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Closing the "Injunction Gap": Overhaul of German Patent Act Speeds Up Litigation
In Short
The Situation: Traditionally, the German patent litigation system has been notorious for its "injunction gap." Infringement and invalidity proceedings are handled separately by different courts. This has resulted in a time lag between the decision in the infringement proceeding and the corresponding invalidity case. While it takes the regional courts about 12 to 18 months to rule on infringement, nullity proceedings require at least 24 months from filing to judgment. German courts therefore often grant injunctions before the validity of the patent in a suit has been adjudicated.
The Result: The new "qualified notice" shortly after filing the nullity action is intended to put the assessment of infringement and validity by the courts in sync and thereby close the "injunction gap." This solution represents a compromise between the old detached system and a true alignment of the time frames of both proceedings. The latter will be achieved with the Unitary Patent Court ("UPC") system that is likely to become a reality in 2022 or 2023.
Looking Ahead: The qualified notice will play an important role in future infringement proceedings. The infringement judges, who usually have no technical training, will refer to it for orientation and are very likely to follow the lead of the Federal Patent Court in their decisions. While this development does not speed up the finalization of the nullity action as such, it is likely to help create a closer temporal connection between these two proceedings.
An upcoming change in Section 83 of the German Patent Act ("PatG") will close the gap between the duration of patent infringement compared to the duration of invalidity proceedings in Germany. From May 1, 2022, onwards, the German Federal Patent Court is obligated to send the parties a "qualified notice" which summarizes the court's preliminary assessment of the validity of patents in suit within six months from service of a nullity action against German and European patents. Also see our recent Commentary, "Still Alive: The German 'Automatic Injunction' in Patent Infringement Cases Under the New Patent Act."
The problems the "injunction gap" brought for a fair process had become obvious over the past decades. One of the biggest risks was the possibility of a judgement finding infringement and ordering the infringer to provide the patentee with detailed information regarding production and business channels, before the validity of the patent had been assessed. If the patent was ultimately revoked, this confidential information has already been disclosed to a direct competitor—a damage that could not be undone.
This illustrates why the "infringement gap" was subject to much criticism in the patent community. The introduction of the early qualified notice is an improvement that leaves the overall structure of bifurcation unchanged, maintaining its key advantage of technically skilled judges reviewing the validity of the patent.
With only six months and one to two briefs per party (at most) in the nullity proceedings before the "qualified notice" is issued, the facts of the case will have to be submitted under great time pressure and in a very concise manner. As the nullity proceedings become more front-loaded, it will be necessary for the parties to research all possible prior art and prepare their arguments early on in the process, even out-of-court.
In the event a warning letter is received, quick action with regard to assessing the possible nullity of the patent will become even more crucial, in order to be prepared in case an infringement action is filed. On the other hand, patentees should aim at anticipating and assessing all possible invalidity arguments against their patent in a potential nullity action before an infringement action is filed, since during the proceedings there will be little time to react.
In the big picture, the reform will make patent litigation in Germany both more effective and balanced. On the plaintiff side, the main advantage is that a positive qualified notice combined with a corresponding decision finding for infringement will be hard to overturn in most cases. This result can be obtained within 12-18 months from the filing of the infringement action. Such a decision can be used as a lead decision by the plaintiffs for parallel cases in other jurisdictions or settlement talks.
Two Key Takeaways
1. For the first time, the non-technical judges of the regional courts can rely on the expert opinion of the German Patent Court when it comes to assessing the strength of a patent. This will require both patentees and alleged infringers to adjust their litigation strategies.
2. The qualified notice on validity will offer early guidance on whether an overall decision in favor of the patentee is to be expected. This opportunity to then receive a sound infringement ruling potentially after 12 months makes the German national litigation system even more attractive as a lead case in international cross-border litigation.
