German Court System Favorable for Patent Litigation

Germany’s specialized court system, where cases are ruled on relatively quickly and it can be easier than in other countries to get an injunction, is increasingly leading technology companies to file patent lawsuits there, say patent law specialists.

Motorola sued Microsoft over patents it has on the H.264 video standard, which led Microsoft to move its European distribution center from Germany to the Netherlands even before the German court of Mannheim ruled in the case. Also, Samsung and Apple are involved in German patent lawsuits, involving a range of technology patents, and Apple and Motorola are also fighting over patents in German courts. All the companies involved declined to comment on why Germany is so popular.

“The impact is higher in the German market, due to its size, so that is a good place to start,” said Joachim Henkel, a professor at the Technical University of Munich, who specializes in technology and information management. “Courts that deal with these things are specialized and comparatively fast.”

Germany has highly specialized judges for patent matters, particularly at the district courts of DA1/4sseldorf and Mannheim, as well as Munich, Hamburg, Frankfurt and GAPttingen. “These judges handle hundreds of patent matters per year,” said Klaus Haft, a German patent lawyer and board member of the European patent lawyer association, EPLAW. Most cases are filed in Mannheim and DA1/4sseldorf. Mannheim is the fastest court for reaching a verdict according to Haft, with most cases receiving decisions in six to eight months, while a DA1/4sseldorf court case takes between 15 and 18 months. The appeals process duration is typically one and a half years both in DA1/4sseldorf and Karlsruhe, Haft said.

The courts in Mannheim and Munich are roughly twice as fast as the U.S. International Trade Commission (ITC), which determines the impact imports have on U.S. industries and can grant injunctions based on patents, said consultant Florian Mueller, who writes a blog about patent issues.

The judges also have specific training to deal with patent cases. “At the Federal Patent Court, there are technical judges: judges who have an engineering degree and additionally studied patent law,” he said.

If a company wins an injunction in a regional court in Germany, that injunction can be preliminarily enforced while the appeal is going on. If the appeals court rules the injunction was prematurely enforced, the plaintiff is liable for all the damages. That is why it is necessary to post a bond to guarantee that those damages can be paid for.

According to Henkel, companies prefer to file U.S. lawsuits if they are after damages, while Germany is preferred by companies that are seeking an injunction to halt sales of products that supposedly infringe its patents. Plaintiffs have a reasonable chance to get an injunction in Germany.

“This is completely different to the U.S. after the Supreme Court’s decision in eBay vs. MercExchange,” Henkel said. In 2006, the Supreme Court ruled in favor of eBay in a patent dispute, effectively overturning a long-held U.S. court practice of issuing injunctions against infringing products in nearly all patent cases. “And so in Germany, injunctions are a powerful tool for the patent holder,” Henkel said.

Sabine AgA(c), a lawyer specializing in intellectual property and patents, and secretary of (EPLAW), agreed with Henkel. “It is true that in Germany, as in other continental Europe countries, injunctions are available to any patent holder who succeeds in an action for patent infringement,” she said in an email. “While in other countries like the U.S. or the U.K., the courts can decide that a patent holder (for example because it does not exploit the patent) should not be granted an injunction although the patent has been found infringed.”

AgA(c) and Mueller also emphasized that the bifurcated system is attractive for companies seeking injunctions. The validity of the patent is submitted to a court other than the one deciding on the infringement issue. Defendants will, if they can afford it, typically respond to an infringement lawsuit not only by defending themselves against the infringement allegations but also by bringing a “nullity action” before the Federal Patent Court, Mueller explained. And this process takes time. First all the prior art for the patent has to be determined. After that it takes 20 months until the court rules, and possibly another couple of years for an appeal, said Mueller.

“It is only in the cases where the patent is grossly invalid that German courts dismiss claims for preliminary injunction or stay proceedings for infringement on the merits,” AgA(c) explained.

According to Mueller, there is another factor that has to be taken into account. “The German ‘Orange-Book-Standard’ approach to standard-essential patents denies injunctions only if a variety of criteria are met, and the legal logic is not equity (fairness and reasonableness) but that a company that commits a severe antitrust violation by seeking an injunction won’t get it,” he said.

Under that standard, holders of standard-essential patents can obtain injunctions even if the patents are considered to have been licensed under fair, reasonable and non-discriminatory terms, otherwise known as FRAND terms.

Currently, Motorola is using standard-essential patents it has on the H.264 video codec against Microsoft in Germany. If Motorola wins on April 17, this could exclude Microsoft from the German market. The H.264 codec is used in the Xbox and Windows 7, amongst other Microsoft products.

“It is correct that German courts have been the only ones in Europe … to decide that an injunction can be granted on the basis of patents declared essential to a standard,” AgA(c) said. Even if the patent holder has agreed to grant a FRAND license when the patent was declared essential, and the patent user has already started license negotiations with the patent holder. “Dutch, French and Italian courts (those last two in preliminary proceedings) have taken a different view.”

AgA(c) pointed out that not all German lower courts rule in favor of standard-essential patent holders. The Karlsruhe Higher Regional Court ruled in February that Motorola Mobility can no longer enforce its standard-essential patents for an injunction against Apple in Germany during the ongoing appeal.

While Germany might be a popular country for patent litigation, there are other countries to watch, AgA(c) said. “Usually, there is simultaneous litigation in Germany, France, the Netherlands and sometimes in the U.K.,” she said. And in those countries, there can be patent litigation with an equally big impact.

For instance, Apple tried to get an injunction against Samsung in the Netherlands. Samsung’s European distribution center is located in the Netherlands, so if Apple would have won, this would have effectively paralyzed Samsung’s business in Europe. The judge denied the injunction, meaning Samsung could continue its business in Europe.

This ruling is why Microsoft chose the Netherlands for its distribution center when it decided that Germany was too risky with Motorola’s standard-essential patent litigation in mind, said AgA(c).

Loek covers all things tech for the IDG News Service. Follow him on Twitter at @loekessers or email tips and comments to loek_essers@idg.com