On 10 February 2009, the oral hearing took place before the German Federal Supreme Court in a landmark case concerning the relationship between patent law and competition law in general, and the relevance of competition-lawbased arguments in patent infringement proceedings in particular.

In 2001, Philips sued a manufacturer of compact discs before the Regional Court Mannheim for alleged infringement of a patent essential to the so called “Orange Book standard” which is the standard for recordable compact discs (CD-R, CD-RW). The defendant argued non-infringement and invalidity and in addition raised the competition law defence. The competition law defence in German patent infringement proceedings is based on the principle that it is against good faith to assert a standard-essential patent by way of a cease and desist claim whilst the patent owner refuses to fulfil his obligation under EU and German competition law to grant a licence under fair, reasonable and non-discriminatory terms and conditions. In the “Orange Book” case the Regional Court Mannheim did not accept the competition law defence and ordered the defendant to cease and desist. The court doubted whether the competition law defence was admissible but in any event stressed that the defendant had not sufficiently substantiated the preconditions for such a defence, i.e. discrimination and/or abusive licence fees.

The Higher Regional Court Karlsruhe rejected the defendant’s appeal. The court was inclined to accept the competition law defence as admissible but just like the first instance, denied that its preconditions were met. The court ruled that discrimination was not substantiated by the defendants and that an abuse of a market dominant position based on excessive licence conditions would only lead to a valid defence if the defendant submits an offer which was so high that any increase in favour of the patentee would be abusive. The court did not allow a second appeal to the Federal Supreme Court but upon the defendants’ complaint the Federal Supreme Court accepted the case on basis of its general importance.

Contrary to the Regional Court Mannheim, the Regional Court Düsseldorf clearly accepted the competition law defence in a number of decisions (see separate article in this issue) but there is no specific decision yet of the German Federal Supreme Court. Accordingly, the decision of the Federal Supreme Court in the “Orange Book” case will be of significant importance as to the extent a defendant in patent infringement proceedings is able to defend himself against cease and desist claims on the basis of competition law without having to initiate separate competition law proceedings against the patent owner.

In the oral hearing which took place on 10 February 2009, the plaintiff’s representative argued against the admissibility of the competition law defence by focusing on the argument that patent infringement proceedings would be overloaded and delayed if the competition law defence was accepted. The defendant mainly countered this by stressing that the alleged infringer must be allowed to raise the defence in patent infringement proceedings as there is no realistic possibility to otherwise get access to the patented technology and, thus, to the relevant industry standard. It was stressed that a licence is not available through preliminary injunction proceedings, while proceedings on the merits claiming for a licence could take many years.

The competition senate of the Federal Supreme Court did not give a clear indication if it is inclined to accept or deny admissibility of the defence. However, some specific questions raised by the judges gave the impression that the court is inclined to accept the defence. The decision will be rendered on 6 May 2009. The decision will have a very significant impact on patent infringement proceedings in Germany as far as patents that are essential to important industry standards are concerned. Accordingly, especially from the defendants’ point of view, this upcoming decision of the German Federal Supreme Court will have tremendous impact on the strategy on how to activate EU and German competition law in the most efficient way to defend against cease and desist/patent infringement claims.