In review: key recent IP developments and trends in Germany

An extract from The Intellectual Property Review, Edition 10

Recent developments

In the matter Sisvel v Haier, the Federal Court of Justice (FCJ) rendered a decision on FRAND and decided that the implementer Haier did not act as a 'willing licensee', as Haier had submitted its declaration of willingness one year after Sisvel's first notification of infringement. The court focused on a 'patent hold-out' – i.e., the problem that the implementer intends to delay negotiations until the patent in suit expires – and in fact, the patent expired during the infringement proceedings.

The fact that the court mentioned the strategy of a patent hold-out is even more relevant in Standard Essential Patent (SEP) matters, where the patentee holds a portfolio with a large number of patents, but has sued the implementer on only a few patents. With these delaying tactics, the implementer can avoid a licence regarding the whole patent portfolio.

Besides the fact that Haier reacted too late to Sisvel's notification, the FCJ decided that Haier in addition did not clearly declare – with its late-submitted declaration – that it was in fact willing to conclude a FRAND licence.² Furthermore, the FCJ decided that it is not sufficient to declare its willingness to take a licence under the condition that the patent is declared infringed and valid by a court.

According to the FCJ, the duties according to the European Court of Justice (ECJ) decision Huawei/ZTE apply to a patent portfolio as well, as long as the SEP holder does not misuse the infringement proceeding to force the implementer to licensing negotiations on a non-standard essential patent.

Last but not least, the FCJ decided that it is not discriminatory if the SEP holder has granted discounts to third parties (in this case, Chinese public authorities). 'Non-discriminatory' does not mean that the patentee must grant a licence at the same royalties to all willing licensees in the sense of a 'uniform tariff'. The holder of an SEP has room for negotiations and thus may grant discounts.

The Regional Court (RC) Dusseldorf decided on 26 November 2020 to refer several questions concerning FRAND matters to the ECJ, which had not yet been decided in the matter Huawei/ZTE. The RC Dusseldorf raised questions concerning two issues: how to deal with FRAND matters in supply chains, and specification of the requirements set in the matter Huawei/ZTE.

In this matter, Nokia sued Daimler before the RC Dusseldorf due to the infringement of an SEP, and some of Daimler's suppliers joined the proceeding. The court stayed the proceeding and submitted its questions to the ECJ, including its preliminary opinion. The RC Dusseldorf holds that a supplier has a right to claim for a FRAND licence as well, since the SEP holder has declared against the European Telecommunications Standards Institute to grant a licence to everybody. Furthermore, it is in the interest of suppliers to act on the basis of their own licence and not only on the basis of a right derived from the car manufacturer's licence. In addition, it is a market standard in the automobile industry that car manufacturers request their suppliers to deliver products free of third parties' rights. This applies to SEP patents owned by SEP holders as well. In addition, the obligation to grant a licence to the supplier does not have negative economic effects for the SEP holder, as the worth of the invention is the relevant pricing factor for the royalty, which is therefore the same amount at each stage of the supply chain.

In the second issue, the RC Dusseldorf wants a clarification of the requirements of the ECJ decision Huawei/ZTE, in particular whether the steps have to be carried out prior to the court proceedings. That is problematic, as the meaning of a FRAND licence is still rather unclear, and the crucial points often come up during the proceedings. If the steps have to be taken prior to the proceedings, it would not be possible to find a FRAND licence later, when the real issues arise. The court rather has to grant an injunction and therefore puts the implementer under pressure.

In addition, the RC Dusseldorf asked the ECJ under which prerequisites a court may deny that an implementer is to be considered as a willing licensee. The RC Dusseldorf intends to apply high hurdles. As the submission of the RC Dusseldorf deals with similar issues to the FCJ in the matter Sisvel v Haier, there are high expectations of the ECJ.

The RC Munich I decided on 19 January 2021 to refer to the ECJ the question as to whether a court has to refuse a preliminary injunction (PI) if the patent in suit did not survive first-instance opposition or nullity proceedings.

The RC Munich I intends with its submission not only a reassessment of the case law by the Higher Regional Court (HRC) Munich stipulated in its decision Electrical Connecting Terminal and another yet unpublished decision, but also of the nationwide practice regarding validity of patents (and utility models) in PI matters.

According to the standards of the Dusseldorf and Mannheim courts, a preliminary injunction based on a patent requires a positive contradictory (first-instance) validity decision if the patent will be the basis for a preliminary injunction.

In the landmark decision Sets for Urinary Catheters, the HRC Dusseldorf allowed exceptions from the requirement of a positive contradictory (first-instance) validity decision, as otherwise the patentee would be treated disadvantageously in various constellations. The case law of various courts has allowed further exceptions. Nevertheless, the HRC Munich took an even stricter line in its recent decisions.

The RC Munich I has doubts whether this is in line with the European Enforcement Directive, which requires that Member States ensure that the competent courts have the possibility to render preliminary measures if requested by the appellant in order to hinder the infringement of intellectual property rights.

Although it cannot be predicted how the ECJ will decide in this matter, it can be expected that the ECJ will take a closer look at the practice in other EU Member States. Most important jurisdictions in the EU for patent infringement (such as France and the Netherlands) do not recognise the requirement of a 'confirmed decision to grant the right'. Thus it would not be surprising if the principles of the decision Sets for Urinary Catheters have to be newly adjusted.

Trends and outlook

Besides the ongoing discussion on the Unified Patent Court, German legislators are currently discussing a law to modernise the German Patent Act. The most relevant topic is modifying the automatic injunction in Germany.

The background was the heat exchanger decision of the FCJ where the court acknowledged the proportionality in infringement matters, but then denied it for several reasons in the specific case and thus remained within the strict line of German courts. This decision has led to pressure from the automobile industry on the legislator to explicitly implement the principle of proportionality in the German Patent Act. The background of this lobbying effort is that the patent situation in the automotive sector is becoming more and more unclear and complicated. Usually, car manufacturers face injunctions owing to an alleged patent infringement by a small but technically complicated part (e.g., chips), where the technical details of such a part are unknown to the car manufacturer. In this case, a patentee could claim injunctive relief regarding the whole car, which allows him to put the manufacturer under huge pressure in potential licensing negotiations.

This problem is even more significant for manufacturers with regard to FRAND matters, as modern cars are connected to mobile networks to provide high-speed internet access. If the principle of proportionality does not apply, the discussion of non-practising entities with mobile phone manufacturers could have a second round with a much stronger impact.