How To Use EU/German Litigation As Part Of A U.S. Patent Enforcement Strategy

Tuesday, April 22, 2014 - 12:19

The Editor interviews Dr. Frank D. Peterreins, a Principal at Fish & Richardson. Dr. Peterreins has a German trial practice specializing in complex patent litigation.

Editor: How does German patent litigation differ from patent litigation in the United States?

Peterreins: The German patent litigation system is different in many respects from the U.S. patent litigation system. While this does not mean that the German system is better than the U.S. system, it does have some advantages that should be considered when developing a global patent litigation strategy to achieve clients’ goals.

One major advantage of the German system is that a patentee can get an injunction within a relatively short time frame, usually within seven to 16 months. There are various reasons why infringement litigation proceedings can be handled more quickly in Germany. First, discovery proceedings are limited. Second, there is no jury trial, and court experts are appointed only in a relatively low number of cases. Third, German district courts only decide on the infringement question in so-called bifurcated proceedings; validity is decided either by the European Patent Office (EPO) in opposition proceedings or by the German Federal Patent Court in nullity proceedings. As a result, a patentee may get an injunction before there has been a validity decision. A defendant will usually try to convince the judges about its non-infringement positions; to get the infringement proceedings suspended in view of clearly novelty-anticipating prior art filed in the invalidity case; or to convince the judges that a court expert is necessary in view of the complexity of the case.

But there are also other European legal “tools” that can help patentees, including European border seizures; evidence seizures on the basis of a court order which was granted in ex-parte proceedings; preliminary injunctions in case of clear-cut infringements; and German utility models, which can be asserted very efficiently in parallel to German/European patents.

Editor: Why is Germany an important forum for bringing patent enforcement litigation within Europe?

Peterreins: Approximately 60 percent of all European patent litigation is handled by German courts. German patent judges are very experienced in handling patent cases. German district courts are organized in specialized patent chambers. This results in a relatively high level of predictability in German court decisions.

The costs of German patent litigation are quite reasonable, usually on the order of around 20 percent of a comparable UK patent litigation, and on the order of around 10 percent of a U.S. patent litigation.

In my experience, patentees have a better chance of winning a patent litigation matter in Germany than in other European jurisdictions.  In particular, German district courts usually apply a broader claim construction compared to UK courts, even if the same European patent (EP) is asserted in those jurisdictions, and UK courts are – at the same time – usually stricter when assessing patentability compared to the German Federal Patent Court and to the European Patent Office (EPO).

Finally, the German market is usually the most important European market in terms of revenues and damages.

Editor: What are the unitary patent and the Unified Patent Court?

Peterreins: The unitary patent is a proposed new patent that will be directly valid in the participating European Union (EU) member states, i.e., without additional validation requirements. The unitary patent is established under an “enhanced cooperation” of the EU member states, and not all EU member states are expected to participate. In addition, European countries that are not members of the EU, like Switzerland, have no right to join the new system.

The unitary patent was approved by the EU Parliament and Council in December 2012. It requires a “minimum ratification” by at least 13 EU states, including France, Germany and the United Kingdom to enter into force.  The goal of the unitary patent is to reduce the cost of translations, validations in EPO member countries, and annuities. And I am confident that the unitary patent will be a great success. 

Unitary patents will be granted by the EPO and can be granted on the basis of presently pending EP applications. Therefore, an applicant might want to delay the examination proceedings until the “minimum ratification” is completed which will – according to the latest news – take place in 2016.

A new Unified Patent Court (UPC) system will start operation at the same time as the unitary patent. It will be possible to enforce conventional EP patents as well as unitary patents in the participating EU member states by filing a single patent litigation action in the UPC. Of course, if such an action is based on an existing EP patent, the action will only cover those countries in which the EP patent was validated. 

My prediction is that the Unified Patent Court system will initially be used for existing EP patents. Many companies will be hesitant to apply for unitary patents until they recognize that unitary patents significantly help to save costs.

The Unified Patent Court system will have a Central Division in Paris, with subdivisions in London and Munich, and local divisions in many of the member states. According to the jurisdiction rules, most cases will be handled by the local divisions. And although the new system provides the theoretical possibility to bifurcate validity and infringement proceedings (in line with the German system), German judges have already indicated that they intend to decide infringement and validity issues within the same proceedings. The Appeals Court will be located in Luxembourg. I am confident that the Appeals Courts will harmonize the existing national case law and the case law of the EPO on validity.

Editor: If implemented, how will the Unified Patent Court impact the way patent litigation is handled in Germany or Europe?

Peterreins: First of all, I am sure that the influence of the German case law on the new case law of the Unified Patent Court will be significant.  In addition, the new Unified Patent Court opens several new strategic options. For example, when a patentee intends to assert an EP, he will have the choice to “opt out” from the Unified Patent Court system by filing a request with the EPO.  With that, he can still use the German patent litigation system to assert the German part of an EP.

However, opting out is only possible if a case is not yet pending before the Unified Patent Court.  Therefore, an alleged infringer can block the opt-out possibility by filing a European nullity action with the Central Division.

I expect that most EU patent litigation actions will be handled by the German local divisions, namely the divisions in Munich, Düsseldorf, Mannheim and Hamburg, because the German approach is generally more favorable to patentees. By filing an EU action with a German local division, a plaintiff will be more likely to benefit from broader claim construction and more favorable legal views on infringement questions.

Editor: What factors should a U.S. company consider when using German or European patent litigation as part of a global patent enforcement strategy?

Peterreins: From a U.S. perspective, one main question is whether the pressure on the defendant can be significantly increased by getting an injunction quickly in Germany or Europe.  In a global world, some defendants cannot afford to be faced with an injunction and will have to accept the patentee’s settlement terms.

German case law is also much more favorable in the case of a “split infringement” situation. In the case of a software invention, a German court would usually confirm an infringement within Germany if the result of a software algorithm is offered or sold in Germany, even if the server which has carried out the algorithm is not located in Germany.

Another consideration is cost. In some cases, the U.S. litigation system is too expensive relative to potential damages. In those cases, a German or European litigation could be the way to go.  And after a positive outcome for the patentee, the decision of the German court could be leveraged by means of the parallel U.S. patent.

On the other hand, the existing case law of the EPO on validity is very strict in some respects. In problematic cases, it might thus make more sense to only file a patent action with a U.S. district court. 

Editor: Are U.S. companies litigating more, or less, in Europe?  What trends are you seeing?

Peterreins: U.S. companies are litigating more and more in Europe because relying only on the U.S. litigation system would be myopic in a global economy. In some industries, for example the medical device industry, patent litigation often starts in Europe, followed by parallel U.S. litigation two or three years later. This is because medical device companies typically get marketing approval in Europe much earlier than in the United States.  

Companies can expect that potential damage amounts granted by the local divisions under the Unified Patent Court system will be at least comparable to damages awarded in U.S. courts; however, the concept of treble damages for willful infringement will still not apply in Europe.

Since litigation costs are much lower in Europe, and the damages granted by European courts will be much higher in the future, I predict that the new Unified Patent Court system will also be attractive to patent-holding companies. 

Editor: How can a U.S. company keep informed about the progress of the unitary patent and Unified Patent Court as well as on the development of the case law?

Peterreins: Official sources are available at http://unified-patent-court.org/ – provided by the Preparatory Committee – and at http://www.epo.org/ – i.e., the website of the European Patent Office.  We post a lot of useful information on our website: www.fr.com/unitary_patent/. The German case law on infringement litigation is discussed in my book Kühnen/Peterreins, Patent Litigation Proceedings in Germany – A Handbook for Practitioners.

Please email the interviewee at peterreins@fr.com with questions about this interview.