Yesterday I reported on HTC's withdrawal of an appeal against a Mannheim ruling in favor of patent holding firm IPCom. I published the original German ruling and an English translation provided to me by a third party.
Large parts of that ruling are very technical and relevant only to one particular patent. But the decision also contains various passages that make a great starting point for anyone researching differences in patent enforcement between U.S. and German patent law. Or in other words, it's a textbook example of how pointless and wasteful (and possibly even counterproductive) it is to raise American arguments in a German court.
Honestly, I facepalmed when I read about some of HTC's arguments. Someone should put up signs in the arrivals halls of all German airports that say in big letters: "THIS AIN'T AMERICA!"
I consider myself an Americanized European, and I'm sympathetic to some of HTC's proposals. But this is one of many examples of companies trying to persuade the courts to change the law. That's not what courts are for. It's the prerogative of elected lawmakers.
Systemic differences regarding injunctive relief and damages
In Germany, we tend to have a zero tolerance policy toward anything prohibited. If something is "verboten" (a word that has common roots with "forbidden") or "untersagt" (same composition as "interdit" in French), we don't only say it. We mean it. Few countries enforce prohibitions more strictly.
That attitude is reflected in our legal system, which places an extremely high, near-absolute priority on stopping at the earliest opportunity, or preventing prophylactically, transgressions of all sorts. We know that our legal system can err, but we generally prefer it to err on the side of prohibition.
This also means that in case of doubt we're inclined to let someone enforce a patent that may not turn out to be valid at the end of a separate nullity proceeding. In the case of IPCom v. HTC, this means that HTC, after failing to show a "high probability" of invalidity in the infringement proceedings (a standard that is comparable to the clear and convincing evidence standard required in patent infringement disputes in the U.S.), probably can't prevent the enforcement of the injunction based on the state of affairs in a parallel nullity proceeding (until that one ends, which gives IPCom plenty of time to enforce the ruling and pressure HTC into a license deal).
But when it comes to monetary damages, we're very conservative. If someone wants to claim damages, we're rather skeptical and require fairly hard evidence. This isn't inconsistent with the prohibitionist approach. After all, if an injunction comes down early enough, we won't even have to talk about huge damages. So we try to enjoin infringers early and often.
By contrast, U.S. law takes a more differentiated look at the question of how to make the victim of an infringement whole. Some remedies (such as damages) are "available at law", meaning a plaintiff who proves a certain violation is entitled to them. Others are only available based on the concept of equity, and are granted exclusively if legal remedies wouldn't be sufficient. In other words, if some other form of relief, which would typically come down to monetary damages, is considered sufficient, then there won't be an injunction. And damages can reach much higher levels in the U.S. than in Germany, though I'd like to note that most people overestimate, by far, the opportunity to receive huge damage awards under U.S. tort law: the most spectacular amounts that have been reported over the years largely related to settlements as well as verdicts that were overturned or substantially adjusted.
One could have endless -- and even interesting -- debates over which system results in greater justice. If I wanted to sue someone, I'd prefer to do so in the U.S., but if someone sued me, I'd rather be sued in Germany. That's a different kind of debate. In connection with the ongoing wireless patent disputes, the U.S. is the most important jurisdiction in the world and Germany is clearly number two, way ahead of any other country on this planet. Various major players now have to defend themselves in Germany, and it's important that they understand certain systemic and cultural differences, even though the grass always appears to be greener on the other side of the fence.
Passages from the IPCom v. HTC ruling
Here are a couple of passages from the decision that show how much of a long shot (actually, "long shot" is an understatement) HTC's lawyers attempted in their American defense against the German IPCom complaint. I used the translation provided to me and edited it where I thought this resulted in an improvement:
"Defendants and Intervener remain unheard with respect to their reasoning based on comparative law relating to the concept of equity in countries with an Anglo-Saxon legal system. The Chamber is bound by applicable national law."
While I don't know what exactly HTC told the court in this context, the above sentence is pretty damning. Apparently HTC's counsel told the Mannheim court about how various Common Law countries approach the question of injunctive vs. monetary relief. I'm sure the judge follows develpoments in international patent law and is aware of what other countries do, but his job is to apply German law.
In another paragraph, the judge replies to HTC's argument that IPCom shouldn't be granted an injunction since it does not practice the patents it owns. That would actually go way beyond the legal standard in the U.S., where non-practicing entities can still win injunctions and even ITC import bans if they meet certain requirements. In his dismissal of HTC's NPE argument, Judge Voß explains the legal framework in Germany:
"The patent as a subjective property right grants the patent owner, pursuant to Art. 64 (1) of the European Patent Convention as read with § 9 sentence 2 of the [German] Patent Act, an exclusive legal position against any other person. In this respect, the patent owner is accorded property under constitutional law (Art. 14 (1), 19 (3) of the Basic Law [Germany's constitution]). The legislature, which is responsible for determining the content and limits of such property (§ 14 (1) sentence 2 of the Basic Law), has not linked the perception of the exclusivity right pursuant to § 9 sentence 2 of the Patent Act to simultaneous use of the patent (§ 9 sentence 1 of the Patent Act) by the patent owner. A patent owner who does not use the patent itself is equally protected and already has, with respect to the enforcement of its intentions of use by granting licenses, an interest worthy of protection and an authorized interest of his own in enforcing the exclusivity right to which he is entitled."
In the next paragraph, Judge Voß also explains that there's an unbelievably high hurdle under German law -- of a theoretical more than practical nature -- if a patent infringer attempts to prevent an injunction from being granted:
"No circumstances have been pled here, or are otherwise apparent, which would make enforcement of the cease-and-desist claim seem disproportionate. The Chamber does assume in principle that the enforcement of a cease-and-desist claim can be disproportionate since rights arising from a patent are not granted without limits (Art. 14 (2) of the Basic Law, § 242 of the German Civil Code). However, since the legislator does not make the cease-and-desist claim subject to any general prohibition on commensurability (not so: § 140a (4), § 140b (4), § 140c (2), § 140d (2) of the Patent Act) and the cease-and-desist claim secures the exclusivity right protected under constitutional law, the scope of the disproportionality defense remains restricted to atypical exceptional cases which could not be foreseen by the legislator. The fact that the patent licensing entity is attempting to enforce a cease-and-desist claim in order to urge infringing parties to pay for a license does not, in the view of the Chamber, constitute such an exception but rather is an inherent part of the patent system as part of the applicable legal and economic system, especially since a patent licensing entity will usually be urged to take such action with respect to existing license agreements."
The last sentence means that a patent holder has a duty (at least a moral one, if not in some cases a contractual one) to protect his paying licensees against unfair competition by enforcing his patent against all infringers, given that otherwise non-paying infringers would be able to undercut paying licensees.
The key legal statement in the passage quoted above is that an injunction is the norm in Germany as a remedy for patent infringement, and, conversely, the only way to change this would be to modify the German Patent Act accordingly (which might in turn require changes to the European Patent Convention, a treaty that Germany agreed to implement in its national law, and possibly to the German constitution). In other words, if you want to change the law, don't submit pages and pages of "equity" theories to such courts as the Mannheim Regional Court. You're not going to prevail; to some of that you're not even going to get a substantive response because it's off-base.
When in Rome, do as the Romans do.
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