Patent litigation in Europe: focus on Germany

30 September 2004

Wolfgang von Meibom, Boris Kreye


In Germany, patent litigation is an important means for a patent owner to enforce his protective rights. The German patent system provides comparatively fast and effective proceedings for a patent owner to obtain injunctive relief against an infringer. Furthermore, court relief is available at reasonable costs if compared with patent litigation in countries with a similar well-developed patent litigation system as, for instance, the United Kingdom or the United States of America.

Due to the advantages of patent litigation in Germany, which will be explained in more detail in the following, it is no wonder that Germany is probably the country in Europe where most of patent infringement disputes go to trial. More than 50 % of all cases of patent litigation in Europe are commenced before German courts. Court decisions of German infringement and validity courts are recognized as sound opinions rendered by competent bodies not only within Germany, but also abroad.

I. Jurisdiction

1) Infringement

Under the German rules governing court jurisdiction specialized patent panels implemented at district courts hear patent infringement cases. A patent panel consists of three judges, one presiding judge and two assisting judges. Usually, none of the judges has a technical background. However the judges exclusively hear patent and at some courts other intellectual property matters and, thus, are experienced in patent infringement disputes.

Each German state has one district court with a patent panel. However, in practice, some district courts have developed a higher expertise in patent matters and, thus, the vast majority of patent cases is heard by these courts. Among these, the District Court of Düsseldorf hears by far the greatest number of patent cases in Germany. More than 50 % of all patent cases in Germany are started at the Düsseldorf Court. Other courts with great expertise in patent matters are the District Courts of Munich and Mannheim. In addition, the District Court of Hamburg has to be mentioned, which is known for taking a more liberal approach as regards the time limit for bringing a request for a preliminary injunction.

Under the German rules of civil procedure the plaintiff can generally bring an action against a potential infringer either at the court where the plaintiff is domiciled or where an act of infringement occurs or is likely to occur. Since most of the infringers usually offer their products all over Germany, e. g. over the Internet, the plaintiff has in most cases the possibility of "forum shopping".

A German infringement court can not only decide on the infringement of German patents or the German part of a European patent but also on the infringement of patents in other European countries if the defendant is domiciled in Germany (Article 2 para. 1 of the European Regulation no. 44/2001 on EU Court jurisdiction and the acceptance and enforcement of decisions in civil-and commercial matters). Thus, a German court can enjoin a German defendant from infringing a patent in UK or France if its international jurisdiction is given. The German court has to apply the law of the country where the infringing act occurs. In such a situation the District Court of Düsseldorf usually decided as a preliminary question also – inter partes – over the validity of the foreign patent (District Court of Düsseldorf, GRUR Int. 2001, 983 – Schwungrad). It is disputed, however, whether the international jurisdiction of a German court that has to decide on the infringement of a foreign patent terminates when the defendant raises validity objections against the foreign patent in the infringement action. According to Article 22 no. 4 of the above mentioned regulation only the courts of the country where the patent was granted have the competence to decide on the validity of this patent. This issue was decided controversially by German infringement courts as well as courts in other EU member states. The Court of Appeal Düsseldorf, thus, presented this question to the European Court of Justice for a guiding decision. At the time of writing this article, however, no decision of the ECJ was available.

The first instance decision of a district court is subject to an appeal to the court of appeal. Among the several courts of appeal hearing patent cases the Court of Appeal Duesseldorf has gained a high reputation for its decisions in patent cases followed by the Courts of Appeal in Munich and Karlsruhe. An appeal against a district court decision can be based on both, questions of facts and questions of law. However, the possibility for a party to submit new facts and defences in the appeal instance is limited (Section 531 of the German Code of Civil Procedure) and basically only possible if such facts were obviously overlooked or deemed irrelevant by the first instance court or not alleged in the first instance without negligence of the submitting party.

An appeal decision in a patent infringement matter can be further appealed to the German Federal Supreme Court. However, the further appeal has to be admitted either by the court of appeals or - upon an objection that the court of appeal did not admit a further appeal - by the Federal Supreme Court. A further appeal has to be admitted if the lawsuit is of fundamental meaning or if the decision of the Federal Supreme Court is necessary for the development of law or to safeguard common case law (Section 543 of the German Code of Civil Procedure).

2) Validity

The German infringement courts have no competence to decide on the validity of a patent. The competence for such a decision lies solely with the EPO and with the German Patent and Trademark Office in case of an opposition, or, in case of a nullity action against a German patent or a German part of a European patent with the Federal German Patent Court in Munich in the first instance and on appeal with the German Federal Supreme Court.

Due to the lack of competency of the lower infringement courts to decide on the validity of a patent the German patent system does not know the invalidity defence in infringement actions. Only in case of an appeal from the Federal Patent Court and further appeal from the Court of Appeals, infringement and validity questions will be decided by the same court, the German Federal Supreme Court.

II. Proceedings on the Merits

1) Duration of proceedings

A first instance judgement in an infringement action on the merits is usually available within nine to twelve months depending on the workload of the respective court. This time frame only applies if no court expert is appointed. The parties will make written submissions in the proceedings which at least include a writ of complaint submitted by the plaintiff, an answer submitted by the defendant and a further reply from the plaintiff. The courts set deadlines for the parties to file these submissions. However, further submissions are possible. After the plaintiff filed his writ of complaint the court will schedule a date for the hearing on the merits. Usually, the parties will not plead the entire case in this hearing but just have the possibility to comment on issues that are not clear from the written submissions. As a consequence, the hearing on the merits is comparatively short and usually does not take longer than one day. In simple mechanical cases it may even take less than an hour. The court will provide a written judgement with its reasoning usually within 4 weeks after the hearing.

The infringement court will declare a first instance decision in proceedings on the merits "as provisionally enforceable" for the winning party. The plaintiff is, however, liable for any damage the defendant suffers due to unjustified enforcement if the first instance judgement is overruled in appeal proceedings. To cover such damage, the enforceability of the decision is subject to the condition that the plaintiff provides the defendant with a security. This security can take the form of a guarantee from a bank or public savings bank that is licensed to do business in Germany. The plaintiff has to provide the defendant, respectively his attorney, with the original guarantee document and can then start enforcement.

A first instance decision of the district court can be appealed within one month to the competent court of appeal (see above). The appeal proceedings last from 12 to 15 months and include the exchange of written submissions as well as an appeal hearing at the end of the proceedings. An appeal decision is enforceable without the requirement to place a security to the other party. Furthermore, in the event that the appeal decision is overturned by the Federal Supreme Court on further appeal the enforcing party faces only limited liability for an unjustified enforcement of the appeal decision (Section 717 para. 3 of the German Code of Civil Procedure). A further appeal to the German Federal Supreme Court may take anything from one and a half to four years.

In nullity proceedings the German Federal Patent Court may render a first instance decision within one and a half years. An appeal decision from the German Federal Supreme Court in nullity proceedings may take much longer because the Federal Supreme Court usually appoints an expert to render an opinion on the validity of the challenged patent.

2) Evidence

As a general rule of German civil procedure law, the plaintiff has to prove its claims by submitting appropriate evidence. However, there is no far-reaching pre-trial discovery system as in the USA, UK or France. Thus, before starting an infringement action the plaintiff should obtain a sample or a brochure or the like that discloses all features of a patent claim. If the patentee is not able to obtain such evidence (e.g. because a claimed process is only carried out on defendant’s premises), one of the following legal instruments may help him to prove infringement.

If the evidence available is (merely) sufficient to support a likelihood of infringement, the patentee may request an order that the defendant submits a sample of the infringing embodiment (Sec. 809 German Civil Law Code). However, German courts have applied this legal instrument very restrictively so far and have required that the plaintiff establishes a high likelihood of infringement before the defendant is ordered to submit a sample. As to the scope of a claim under Sec. 809, the patentee is e.g. not allowed to switch on the allegedly infringing device or to remove the chassis in order to inspect the inside of a product. Therefore, Sec. 809 has had a minor practical importance in infringement suits so far. However, this might change significantly within the next two years as Article 2 of the EU directive 2004/48/EC concerning the enforcement of intellectual property rights stipulates that Member States allow such an “inspection claim”, which is in line with Article 43 TRIPs.

In addition, the court can order that either party or even a third person to submit documents in its possession referred to in the briefs (Sec. 142 and 143 of the German Code of Civil Procedure). Therefore, the patentee may for instance refer to a drawing or a picture of a device to prove infringement, even if he actually has no direct access to this document. A decision under sec. 142 to submit the respective documents, however, lies in the discretion of the court.

Finally, with regard to process patents, Sec. 139 par. 3 of the German Patent Act partly transfers the burden of proof from the patentee to the alleged infringer. If the patent covers a process of manufacturing a new product, the patentee merely has to prove that defendant’s product is identical to the product made by the claimed process. In this case, the defendant has to submit full counter-evidence to prove that he is not using the claimed process.

3) Experts

Usually, the appointment of a court expert is an exception rather than the rule at district court or court of appeal level. Some courts like the District Court of Munich and Mannheim tend to appoint an expert more often than other courts, e. g. the District Court of Düsseldorf. An expert is only appointed by a court if complicated technical questions and / or the interpretation of a patent are at issue and the court cannot decide upon these questions on the basis of his own knowledge and experience. Usually, the parties have the right to suggest appropriate candidates and to comment on the other party's candidates. The expert would usually have an academic degree and in most of the cases is a German university professor or professor at a higher technical college in Germany. The expert has to render a written opinion in German. The expert opinion is not binding for the court and the court may not base its findings on the opinion. The appointment of a court expert and the subsequent procedure of finding the right candidate and preparing the opinion usually delays the infringement proceedings for at least a year, sometimes much longer.

4) Stay of Infringement Proceedings

Although there is no invalidity defence in Germany due to the separation of infringement and invalidity proceedings, a German infringement court has the possibility under Section 148 of the German Code of Civil Procedure to stay the infringement proceedings in view of a pending opposition or a nullity action brought by the defendant against the patent in suit. The decision to stay an infringement action lies in the discretion of the infringement court. The infringement court will balance the interests of the patent owner against the interests of the alleged infringer. According to the decision "Transportfahrzeug" of the German Federal Supreme Court the interest of the patent owner to enforce his granted patent generally prevails over the interest of the alleged infringer to stay the infringement proceedings (Federal Supreme Court, RUR 1987, 284 - Tansportfahrzeug). The infringement court shall stay the infringement proceedings only if there is a preponderant probability that the patent will be revoked in invalidity proceedings. According to the Federal Supreme Court this cannot be assumed if the closest prior art in the invalidity proceedings was already considered during prosecution or if the attack is only based on prior art to establish that the subject matter of the patent in suit lacks an inventive step. In other words, only if novelty destroying prior art that was not considered during prosecution is cited in the invalidity proceedings, is the infringement court likely to stay the infringement action. This case law of the Federal Supreme Court is generally followed by the lower courts.

Other factors that are to be taken into account by the infringement court when balancing the interests of the patent owner against the alleged infringer are an enforceable first instance decision for the plaintiff and /or the timing of the opposition proceedings or nullity action.

According to a decision of the Court of Appeal Düsseldorf the threshold for a stay of infringement proceedings can be lower on appeal if the plaintiff already has achieved a positive first instance decision (OLG Düsseldorf, Mitt. 1995, 257, 258 – Steinknacker). In such a case the interests of the patent owner would be secured already by the first instance decision that, upon providing a security to the defendant, can be enforced against the defendant. Thus, the requirements for a stay of the infringement proceeding in the appeal instance could be lower than in the first instance and a stay would be appropriate if there is some likelihood that the patent will be revoked. This could be the case even if there is no new prior art cited in the invalidity proceedings.

As regards timing, the defendant should bring an invalidity attack on the patent in suit in due course upon learning about the infringing activity. If the invalidity attack and his request for a stay of the infringement action are brought with the obvious intention to delay the infringement proceedings, the infringement court can deny a stay of the infringement action for this reason.

In practice, the stay of an infringement action in view of a pending opposition or nullity action is still the exception in Germany. Only 10 to 15 % of infringement actions are stayed because the validity of the underlying patent is challenged into parallel invalidity proceedings. However, there is a tendency at least of the Düsseldorf Court to stay infringement proceedings more often.

5) Remedies

A judgement in favour of the patent holder in proceedings on the merits usually includes injunctive relief by which the infringer is enjoined from further manufacturing, selling, offering distributing or possessing infringing goods. Also, a declaratory ruling that the defendant has to pay damages accompanied by an order against the infringer to render account about his acts of infringement is part of the ruling. The information the defendant has to provide shall enable the plaintiff to assess damages and to identify further infringers in the supply chain or in downstream commerce. In addition, the court can rule that the defendant has to destroy all infringing products in defendant's possession. Besides that, the losing party generally has to bear the court costs and the attorney fees of the winning party under German procedural law.

The actual legal costs for the plaintiff in a small mechanical case may be EUR 50,000.00 for one instance or even less. A complex bio-tech case may create legal costs in the amount of EUR 100,000.00 or more for one instance. Similar costs may arise if the validity of a patent is challenged in parallel proceedings. Attorney fees, however, can only be recovered from the losing party in the amount as provided by the German statutory fee schedule. Such fees often do not reflect the actual costs. To enable the court to determine a certain value for a patent infringement action, the plaintiff usually suggests a "value at issue" to the court in its writ of complaint. In practice, however, this value usually does not represent the actual value of the lawsuit for the plaintiff but is merely a theoretical figure for the assessment of court costs and attorney fees. In any event, the value suggested by the plaintiff does not limit the recoverable damages caused by the infringement.

6) Damages

As described above, a decision in an infringement lawsuit in Germany will not include the award of actual damages but will just provide a declaration that defendant has to reimburse the plaintiff for his damage. The plaintiff has to calculate his damages on the basis of the information provided by defendant in the accounting procedure and, if the defendant does not pay, bring a separate action for the recovery of damages. Generally, three methods to calculate damages are available. The plaintiff can choose between a reasonable royalty, infringer's profit or his lost profits. In practice, only the first two possibilities play an important role, since the requirement for the patent owner to prove that he actually suffered lost profits are relatively high in Germany and usually are only met if the patent owner can establish that he would have sold his own products instead of the infringer's products being sold to customers. This fact is difficult to establish if there are further competitors besides the patent owner and the infringer, on the market, who offer similar products that could have been bought alternatively.

Among the two other methods, reasonable royalty or infringer's profit, the first one is still the most common method for calculating damages in Germany. However, patent owners are tending to more and more claim the profit of the infringer due to a change of case law. In the past, infringers were allowed to deduct overhead costs from their turnover with the infringing products. This possibility opened the door to "creative accounting". Many infringers pretended that they didn't make any profit at all with their infringing products. This loophole was effectively closed by the German Federal Supreme Court with its decision "Gemeinkostenanteil", which was rendered in a design right infringement case in 2000 and is already followed by lower courts in patent cases. According to the reasoning of the Federal Supreme Court, infringers are, in principle, only entitled to deduct from their turnover variable costs and such overhead cost that are directly linked to the production / distribution of the infringing product. The burden of proof for the latter lies with the infringer. As a consequence, claiming infringer's profits as damages has become much more attractive in Germany. It may be estimated that the amount of damages awarded in Germany will be substantially higher in the future in view of this jurisdiction.

III. Preliminary injunction

Besides full proceedings on the merits, preliminary relief is available in Germany for a patent owner in Germany. Possible remedies in preliminary proceedings are an injunction to enjoin the infringer from manufacturing, selling, offering or distributing infringing goods as well as a claim for information regarding the origin and the distribution channels of the infringing product in case of an obvious infringement (Section 140 b para. 1 and 3 of the German Patent Act).

A request for a preliminary injunction has to be filed with one of the competent district courts, and, if granted ex-parte, preliminary relief will be available within days. An ex-parte injunction, however, is the rare exception in patent infringement cases in Germany. It is usually only granted when the validity of the patent has been confirmed by a competent body, i. e. the EPO or the German Federal Patent Court and an infringement is clear and obvious. The question of infringement must not require an in-depth analysis of the claims and the infringing embodiment.

If these requirements are not met preliminary injunctions will not be granted without a hearing that usually takes place four to six weeks after the petitioner filed its request for a preliminary injunction. One requirement for obtaining preliminary relief in such a case is clear infringement either literally or with equivalent means. In any event, the court must be able to understand the subject matter of the patent as well as the infringement without the help of an expert. In preliminary proceedings no court experts will be appointed. Secondly, the validity of the patent must be strong, although not necessarily confirmed by the EPO or the German Federal Patent Court as it is necessary for an ex-parte injunction.

A third requirement is the so-called "urgency" for the petitioner to obtain preliminary relief. Basically the petitioner has to show that he will suffer severe damage if an injunction is not granted. Unlike in unfair competition or trademark matters there is no presumption that the matter is urgent. The corresponding provision of Section 25 of the German Unfair Competition Act does not apply in patent infringement cases. Thus, the petitioner needs to establish facts that the grant of a preliminary injunction is necessary to prevent damage to him. Most of the German patent infringement courts require the petitioner to file a request for a preliminary injunction four to six weeks after he learned about the infringement of the patent. The District court of Hamburg, as already mentioned above, usually takes a more liberal approach and considers a request for a preliminary injunction as urgent even if it is brought a couple of months after the patent owner learned of the infringement.

An injunction can be immediately enforced without a security. A judgement by which a preliminary injunction is granted or denied can be appealed to the Court of Appeal within one month. The appeal proceedings may take another three to four months until an appeal decision is available.

There is no possibility to stay preliminary proceedings in view of parallel opposition proceedings or a nullity action. Thus the infringement court must be convinced that there is a substantial likelihood that the patent will be upheld, if the validity is attacked.

In order to prevent a court from granting an injunction ex-parte a so-called "protective letter" may be filed with the court that will potentially receive a request for a preliminary injunction from the patent owner. In a protective letter, the potential respondent sets forth its defences against the alleged infringement so that the court has the counter arguments for infringement on its file when deciding upon the request for an injunction.

IV. Summary

The German patent system provides a number of advantages for the enforcement of patents. Due to the separation of infringement proceedings on the one hand and validity proceedings on the other, the patent owner can obtain an injunction within a relatively short time frame, because the question of invalidity is not directly linked to the question of infringement and will be dealt with in separate proceedings. Furthermore, the possibility to provisionally enforce first instance decision against the infringer provides the successful plaintiff with an effective means to prevent further infringement of his patents. The plaintiff having an enforceable decision with an injunction in hand has a strong position vis-à-vis the defendant, e.g. for out of court settlements. Finally, court relief can be obtained at relatively low costs in Germany compared to other European countries or the US. Given the above advantages and the expertise of the German patent courts, Germany remains a highly attractive place for patent litigation in Europe.

A version of this article was first published in the September 2004 issue of MIP magazine.