Only intermittently do I author articles in German--and it's more or less unprecedented for me to adopt a quasi-academic style with proper citations because it would just slow me down when adding content to this blog. But the rare exception has just occurred, and a German-language Wolters Kluwer publication very recently published a German-language article of mine, with various citations in the footnotes.
A few years ago Wolters Kluwer's Licensing Journal asked for permission to reprint a FOSS Patents post on a Qualcomm-BlackBerry licensing dispute that was resolved through binding arbitration. I gladly authorized it. Now, the November 2021 edition of Wolters Kluwer's Zeitschrift für das Recht der digitalen Wirtschaft (which I would translate as "law journal for the digital economy") has come out with a slight delay, and on pages 407-410 (the content of the November edition starts with page number 401) subscribers can find my article entitled Unterlassungsanspruch bleibt Hebel der Patentinhaber in Lizenzverhandlungen ("entitlement to injunctive relief continues to give patentees leverage in licensing negotiations").
The ZdiW's editors are professors Bernd Hartmann and Mary-Rose McGuire, both of the University of Osnabrueck in Northern Germany. Professor McGuire was a witness at a parliamentary hearing on patent injunction reform, frequently comments on patent enforcement rules, and under her auspices, Maximilian Schellhorn (now practicing law at Hoyng Rokh Monegier) authored a doctoral thesis that took a critical perspective on the proposal for German patent injunction reform that was on the table at the time and subsequently adopted in an almost identical fashion.
I thank the editors for the invitation to contribute, and I am also honored to see my piece published in an edition whose distinguished contributors include, among others, Munich law professor Ansgar Ohly (who was interviewed about three aspects of German patent injunction reform) and Noerr partner Professor Sebastian Wuendisch.
You won't find the views expressed in my article surprising if you've previously read my commentary on that botched reform effort on this blog and/or considering the headline: I strongly caution licensing negotiators against false hopes connected to last year's "reform," which is a typical case of plus ça change.
Here's a quick overview of the article:
I. Yes on reform, no on change: while there is some spin doctoring for political or career reasons, those who way overstate the impact of the bill are not going to hold anyone harmless who bases decisions on unrealistic expectations.
II. Still the same high hurdle for a disproportionality defense: it would have taken a fundamentally different statute to bring about change, and if we want to be good democrats, we must accept that lawmakers favored continuity.
III. Third-party interests: the courts will seek to take shortcuts rather than spend years hearing court-appointed and party experts on the economic implications of the enforcement of a hypothetical injunction on third parties. It is predictable that in most cases the patent holder will make a licensing offer, thereby effectively precluding a defense based on third-party interests as the conclusion of a license agreement will avoid that third parties are harmed. I reiterate in the article my opinion that it would not make sense to hold owners of non-standard-esential patents ("non-SEPs") to a higher standard than those seeking to enforce their SEPs (and who have to overcome a dolo agit defense).
IV. SEPs: defendants with an unavailing FRAND defense are not going to win on the basis of an alleged disproportionality a battle they've already lost.
V. Monetary compensation for ongoing infringement: while it appears rather hypothetical that an injunction will be denied in practice, the German equivalent of "ongoing royalties" in the U.S. will likely exceed a royalty for punitive reasons and for the sake of deterrence of unlawful behavior.
VI. Higher legal fees: for professional liability reasons, defense counsel (in-house as well as outside) will have to put some significant effort into a propoertionality defense, but the courts will likely reach their conclusions on that part on a summary basis.
VII. Summary: I don't see how defendants are in a stronger position in non-SEP cases now, and with respect to SEPs they are actually under more pressure than ever due to recent developments in FRAND case law. I urge companies to carefully analyze the practical effects of the new patent injunction statute and to base their decisions related to licensing negotiations on a realistic assessment of the situation rather than the wishful thinking of those who failed to bring about true reform.
I'll add a few observations here. There is a total consensus among judges (who make the decisions) and commentators (who, like me, strive to make accurate predictions). Judge Fabian Hoffmann of the Federal Court of Justice said that it would have taken a different statute to get different outcomes (true!). Presiding Judge Klaus Bacher of the same division of that court said it was merely a consolidation of the existing case law (true!). Presiding Judge Andreas Voss ("Voß" in German) of the Karlsruhe Higher Regional Court's Sixth Civil Senate told an audience not to underestimate the "resilience" of the judiciary in this regard (good advice!). Other judges likewise predicted continuity. As for specialized media outlets, Juve Patent has consistently concluded that patent injunctions will remain the norm in Germany (precisely!), and IAM recently wrote that the reform bill could change things in theory but won't in practice (spot-on!).
Meanwhile I've come up with a new analogy to explain the failure of that "reform" effort. Those advocating reform opposed what they considered a largely binary approach. Now, in the binary system, 10 + 10 = 100 (in the decimal systems: 2 + 2 = 4). If you don't want 10 + 10 to amount to 100, you're not going to achieve it within the binary numeral system. You can theorize about it all you want, but in the end you'll get the same outcome again and again and again. You don't necessarily have to switch from binary to decimal, where 10 + 10 = 20. Even a ternary, quaternary or other numeral system might give you an outcome that looks different from 100. But if you need a different numeral system, you must make that departure from the binary system your political demand. Instead, those advocating "reform" thought or pretended they could solve the problem while staying binary, and some of them were simply not smart enough to figure it out while others didn't care about whether anything would change in practice: they just wanted a symbolical success in order to tell their superiors they had achieved something. It was easy for politicans to figure them all out, and to give them something of zero value.
Let there be no doubt about it: the hurdle would have been extremely high to depart from the binary numeral system. There would have been a huge risk of not getting anything in the end--but by contenting themselves with no practical change, those "reform" advocates defeated themselves. Those seeking to preserve the status quo declared themselves in opposition to any statutory rewording, and that made tactical sense: by way overstating the impact of whatever the pro-"reform" camp proposed, they enabled politicians to say, as parliamentary rapporteur Ingmar Jung did, that "when one side complains it doesn't go far enough, while the other says it goes too far, you've probably struck a great compromise." That rule of thumb is nonsensical, and that politician made it clear throughout the process that he was in favor of keeping patent enforcement strong.
In early June, after a political agreement among the then-coalition parties ahead of the plenary vote in the Bundestag (Federal Parliament), only formalities remained. Parties who had upcoming trials were already able to hire and instruct economic experts. Then, in mid-August, the bill was formally published in the Federal Law Gazette, with the part on injunctions taking immediate effect. By now, almost five months have passed and not a single case is known in which the injunction "reform" statute made even the slightest difference. Just a waste of time, money, energy. And it's going to stay that way forever in all likelihood. Should there be any deviation from the past standard, such as by a regional appeals court, the Federal Court of Justice will be sure to set the record straight in no uncertain terms--and a patentee who's prevailed on the merits but has been denied an injunction has a strong incentive to exhaust all appeals.
One company whose IP department occasionally spouts nonsense that overstates the impact of that patent injunction "reform" is Deutsche Telekom. Then, they also brought an "antitrust case" against licensing firm IPCom that is probably the greatest lunacy I've ever seen in patent litigation and was exposed as totally meritless by the Mannheim Regional Court. Whatever Deutsche Telekom says, defendant after defendant will fail to prevail on a disproportionality defense in German courts. That's why we still haven't heard, and most likely won't hear, about any case where the new statute actually strengthened a defendant's position.
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