ACT | The App Association is a long-time advocate of strong intellectual property protections and works hard to include our members’ voices in the relevant policy development processes taking place across the EU. Small tech businesses thrive in environments where they can enjoy legal certainty and which reflect widely accepted fairness principles. However, tech small and medium enterprises (SMEs) have long faced difficulty in Germany. Under the current legal framework, courts issue injunctions against those accused of patent infringement without fully determining if infringement has occurred. The courts also do not consider whether the remedy they order is proportionate to the impact on the public interest. For example, does an accusation of infringing a single patent in one component of a complex device warrant the prohibition of its production entirely? Fortunately, the German government just took an important step towards creating a more competitive and innovation-enabling environment in Germany by modernising its Patent Act.

In January 2020, the German Ministry for Justice and Consumer Protection (BMJV) published its tentative draft (Diskussionsentwurf) for a modernised Patent Act. Then, in September, the BMJV released a second draft (Referentenentwurf), whereafter the federal government published its final draft act in October 2020. The draft act then went on to be debated by the German parliament, the Bundestag.

Throughout the last year, the App Association participated in every step of the legislative process. We submitted feedback to each draft released by the BMJV, met with Members of the Bundestag and participated in stakeholder roundtables. We urged the German government to:

  • Introduce a proportionality test into §139 of the Patent Act concerning injunctions and the inclusion of third-party interests.
  • Align German patent law with the Intellectual Property Rights Enforcement Directive (IPRED) of the European Parliament and the Council and eliminate quasi-automatic injunctive relief that is possible in the German system. The IPRED’s Article 11 states that “[t]he competent courts can issue an order against the infringing party upon finding an infringement of an intellectual property right, which prohibits the infringer from further infringing the right in question”.
  • Reduce the timespan between an injunction and a validity test (injunction gap) to avoid situations in which an injunction is granted for a patent that is later declared invalid or should not have been granted in the first place.

Following stakeholder consultations and considerable debate in the Bundestag, an agreement emerged on the draft for a “Second Law on the Simplification and Modernisation of the Patent Act” in June 2021. Below we’re highlighting the two most important changes.

Amongst other things, the modernised Patent Act provides for a change to §139, which regulates injunctive relief for the patent holder in cases of patent infringement. The new revision now allows for the limitation of injunctions for proportionality reasons. This means an injunction can be restricted if claiming it would result in disproportionate hardship for the infringer or third parties due to the extraordinary circumstances of the individual case and the good faith requirement. Appropriately, the patent holder is not disadvantaged because they would then receive additional monetary compensation. A proportionality test is now codified into the law, providing courts with an express basis for temporary or permanent suspension of an injunction against fair compensation, in addition to potential damages, for past infringements. This proportionality test will help address cases related to aggressive patent trolls, or instances where a discrepancy exists between invention value and economic loss of the defendant or detriment to ‘paramount interests’ of third parties. It remains to be seen over the next several years which cases will trigger these restrictions of injunctive relief and how the modernised Patent Act will impact the way Courts grant injunctions in patent litigation.

Additionally, the revised Patent Act provides for a rule under which the federal patent court (the Bundespatentgericht, which provides validity decisions) “shall” provide to the litigants a first indicative assessment/interim decision of the case within six months after a nullity action has been filed. This rule aims to accelerate patent nullity proceedings as well as improve the synchronisation of infringement proceedings before civil courts and the nullity proceedings before the federal patent court. At the moment, infringement proceedings are often decided before a decision on the validity of a patent has been reached, and the often mismatched timelines of both proceedings can be frustrating for those accused of infringement as they can’t point to an invalidated patent during infringement proceedings. While this new approach is meant to reduce unnecessary delays and inform both litigants and the infringement court before a decision is reached, the modernised Patent Act does not increase funding and staffing for the federal patent court so it remains unclear how significant the impact of this change will be. Funding and staffing of the federal patent court, however, is a separate and currently ongoing discussion.

Although the modernised Patent Act has not been signed into law, we expect it to enter into force shortly, a move welcomed by the App Association. Because an injunction can be devastating for SMEs whose business models and growth often depend entirely on one product line or offering, it’s so important that courts confirm an injunction is in the public interest. For this reason, considering the proportionality of a remedy before granting an injunction is essential to ensure continued small business competitiveness and a level playing field for all actors. We believe this modernised Patent Act addresses some of the current power imbalances in German patent law and aligns Germany meaningfully with many other leading markets.