Reed Smith Client Alert

As commonly known, the protection of a patented method does not stop at the application of that method, but encompasses the product directly obtained through that method. However, it is less clear whether only tangibles can be considered such a "product" or whether intangibles are covered as well. In contrast to the majority of the German scholars, the District Court of Düsseldorf has been less reluctant to follow a broad approach. It considered specific information – or more precisely: a specific way of representing information, namely MPEG-2 coded video data – capable of constituting the "direct product" of a patented coding method. Consequently, a potential infringer would not be able to escape his liability by merely transferring the "production site", i.e. the place where the method was to be applied, abroad if the resulting product would still be distributed in Germany. However, the same court denied protection for the result of a patented genetic testing method because the "produced" binary information ("yes" and "no"), in relation to the occurrence of a specific genetic mutation, was not deemed sophisticated enough to merit protection.

The German Federal Court of Justice has now seized the opportunity for clarification (X ZR 33/10 – "MPEG-2 Videosignalcodierung"). Subject matter of the patent at stake was another process for coding, transfer, storage and decoding of video signals in accordance with the international MPEG-2 standard. A patent pool commercialized the patent on behalf of the patentee through offering standard license agreements. The defendant, a DVD manufacturer located in Greece, refused to take a license and pay royalties. A third party, hired by the patentee, placed an order for 500 DVDs to be made on the basis of a DVD master carrying the already coded video data. After the Greek DVD manufacturer had shipped the ordered 500 DVDs to Germany, the patentee filed an infringement action with the District Court of Düsseldorf. The District Court and the Appellate Court of Düsseldorf both (as in the past) assumed infringement; certainly, transferring already MPEG-2 coded video data from the DVD master to a DVD did not infringe the patented method, but both courts found that those coded video data constituted a "product directly obtained" from the patented coding method, and thus held the delivery of the DVD to Germany to be infringing.

In essence, the Federal Court of Justice followed the approach taken by the District Court and the Appellate Court. It also held that a method for reducing the data volume in accordance with the MPEG-2 standard is a "production" method, which is a necessary condition as under German law only the products obtained by a production method can benefit from patent protection. Apparently, it did matter to the court whether an intangible electronic signal could, in particular when comprised in a tangible good such as a DVD, be reproduced, used and traded like an article of manufacture. The further requirement for patent protection was also met, namely that the coded video data had to be a "direct" product of the claimed (production) method. The defendant had challenged that the coded video data were transferred and saved several times in various storage units and data carriers when making the DVD master, and subsequently producing the DVDs. However, the data concerned remained essentially unchanged and unaltered, and the court concluded that the required intermediary storing and saving of data could be compared with the "packaging" of a product (the complaint was still dismissed as the court applied the doctrine of exhaustion of rights in relation to the making of the DVD master comprising MPEG-2 coded video data with the consent of the patentee).

One should note that the German Federal Court of Justice has now accepted that certain data may be the subject of an "extended" patent protection in the form of a product directly obtained through a patented method. However, one may assume that the "information product" will have to meet a certain standard or be of a certain quality. Unfortunately, the ruling does not provide guidance in this respect; for instance, does it matter whether the subject matter of such "direct product" would have to be considered patentable in order to benefit from patent protection? One would hope for further guidance on how to draw a line between a "production" method – where the "direct" product would be covered, and a mere processing of information – where this would not be the case.

In any case, the current ruling appears to be a good starting point to pay attention to proper claim drafting where an invention comprises a method to generate more or less complex information and data.


Client Alert 2012-268