German patent disputes are decided in first-instance proceedings by the "normal" district courts with ordinary jurisdictional authority. At some district courts, however, specialized divisions have been established that deal exclusively (or predominantly) with patent disputes. As is common at German district courts, these court divisions have three professional judges (but no jury), and the judges need not have completed any special technical training. That said, the judges working in these court divisions are all distinguished by the enormous willingness and energy with which they analyze and understand the technical issues involved in patent infringement proceedings.
In the course of proceedings, the main responsibility of the representatives of the parties is often to prepare the technical facts of the case in such a way that it can be grasped by these "professional laypersons." As an attorney, one can rely on not having to simplify things to such an extent that the content is distorted and on the parties generally being able to expect as a basic principle that, after intensive examination, the experienced German judges in the infringement proceedings understand exactly what the technical issues in the case are.
Procedural Principles and Conduct of Proceedings
Compared with proceedings in the United States, infringement proceedings in Germany are specifically characterized by the fact that (1) no discovery procedures are conducted and (2) evidence is taken only in respect to the relevant disputed points.
One consequence is that, from the outset, the plaintiff has a considerable duty to present facts and proof, which it can honor only by preparing the case very thoroughly or indeed by submitting preparatory motions for the admission of evidence, which is discussed below. Another consequence is that the main focus of proceedings is clearly placed on the written phase—in most cases, proceedings mainly consist of exchanging two major submissions from each party, followed by a well-prepared hearing. The latter rarely lasts longer than two hours and is basically concerned only with clarifying any aspects that are not clear to the court from the written submissions and, if necessary, with continuing argument on what has already been presented in written form.
During the entire proceedings, a systematic distinction is made between presentation of facts, on the one hand, and legal arguments, on the other. Evidence is taken only in relation to a statement of facts and only when the statement of facts is disputed by the opposing party and when the issue in question is of relevance for the decision—that is, when the issue is a crucial one. In practice, due to interpretation of the patent being per se a "legal issue," evidence is taken in rare cases only, and it is only in rare cases that the judges call in expert witnesses. Therefore, it is possible to conduct very lean, "concentrated" proceedings, and patent judgments frequently are handed down within the first year after the complaint is filed.
There are differences in procedures at the various venues:
- In the Düsseldorf procedure, an initial hearing mainly functioning as an organizational endeavor is held at a relatively early stage. This is followed by a comparatively inflexible procedure, at the beginning of which the parties already know when the final hearing will be held. Cases take about 16 months to reach a decision, but durations are likely to be reduced in the future due to the creation of an additional special court division (the third).
- Cases are dealt with much more quickly under the Mannheim procedure, where a decision is usually reached within about 10 months after an action is filed.
- An interesting variant has recently been established at the district court in Munich, where the patent division endeavors to hold an initial hearing within four months after an action is filed. The purpose of the initial hearing is mainly to discuss how the patent is to be interpreted, and the court may indicate at that stage what it considers the key issues in the case are likely to be. Proceedings then continue with the second round of submissions and a final court hearing.
- The Hamburg method seems to be the most flexible by comparison, in that the judges there adapt the organization of the proceedings to the particular features of the case. Readiness to grant temporary injunctions also appears to be greatest in Hamburg (see below).
Because jurisdiction exists wherever the infringing product is offered for sale, the plaintiff can engage in forum shopping in most cases. It will then seek out the most suitable court for the peculiarities of the litigation.
Preparing Patent Litigation Actions
The absence of discovery procedures may, of course, result in the patent holder being faced with a lack of proof. This may happen, for example, when it is not possible to see from the finished product available on the market that a patent is being infringed—as is typically the case with method patents that are infringed behind the closed factory gates of the defendant.
German procedural law grants certain rights to the presentation of documents in such cases, and the patent holder can use those rights to make the infringer present certain specifically named documents that are in the latter's possession.
The court divisions specialized in patent litigation (especially within the district court in Düsseldorf) have also developed a method (frequently called "Faxkarte-proceedings") that was initially an implementation of the European Union Enforcement Directive and that has now been integrated in large part into German statutory law. Specifically, anyone (1) who can show that there is a "certain probability" that his or her patent is being infringed, and (2) who relies on the assistance of the courts to clarify the matter, can request that the infringing product or method be inspected and examined in the presence of a court-appointed expert (and possibly also in the presence of his or her attorneys). The expert then prepares a report that is initially available only to the court itself and to the attorneys involved in the case. If the expert concludes that the patent has been infringed, the report is then divulged to the patent holder, who thus acquires a basis for an infringement suit, which can then be filed. Otherwise, the report is kept under lock and key, and the attorneys representing the patent holder remain committed to confidentiality vis-à-vis their client, in order to protect the wrongly accused party's interest in secrecy.
This procedure thus protects the interests of both parties, while still providing the patent holder with an effective means of enforcing patent claims, which would otherwise be out of reach (and the patent holder would be unable to furnish proof).
When preparing legal action, it is important to realize that the plaintiff can often exploit the effect of surprise, or indeed must do so. In many cases, it may be wise for tactical reasons not to warn the infringer in the form of a warning letter before court proceedings are pending. The defendant might otherwise succeed in guiding an "Italian torpedo" to its target—in a country where slow legal process can be expected (typically Italy or Belgium), he or she could file an action for declaratory judgment of noninfringement, as a result of which the German infringement proceedings must then be suspended (under certain narrow constraints imposed by European law) and the plaintiff is robbed de facto of efficient legal protection in Germany for several years.
The Principle of Separation
A key feature of German patent infringement proceedings is the "principle of separation"—the courts dealing with infringement cases are not empowered to rule on the legal validity of the patent in suit, which means that defendants in infringement cases cannot plead that the patent has no legal validity. Instead, a defendant wishing to plea that the patent in suit has no legal validity must file a separate nullity action. If the patent in suit is still within the time limit for opposition proceedings, it is possible to file an opposition (in the case of German patents, before the German Patent and Trademark Office, or in the case of European patents, before the European Patent Office); once the period for opposition has elapsed, the defendant needs to file an action for nullity before the Federal Patent Court in Munich.
If the infringement courts are convinced that the patent in suit lacks legal validity, they cannot dismiss the infringement suit on those grounds, but can only suspend the infringement proceedings until a decision has been reached in the opposition or nullity proceedings. In practice, proceedings are generally only suspended when, in the view of the infringement court, the action for nullity (or the opposition) has strong prospects of succeeding—which in most cases is only assumed if the defendant is able to present a (written) prior art document that destroys the novelty of the patent in suit. As a basic principle, no evidence is taken in the infringement courts on the issue of legal validity (nor in the form of witness testimony).
This peculiarity of German proceedings does not run counter to the legal system in the way that it is often perceived in other countries. First of all, the basic statutory decision behind the principle of separation is based on the realization that a patent is "examined" intellectual property and that the patent case file at the Patent Office must be accorded a certain degree of trust (in contrast to utility models, which are not "examined" in that sense—see below). It is certainly not the case in practice, moreover, that parties are unable to make different (and self-contradicting) arguments in infringement proceedings and in nullity proceedings. The German infringement and nullity courts (and the patent offices, too) are used to also seeing the submissions filed by the parties in the respective proceedings. Both proceedings are eventually combined at the Federal Court of Justice as the higher court—the Federal Court of Justice (the German supreme court) is the court of appeal for the infringement dispute and simultaneously the court of appeal for the nullity proceeding. Self-contradictory arguments are exposed here, at the latest.
The German principle of separation ultimately fosters concentration of the respective questions at issue in the patent infringement case—hence the speed of proceedings.
The logical consequence is that the principle of separation cannot be applied to utility models. German utility models are technical IPRs [intellectual property rights] that can basically have a similar effect to a patent (with a reduced protection period of 10 years) but are registered without formal examination of their content. In utility model infringement proceedings, the defendant may use the defense of lack of patentability, and the action is dismissed if the infringement court comes to the conclusion that the utility model is not eligible for protection. Conversely, however, patent holders have certain freedoms in the extent to which they can sue on the utility model. What ensues, therefore, is precisely that interplay, well known in many international jurisdictions, between questions of legal validity and questions concerning infringement of intellectual property.
The Court Ruling
Judgments handed down by German courts may also differ considerably in content from parallel judgments in U.S. courts.
Generally, plaintiffs can seek lower damages than in the United States. Although the claim to damages is not conditional on subjective knowledge of the patent infringement (which is why it is not essential that a notice or warning letter was sent, or when), there is no such thing in Germany as punitive damages, and the amount of damages is still calculated in most cases in relation to hypothetical royalties. (The profits generated by the infringing party are also taken as a basis for calculating damages, as are, in rare cases, the earnings lost by the patent holder.)
The decisions handed down by the infringement courts in first-instance proceedings are basically enforceable against lodging of security, which can also be provided in the form of a bank guarantee. The amount of security provided is defined by the court and is based on the damage that the defendant would suffer if a potentially "wrong" judgment were enforced.
The same principle applies to patents that are essential to standards. In its landmark Orange Book Standard decision, the Federal Court of Justice ruled that patents of relevance for standards can also lead to injunctions in infringement disputes (which are then enforceable). The defendant can only take action against such an injunction (1) by making a specifically quantified offer to take a license that meets fair, reasonable, and nondiscriminatory (FRAND) conditions; and (2) by simultaneously adhering to its own offer (without having been ordered to do so in a court judgment)—that is, by paying the royalty offered or (alternatively) by depositing the royalty irrevocably. The burden of proof as to whether the offer is genuinely "FRAND" is then borne by the defendant, which means that, even according to the Orange Book Standard decision, there is still a high hurdle to be overcome by any defendant wishing to circumvent injunctions based on essential patents.
This possibility of obtaining an enforceable judgment within one year is presumably a major reason why plaintiffs often decide on Germany as a venue for European or international patent litigation. In particular, in combination with a complaint in a U.S. court, which is more likely to focus on pecuniary damages, it is possible to generate a considerable threat to the defendant.
Another noteworthy aspect is that it is possible in Germany to obtain temporary injunctions that can be served within a few days after application is made in ex parte proceedings. Such an expedited application should always be considered in practice whenever (1) the technicalities of the case are relatively simple, (2) the patent holder has only recently discovered the infringement (i.e., the matter is urgent), and (3) the patent holder can present facts (beyond the decision granting the patent) in favor of the patent's validity—for example, when the patent has survived opposition proceedings.
German patent infringement proceedings can be considered relatively cost-efficient.
A general principle is that the defeated party must bear the court costs and must also reimburse the opponent any attorney fees that have been incurred. Both types of costs, however, are lump sums based on the value being litigated and, for that reason, are easy to predict in most cases. This lump-sum approach to reimbursement of costs makes it possible for medium-sized companies, in particular, to conduct patent disputes with a reasonable cost risk.
Assuming a litigation value of 500,000 euros (which is in the lower range of values common in patent litigation proceedings), court costs and reimbursed attorney fees will amount to about 24,000 euros in total. However, Germany is attractive as a venue for major patent litigation disputes as well. Assuming a (very high) litigation value of 10 million euros (which is about the value of disputes relating to essential patents in the telecommunications industry), the losing party will be faced with about 250,000 euros in court costs and reimbursable attorney fees. These costs are compounded, of course, by the fees for one's own attorneys, and the costs for the nullity proceedings (often conducted in parallel) must not be ignored, either. But practice shows that costs in Germany typically are only about a tenth of those incurred in similar cases before U.S. courts.
From the plaintiff's perspective, there are many reasons for conducting patent infringement disputes in Germany, including specialized judges, the quality of court rulings, relatively quick proceedings devoid of expansive discovery practice, focused infringement disputes, the separate treatment of validity, and relatively reasonable costs.
Keywords: litigation, intellectual property, patent disputes, infringement proceedings, attorney fees, court costs, declaratory judgment, discovery, expert report, method patent, patent enforcement, utility model, FRAND, Germany