if they believe that it is highly likely that the patent will be invalidated. The threshold is slightly lower in appeal instances. The court not only considers the likely outcome in the validity proceeding. Courts are more likely to stay infringement proceedings if the patentee merely asserts its claim for damages. Unlike the claim for injunctive relief, suspending a decision on a damages claim does not impact the right of the patentee to exclude others from making use of the patent. The case law also supports that the threshold for a stay is lower once the patentee defends the patent in the validity proceedings with only limited scope.4
vi Timing and cost considerations
The decision on infringement is usually issued much quicker than the decision on validity. The average duration of an infringement proceeding in the first instance ranges between 10 (for Mannheim, 12 (for Munich) and 20 (for Düsseldorf) months after the complaint was filed. The FPC currently needs at least 24 months to render a decision, often much longer. Because the FPC is more likely to invalidate a patent than an infringement court is likely to stay the case, this difference in timing often leads to provisionally enforceable first (or even second) instance infringement decisions based on patents that are subsequently invalidated.
In a litigation before a German civil court, the losing party bears the statutory costs of the litigation. These costs include court fees, statutory attorney (and patent attorney) fees and other reasonable expenses, such as travel and translation costs. The plaintiff in an infringement proceeding must advance the court fees after filing the complaint for the complaint to be served on the defendant. If the plaintiff prevails, the defendant must reimburse the court fees to the plaintiff. Statutory court and attorney fees both are calculated based on the value in dispute. The statutory limit is €30 million. If the value in dispute is, for example, €1 million, statutory court fees amount to €16,008. The court fees are higher for appeals (i.e., €21,344 at this value for the appeal to the higher regional court). A further appeal to the FCJ in such case, if admitted, would trigger court fees in the amount of €26,680.
The costs of a first instance nullity proceeding range between the costs of an appeal and a further appeal in an infringement proceeding for the same value in dispute. The FPC usually uses the value in dispute of the infringement proceeding and adds 25 per cent. The statutory fees of the nullity action are then calculated based on this increased value in dispute.
vii Preliminary injunctions
In urgent cases, a patentee may enforce its claim for injunctive relief within a few days or weeks. The courts that hear the main proceedings are also competent to issue preliminary injunctions (PI). The threshold for a PI to be issued is, however, high. The court must find, that patent validity is beyond doubt, the patent is clearly infringed, and the matter is urgent. The court considers a matter urgent if the applicant requests a PI within a month of learning the facts that constitute the alleged infringement. The Düsseldorf court applies a more flexible test that considers the actual circumstances. Petitioners may even wait until a second instance decision on patent validity before taking action, if they have good reasons to wait.5 A reason would be if the decision on validity resolves an uncertainty as to whether the patent is infringed.
The burden of proof is with the petitioner, who must substantiate and show credibly all facts from which the infringement follows, why patent validity is beyond doubt and why the case is urgent. Unlike in main proceedings, the court does not take formal evidence, e.g. expert reports, but often relies on affidavits, which, unlike in main proceedings, are admissible in PI proceedings.
The court may issue an ex parte PI a couple of days after filing if the court is convinced that the patent is clearly valid and has been infringed and the matter is particularly urgent. A matter is urgent and warrants a PI to be issued ex parte if a further delay deprives the applicant of effective relief. This is usually the case at trade shows and for short-term sales activities. Last year, the Federal Constitutional Court (FCC) imposed stricter requirements for ex parte PIs to fully consider the 'principle of procedural equality of arms'.6 Ex parte injunctions are now only permissible if the purpose of the proceedings would otherwise be defeated. The decision limits the relevance of ex parte PIs in German patent law to rare exceptions (i.e., trade shows). Where the circumstances permit, German courts will only consider granting a PI ex parte, if the applicant has sent a warning letter to the respondent to inform them about the infringement allegation and to provide the opportunity to reply. The alleged infringer should present all its arguments in detail. The applicant is required to submit such reply to the court to also inform the court about the other side of the 'story'. If the respondent does not reply or replies only superficially, the courts assume that the respondent does not have better arguments. This may support the argument of the applicant and work against the respondent.
If an alleged infringer anticipates a PI, the infringer may also file a protective brief to present its arguments on its own initiative. The protective brief is comparable to an anticipated statement of defence. Such writ can raise doubts as to the merits of the claim and therefore prevent a PI from issuing ex parte. It may, however, also 'backfire' and enhance the chances of an ex parte PI if relevant details are provided. Moreover, the courts will assume that the respondent has presented its defence arguments and will be less inclined to schedule a hearing to hear the respondent's side. It must therefore be carefully considered whether to file such brief. If the applicant has sent a warning letter first and the alleged infringer has already replied, a protective brief may no longer be necessary.
viii Warning letter
The patentee may alert the alleged infringer of the infringement by sending a warning letter before filing a complaint or PI application. In the letter, the patentee usually describes why the recipient infringes the patent. The patentee furthermore requests that the alleged infringer signs a cease-and-desist declaration. The description of the patent infringement needs to be specific, allowing the alleged infringer to verify the allegations and to refrain from continuing the infringing acts. The patentee usually sets a contractual penalty for each violating act. Such penalty may either be a specific amount, or the patentee may use a penalty model based on the 'Hamburg custom'. According to the Hamburg custom, the patentee does not have to specify the penalty. The patentee may leave the appropriate penalty to its own discretion, allowing for a court to review, in case of dispute between the parties, if the penalty is appropriate.
An unjustified warning letter triggers liability of the patentee for damages the recipient suffers because of the unwarranted warning. Such damages are usually limited to the statutory attorney fees but may also include lost profits for lost sales, in particular if the warning letter was sent to customers of the infringer.
A warning letter also provides a reason for the alleged infringer to file a declaratory action of non-infringement. In a cross-border context, this may lead to a 'Torpedo action' in another EU Member State. As a result, the patentee could be hindered from filing an infringement action in Germany. Under Article 29, Paragraph 1 Brussels Ia Regulation, German courts must stay the subsequently filed infringement proceedings if proceedings are pending between the same parties on the same subject matter in another EU Member State, until jurisdiction of the first court is decided.
iv SUBSTANTIVE LAW
The patent claims determine the scope of protection. Under German law, patent claims must be interpreted in line with the understanding of the average skilled person in the relevant field of the art. The description and drawings must be considered in the interpretation. German courts put little to no relevance on the prosecution history of a patent when interpreting its scope.
ii Patent infringing acts
Pursuant to Section 9 GPA, the following acts directly infringe a patent:
- manufacturing, offering, putting on the market or using a patented product, or importing or possessing such product for the aforementioned purposes;
- using the patented method or offering the method for use in Germany, if the offering party knows or it is obvious from the circumstances that the use of the method is prohibited without the patentee's consent; and
- offering, putting on the market or using a product immediately manufactured with a patented method, or importing or possessing such product for the aforementioned purposes.
Only an act in Germany can infringe a German patent. The courts are rather generous with finding domestic infringement. An offer that is directed to the German market is a domestic act regardless of where it originates. A product is put on the market in Germany if it is sent from Germany to a destination abroad or from a source abroad to a destination in Germany. The case law is stricter for method patents. Infringement either requires all process steps to be performed domestically, or the steps performed abroad must be attributable to the domestic steps. Such attribution is not possible if the results of the method are commercialised in Germany, but the final process step takes place outside of Germany.7 The liability for immediate products of patented methods extends beyond the territorial scope of method patents. Marketing immediate products of a patented process in Germany infringes the German patent, regardless of where the protected manufacturing method was carried out. The FCJ has, however, found that the presentation of a diagnostic result derived from a patented diagnostic process is not an immediate product of such process because it merely represents information.8
The person that is committing the infringement is liable as infringer. Liability for infringement extends to third parties whose negligent behaviour enabled the infringement or who aided and abetted in the infringement of another person. The FCJ recently confirmed the liability for infringement in Germany of a foreign manufacturer who delivered the infringing product to a third party abroad but knew or had reason to know that the third party would later import the product to Germany.9 In addition to the company on behalf of which the infringement occurred, the management can be liable for infringement. This applies to the management personnel in whose area of responsibility the infringement occurred and to any management that knew of the infringement (or reasonably should have known) but failed to prevent it.
Mere preparatory steps do not constitute infringement. Patentees can, however, seek individual remedies for infringement even before the first infringement has occurred if there is a sufficiently high risk that an infringement will take place (Erstbegehungsgefahr). Showcasing an infringing embodiment (medical device) that is not yet marketable because a required certification has not been granted (yet) does not meet the threshold that triggers liability.10 Obtaining a marketing authorisation that allows the individual to market a pharmaceutical product does not result in liability for intended marketing of the product, at least if the allegedly infringed patent will lapse before the authorisation becomes invalid for non-use.11
If the marketed product does not fulfil all elements of the relevant patent claim, but may do so in a subsequent manufacturing step, a third party may be liable for indirect infringement under Section 10 GPA. This applies if a third party supplies or offers to supply (in Germany) an unauthorised person with means relating to an essential element of the invention for implementation in Germany if the third party knows, or it is obvious from the circumstances that the means are suitable and intended to be used for implementation of the invention.
iii Doctrine of equivalents
If an embodiment or method does not fall within the literal scope of a patent claim (considering also the understanding of the skilled person), it may nevertheless infringe the patent under the doctrine of equivalents. Infringement under this doctrine is subject to the following requirements:
- the embodiment solves the problem underlying the invention with modified means having objectively the same effect (Gleichwirkung);
- the person skilled in the art must have been able to come up with the modified means as having the same effect without any inventive effort (Naheliegen); and
- the required considerations must be based on the meaning of the technical teaching such that the skilled person considers the modification as an equivalent solution (Gleichwertigkeit).
Additionally, the accused embodiment, including the modified means, must have been new and inventive over the prior art at the priority date of the patent. This Formstein defence is an exception to the rule that validity considerations cannot be raised as defence in an infringement case.
iv Invalidity and other defences
Outside a claim based on the doctrine of equivalents, the German bifurcation system excludes challenges of a patent's validity as a direct defence against an infringement allegation. A defendant can only request to stay the infringement proceedings pending the outcome of a separate opposition or nullity action.
The defendant can, however, raise other substantive defences, the most important being as follows.
Section 11 GPA exempts a number of activities from patent infringement, namely private, non-commercial use, experimental use (provided that the experiment relates to the subject matter of the invention), the Roche-Bolar exemption (permits studies and trials required to obtain a pharmaceutical marketing authorisation in the EU or third countries), individual preparation of drugs in pharmacies based on a physician's prescription and use of the patent in vessels or vehicles that only temporarily enter the German territory.
Right of prior use
If a defendant had already begun to use the invention in Germany or had made the necessary arrangements for doing so at the date of the patent application or the relevant priority date, it is entitled to continue using the invention for purposes of its own business (Section 12 GPA). The right of prior use is specific to the respective business. The FCJ is expected to decide whether and under which circumstances a supplier of components of a patented product (who would qualify only as an indirect infringer) can later rely on its prior use for directly manufacturing the product.12
The patentee is precluded from enforcing its patent against a party having a valid licence in the patent.
If the patented product is placed on the market in the EU or EEA by the patentee or with the consent of the patentee, the patentee's rights of exclusivity with respect to that product are exhausted. German law currently shows no tendency that would support a worldwide concept of exhaustion. The most prevalent exhaustion cases relate to whether the replacement of parts of a device that is already on the market qualifies as (exhausted) intended use or as (non-exhausted) remanufacturing of the device.13
Statute of limitations
The general statute of limitations also applies to patent infringement. The remedies for infringement become time-barred after three years from the end of the year in which the claim arose and the claimant became aware (or grossly negligently did not become aware) of the identity of the defendant and the grounds giving rise to the claim. Irrespective of any knowledge about the claim, claims for patent infringement become time-barred 10 years after the claim arose. In practice, the effect of the statute of limitations is limited. If an infringement continues, each new infringement serves as recurring basis for the injunctive claim. Contrarily, damages can only be claimed for infringements that occurred within the limitation period. After the damages claim has lapsed, the patentee is still entitled to claim the unjust enrichment of the infringer as part of a 'residual damages claim', which itself does not become time-barred for 10 years from the infringement. This practically extends the damages claim for an overall period of 10 years.
The defence of laches/estoppel applies in Germany if the claimant has remained inactive for a longer period and thereby created the impression that it will no longer assert the claim. The requirements for this defence are high. In practice it rarely applies, also given the rather long limitation periods.
Patents are meant to create a monopoly, which leads to the conflict between patent and antitrust law. In recent years, most disputes in the context of the antitrust defence have revolved around determining whether a patentee claiming injunctive relief based on a standard-essential patent (SEP) abuses its rights. Having a dominant market position, which does, however, not automatically follow from holding an SEP, may require the patentee to offer a licence to the infringer on fair, reasonable and non-discriminatory (FRAND) terms. Failure to offer a licence on such terms precludes remedies with injunctive character.
The leading European case on antitrust-related defences against SEP enforcement remains the European Court of Justice (ECJ) Huawei v. ZTE decision from 2015,14 which was based on a referral from the Regional Court Düsseldorf. German courts are still working to specify the details of the process that the ECJ requires for enforcing SEPs, namely consisting of a notification of infringement by the patentee, the implementer's request of a licence showing its willingness to licence, a licence offer by the patentee, potentially followed by a counteroffer from the implementer. On various issues, the rulings of the prominent higher regional courts of Düsseldorf and Karlsruhe are divided. In 2019, an infringement case was finally appealed to the FCJ. It is expected to provide guidance from the highest German civil court on some FRAND issues in the foreseeable future.
Recent key developments from the first and second instance courts were as follows:
- The Regional Court, Düsseldorf enjoined the German subsidiary of an international corporation even though the defendant had made a counteroffer for a licence. The court held that the subsidiary's counteroffer cannot be FRAND if the patentee seeks to license the parent company, although the parent was not a party to the litigation.15
- The Higher Regional Court, Düsseldorf held that a FRAND declaration by the previous holder of the patent has a binding effect on the acquirer of the patent. The acquirer must adhere to the terms of the original FRAND declaration and cannot use the sale of the patent to claim higher royalties.16
- The ECJ's process steps must usually be followed before filing a lawsuit. The Regional Court, Mannheim suggested some flexibility to complete omitted steps by proposing that the patentee applies for a stay of the proceedings to conclude the licence discussions (to which a defendant who is willing to license would naturally agree).17
Other key questions remain unanswered. Among these are whether only one specific offer or a range of terms can be FRAND, whether a FRAND offer requires patentees to license the SEP at a certain level in the manufacturing chain, for example, the component manufacturer as opposed to the end-product manufacturer, and whether German courts will determine royalty rates for the non-German parts of patent portfolios. Apart from litigation on patents declared standard-essential together with FRAND commitments, there is increasing attention on patents on de facto standards. The FCJ's Orange Book decision,18 which governed the antitrust defence before Huawei v. ZTE and imposed much stricter requirements on the implementer, still seems to be good law in this context.
v FINAL REMEDIES FOR INFRINGEMENT
i Non-monetary remedies
Once an infringing act has been committed or there is a risk of first violation, the patentee can request an injunction and require the infringer to cease and desist from further infringing activities. The statute does not set out additional requirements to secure an injunction. The injunction will remain in force until the judgment is lifted or the patent has lapsed. The injunction covers not only the infringing embodiments accused in the litigation but all other infringements that are identical at their core (i.e., that equally infringe the patent claims). For such additional embodiments, the claimants must demonstrate the infringement as part of the enforcement proceeding. Restrictions of the injunction in terms of scope or time (grace period) are hardly relevant in practice.
Recall and destruction
The patentee is entitled to require the infringer to recall infringing products from its commercial customers and to destroy infringing embodiments in its possession. The destruction claim extends to materials and machines that are primarily used for manufacturing infringing products. Recall and destruction do not require negligence but are subject to a proportionality requirement.
Information and rendering of accounts
The patentee can seek information with a view to the infringer or with a view to third parties. Third party information relates to the origin of the infringing products and their distribution channels. This information allows the patentee to enforce its rights against suppliers or purchasers of infringing products in further proceedings. Information about the infringer includes details on the scope of the infringement and rendering of accounts. This process is intended to allow the patentee to calculate its damages claim, which the patentee cannot do without access to this information.
Publication of judgment
The judgment in favour of the patentee can be published at the request of the patentee and at the cost of the infringer. The decision to publish the judgment is non-discretionary but requires the patentee to demonstrate a legitimate interest in the publication. The standard for such interest is high. The publication of a judgment therefore has little practicable relevance.
ii Monetary remedies
The infringer is liable for damages if the patent was intentionally or negligently infringed. The courts apply a strict negligence standard, generally requiring manufacturers (and distributors) to review the relevant patent landscape and identify patent infringements. Infringers are hardly found not at fault. The courts do, however, grant a one-month grace period after the grant before damages can be requested.
The patentee can choose between the following three methods to calculate damages. Punitive damages are not available.
- Patentee's lost profits: this method is rarely used. It is often difficult to prove and requires the infringer to disclose its own confidential profit structure.
- Licence analogy: the patentee can claim the amount of reasonable licence royalties that reasonable parties would have hypothetically agreed on from an ex ante perspective. In practice, this will be a running royalty, not a lump-sum payment.
- Restitution of infringer's profit: the patentee can claim the profit that the infringer has made because of the infringement. Courts only allow deducting costs that are specifically attributable to the production of the infringing products, for which the infringer has the burden of proof. General overhead costs are not deductible.
The calculation requires information on the scope of the infringement and the infringer's cost structure. The patentee can obtain such information through the claim to render accounts. Procedurally, patentees enforce the damages claim in two steps. The first is a request for a declaratory judgment, together with an obligation to render accounts. In most instances the court will issue the injunction at the same time. Once the calculation is made, the patentee must file a second action to claim payment of the specific amount of damages. The court has already confirmed the obligation to pay damages in the first action. Therefore, in practice many parties settle afterwards. Specific damages claims are, therefore, an exception.
In addition to damages claims, the patentee can claim the unjust enrichment that the infringer has obtained from the infringement. In practice, the unjust enrichment claim is most relevant in the form of the residual damages claim that applies after the three-year limitation period for damages has expired but before the absolute limitation of 10 years after the infringement applies.
Use of the patented invention before the grant of the patent does not constitute infringement. The patentee can, however, claim adequate compensation for the use between the publication of the application and the grant if such use falls within the scope of the application, the defendant was at fault and (for European Patent Applications) if the application was made in German or a German translation of the claims was published by the GPTO or sent to the defendant. Compensation usually corresponds to the amount of a hypothetical licence fee.
iii Provisional enforcement
First instance judgments are provisionally enforceable pending an appeal against the provision of a security. Upon request, the courts will set separate securities for the individual remedies. Second instance judgments are provisionally enforceable without security. The defendant can request suspension of the provisional enforcement (e.g., a stay of the injunction). Such requests are, however, granted only in exceptional cases. Courts do not consider potential negative effects of the enforcement for the defendant sufficient.19 Courts will, however, suspend the enforcement, for example, if the patent gets revoked in a (not necessarily final) decision in a parallel validity proceeding.
If provisional enforcement turns out to be unwarranted, because the first instance decision or the appeal decision are subsequently lifted, the enforcing patentee is liable, in some cases even strictly liable for damages pursuant to Section 717 Paragraphs 2 or 3 CCP.
vi OTHER TYPES OF PATENT PROCEEDING
i Inspection proceedings
If a patentee has indications of an infringement, it can seek to gather additional information, allowing it to substantiate a complaint for patent infringement through an inspection proceeding. The information can relate to both the details of the product or method to confirm whether it falls within the scope of the patent and whether a third party commits infringing acts. After a respective court order, the patentee can conduct an onsite inspection through its attorney and patent attorney together with a bailiff and a court-appointed expert, or the patentee can demand production of documents. Orders for inspection proceedings are generally granted ex parte. The defendant's confidentiality interests are protected by excluding the patentee from the inspection, requiring confidentiality from its counsel and only allowing the patentee access after a separate review process and redaction of sensitive information. While not as far reaching as the French saisie-contrefaçon, the German inspection remains a useful tool to investigate local defendants.
ii Declarations of non-infringement
An alleged infringer can request a declaratory judgment of non-infringement (DNI) if it can show a legitimate interest in such declaration (e.g., after it received a warning letter). Unlike in a cross-border context, a DNI in Germany does not prevent a separate infringing action before another court that has jurisdiction. A DNI becomes inadmissible once the patentee can no longer unilaterally withdraw its separate infringement action after the first oral hearing.
iii Compulsory licences
The GPA provides for the grant of a compulsory licence if an implementer failed to obtain a consensual licence and the public interest requires a licence. The FPC is competent to issue compulsory licences and will hear both, main actions and actions seeking the provisional grant of a licence. These licences have hardly been relevant. Between 1949 and 2016, only one compulsory licence was granted in the first instance and later revoked. With the 2016 grant of a compulsory licence for an HIV drug, which was confirmed by the FCJ,20 one may have thought that the practical relevance may increase. The FPC and the FCJ have, however, recently denied a request for a preliminary compulsory licence.21
iv Challenge of ownership
Germany applies a first-to-file principle, awarding the patent to the first person who files a respective application. There is no examination of the substantive ownership of the invention. Pursuant to Section 8 GPA, if a person without title files for a patent, the entitled person can demand the assignment of the right in the patent (application). The claim must be asserted within two years of the grant of the patent, unless the applicant acted in bad faith. Typical ownership challenges relate to employees claiming rights in inventions they made but that their employer registered for patent protection. The employer is entitled to inventions of its employees under the German Act on Employee Inventions but must follow a certain process to secure ownership. In return, the employer must pay adequate remuneration for the invention in addition to the salary. Disputes on the amount of the remuneration can be adjudicated before a special arbitration board for employee inventions at the GPTO.
v Customs seizures
If infringing goods are imported into or exported out of Germany, patentees may apply to custom authorities to seize the infringing products at the border. Imports and exports into non-EU states are governed by European Regulation No. 608/2013. The patentee, namely the proprietor of the seized goods, can file an objection against the custom authority's action or lack of action to seize the products. Seizures of imports and exports into the customs area of the EU are governed by Section 142a GPA. Such seizures require an obvious infringement of the patent. Ultimately, a court must determine whether the products infringe. A customs seizure can nevertheless be an effective tool to quickly interrupt a competitor's marketing efforts. Some customs authorities will even conduct seizures at trade shows and remove infringing products on display. The success of a customs seizure critically depends on providing customs authorities with detailed information about the points of entry and a description of the infringing products.
i Infringement proceedings
First instance decisions of the regional courts are appealable to the higher regional courts. The appeal can be based on questions of law and questions of fact. New facts can, however, only be introduced in the second instance if admitted. The deadline for filing an appeal is one month after the written judgment of first instance has been served. The grounds for the appeal must be submitted within one additional month. The appeal procedure is equally front-loaded as the first instance proceeding. Generally, two rounds of briefs are exchanged before the oral hearing. Appeal proceedings take between one to two years, with statutory costs slightly increased over the first instance.
The decision of the appeal court can be further appealed to the FCJ. Such further appeal is limited to questions of law and requires leave to further appeal from the second instance court. In the absence of such leave, the losing party may seek permission to a further appeal from the FCJ. Most of such requests are, however, denied. The deadlines for the further appeal are like those of the appeal. The parties must be represented by attorneys that are only admitted before the FCJ.
ii Nullity proceedings
Judgments of the FPC in nullity actions can be appealed directly to the FCJ. Permission is not required. The appeal can be based on questions of law and – with certain limitations – questions of fact. The deadline for filing an appeal is one month after the written judgment of first instance was served. The grounds for the appeal must be submitted within two additional months. Parties in a nullity appeal before the FCJ can be represented by any attorney or patent attorney.
viii THE YEAR IN REVIEW
i Infringer's profit as part of residual damages
One of the key German decisions in the past year relates to the scope of the residual damages claim. Even though the patentee can choose between three methods to calculate the (non-time-barred) damages claim, it was previously thought that the residual damages claim is limited to a hypothetical licence fee. The FCJ now ruled that the patentee can also claim the infringer's profit.22 The court considered that the infringer not only 'saved' the costs of a licence fee but also obtained its profit from the infringement at the expense of the patentee. Such profits are, therefore, covered by the residual damages claim. The claim is based on the legal principle that an infringer shall not be allowed to retain any benefit from having acted unlawfully. Following this decision, the two most relevant calculation methods for damages will also be available under the residual damages claim. The limitation period for damages claims will, therefore, largely lose its effect. Patentees may be able to recover more substantial payments for a period of up to 10 years.
ii Recall as part of injunctive claim
In other fields of intellectual property law, the FCJ has ruled that the injunctive claim to cease and desist from further infringement includes the obligation to remove the effect of past infringements, including recalling sold products from customers. This has sparked considerable debate because it could undermine the additional requirements of the independent recall claim. It is not yet clear if this case law also applies to patent infringement. A first indication that this will not be the case comes from the Higher Regional Court, Düsseldorf.23 The court held that recall obligations are not part of the cease-and-desist claim. Both are governed by separate statutory provisions, subject to different requirements and must be enforced in different proceedings. It remains to be seen whether other courts, in particular the patent senate at the FCJ, will follow this approach.
iii Claim interpretation in light of cited prior art
The FCJ confirmed a patent that was challenged on the basis of prior art that was already cited in the patent specification. The court reasoned that a patent seeks to distinguish itself from the prior art that it cites. This is relevant for claim interpretation. If the description equates part of the patent claim with the cited prior art, the remaining features cannot be interpreted in a way such that they are disclosed in the very prior art from which they are intended to distinguish the subject matter.24 This rule of claim construction in light of cited prior art is an exception to the general rule that a patent is not necessarily interpreted to have a valid scope. While the decision will make it more difficult to invalidate patents over prior art that is already cited, it offers accused infringers a potentially powerful non-infringement argument if the accused embodiment corresponds with the cited prior art.
The establishment of the Unified Patent Court (UPC) is still closely followed in Germany. The constitutional complaint25 against the ratification of the UPC Agreement is still pending. The timeline is unclear and the outcome unknown. The ratification process is Germany is suspended pending the decision in this proceeding. After all other required jurisdictions, including the United Kingdom, have ratified the UPC Agreement, the process in Germany is the only remaining piece before the UPC can be established. The FCC announced its intention to decide in 2019. Despite the postponement of Brexit, it remains unclear whether Germany will ratify the UPC Agreement before the United Kingdom will leave the EU. Many believe this to be required for the United Kingdom to participate in the UPC following Brexit. Therefore, the future of the UPC and its territorial scope are uncertain.
The automatic injunction, namely proportionality considerations for the grant of an injunction for patent infringement in Germany, has received the attention of policy makers in Germany. The statutory provisions do not set out additional material requirements for the grant of the injunction other than infringement. Various interested parties claim that this leads to automatic injunctions and disproportionate results in practice. Representatives of the telecommunications, electronics and automotive industries argue that this mechanism allows the patentee to leverage patents disproportionately if a patent on a small component can prevent the sale of a complex product like a car. At the same time, some companies from the healthcare sector argue that the public interest (mainly in the form of patients' interests) is not sufficiently considered in the current injunction practice. The bifurcation system and the very different lengths of infringement and invalidity proceedings create an additional potential for patentees to enforce injunctions based on patents that are ultimately found to be invalid. The German Ministry of Justice consulted industry representatives in May 2019, and it is currently expected that German patent law will be reformed to some extent.
1 Julia Schönbohm is partner, Bolko Ehlgen is managing associate, and Natalie Ackermann-Blome is associate at Linklaters LLP.
2 Section 2 no. 3 German Utility Model Act. The Federal Court of Justice, ruling of 27 March 2018, X ZB 18/16 – Feldmausbekämpfung recently affirmed the constitutionality of this provision.
3 Federal Court of Justice, ruling of 13 May 2003, X ZR 226/00 – Momentanpol.
4 Higher Regional Court Munich, ruling of 8 December 1989, 6 W 3050/89 – Regal-Ordnungssysteme; Regional Court Munich, ruling of 21 September 2017, 7 O 15820/16 – Maskensystem; see also Kühnen, Handbuch der Patentverletzung, 11th edition 2019, D. para. 731 et seqq.
5 Higher Regional Court Düsseldorf, ruling of 29 June 2017, I-15 U 4/17 – Vakuumgestütztes Behandlungssystem.
6 Federal Constitutional Court, ruling of 30 September 2018, 1 BvR 1783/17.
7 Higher Regional Court Düsseldorf, ruling of 23 March 2017, I-2 U 5/17 – Pränatale Diagnostik.
8 Federal Court of Justice, ruling of 27 September 2016, X ZR 124/15 – Rezeptortyrosinkinase II.
9 Federal Court of Justice, ruling of 16 May 2017, X ZR 120/15 – Abdichtsystem.
10 Regional Court Hamburg, ruling of 24 October 2013, 327 O 326/13 – Koronarstent.
11 Higher Regional Court Düsseldorf, ruling of 20 September 2012, I-2 U 44/12 – HIV-Medikament.
12 Second instance decision: Higher Regional Court Düsseldorf, ruling of 14 March 2018, I-15 U 49/16 – Schutzverkleidung für funktechnische Anlagen.
13 Federal Court of Justice, ruling of 24 October 2017, X ZR 55/16 – Trommeleinheit.
14 European Court of Justice, ruling of 16 July 2015, C-170/13 – Huawei v. ZTE.
15 Regional Court Düsseldorf, ruling of 9 November 2018, 4 a O 15/17.
16 Higher Regional Court Düsseldorf, ruling of 22 March 2019, 2 U 31/16 – Improving Handovers. Further appeal pending before the FCJ.
17 Regional Court Mannheim, ruling of 10 November 2017, 7 O 28/16 – Funkstation.
18 Federal Court of Justice, ruling of 6 May 2009, KZR 39/06 – Orange-Book-Standard.
19 Federal Court of Justice, ruling of 25 September 2018, X ZR 76/18 – Werkzeuggriff: Irreparable negative effects of disclosing information about the buyers of the infringer do not warrant suspension of enforcement even if the patent has expired and the patentee can no longer bring injunctive claims against the buyers.
20 Federal Patent Court, ruling of 31 August 2016, 3 LiQ 1/16 (EP) – Isentress, confirmed by Federal Court of Justice, ruling of 11 July 2017, X ZB 2/17 – Raltegravir.
21 Federal Patent Court, ruling of 6 September 2018, 3 LiQ 1/18 (EP), confirmed by Federal Court of Justice, ruling of 4 June 2019, X ZB 2/19 – Alirocumab.
22 Federal Court of Justice, ruling of 26 March 2019, X ZR 109/16 – Spannungsversorgungsvorrichtung.
23 Higher Regional Court Düsseldorf, ruling of 30 April 2018, I-15 W 9/18 – Rasierklingeneinheit.
24 Federal Court of Justice, ruling of 27 November 2018, X ZR 16/17 – Scheinwerferbelüftungssystem.
25 Federal Constitutional Court, file no. 2 BvR 739/17 – pending.