The Patent Litigation Law Review: Germany
Germany is one of the most prominent European jurisdictions for patent litigation and, despite slightly declining case numbers, remains the most frequented one. In 2020, the German patent courts recorded more than 700 new cases. The Regional Court of Düsseldorf continues to attract the highest number of cases, followed by the courts in Munich and Mannheim.
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.
Types of patent
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 invention must be new, involve an inventive step and be industrially applicable (Section 1, Paragraph 1 of the GPA). The GPA provides for the typical exclusions from patent protection (e.g., violations of public order, 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. The term of a German patent is 20 years, beginning with the filing date. Following the grant of a patent, anyone can challenge the validity of the patent by filing an opposition within nine months 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 of this book.
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 like a granted national patent.
ii Utility models
Protection for inventions is also available in the form of utility models. The maximum protection term of a utility model is 10 years from the application date. The requirements to be protectable 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 the use is domestic. Utility models benefit from a six-month grace period for publications attributable to the applicant. This allows utility model protection to be secured when patent protection would not be available.
The GPTO will scrutinise 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 within several weeks.
In the absence of a presumption of validity, it is more difficult to enforce a utility model than a patent in the German bifurcated system. Unlike for patents, the defendant can raise lack of validity of a utility model as a direct defence against an infringement claim, in addition to filing a cancellation request with the GPTO. The infringement court must be convinced that the utility model is valid 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 those circumstances, the utility model can be an attractive and flexible enforcement option. Applicants can file a utility model on the basis of 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 without the need to register a separate more limited utility model.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 aims to compensate for the regulatory delay for the approval and comes into force after the basic patent has expired. Regulation (EC) No. 469/2009 of 6 May 2009 applies to SPC protection in Germany, in addition to Section 16a of the GPA.
Procedure in patent enforcement and invalidity actions
i Competent courts
Germany has a bifurcated enforcement system. Infringement and nullity proceedings are heard by different courts. Civil courts are competent to decide infringement proceedings, and the FPC decides nullity proceedings.
Judges in infringement proceedings may and must determine the scope of the patent for the infringement assessment. They are, however, bound by its grant and any final decision of the FPC, GPTO or the EPO on validity. A defendant may, therefore, not raise an invalidity defence or bring a counterclaim for invalidity in the infringement proceedings.
Infringement courts may merely stay the proceedings if validity proceedings are pending and the court expects those proceedings to result in a relevant reduction in scope or the invalidation of the patent that is enforced.
The regional courts are competent to hear infringement proceedings in the first instance. The regional court where the defendant is domiciled or where the infringement took place has jurisdiction. Infringing offers on the internet or other nationwide media amount to an infringement in the whole of Germany and allow the plaintiff to choose the venue.
The most frequented courts in Germany are the regional courts of Düsseldorf, Munich, Mannheim, Frankfurt and Hamburg. Appeals are decided by the higher regional courts, and further appeals on questions of law are, in cases of general relevance, heard at the Federal Court of Justice (FCJ).
Each state within Germany can designate a regional court that is competent to decide patent cases in the state territory. The respective courts establish specialised patent chambers to ensure that experienced judges decide patent disputes. The chambers comprise three legally qualified judges, without a technical judge being part of the panel. The same applies for senates at the higher regional courts. The FCJ decides with a panel of five legally trained judges.
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 must make all possible defence arguments in its statement of defence. This includes any arguments to support a stay of the proceedings.
The burden of proof for the infringement is on the plaintiff. The plaintiff must specifically demonstrate and substantiate an infringement. German procedural law has no counterpart to court-supervised fact-finding, such as disclosure or discovery.
Infringement proceedings are 'front-loaded'. They heavily depend on written submissions and less on the hearing. 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 court 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, in rare cases even a full day. A decision is usually issued about four weeks after the oral hearing.
Infringement courts determine the scope of the patent. 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 senates at the FPC comprise 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 action is not time-bound. It can, however, only be initiated after the opposition period has lapsed or pending opposition proceedings (including proceedings before the EPO) have been concluded. There is currently a legislative discussion on whether to allow parties that were sued for infringement to file a nullity action against that patent even while the opposition period or proceedings are ongoing; however, this change has not yet made it into the revisions to the GPA.
The nullity action may be based on the following grounds:
- lack of patentability;
- insufficient disclosure;
- usurpation; and
- added matter.
The FPC investigates 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 and file the grounds for the objection within two months (one-month extension possible).
To ensure timely proceedings, the FPC informs the parties as early as possible on the aspects that it considers relevant for its decision in a preliminary assessment. Under the recently amended procedural rules, the preliminary assessment 'shall' be provided within six months of service of the complaint.
The court can order the parties to respond to its assessment within a specific time frame. According to Section 83, Paragraph 4 of the 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 as front-loaded as infringement proceedings. Oral hearings are, however, much more detailed and often last a full day.
The decision is usually issued immediately after the oral hearing. The written grounds are only provided two to five 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 must be established on the day of the oral hearing. Standing to sue requires that the legal owner of a patent be registered in the patent register. The registration is, however, not necessary for effectively assigning ownership.
A non-exclusive licensee has no standing to sue. It can, therefore, not 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 must 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). Claims for damages, accounting and compensation can be freely assigned. The authorisation and assignment must 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 the alignment of 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 if it is believed that it is highly likely that the patent will be invalidated. The threshold is slightly lower in appeal instances. The court does not only consider the likely outcome in the validity proceedings.
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 the threshold for a stay being 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 infringement proceedings in the first instance ranges between nine and 10 months for Mannheim, 12 months for Munich and between 15 and 20 months for Düsseldorf 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 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 litigation before a German civil court, the losing party bears the statutory costs of the litigation. The costs include court fees, statutory attorney (and patent attorney) fees and other reasonable expenses, such as travel and translation costs. The plaintiff in infringement proceedings 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 those court fees to the plaintiff.
Statutory court and attorney fees are both calculated based on the value in dispute. The statutory maximum is €30 million. If the value in dispute is, for example, €1 million, the statutory court fees will be €17,643. The court fees are higher for appeals (i.e., €23,524 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 of €29,405.
The costs of first instance nullity proceedings range between the costs of an appeal and a further appeal in infringement proceedings for the same value in dispute. The FPC usually uses the value in dispute of the infringement proceedings 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
The courts that hear the main proceedings are also competent to issue preliminary injunctions (PIs). In urgent cases, a patentee may enforce its claim for injunctive relief within a few days or weeks. 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.
In principle, German courts will only consider the validity of the patent in suit to be sufficient if it has survived first instance opposition or nullity proceedings.5 Most courts consider a matter urgent if the applicant requests a PI within a month of learning the facts that constitute the alleged infringement. The Higher Regional Court of Düsseldorf 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.6 A reason would be if the decision on validity resolves an uncertainty on 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 highly urgent and warrants a PI to be issued ex parte if a further delay deprives the applicant of effective relief.
In 2018, the Federal Constitutional Court (FCC) imposed stricter requirements for ex parte PIs to fully consider the 'principle of procedural equality of arms' and has continued to develop this strict approach ever since.7 Ex parte injunctions are now only permissible if the purpose of the proceedings would otherwise be defeated.8 Those decisions likely limit the relevance of ex parte PIs in German patent law to rare exceptions (e.g., 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 it about the infringement allegation and to provide the opportunity to reply. The alleged infringer should present all its arguments in detail in its reply. The applicant is required to submit this 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. This writ can raise doubts on the merits of the claim and, therefore, prevent a PI from being issued ex parte. It may, however, also 'backfire' and enhance the chances of an ex parte PI if relevant details are provided.
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; therefore, whether to file a protective brief must be carefully considered. 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 Anti-suit injunctions
Although anti-suit injunctions are not admissible in Germany, the Regional Court and the Higher Court of Munich have issued, respectively confirmed, an 'anti-anti-suit injunction'.9 A request before a foreign court seeking to prevent a patentee from enforcing its patent in Germany (anti-suit injunction) can, therefore, be pre-empted by way of a PI from a German court. The Munich courts found that the request for an anti-suit injunction in another jurisdiction impairs the patentee's property-like rights of asserting the patent against an infringement and is thus impermissible.
By allowing this kind of redress, the German courts have essentially resorted to the very instrument they seek to prevent: an order not to pursue proceedings before a foreign court. The Regional Court of Munich later specified that an anti-anti-suit injunction can be requested as soon as the implementer files an action seeking a declaration of a global fair, reasonable and non-discriminatory (FRAND) royalty in a jurisdiction in which anti-suit injunctions are available.10
ix 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 has infringed the patent. The patentee furthermore requests that the alleged infringer sign a cease-and-desist declaration.
The description of the patent infringement must be specific to allow 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. The penalty may be a specific amount, or the patentee may use a penalty model based on the 'New Hamburg custom'. According to the New Hamburg custom, the patentee does not have to specify the penalty. The patentee may leave the appropriate penalty to its own discretion, allowing a court to review, in the case of a dispute between the parties, whether the penalty is appropriate.
An unjustified warning letter triggers liability of the patentee for damages the recipient has suffered because of the unwarranted warning. The 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 of the 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.
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 of the GPA, the following acts directly infringe a patent:
- manufacturing, offering, putting on the market or using a patented product, or importing or possessing the 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 the product for the aforementioned purposes.
Only an act in Germany can infringe a German patent. The courts are rather generous with finding domestic infringements. 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. This attribution is not possible if the results of the method are commercialised in Germany, but the final process step takes place outside Germany.11
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 this process because it merely represents information.12
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 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.13
Such knowledge can result, for example, from a warning letter or entitlement enquiry sent to the defendant. This triggers an obligation of the supplier to investigate whether its products are shipped to Germany. It, however, remains undecided which steps a supplier must take to prevent such shipments and avoid liability.14
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. Showcasing an infringing embodiment (medical device) that is not yet marketable because a required certification has not (yet) been granted does not meet the threshold that triggers liability.15 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.16
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 of the 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 a 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 that have objectively the same effect;
- a 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; and
- the required considerations must be based on the meaning of the technical teaching such that a skilled person considers the modification as an equivalent solution.
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 of the 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 European Union 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 the needs of its own business (Section 12 of the GPA). The right of prior use is specific to the respective business.
In 2019, the FCJ found that 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 itself if the only sensible use of the components had been to assemble them into the patented product. The supplier must, however, not use the patent in a different form than under the prior use. Embodiments according to dependent claims that have additional advantages are outside the right of prior use, while switching between alternatives that the patent considers fully equivalent is still covered.17
The patentee is precluded from enforcing its patent against a party that has a valid licence in the patent.
If the patented product is placed on the market in the European Union or the European Economic Area (which, following Brexit, no longer includes the United Kingdom) 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) remanufacture of the device.18
Statute of limitations
The general statute of limitations also applies to patent infringement. The remedies for infringement become time-barred after three years of 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, given the rather long limitation periods, among other reasons.
Patents are meant to create a monopoly, which leads to a 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, however, does not automatically follow from holding an SEP, may require the patentee to offer a licence to the infringer on FRAND terms. Failure to offer a licence on those terms precludes remedies with injunctive character.
The leading European case on antitrust-related defences against SEP enforcement remains the European Court of Justice's (ECJ) Huawei v. ZTE decision from 2015,19 which was based on a referral from the Regional Court of Düsseldorf. German courts are still working to fully specify the details of the process that the ECJ requires for enforcing SEPs, which comprises a notification of infringement by the patentee, the implementer's request of a licence showing its willingness to licence and a licence offer by the patentee, potentially followed by a counter-offer from the implementer.
In 2020, the FCJ issued its first FRAND ruling since Huawei v. ZTE.20 The decision provides guidance on at least some FRAND issues; however, it leaves various points undecided. The FCJ ultimately ruled in favour of the patentee because it found the defendant not to be a 'willing licensee'. The court applied a strict standard to the defendant's obligations in reaction to the notification of infringement. The implementer must clearly and unambiguously declare its willingness to take a licence on FRAND terms, whatever those terms are ultimately determined to be.
In the case at hand, the FCJ found that the defendant had only reacted reluctantly to the patentee's licence offer (e.g., by answering to the patentee's licence offer too late or by making only half-hearted offers). Because the patentee does not need to make a FRAND offer to an unwilling licensee, the FCJ did not provide conclusive answers on highly relevant substantive questions for FRAND licences in Germany; it only hinted at the fact that it considers portfolio licences to be FRAND, provided that they only include SEPs.
The FCJ indicated that reasonable grounds can justify different treatment of licensees and that those differences do not necessarily make an offer discriminatory. Significant questions, however, remain about how this position will play out in practice.
In a further decision in late 2020, the FCJ confirmed and further specified this ruling.21
Further key developments from the appeal courts
The Higher Regional Court of 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. The acquirer must also present relevant information on its past licensing practice to allow the implementer to assess the offer against the FRAND standard.22
In 2020, a key issue in FRAND cases was whether the SEP holder can choose which company in the manufacturing chain to grant a licence to – in other words whether it is FRAND to sue the end-product manufacturer for patent infringement when its supplier offers to take a licence on FRAND terms. Several implementers called for a second referral to the ECJ to clarify this issue.
In one notable case before the Regional Court of Mannheim, the Federal Cartel Office, in what could be compared to an amicus curiae brief, even asked the court to make such referral. The court, however, rendered judgment against the defendant.23
In late 2020, the Regional Court of Düsseldorf finally did take up the call for a referral and submitted several questions for the ECJ to decide. In addition to the key matter of FRAND licensing obligations in the manufacturing chain, the court also asked for clarification on whether the strict requirements for being a 'willing licensee' that the FCJ stipulated are in line with the ECJ's ruling in Huawei v. ZTE.24 While this may have paved the way for a second landmark ECJ decision on FRAND, the underlying case settled in 2021, rendering the referral moot. It is currently unclear if there might be another opportunity for a referral to the ECJ.
Despite these recent decisions, these and further key questions still remain unanswered. Among these are whether only one specific offer or a range of terms can be FRAND 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,25 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, as well as in other contexts: the FCJ held in its recent FRAND decision that if a patentee acts abusively under the Orange Book rules, this will also limit the enforcement of the patent under the Huawei v. ZTE framework.
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; however, following a recent amendment, it allows the limitation of the injunction to the extent that claiming injunctive relief puts disproportionate hardship on the infringer or third parties.
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 additional embodiments, the claimants must demonstrate the infringement as part of the enforcement proceedings. 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 this 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. In practice, many parties settle afterwards. Specific damages claims are, therefore, an exception.
In addition to damages claims, including in cases where the defendant did not act negligently, 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 lapse of the three-year limitation period for damages but before the application of the absolute limitation of 10 years after the infringement.
The residual damages claim is based on the principle that an infringer should not be allowed to retain any benefit from having acted unlawfully. The claim is, therefore, not limited to a hypothetical licence fee. The patentee can also claim the infringer's profit after the lapse of the limitation period for the 'full' damages claim.26
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) 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 to be sufficient.27 Courts will, however, suspend the enforcement if, for example, the patent gets revoked in a (not necessarily final) decision in parallel validity proceedings.
If provisional enforcement turns out to be unwarranted because the first instance decision or the appeal decision are subsequently lifted, the enforcing patentee will be liable, in some cases even strictly liable, for damages pursuant to Section 717, Paragraphs 2 or 3 of the CCP.
iv Remedies in SEP cases
Generally, the same monetary and non-monetary remedies are available to holders of SEPs. Because of the relevance of an SEP for the competitive landscape and the potential for the holder to block access to a standard, there are certain limitations to the enforcement of SEPs. In particular, the SEP holder must comply with certain obligations and follow certain steps before enforcing claims with an injunctive character (see Section IV.iv. for details on the FRAND defence).
Other types of patent proceedings
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 inspection proceedings. The information can relate to both the details of the product or of the 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 on-site 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 and governmental authorisations for use
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,28 one may have thought that the practical relevance may increase. The FPC and the FCJ, however, denied a request for a preliminary compulsory licence in 2018 and 2019,29 and no compulsory licences have since been granted.
The GPA further provides for the right of the federal government to authorise the use of a patent. The authorisation can be based on general public welfare reasons, in which case the entire government must issue the decision, or security interests of the Federal Republic of Germany, in which case individual ministries are competent to authorise the use. The authorisation, as a result of which the patent does not take effect within the scope of the authorisation, can be exercised by the government itself or be delegated to third parties. The patentee is entitled to adequate compensation.
This provision received heightened attention during the covid-19 pandemic when the legislator broadened the right of individual ministries to issue such authorisations in pandemic situations. Nevertheless, no such authorisation has been granted to date.
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 of the 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 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 customs authorities to seize the infringing products at the border.
Imports and exports into non-EU states are governed by Regulation (EU) No. 608/2013. The alleged infringer (i.e., the proprietor of the seized goods) can object to the custom authority's action to seize the products.
Seizures of imports and exports into the customs area of the European Union are governed by Section 142a of the GPA. Such seizures require an obvious infringement of the patent. Ultimately, a court must determine whether the products infringe the patent.
A customs seizure can 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 as front-loaded as the first instance proceedings. Generally, two rounds of briefs are exchanged before the oral hearing. Appeal proceedings take between one and two years, with statutory costs slightly increased compared with the first instance.
The decision of the appeal court can be further appealed to the FCJ. This further appeal is limited to questions of law and requires leave to further appeal from the second instance court. In the absence of this leave, the losing party may seek permission to a further appeal from the FCJ. Most of those 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 for appeal 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.
The year in review
i GPA reform
After a long and heated debate, the German legislator passed a bill reforming the GPA in the summer of 2021. The centrepiece of the reform is the introduction of a proportionality test for the grant of an injunction for patent infringement.
Previously, the grant of an injunction was generally considered to be the automatic consequence of a committed infringement. This view was first challenged in a decision from the FCJ in 2016 in which it considered, but ultimately rejected, a grace period before an injunction becomes effective to allow the infringer to change its (complex) product and avoid a disproportionate impact on the whole product following an infringing component. While other European jurisdictions (in particular, the United Kingdom) have handled injunctions more flexibly with a view to proportionality, German courts have remained reluctant to deviate from the automatic injunction.
In view of an increased number of SEP cases and cases concerning complex products in which a patent on a small component can stop sales of the entire product, the legislator decided to put the decision of the FCJ into statutory law. The revised law now requires courts to deny the claim for an injunction 'to the extent that, due to special circumstances of the case, an injunction would create a disproportionate hardship not justified by the interests of the patentee'.
The proportionality exception applies only in exceptional cases and does not make the injunction subject to a full-scale proportionality test. Not only are the interests of the infringer considered but also the interests of third parties. This will allow consideration of the public interest in patent cases even outside the strict requirements for a compulsory licence. If the injunction is denied or limited, the plaintiff is entitled to a reasonable monetary compensation.
The reform act also introduced further changes, notably improved protection of confidentiality interests and trade secrets in patent cases and amended procedural rules meant to speed up nullity proceedings before the FPC. Importantly, the preliminary assessment of the FPC 'shall' be issued within six months of service of the complaint to allow an infringement court to benefit from the views of the FPC for its stay decision. Whether this provision will have a meaningful effect in practice also depends on having sufficient staff at the FPC to handle the current case load.
ii Constitutional Court rejects second challenge against the UPC
After the first ratification act for the Unified Patent Court (UPC) Agreement had been ruled unconstitutional for formal reasons, the second attempt by Germany to ratify the agreement was halted yet again by a further constitutional challenge. For quite some time, it was unclear whether and when the project would resume.
In July 2021, the Constitutional Court finally announced that it has rejected the requests for interim relief because the main challenges are inadmissible.30 This decision means that, for practical purposes, the dispute that had blocked the ratification of the UPC Agreement for many years is finally over. Germany ratified the UPC Agreement in August 2021, but it has not yet deposited the instrument of ratification, which is required for the UPC Agreement to enter into force.
In the meantime, several elements of the UPC have changed, including the United Kingdom's decision to withdraw from the project; therefore, while Germany should technically now be able to conclude the ratification process by depositing the ratification act, there are numerous things about the UPC to sort out, including where to relocate the part of the Central Division that was intended for London and concerns around the judicial system at the European Parliament Office. There is currently no clear timetable for when the UPC might start operating.
iii Validity standard in preliminary injunction proceedings
Until recently, the German courts did not approach the assessment of the comfort in a patent's validity required to grant a PI uniformly. Munich had traditionally been a more generous venue for the grant of PIs.
In 2019, the Higher Regional Court of Munich increased the required standard to bring the Munich venue in line with the other major courts. In early 2021, the first instance Regional Court of Munich was asked to grant a PI for infringement of a patent that had been granted only one month earlier.31 The Regional Court considered the patent infringed and valid. The general requirement (now applicable in Munich) that the patent must have survived an opposition or nullity action was, however, not met. The court did, however, not dismiss the request for a PI but referred the case to the ECJ, effectively circumventing the competent court of appeal.
The Munich court argued that the high standard applied by the courts lacks a statutory basis. If this standard were applied, an injunction based on recently granted patents would never succeed. Moreover, the patent proprietor has no influence on whether third parties initiate validity proceedings against the patent and, therefore, cannot take steps to make the patent more enforceable.
Against this background, the court asked the ECJ to determine whether the approach taken by the German courts conforms with the EU Directive on the enforcement of intellectual property rights. The decision from the ECJ may not only shape the PI practice in Germany, but more broadly in the European Union.
The main developments over the past year determine the outlook for patent law in Germany.
Changes to the Patent Act have been introduced. A key point of interest will be how the courts apply the amended provisions going forward, in particular whether injunctions will become less automatic. The same applies to the revisions that apply to nullity actions.
The federal government has announced that it will ramp up staffing at the FPC, which will accelerate proceedings and, together with the tighter deadlines in the statute, close some of the time disparity between infringement and nullity cases in Germany. Allowing defendants in an infringement case to file nullity actions while an opposition is pending would be a further step to reducing the 'injunction gap'. It is, however, unclear whether this further amendment will be enacted.
The UPC is the second area in which developments are expected. The main hurdles have now been overcome, albeit with major delays and the loss of a Member State. Nevertheless, there still seems to be support for the project, although its success depends on quick implementation and a high level of consent between the Member States. Ultimately, it is up to the users of the patent system to decide whether the UPC system is still attractive without the United Kingdom.
In the SEP field, different developments can be observed. The FCJ is generally taking a patent owner-friendly position, supported by some of the lower courts. Notably, the Düsseldorf courts take a different view, which culminated in the above-mentioned referral to the ECJ. A guidance from Luxembourg may have resolved some of the open questions and different approaches of the courts in Germany. As the case settled, implementers will need to wait for a further chance to make their case heard at the European level. Until then, it remains unclear whether a 'licence to all' approach applies in Germany.
1 Julia Schönbohm and Bolko Ehlgen are partners at Linklaters LLP.
2 Section 2, No. 3 of the German Utility Model Act. The Federal Court of Justice, ruling of 27 March 2018, X ZB 18/16 – Feldmausbekämpfung 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 of Karlsruhe, ruling of 2 January 2019, 6 W 69/18 – Empfangsanordnung; Higher Regional Court of Munich, ruling of 8 December 1989, 6 W 3050/89 – Regal-Ordnungssysteme; Regional Court of Munich, ruling of 21 September 2017, 7 O 15820/16 – Maskensystem.
5 See, for example, Higher Regional Court of Munich, ruling of 12 December 2019, 6 U 4009/19 – Elektrische Anschlussklemme. This decision confirmed this general rule and brought the practice of the Munich courts, which was previously less strict, in line with the approach of the Düsseldorf and Mannheim courts. There are, however, exceptions, such as for generics cases, see Regional Court of Hamburg, ruling of 10 September 2019, 327 O 263/19 – Methylphenidat. The new approach of the Higher Regional Court has recently been questioned by the District Court Munich in its decision of 19 January 2021, 21 O 16782/20, which has referred the matter to the ECJ to decide whether this new approach conforms with EU law; see Section VIII.i. for details.
6 Higher Regional Court of Düsseldorf, ruling of 29 June 2017, I-15 U 4/17 – Vakuumgestütztes Behandlungssystem.
7 Federal Constitutional Court, ruling of 30 September 2018, 1 BvR 1783/17; ruling of 3 June 2020, 1 BvR 1246/20; ruling of 27 July 2020, 1 BvR 1379/20; ruling of 4 February 2021, 1 BvR 2743/21; ruling of 6 February 2021, 1 BvR 249/21.
8 See, for example, Higher Regional Court of Munich, ruling of 26 November 2020, 6 W 1146/20 – Fassungsanordnung; Higher Regional Court of Frankfurt, ruling of 16 March 2021, 6 W 102/19 – Original Ersatzteil. The Regional Court Düsseldorf has now also confirmed several preliminary injunctions granting AASIs, see Case Nos. 4c O 73/20; 4c O 74/20; 4c O 75/20.
9 Regional Court of Munich, ruling of 2 October 2019, 21 O 9333/19 and Higher Regional Court Munich, ruling of 12 December 2019, 6 U 5042/19 – Anti-suit injunction.
10 Regional Court of Munich, ruling of 24 June 2021, 7 O 36/21.
11 Higher Regional Court of Düsseldorf, ruling of 23 March 2017, I-2 U 5/17 – Pränatale Diagnostik. Regional Court of Düsseldorf, ruling of 28 July 2020, 4a O 53/19 – Online-Sehtest, confirms this ruling but holds that not only the final process step is relevant but also where the technical benefit of the invention is realised.
12 Federal Court of Justice, ruling of 27 September 2016, X ZR 124/15 – Rezeptortyrosinkinase II.
13 Federal Court of Justice, ruling of 16 May 2017, X ZR 120/15 – Abdichtsystem.
14 Federal Court of Justice, ruling of 8 June 2021, X ZR 47/19 – Ultraschallwandler.
15 Regional Court of Hamburg, ruling of 24 October 2013, 327 O 326/13 – Koronarstent.
16 Higher Regional Court of Düsseldorf, ruling of 20 September 2012, I-2 U 44/12 – HIV-Medikament.
17 Federal Court of Justice, ruling of 14 May 2019, X ZR 95/18 – Schutzverkleidung.
18 Federal Court of Justice, ruling of 24 October 2017, X ZR 55/16 – Trommeleinheit; Higher Regional Court of Düsseldorf, ruling of 25 February 2021, 15 U 1/20 – Filtervorrichtung.
19 European Court of Justice, ruling of 16 July 2015, C-170/13 – Huawei v. ZTE.
20 Federal Court of Justice, ruling of 5 May 2020, KZR 36/17 – FRAND-Einwand.
21 Federal Court of Justice, ruling of 24 November 2020, KZR 35/17 – FRAND-Einwand II.
22 Higher Regional Court of Düsseldorf, ruling of 22 March 2019, 2 U 31/16 – Improving Handovers. Further appeal pending before the FCJ.
23 Regional Court of Mannheim, ruling of 18 August 2020, 2 O 34/19 – Nokia-SEP.
24 Regional Court of Düsseldorf, ruling 26 November 2020, 4c O 17/19 – Nokia-SEP.
25 Federal Court of Justice, ruling of 6 May 2009, KZR 39/06 – Orange-Book-Standard.
26 Federal Court of Justice, ruling of 26 March 2019, X ZR 109/16 – Spannungsversorgungsvorrichtung.
27 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.
28 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.
29 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.
30 Federal Constitutional Court, rulings of 23 June 2021, 2 BvR 2216/20 and 2 BvR 2217/20.
31 Regional Court of Munich, ruling of 19 January 2021 – 21 O 16782/20.