The “Prepaid Telephone Card” Decision of the Higher Regional Court Düsseldorf

11 August 2010

Felix T. Rödiger, Nina Malzhacker

In a recently published decision the Higher Regional Court Düsseldorf extended the scope of national method patents to cross-border situations (“Prepaid Telephone Card” decision dated 10 December 2009, docket number I-2 U 51/08).

“Rohrschweissverfahren” Decision

The judgment complements a decision of the Federal Supreme Court (“Rohrschweissverfahren” dated 27 February 2007, docket number X 113/04), which considered a national patent to be infringed by an action which starts abroad and ends in Germany. However, over the last years it has remained unclear whether this ruling should apply vice-versa. This loophole for potential infringers has now been closed by the Higher Regional Court Düsseldorf.

“Prepaid Telephone Card” Decision

The patent in dispute concerned a method for processing prepaid telephone calls which comprised various procedural steps. It involved inter alia a server, which can be toll-free, accessed via a code number imprinted on a vendible telephone card.

The Defendant’s main argument was that their server was located outside of Germany. Apart from selling the telephone card, most of the method steps were performed abroad. Therefore the principle of territoriality excluded an infringement of the German patent.

The Court rejected the Defendant’s argument. The principle of territoriality limits the effect of a patent to the territory of the state which has granted the patent. Subsequently, an action must have sufficient relation to Germany to affect a national patent. Actions exclusively taken place abroad cannot constitute a German patent infringement. However, cross-border actions must be treated differently.

With view to method claims the Court distinguished two scenarios:

  • First scenario: the infringing act starts abroad but is completed in Germany; and

  • Second scenario: the infringing act starts in Germany but is completed abroad.

The Court held that, for both scenarios, actions taken place abroad must be treated like domestic actions when the infringer exploits them to successfully infringe a national patent. This requires that the actions outside of Germany are wilfully intended to have a direct impact on the national German market.

The Court illustrated this general rule with one example for each scenario: 

The example for the first scenario was based on a patent for a manufacturing process. By applying the first method steps abroad, a preliminary product was manufactured. Afterwards the preliminary product was transported to Germany where it was finalised by applying the remaining method steps. The manufacturer must accept liability for the actions abroad since he took advantage of the work results.

The example for the second scenario was based on the patent in suit:  It was considered sufficient that the Defendant sold the telephone card in Germany since the further method steps had effects in Germany.  All commands generated by the server (e.g. credit check, enabling and cutting-off of the telephone connection) were transferred to Germany where they were needed for the realisation of the patented method. Moreover, all advantages of patented method materialised in Germany. 

The Defendant appealed the decision. The proceedings are currently pending before the Federal Supreme Court under the docket number Xa ZR 8/10.

Potential consequences

As a consequence, it will become increasingly difficult for companies to circumvent an infringement of a method patent in Germany. Outsourcing individual steps to various countries will no longer give “a freedom to operate”. Companies which used this strategy in the past might now face the danger that patentees will enforce their rights on the basis of the new case law.