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8 July 2021
Now that the last reform of Intellectual Property by the Act on the Simplification and Modernisation of German Patent Law was more than 10 years ago, it was time to review whether the current legal regulations still meet the requirements that effective and balanced protection of Intellectual Property Rights demands.
In patent and utility model law, there was a need for clarification with regard to the right to a cease and desist claim in the event of infringements of IP rights. There was also a need for optimisation with regard to better synchronisation of infringement proceedings before the civil courts and nullity proceedings before the Federal Patent Court (BPatG). There was a further need for regulation with regard to improved protection of confidential information in patent, utility model and semiconductor protection litigation.
Therefore, on 10 June 2021, the Bundestag passed the Second Act to Simplify and Modernise Patent Law with the following important amendments:
Nullity proceedings before the Federal Patent Court and infringement proceedings before the civil courts are synchronised in order to close the so-called “injunction gap” by procedural means. Since nullity proceedings usually take much longer than infringement proceedings, it is not uncommon for an injunction to be imposed on the basis of a patent that later proves not to be legally valid. An injunction that can be provisionally enforced has enormous economic consequences for the alleged infringer. Even if claims for damages can be asserted later in the event that the patent-in-suit is declared invalid, the actual consequences of a market exclusion based on the injunction can usually no longer be fully compensated.
Accordingly, the qualified notice under Section 83 Patent Act, by which the Federal Patent Court communicates its preliminary assessment of the legal status of the patent, shall be issued already within six months after filing the nullity action. If a patent case is pending, the qualified notice shall be transmitted ex officio to the infringement court, so that the infringement court then regularly has a corresponding notice of the Federal Patent Court before the oral proceedings, which can be taken into account in the question of the stay of the infringement proceedings.
In addition, the legislative resolution now clarifies the right to injunctive relief in the case of infringements of patents or utility models. In accordance with the case law of the highest courts, it is to be ensured that the possibility, which already exists under current law, to take into account considerations of proportionality in the claim for injunctive relief, also has sufficient effect in judicial practice as a corrective, so that the proportionality assessment has now been expressly included in the regulation of the claim for injunctive relief under patent law.
Although the present regulation introduces a standard proportionality assessment, it sets the hurdles for its implementation in individual cases higher. In assessing proportionality, the judges must examine the particular circumstances of the individual case to determine whether this would lead to an “unjustified hardship not justified by the exclusive right” on the part of the patent proprietor. Section 139 Patent Act was also supplemented by a reference to the requirements of good faith. The interests of third parties may also have to be taken into account.
The explanatory memorandum to the law mentions some aspects in the weighing of proportionality:
a) Whether the infringer is primarily concerned with the monetisation of his rights and not with the execution of inventions as an expression of the innovation function of the patent system. The latter is usually the case with pure patent exploiters.
b) Whether the patent infringer would suffer exceptionally great damage from the claim for injunctive relief, for example because at the time of the assertion of the claim for injunctive relief extensive investments have already been made in the development and manufacture of a product and these consequences would be completely disproportionate to the value of the infringed patent. This may be the case in particular in the case of long research and development periods.
c) The increasing complexity of many products in some industries, such as electronics, telecommunications, IT and automotive, means that both partial and final products often contain a large number of patent-protected components. The fact that only a small technical aspect of a complex and elaborately developed product is protected by the asserted patent may be significant for the assessment of proportionality.
d) Subjective elements may also have to be assessed in the context of the overall assessment of the circumstances, for example, whether possible and reasonable precautions were taken to avoid patent infringement, for example, by means of an appropriate so-called “freedom to operate analysis”.
e) The new provision now also expressly provides that, in addition to the interests of the infringed party and the infringer, the interests of third parties may also have to be taken into account when deciding whether the right to injunctive relief is to be limited by way of exception for reasons of proportionality. In this respect, however, it must be taken into account that the mere impairment of the interests of third parties is not sufficient to exclude the infringer’s right to injunctive relief. This is because (indirect) disadvantages for third parties are also a regular consequence of an injunction, which must generally be accepted in the case of a patent infringement. A limitation of the injunctive relief can therefore only be considered in cases where the impairment of fundamental rights of third parties clearly represents such a hardship for them that the unrestricted recognition of the exclusive right and the interests of the patent proprietor take a back seat by way of exception.
In addition, the procedural provisions for the protection of trade secrets from the Trade Secrets Protection Act are adopted for patent litigation, in which confidential technical information is often presented.
At the request of a party, the court can now classify disputed information as confidential in whole or in part. Such information must be treated confidentially by the parties to the proceedings and may not be used or disclosed by them outside of court proceedings. This also applies in principle after the conclusion of the judicial proceedings. Furthermore, the court is enabled to restrict access to documents or to the oral proceedings to a narrow circle of persons upon request.
The claim for damages for the patent proprietor now contains a compensation claim, which is intended to “adequately” compensate for the limitation of the injunctive relief. The patent infringer is thus threatened with more extensive compensation payments than merely in the amount of the actual licence fees.
If the claim for injunctive relief is exceptionally (partially) excluded due to disproportionality, the court now has the possibility to award the injured party appropriate compensation in money. In this way, the claim for compensation can – if a corresponding application is made – in appropriate cases already be determined in the same judgment in which the claim for injunctive relief is (partially) excluded. Furthermore, the principle of proportionality may in individual cases require that the right holder be awarded pecuniary compensation even in the case of a blameless patent infringement, where a claim for damages would have to be denied. If the court deems it necessary in an individual case to limit or temporarily exclude the right to injunctive relief, this does not lead to a legalisation of the patent infringement – unlike a compulsory licence under Section 24 Patent Act. Any claim for damages remains unaffected in this case. This also applies if the infringed party is entitled to compensation under the new Section 139 (1), fourth sentence, Patent Act. In this case, the infringed party can still assert a further claim for damages against the infringer by means of Section 139 (2) Patent Act.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Withers & Rogers LLP July 2021