Following a highly controversial debate, the German government proposed a reform of the German Patent Act. The draft now explicitly provides that the claim for an injunction is subject to a proportionality test. According to the reasons provided, this should merely clarify the already applicable legal regime to which proportionality is inherent.

A significant change is that third party interests were added and are therefore also a relevant criterion. This follows the approach already implemented by the courts in the UK. So far, German infringement courts do not take third party interests into account and justify this with the rationale that the requirements for a compulsory license should not be undermined.

According to the current timeline, it is expected that the law will pass on May 7, 2021. Following this, German patent law will be more closely aligned to the transformed technical and economic environment that triggers patent enforcement.

Germany’s current patent litigation regime

In Germany, if a patent is infringed and the infringement court expects that the patent will survive a separate validity proceeding, a German court will automatically issue an injunction pursuant to section 139(1) of the German Patent Act. The infringement and the validity of patents are tried in separate proceedings (the so-called bifurcated system).

In the infringement proceedings, the courts consider patent validity only at a high level to decide whether to stay the proceedings pending the outcome of a separate opposition proceeding or nullity action. A stay of the infringement proceeding requires a high likelihood that the patent will be invalidated.

While only a small percentage of infringement proceedings are stayed pending the outcome of a validity proceeding, the percentage of patents that are invalidated or reduced in scope in the nullity proceedings is high.

The German Federal Court of Justice (Bundesgerichtshof [BGH]) had recognised the relevance of the principle of proportionality in patent infringement proceedings, even though it is currently not yet written in the statute. In 2016, the court confirmed in its Wärmetauscher decision that patent injunctions are subject to proportionality considerations.

The BGH mentioned use-by periods as an example of a suitable means to avoid disproportionate consequences, but eventually granted the injunction. Since this decision, many lower courts decided cases in which proportionality considerations played a role. So far, however, no German court has refused to grant an injunction because of disproportionate effects.

Reasons for reform

Impact on defendants and third parties

With its bifurcated system and automatic injunctions that can be enforced provisionally, Germany is an attractive forum to enforce patent rights. This can, however, have a significant impact on defendants. They may well be permanently put out of business with respect to the accused product on the basis of an automatic injunction and may not be able to re-enter the market once the injunction is lifted, eg, if the patent falls.

Third-party interests may also be seriously affected by an injunction, eg, if allegedly infringing products are of fundamental importance or vital for patients undergoing medical treatment. A recent example is the PCSK9 inhibitor Praluent (alirocumab) that had to be taken off the market in Germany following a first instance decision that the plaintiff provisionally enforced.

The underlying patent was later invalidated, and the injunction lifted. The Federal Patent Court had refused to grant a compulsory licence and patients were forced to stop their treatment with Praluent.

Technological and economic background

A reform seems necessary to reflect a changing technological and economic reality since the introduction of the first German Patent Act in 1877. Nowadays, products have reached a high level of complexity. The number of patents implemented in complex products and thus the length of manufacturing chains increased significantly.

In this situation, manufacturers of small components enforce patents outside their own level of the manufacturing chain against the manufacturer of the final product. Moreover, the eBay v MercExchange decision (cf. section 2.3 below) led to the rise of so-called non-practising entities that hold patents for products or processes without any intentions of developing them but enforce their patent rights around the globe. These changes require that courts take a closer look at the specific circumstances of each case or at least entertain the question of whether an automatic injunction is always the appropriate remedy.

Different approaches in other jurisdictions

Other jurisdictions show more flexibility in their approach to granting injunctions. For instance, in 2006, the US Supreme Court’s eBay v MercExchange decision changed the rules that apply to patent litigation in the US. According to this decision, an injunction can be granted only if (i) the plaintiff has suffered an irreparable injury; (ii) remedies available at law are inadequate to compensate for that injury; (iii) considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (iv) a permanent injunction would not disserve the public interest. Otherwise, the injunction is deemed disproportionate.

In the UK, the enforcement of an injunction may be disproportionate, but only in very exceptional cases, and third party interests are considered. It is the rule that injunctions are granted in the first place. The courts distinguish between “provisional injunctions” before the clarification of the legal position and “final injunctions” afterwards. An injunction is less frequently granted before the status of the patent is clarified.

Proposed amendment

Against this background, the German government proposed a modernisation of the German Patent Act.

Proportionality

The most important change for patent litigation relates to section 139(1) of the Patent Act. The government proposed to clarify that the claim for an injunction can be excluded in exceptional cases. Pursuant to the draft, the courts should be able to weigh the interests of the patentee and the infringer in the individual case, which is, as the government points out correctly, essentially an implementation of the Wärmetauscher decision.

In addition, third party interests shall also become relevant, what they are currently not in infringement proceedings.

Balancing criteria

The government deliberately refrained from listing specific case groups. However, as per the draft, balancing the interests of the patentee, the infringer and third parties could include the following considerations (cf. pages 60 et seq of the draft):