Modernizing German Patent Law: Toward an explicit obligation for proportionality control of injunctions?

Just over ten years after the last amendment to the German Patent Act, the German Federal Ministry of Justice and Consumer Protection submitted a discussion draft at the beginning of this year that provides for a selective revision of the Act. The overall objective of this revision is to achieve an ‘effective and balanced protection of industrial property rights’. The main proposed amendments concern injunctive relief under Section 139(1) of the German Patent Act and the application of the new German Act on the Protection of Trade Secrets in patent litigation cases. In a laudable aspiration to open the dialogue, the Ministry of Justice and Consumer Protection called for comments regarding the considered amendments. In response to this call, the Max Planck Institute for Innovation and Competition has released a Position Paper. While the Institute generally welcomes the initiative, the paper offers some suggestions aimed at increasing precision in the areas of first, the concept and the implementation of the proportionality test for granting injunctive relief, and, second, the need for enhanced protection of trade secrets in patent disputes.

Concerning injunctive relief, the discussion draft proposes to amend Section 139(1), which currently reads as follows: ‘Any person who uses a patented invention contrary to sections 9 to 13 may, in the event of the risk of recurrent infringement, be sued by the aggrieved party for cessation and desistance. This right may also be asserted in the event of the risk of a first-time infringement.’ There is an ongoing debate in Germany as to what extent this wording allows for proportionality considerations. In a landmark judgment of 2016, the German Federal Court of Justice decided that courts should have latitude to deny an injunction if its issuance would be disproportionate. In response to this decision of the Court of Justice’s, the Ministry of Justice and Consumer Protection proposes to insert a third sentence to Section 139(1): ‘The claim is excluded insofar as its enforcement is disproportionate because it constitutes a hardship not justified by the exclusive right under the special circumstances and taking into account the interests of the patentee vis-à-vis the infringer and the principle of good faith’. This proposed addition is motivated by the concerns expressed in Germany by the automotive and telecommunications industries at courts’ reluctance to rely upon proportionality as a corrective mechanism against undue injunctions, in particular against the background of digitalization and the increased technological complexity of products.

With regard to the proportionality assessment, the Max Planck Institute suggests that, rather than reducing it to an application of the principle of good faith, the concept of proportionality should be interpreted and applied in light of the ratio legis of patent protection to prevent dysfunctional effects potentially resulting from the exercise of the exclusive right and the associated claim to an injunction. In this regard, the position paper argues that it is neither desirable nor appropriate to prioritize the interests of the patentee over those of the infringer as a matter of principle. The starting point for the proportionality assessment should instead be the question of whether the enforcement of the claim to injunctive relief will result in the ‘exclusionary value’ of the injunction claimed in the dispute becoming out of proportion with the competitive market value of the subject-matter of protection (ie, the market value of the invention under conditions of effective competition). Scenarios involving complex products, non-practicing entities and standard-essential patents are used to illustrate the approach.

The Institute also takes a position against the discussion draft’s rejection to take into account third-party or public interests within the proportionality assessment. Public interest considerations are an inherent part of the patent system. It should therefore be possible for a court to refuse to issue an injunction if the latter is disproportionate due to a public interest in keeping the infringing product on the markets, insofar as the plaintiff’s interest in patent protection can be effectively satisfied in monetary terms.

Concerning the application of the procedural provisions contained in the German Trade Secrets Act to patent disputes, the position paper argues for the need for enhanced protection of confidential information. The German Trade Secrets Act, which transposes the European Trade Secrets Directive, already presents certain deficiencies in the protection of the parties' secrecy interests, because of the impossibility of restricting access to confidential information in legal proceedings to the parties' legal counsel. This insufficiency, if transposed to patent infringement proceedings, would first conflict with the existing procedural mechanism for independent evidence-gathering (known as ‘Düsseldorf proceedings’), the purpose of which is precisely to prevent the patent holder from getting access to the alleged infringer's confidential information. Such an approach would, furthermore, facilitate ‘fishing expeditions’, in which the patent owner, by claiming a violation of its exclusive right, gains access to trade secrets of competitors.

Luc Desaunettes-Barbero is a Doctoral Student and Junior Research Fellow at the Max Planck Institute for Innovation and Competition

Prof. Dr. Reto M. Hilty is a Director at the Max Planck Institute for Innovation and Competition, and Professor at the University of Zurich

Daria Kim is a Doctoral Student and Junior Research Fellow at the Max Planck Institute for Innovation and Competition

Dr. Matthias Lamping is a Senior Research Fellow at the Max Planck Institute for Innovation and Competition

Peter R. Slowinski is a Doctoral Student and Junior Research Fellow at the Max Planck Institute for Innovation and Competition

Prof. Dr. Hanns Ullrich is an Affiliated Research Fellow at the Max Planck Institute for Innovation and Competition