On the discussion about the new regulation of the right to injunctive relief under German patent law
The German Federal Ministry of Justice and Consumer Protection (BMJV) recently presented the draft bill on the second law for streamlining and modernising patent law (2nd PatMoG). Above all, the planned amendment of the right to injunctive relief causes for heated debates. An initial classification.
PatMoG ante portas
On September 1st 2020 – about a decade after the last major amendment of the German patent laws – the German Federal Ministry of Justice and Consumer Protection (BMJV) presented a ministerial draft on the second law for streamlining and modernising patent law (2nd PatMoG). TThe ministerial draft had been preceded by a discussion draft which stems from the beginning of 2020. As it did with the discussion draft, the BMJV invited stakeholders – companies, industry associations, scientists – to comment on the ministerial draft.
The bone of contention: Sec. 139 German Patent Act in the version of the Ministerial Draft
To anticipate the atmospheric picture of (not only) the recent consultation: None of the reform proposals divides the community as much as the proposed amendment of the right to injunctive relief. What appears to some as an overdue measure to contain extortionate injunctions, appears to others as the opening of a safe harbour for patent infringers or as the transition to a regulation for a compulsory license, respectively.
Initial situation and problem
What is at issue?
A patent grants its owner an exclusive right, i.e. it allows them to use the invention for themselves and to prohibit others from using it or to make its use dependent on the payment of a license fee. Anyone whose protected invention is used without authorization can defend themselves by seeking injunctive relief under Sec. 139 of the German Patent Act, among other things, and, with the help of the courts, prohibit the infringer from unlawfully using their intellectual property. An injunctive relief does not require culpability on the part of the infringer. Roughly speaking, it merely prerequisites that a patent has been infringed and that there is a risk that this will happen again (with the latter, the so-called he dangers of re-offending, being presumed). If a patent infringement is established, this may result in the infringing product having to be withdrawn from the market for a long time. Hence, Sec. 139 (1) of the German Patent Act is a sharp sword. Particularly due to the clout of the injunctive relief, but also because of relatively moderate procedural costs and a rather short duration of proceedings, Germany is considered a popular forum for patent infringement suits.
However, the severity of the injunctive relief has recently been perceived as a considerable, sometimes existential problem, especially in the case of complex products. In such complex products, it is not uncommon for hundreds of patents to be implemented. If there is a threat of production stops and sales bans because, for example, a small component installed in a car implements a patent covering a minor function that has "slipped through" in the patent search, the question can be asked whether this is overshooting the mark by far. Such cases become even more serious when so-called non-practicing entities (NPE), also commonly referred to as patent trolls, are involved. NPE's are companies that neither conduct research and development nor maintain their own production, but whose business model consists of acquiring patents (especially from insolvency assets) in order to exploit them profitably through licensing, and who use the right to injunctive relief in a calculated or – horribile dictu – extortionate manner in order to emphasise their license claim.
Proposal of the BMJV
The BMJV addresses this problem by proposing to explicitly make Sec. 139 (1) German Patent Act subject to a proportionality requirement. Sec. 139 (1), 3rd, 4th and 5th sentence of the German Patent Act in the version of the ministerial draft read:
"The claim is excluded as far as the enforcement of the cease-and-desist claim is disproportionate because, due to special circumstances taking into account the interests of the infringer or third parties, it constitutes undue hardship not justified by the exclusive right. In this case, the infringed party may demand compensation in money as far as this appears appropriate. The claim for damages pursuant to paragraph 2 shall remain unaffected."
Comment
It should be welcome that the BMJV advocates in favour of giving the principle of proportionality a legal upgrade. This will certainly not turn the injunctive relief into a blunt weapon. Basically, it is undisputed and has been established (at the latest) since the Federal Court of Justice ruling re Wärmetauscher (FCJ, judgment of 10.5.2016 - X ZR 114/13) that the enforcement of patent rights is not completely immune to consequential considerations. However, the judicial reception to date has been characterized by some restraint. An explicit regulation should help to solve this reluctance to some degree.
However, this potential progress may come at a high price: Against the background of the essential nature of a "continued strong right to injunctive relief", the ministerial draft emphasises the exceptional nature of the new provision. Nevertheless, it cannot be ruled out that the now proposed version will ultimately result in a more far-reaching restriction of the right to injunctive relief than intended by its authors. While according to the previous discussion draft, a limitation of the right to injunctive relief required for "unjustified hardship", under the ministerial draft "unjustified disadvantages" shall suffice. Also, the interests of the patentee are not reflected by ministerial draft. Finally, it is unclear which third party interests are to be taken into account in the process of consideration. Instead of relying on the fact that practice will fix those issues, the proposed wording of Sec. 139 German Patent Act should be readjusted.
[Note from the editors: In the meantime, Sec. 139 German Patent Act has been adopted on 10.06.2021 in the version set out above. Thus, the legislator refrained from readjusting Sec. 139 German Patent Act, although the Federal Council of Germany (Bundesrat), too, suggested such readjustments in the course of the legislative process (BT-Drs. 19/25821 of January 13th 2021, p. 74 et seq.).]
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