Injunction gap
The ministry of justice failed to achieve one of its main goals. It originally intended to tackle the “injunction gap,” a phenomenon associated with Germany’s bifurcated patent litigation system, in which infringement and validity questions are discussed in separate forums.
From the perspective of the patentee, bifurcation has the advantage of speeding up infringement proceedings. If there is an infringement, the court usually issues a permanent injunction within 18-24 months. However, the period from filing to decision in opposition and nullity proceedings is considerably longer. This implies that, while an alleged infringer may eventually succeed in invalidating the patent, during the injunction gap it faces the threat of enforcement of an already granted injunction.
The ministry of justice proposed two different mechanisms to closer synchronization of infringement and invalidation proceedings. The overall aim was to enable defendants to bring nullity proceedings without having to await the outcome of prior opposition proceedings. However, the proposals met with widespread criticism and the ministry therefore dropped the matter.
Codification of the principle of proportionality
By contrast, sometimes harsh criticism did not deter the ministry from following through with the plan to codify the principle of proportionality. Section 139(1) PatG (as amended) gives reason to assume that users of the system may not necessarily welcome the changes.
The wording of the defense leaves considerable room for interpretation, not least because it refers to abstract concepts such as “good faith” and “unacceptable hardship.” Future case law will have to provide guidance on how the interests of parties to the proceedings, as well as the interests of third parties, ought to be balanced. Moreover, it is moot as to whether in cases relating to standard-essential patents (SEPs), there is room for the defendant to rely on the proportionality principle in addition to the so-called FRAND defense (fair, reasonable and non-discriminatory).
On the plus side, one cannot fail to note that the legislators amended the wording relating to compensation in lieu of an injunction. Whereas previous drafts provided that compensation should be awarded where appropriate, section 139(1) PatG (as amended) unequivocally states that the patentee is entitled to compensation.
Confidentiality club – at last!
In implementing the Know-How Directive in 2019, the German legislature discovered a concept that common lawyers are well familiar with: the confidentiality club. At the time, commentators observed that confidentiality concerns are not confined to trade secrets cases. In the context of patent infringement cases, in particular those involving SEPs, a party often discloses commercially sensitive information to the court and the other party. Accordingly, there is a need to limit the number of recipients to the members of a confidentiality club. In future this will be possible because, in accordance with new section 145a PatG the relevant provisions of the Trade Secrets Act will also apply in patent infringement cases.
Implications
From the outset, the ministry of justice proposed a limited number of changes to the Patents Act, and by the time the bill reached parliament, the drafters had abandoned the plan to tackle the injunction gap. It would nonetheless be wrong to conclude that the reform is merely a storm in a teacup. We are yet to learn how the courts will interpret the proportionality principle, and how significant the implications for companies doing business in Germany will be. Admittedly, the reference to abstract concepts and third party interests in section 139(1) PatG (as amended) creates uncertainty. At the same time, the “open” wording may enable judges to deal with different cases in a more flexible manner than is currently possible. Given the substantial number of infringement cases brought in Germany every year, there is some hope that case law will evolve quickly and that a growing body of judgments will improve predictability. In the meantime, potential litigants are well advised to follow developments in Germany as a leading patent litigation jurisdiction.
Client Alert 2020-166
