As the leading voice for small business innovators, ACT | The App Association works hard to bring the small business voice to legal and policy discussions about standard-essential patents (SEPs). Our goal is to create an environment that allows small businesses to contribute to and utilize standardized technologies. A balanced approach to patents is one that appreciates the voluntary fair, reasonable, and non-discriminatory (known as “FRAND”) commitment made by patent owners. In our members’ experiences, SEP licensing abuse hurts their ability to be successful, compete, and grow.

As part of our SEP-related efforts, we hosted a workshop in Berlin, Germany, earlier this year. This workshop, “German Leadership in Standard Essential Patents & FRAND Licensing,” aimed to clarify the complex SEP licensing process for key German stakeholders, particularly because German courts are now a popular stage for SEP disputes in the European Union (EU). Our workshop gathered experts and practitioners for a day of presentations and panel sessions, including a keynote by Nikolaus von Peter, the European Commission’s (EC) representative in Germany, who emphasized the importance of fair SEP licensing for access to technology. The workshop also included discussion of a new set of best practices for SEP licensing in internet of things (IoT) technologies developed by a diversity of interests ranging from tech to auto and others.

The panels addressed a wide range of topics, including verticals now being affected by SEP licensing abuse, such as the auto industry, and the subsequent discussion reached some interesting conclusions. For example, one panel found agreement amongst the workshop’s participants that Germany’s current patent law does not sufficiently reflect the EU’s IPR Enforcement Directive (IPRED) proportionality principles and identified areas for improvement in Germany’s approach to SEPs.

At the end of the workshop, participants identified an important call to action and the App Association recognized Germany’s ongoing patent reform efforts as a key opportunity to share the results of the workshop. The App Association later issued a workshop report where we suggested cross-sector collaboration to develop specific recommendations on patent reforms in Germany. We shared these recommendations with German policymakers.

Since our workshop, we see some positive developments in Germany. At the end of last year, the German newspaper Handelsblatt published an article entirely focused on patent reform – the first of its kind as far as we are aware. The German Ministry of Justice reportedly plans to release a framework paper on key issues related to patent reform at the beginning of 2020.

In the article, one of our workshop participants, patent expert Florian Müller, emphasized that “patent holders use courts to request that production of vehicles and operation of telecommunications networks in Germany is stopped entirely. Nobody really wants to sue Germany back into the 19th century. It’s entirely about money and how much more can be pocketed with maximum pressure. Because telecoms, automakers, and electronics firms often don’t have a choice after losing a patent dispute, they just quietly pay millions or billions.”

Members of Angela Merkel’s governing party (CDU) stated that, “when large amounts of patents are bought out to threaten companies with halting their production processes, that constitutes an abusive practice that we have to shut down.” They noted that this is especially the case when it comes to SEPs.

Overall, the German government is reportedly considering two reforms:

  1. Currently, patent-related injunctions do not stipulate a proportionality assessment – this could be changed, and procedural law could be modified accordingly.
  2. An infringement lawsuit in a Landgericht (district court) does not currently take into account the often-lengthy lawsuits in the Bundespatentgericht (federal patent court), in which the patent’s validity is examined. Thus, the German government suggests a synchronization of proceedings – as EU law actually requires an examination of proportionality before issuance of a ban on production or sales.

The App Association is glad to see that Germany policymakers are closely paying attention to the SEP issue, and patent reform widely. These are positive developments, especially for small businesses. Often, small business growth depends on a single product, and an injunction can be devastating for small and medium enterprises (SMEs). This is why considering issues like proportionality of the remedy, in conjunction with other variables such as antitrust factors, before awarding an injunction would really help. By addressing the current imbalance of power in the German patent space, Germany would align itself with many other leading jurisdictions. Such reform would provide much-needed certainty to countless SMEs that innovate using standardized technologies and allow for their continuous growth and competition in new technological spaces.

You can find our full report on the Berlin workshop here.

The Handelsblatt article (in German) is available here.