Today's Nokia v. Lenovo standard-essential patent (SEP) injunction is just the latest--and for sure won't be the last--in a string of German patent rulings that underscore the need for serious reform. Absent forceful legislative intervention, various German patent judges and their "forum-selling" mentality will turn their jurisdiction into a tool for extortion that will cost the real (product-making) economy dearly and enrich only those whose business model or career is all about patent litigation.
Stakeholders had until Wednesday of last week (September 23) to provide feedback the latest draft patent reform bill (the second one to be published) by the Federal Ministry of Justice of Germany. Yesterday the ministry published the submissions (almost all of which were written in German) on its website.
All in all, the reactions validate my initial assessment that the second draft constituted a major improvement over the first one from the perspective of defendants:
Those who had previously made it clear that no injunction reform would be the best reform reiterate that view and are sure to point out that the first draft would yet be the lesser evil from their perspective than the second. A chemical industry association had already taken that position in a statement to financial daily Handelsblatt in early September.
Those who advocate meaningful reform recognize that progress has been made, but most of them appear to think the draft statute doesn't go far enough. I never said that the first draft was perfect, but what surprised and impressed me was that it clearly departed from the previous informal pledge of allegiance to the case law of the Federal Court of Justice on patent injunctions.
In my previous post on this reform process I outlined the procedural steps that remain--and the risk of reform opponents running out the clock, in which case the most likely outcome would be an unhelpful pseudo-reform.
With a view to last week's submissions, I'd like to share just three more observations:
Reform opponents keep making multiple submissions (with Siemens effectively being behind at least three, and having influenced a couple more, submissions, but also the aggressive patent abusers of Nokia and Ericsson utilizing more than one channel) while pro-reform forces, apart from Nvidia and Deutsche Telekom, make the mistake of communicating with politics only through their industry associations. Some pro-reform players stand for huge numbers of jobs in Germany, giving them every right to make corporate statements beyond whatever watered-down positions result from association-internal consensus building.
Your focus on consensus is part of the mentality that prevents Germany from being a major player in the Digital Economy. It's about preserving the things of the past instead of coming up with better solutions for the future. It's what makes large German companies appear like dinosaurs in a world increasingly belonging to revolutionaries.
While Siemens is hyperactive in lobbying, I wouldn't trust their head of IP in this context as far as I could throw him, considering the things I heard him say on a conference call in the spring (with members of the German parliament) and his other statements, including his written submissions, on this topic.
Siemens's feedback to the second draft reform bill is wrong in so many ways I can't address them all, but one is very easy to demonstrate and shows they don't strive to be truthful or, more likely, don't care to do their research homework before making an official submission to their government. In the fourth section of that letter, Siemens says that the latest SEP jurisprudence in Germany--to wit, Sisvel v. Haier, Nokia v. Daimler in Mannheim, Sharp v. Daimler in Munich)--"shows [...] that the courts are very much capable of taking into consideration the proportionality of remedies--such as through the requirements for collateral--in their decisions."
No. Not only do those decisions fail to address proportionality in light of the EU's enforcement directive (banning complex multifunctional products over minor features) but the collateral in Sharp v. Daimler is chump change relative to what's at stake: 5 million euros and a half. Even considering Daimler had told the court that Sharp's exhaustive component-level license deal with Huawei reduced the impact of an injunction by 86%, that tiny amount (over which Sharp could post a bond or which it could deposit) is ridiculous even for just 14% of Daimler's Germany-wide sales. Siemens should recognize this mistake and resubmit its statement after at least deleting its reference to that case.
Today's ruling in Nokia v. Lenovo is another example of the new Munich minimalism when it comes to security--and maximalism when it comes to SEP enforcement.
While it is true that the Mannheim Regional Court's Nokia v. Daimler injunction comes with a huge requirement for collateral (€7 billion), there are SEP holders (from outside of Europe) who actually have the liquidity to make such a deposit and enforce--and the appeals court could lower the amount anytime, though fortunately it convinced Nokia to commit to refrain from enforcement while Daimler's motion for an enforcement stay is pending.
As for the impact of Sisvel v. Haier, it took only one week for the first decision to come down and validate my prediction that "more unhinged" SEP injunctions were going to come down in Germany as a result of that (mis)guidance by the Federal Court of Justice.
While Siemens is just annoying, Ericsson is at least funny.
They seriously tell the German government in their submission--more than once and always in bold-face letters--that the new draft injunction statute would make Germany less attractive and relevant a patent litigation venue. That's a crazy argument to make in an economic policy context. The name of the game is what's best for the economy and, by extension, for consumers, and not for the patent litigation industry. There's nothing desirable about being a patent litigation hotspot for the economy at large.
I'll keep following this reform process. The next step will be for the ministry to finalize its position in light of the feedback it just received.
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