Monday, August 5, 2013

Tetzner on permanent injunctions under German law

As I discuss in my book (pp. 245-48), to date German courts almost always award the prevailing patent owner a permanent injunction, unless the defendant successfully raises the competition law (Orange-Book-Standard) defense (which is rare).  According to the Orange-Book-Standard decision, TFEU article 102 prevents a patent owner who occupies a dominant position in a relevant market from obtaining an injunction, if the following two conditions are met:  (1)  The infringer proves that it “made an offer, ready for acceptance, on contractual conditions, which the patent holder cannot refuse without thereby treating the party seeking a license unequally without good cause as compared with similar enterprises or impeding him inequitably”; and  (2) it “behaves as if the patent holder had already accepted his offer” by paying “the consideration that the licensee would be obliged to pay according to a non-discriminatory or non-obstructive licence contract.”  BGH May 6, 2009, GRUR Int. 747, 2009 (Ger.), English translation available at 41 IIC 369-75 (2010).  In practice, however, it has proven extremely difficult to meet these conditions.  In addition, German courts have held that for the defense to apply, the potential licensee also must agree not to challenge the patent’s validity.  See, e.g., OLG Karlsruhe, Jan. 23, 2012, 6 U 136/11, Mitt. Heft 3/2012, 137.  Of course, it is possible that the Orange-Book-Standard framework will be modified in the near future.  The European Commission has issued Statements of Objections against both Motorola and Samsung, based on these firms’ requests for injunctive relief despite having committed to license their SEPs on FRAND terms, in possible violation of E.U. competition law.  See European Commission, Press Release, Antitrust:  Commission Sends Statement of Objections to Motorola Mobility on Potential Misuse of Mobile Phone Standard-Essential Patents (May 6, 2013), available at;  European Commission, Press Release, Antitrust:  Commission Sends Statement of Objections to Samsung on Potential Misuse of Mobile Phone Standard-Essential Patents (Dec. 21, 2012), available at   And in March 2013, a German court referred to the Court of Justice for the European Union (CJEU) the question of whether it is an abuse of dominant position, in violation of E.U. competition law, for the owner of an SEP who has made a FRAND commitment to seek an injunction when the infringer has expressed its willingness to negotiate a FRAND license.  See LG Düsseldorf, March 21, 2013, Case No. 4 b O 104/12, GRUR-RR 196, 2013.  But for now, at least, the conditions under which German courts will deny permanent injunctions are pretty narrow.

During my visit to Munich last month, however, my friend Dr, Heinz Goddar alerted to me an old law review article by Dr. Heinrich Tetzner, Patentschutz wesentlicher Grundstücksbestandteile, in Deutsches Gemein- und Wirtschaftsrecht vom 1. und 15. Februar 1942, 3/4, at pp. 44-45.  The title translates to something like Patent Protection of Essential Property Components.  Tetzner adapted and expanded the relevant portion in his 1972 book Das Materielle Patentrecht der Bundesrepublik Deutschland, at pp. 87-88.  Tetzner’s subject is whether patent rights can subsist in articles that are incorporated into real property.   In relevant part, Teztner writes (this is my translation, from his 1972 book, so apologies if it's a bit rough):
The approach to the foregoing question must start from the common principle, that the exercise of subjective rights are constrained by the protectable interests of society, that any exercise which infringes upon the common good is a misuse.  Moreover, the assertion of a claim arising from patent law may not succeed, if it will result in a disproportionate destruction of business value, if the tearing apart of a thing into components, which the exercise of exclusive patent rights always threatens to imply, either reduces the value of a portion disproportionately or gives rise to costs which are out of proportion to the value of the part. . . .

. . . This patent protection is not lost through its installation in an unmovable asset; but it is, according to common principles, possible that the assertion of a patent claim is constrained.  The patent owner cannot proceed without consideration for the damage accruing to the infringer, and there must be a comparison of interests, whereby all the circumstances of the case are considered, as well as the degree of fault on the part of the infringer in relation to the person who stands to be injured by the removal of the portion.
The article is also cited with approval in the Benkard patent treatise.  See Benkard Patentgesetz, 10th edition, page 1401, number 26a, last sentence of first paragraph.  The basic idea reminds me of such pre-eBay cases in the U.S. as City of Milwaukee v. Activated Sludge, Inc., 69 F.2d 577, 593 (7th Cir. 1934), in which the court decided not to enter an injunction the immediate consequence of which would have been the discharge of raw sewage into Lake Michigan.   

If German courts were to apply this principle in standard essential patent cases, would they conclude that (at least sometimes) an injunction should not issue because it would lead to a disproportionate burden on the defendant?  On the one hand, if the maker of a device infringes an SEP and is enjoined, consumers who already are in possession of the infringing devices are not likely to be required to stop using them.  And the device is a mass-market product, unlike, say, a building.  But the harm suffered as a result of the injunction can be greatly disproportionate to the ex ante value of the patent, and an appropriate balancing of interests may well lead one to conclude that no injunction should issue (without having to invoke competition law).

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