Draft amendment of German Patent Law in January 2020
On 14 January 2020, the German Ministry of Justice published the draft Act for modernising the German Patent Act ("Draft Act"), which contains inter alia three proposals of high, practical relevance.
Automatic injunction – from rule to principle?
Automatic injunctions against patent infringements has been the long-established rule in Germany. This rule however, has increasingly been challenged in recent years when courts have had to judge complex products covered by hundreds of patents, and the “internet of things” became a household name. Was it still fair to automatically enjoin and block products having to apply technical standards to be competitive, and thereby almost automatically being forced to make use of standard essential patents (SEPs)? When connectivity entered the automotive industry, this discussion reached the heart of the German economy.
Patent litigation purists were nevertheless reluctant to amend the law and to drop the automatic injunction rule, referring to existing legal limitations and potential defences to alleviate or even avoid negative effects.
Still equitable considerations remained unanswered, and threatened to overburden the jurisprudence.
In its amendment of §139(1) German Patent Act the Draft Act proposes a statutory solution: Injunctive relief shall be excluded if the enforcement of the injunction is disproportionate because it represents a hardship for the patent infringer which is, due to special circumstances, not justified by the exclusive right when taking into account the interests of both parties as well as good faith considerations. Furthermore, in the reasoning of the Draft Act the law makers provide some guidance for applying this test by stressing the importance of injunctive relief. Therefore, it can be expected that exceptions to the automatic injunction shall be reserved to extraordinary cases of absolutely unacceptable harm for patent infringers.
Before its implementation this proposal will sail through a storm of debate with the Ministry of Justice inviting parties such as industry, legal practice and academia to submit their comments. While legal practitioners see the patent system being devalued and one of the USPs of Germany's patent litigation system severely blemished, academia and industry are more relaxed, or even claiming stronger limitations that may also take public and third-party interests into account.
If enacted, this change of law will of course find patent cases being swamped by submissions asserting the new Non-Automatic Injunction Defence.
“Protective orders” for trade secrets
Particularly, the increasing numbers of SEP cases and the associated questions about FRAND licence rates have made confidentiality of trade secrets a hot topic in patent infringement proceedings, without the existence of an efficient and reliable tool for protection yet. With SEP holders being forced (practically or even by court order) to disclose the terms of the licence agreements concluded with competitors of the defendant to show FRANDness of the terms proposed to the defendant, they insisted that such confidential information must be protected before being disclosed in patent proceedings. Courts were sympathetic but, due to the absence of the power to grant protective orders, procedurally often relied on a contractual solution, namely the “obligation” of the other party to consent to an NDA if it wishes to obtain access to the trade secret.
If implemented, the Draft Act will introduce a protective order system by new § 145a PatG which declares §§ 16 to 20 of the German Act on Trade Secret Protection (GeschGehG) of April 18, 2019 applicable also in patent infringement proceedings. Transferring the EU Trade Secrets Directive into German law, the GeschGehG stipulates that a court may declare information disclosed during the proceedings as confidential. Such confidentiality may last for the course, or even beyond the end, of the proceedings. Furthermore, to secure confidentiality the court may inter alia order that only a restricted number of persons can get access to the confidential information, and additionally, the court may sanction any breach of confidentiality by ordering a fine or even imprisonment.
Such protective orders for trade secrets will help to ease disclosure of confidential information during patent infringement proceedings, particularly terms of licence agreements with third parties in SEP/FRAND cases. However, the securing of confidentiality of trade secrets will also support fact finding in other patent cases where confidential information may need be exchanged, such as entitlement proceedings. A further scope of application could be cases where specific business information (sales numbers, turnover, etc.) might have to be disclosed. Here, a potential interlocking with the limitation of cease-and-desist might come into play. Where a party wishes to argue that any injunctive relief will put the existence of the company at risk and that the injunction should be limited in some manner, such party may in future request that the business information disclosed in the reasoning for the existence-threatening argumentation may be declared confidential.
Closing the injunction gap?
Germany is one of the few European countries having a bifurcated patent system. This means that national invalidation proceedings regarding patents are heard by a different court (German Federal Patent Court/BPatG) than national patent infringement proceedings (District Court). As the District Courts’ proceedings usually are much quicker than the Federal Patent Court’s proceedings, the plaintiff in infringement proceedings may hold a (preliminary) enforceable decision finding infringement of the patent in their hands while the case on the validity of the patent has not been decided.
According to the Draft, this legal uncertainty shall be overcome by an amendment of §§ 82-83 PatG, intending to accelerate and tighten invalidation proceedings before the BPatG.
The Draft proposes implementation of a new § 82 (3) PatG which stipulates that the patent holder has to substantiate the opposition to the request for nullification of the patent within two months from service of the nullity action. An extension of one month is possible in case considerable grounds are presented.
In addition, the new § 83 (1) PatG stipulates that the BPatG should render a preliminary opinion regarding the validity of the patent within six months from service of the nullity action. The preliminary opinion shall be provided to the infringement court by the BPatG directly in order to enable the District Court to consider the preliminary opinion on the validity during the infringement proceedings.
The proposal should be able to close the so-called “injunction gap” between infringement decision and invalidity decision in Germany. It may therefore help defendants in case they are threatened with an infringement of invalid patents. On the other hand, a preliminary opinion is only “preliminary” and, thus, it is not absolutely unusual for the BPatG to reconsider and change its preliminary view before or during the oral hearing, particularly if this view was formed under severe time constraints. Therefore, it must be awaited how much the District Courts will give to this “preliminary” view of the BPatG.
Even more interesting to see will be whether the BPatG will be able to meet the envisaged timeline, given that the last Patent Modernisation Act, which was implemented 10 years ago, aimed at a time-to-decision of 1 year. Statistics show that it is still over 2 years. It thus seems as if these goals, the old ones and the new ones, can only be reached if the resources of the BPatG are significantly improved.