Monday, May 21, 2018

Stays Pending Design-Around in Germany, Part 3: Don't Hold Your Breath

As most readers are aware, following the U.S. Supreme Court's 2006 decision in eBay v. MercExchange courts deny the prevailing patent owner an injunction about 1/4 of the time, and award instead an ongoing royalty.  Patent assertion entities almost never get injunctions, but even operating companies sometimes are unsuccessful in obtaining injunctions, particularly where the patent is only one of many embodied in a complex device.  Occasionally, however, courts adopt something of an in-between position, awarding a permanent injunction but delaying (staying) the entry of the injunction for a period of time, to enable the infringer to come up with a noninfringing design-around; in the interim, the infringer will pay an ongoing royalty.  Sometimes this may seem more equitable or proportionate than either granting an injunction that would take effect immediately, or denying the injunction altogether.

In most other countries, injunctive relief remains the norm, though (depending on the circumstances and the country) there sometimes can be ways to avoid it--in the common law countries, as a matter of equitable discretion, or in civil law countries by application of the abuse of right doctrine, or else by means of competition law (e.g., Huawei v. ZTE) or perhaps via application of the "proportionality" concept set forth in the E.C. Enforcement Directive.  I think it's fair to say, however, that German courts do not interpret any of the possible exceptions to injunctive relief very broadly.  (See also this recent discussion  on IPKat.)  And while there is some potential leeway in Germany to stay an injunction pending design around--a concept known as the Aufbrauchfrist--to date German courts have applied this procedure only rarely.  The leading case is a 2016 decision of the Bundesgerichtsfhof--Judgment of 10 May 2016, X ZR 114/13 (Wärmetauscher, or "Heat Exchanger"), available in the original German here--which I've discussed on this blog a couple of times previously (here and here).  As those posts indicate, the German court seems to be of the view that the Aufbrauchfrist should rarely if ever be granted in a patent case.

A more recent decision of the Düsseldorf Landesgericht (trial court), which I learned of from Daniel Hoppe's article titled Die Rechtsprechung der deutschen Instanzgerichte zum Patent- und Gebrauchsmusterrecht seit dem Jahr 2016 ("The Patent and Utility Model Case Law of the German Lower Courts Since 2016"), GRUR-RR 2017, 465, further drives home the point.  In its Judgment of March 9, 2017, 4a O 17/15, the court denied an Aufbrauchfrist that would have stayed an injunction to enable the defendant to design around a medical device (an "Apparatus for endovascularly replacing a patient's heart valve").  Consistent with Wärmetauscher, the court describes the Aufbrauchfrist as exceptional, available only in narrow circumstances, etc. etc.  The court then states (paras. 213-217) that is not evident from the governing case law that the interests of third parties or of the public should be considered at all, in deciding whether to grant such a stay.  According to the legislature, the right to an injunction doesn't depend on proportionality considerations; rather, those considerations may play a role only in determining whether to grant a compulsory license   under section 24 of the Patent Act.  (Later in the decision, however, the court does conclude that the interest of third parties is to be considered in deciding whether to order the recall and destruction of the infringing goods, and that here such an order would cause disproportionate harm to the interests of hospitals, heart centers, and patients.)  Further, the court sees nothing out of the ordinary in granting an injunction here, or any bad faith on the part of the patentee; interestingly, perhaps, the court notes that the patent owner is not a PAE.

Bottom line:  maybe the German courts someday will come around to the view that granting a stay pending design-around is a good idea in a wider range of cases.  But for now, I wouldn't hold my breath waiting for that to happen.  

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