IP-Litigation in Germany. German and European Patent, Trademark and Design Attorneys Lawyers

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1 IP-Litigation in Germany German and European Patent, Trademark and Design Attorneys Lawyers

2 What is a litigation team in Germany? In contrast to litigation procedures in certain jurisdictions, in particular the US, a German litigation team requires far fewer personnel. This is, primarily, a result of German litigation having no Disclosure, thus relieving us from having to screen endless volumes of documentation pertaining to the case. It is typical for a German litigation team to comprise an Attorney at Law who has specialized in, and has extensive knowledge of, IP litigation and German Court proceedings, and the Patent Attorney who has ultimate responsibility for the technical aspects of the case. Naturally, for extremely complex and extended cases, this team of two Attorneys may be strengthened by additional Lawyers as necessary.

3 In a nutshell: Why Litigate IP in Germany? Experience: German courts have an excellent reputation for IP-litigation, and in particular for patent litigation. It is worth remembering that 2/3 of all patent litigation proceedings in Europe are tried before German courts. Quick Decisions: The issuance of a judgement from the court of first instance will typically take around 9 to 14 months (with the assumption that the scope and complexity of the case is average) which is quicker than for other jurisdictions. With regard to patent matters, this is primarily a result of the German courts not reviewing the validity of the asserted patent, and focusing solely on the question of infringement. Foreseeable Costs: The costs for IP-infringement proceedings are readily calculable and are reasonable when compared with other countries. The governing principle is: the loser pays which does not mean that the losing party must pay the actual legal expenses incurred by the prevailing party. The losing party has only to bear the court fees and the fees of the attorneys of the prevailing party up to a certain, reasonable, level which is stipulated by statutes. Quick Interim Relief: Preliminary injunctions are a standard measure in IP matters in Germany; injunctions may even be issued within a few hours if the case is really urgent (e.g. trade shows). German courts can also issue preliminary injunctions ex parte. Efficient Pre-trial Discovery: In recent years, the applicable statutes have been amended to include effective tools which ensure that evidence can be preserved and gathered in the pre-trial stage. That is, search orders are granted if the mere likelihood of an infringement is given. Well-organized border seizure: German customs authorities cooperate closely with IP owners to provide samples of accused products.

4 I. How to establish jurisdiction in Germany German courts assume jurisdiction for IP-litigation if the defendant is domiciled in Germany. Additionally, German jurisdiction can be established if either the infringement activity takes place in Germany, or if the result of the infringement activity will have an effect on German territory. In this regard, one should note that in recent years German case law has tended to interpret these requirements in a very broad way: it suffices, for example, that an English website is accessible by German consumers and that products may be ordered over this website; or for this website to refer to a German subsidiary or agency. Ultimately, it is possible to establish jurisdiction in Germany by luring the infringer into offering and selling infringing products to German customers. This form of mystery shopping is fully endorsed by the German courts, and is in line with German law on the taking of evidence. Court of Appeal Hamburg 2

5 II. Duration and Course of Action 1. Duration Naturally, the length of any infringement proceedings depends on the scope and complexity of the individual case. In particular, it is decisive whether the court has to appoint an independent expert in order to gain a better understanding of the underlying facts of the case at issue. This is however rarely the case. Generally, it takes a court of first instance between 9 and 14 months to render a judgement. This judgement is provisionally enforceable if a security is posted (in practice: a bank guarantee). The enforcement of the judgement leads, in many cases, to a favourable settlement. This is particularly true in patent matters, where a favourable judgement in Germany will often serve as the starting point for the settlement of a multi-jurisdictional litigation. 2. Course of action Infringement action in Germany is initiated by the plaintiff, and is begun with the submission of a statement of claim (Klageschrift). This brief must contain a complete representation of the case, covering both factual and legal issues. In this manner, the process differs substantially from the notice-pleading which is common in Anglo- American jurisdictions. The statement of claim is subsequently served on the defendant by the court. Within 4 to 6 weeks of the statement of claim being served, the court may fix a so-called early oral hearing (Früher erster Termin) for discussion of procedural questions and setting of deadlines for the filing of briefs. It is worth noting that this is the standard practice of the Düsseldorf court, which is the busiest court for IP matters in Germany. The defendant will typically be given 2 to 3 months in which to present the statement of defence (Klageerwiderung). After a further similar period, the plaintiff must file a reply which is then followed by the defendant s rejoinder. 3

6 The court will usually allow between 8 and 10 months for this exchange of written arguments. After the exchange of written arguments, a public main oral hearing (Haupttermin) will take place. In such hearings, the presiding judge takes the lead and discusses all relevant issues and renders, in general, a preliminary opinion. If technical questions remain unclear, the court may decide to appoint an independent expert. The court will usually issue the decision within two months of the hearing. An appeal can be filed against an unfavourable judgement within one month of the decision. A written statement containing the full grounds of appeal must be filed within one further month of lodging the appeal. Please note that the appeal proceedings do not suspend the enforcement of the judgement. If the Court of Appeal admits a further recourse to the Federal Supreme Court, a binding decision requires three instances. In most cases, however, the decision of the Court of Appeal will be the final and binding one. III. The correct venue There are 12 district courts (Landgerichte) which specialize in patent litigation, 16 district courts which specialize in design cases and 21 district courts which specialize in trademark matters. If the accused products have been distributed nationally, for example as a result of their display on a website accessible in Germany, the plaintiff has a choice of forum among these courts. In patent infringement proceedings, the most commonly used courts in Germany are the Düsseldorf, Mannheim and Munich I courts. These three courts alone hear over 900 cases a year (more than in all other European jurisdictions). As a result of their experience and expertise, predictable decisions with a uniform and reliable quality are guaranteed. In design and trademark matters, the district courts of Munich, Cologne and Hamburg are the most renowned. 4

7 IV. Patents: Principle of Separation In most European countries, as well as in the United States, the infringement court simultaneously assesses both the validity and the infringement of a patent in suit. In Germany, these questions are dealt with by separate bodies in different proceedings: civil courts are used for the question of infringement, whilst the German Federal Patent Office will consider oppositions and the Federal Patent Court will decide on nullity actions. A consequence of this separation is that any lack of validity of the patent in suit cannot, as a general rule, be raised during infringement proceedings, since the civil court is not competent to hear arguments in this respect. This means that the court handling the infringement action must, in principle, proceed on the basis of the patent as granted. If defendants wish to question the validity of the patent in suit, they must either file an opposition within the opposition period or, if this term has lapsed, a nullity action, and request that the infringement court stay the infringement action until a final decision on the validity of the patent in suit is issued by the competent body. This request will only be followed if the infringement court believes that the challenge of the validity of the patent will very probably be successful. As a rule, a stay of proceedings is granted in only 5-10% of cases. V. Interim Relief on what terms? Preliminary injunctions are most commonly used in IP-infringement cases which deal with trademarks, copyrights or design rights. In cases of particular urgency, for example: if a trade show takes place, the court may issue an ex parte injunction within one or two days and sometimes even within a few hours. 5

8 In patent infringement cases, the courts are more reluctant to grant interim relief as a result of their technical complexity. The infringement courts are inclined to only issue a preliminary injunction if the validity of the patent in suit is not questionable and if the infringement is clear-cut (excluding in general cases under the doctrine of equivalents). Preliminary injunctions may, of course, be appealed by the defendant. Such an appeal does not, however, suspend the enforceability of the preliminary injunction. If the Court of Appeal overturns the District Court s decision, and if the preliminary injunction had already been enforced by the applicant, the applicant has to reimburse the defendant all damages which were incurred as a result of the enforcement. If a party expects to receive a preliminary injunction, a so-called Anticipatory Defence Brief (Schutzschrift) may be filed with the competent courts. This brief defends against the issuance of the injunction, or at least ensures that a hearing will be scheduled during which the defendant can present a defence. VI. Is Pre-trial Discovery available? German law does not provide the same scope of pre-trial discovery typical in the United States or the United Kingdom. In recent years, however, significant changes have taken place, which have improved the opportunities for IP-owners to obtain pretrial discovery. German IP laws now entitle any person with a standing to sue in infringement proceedings to request from the potential infringer the inspection of an object at his disposal, or of a procedure carried out on his premises, even if only a mere likelihood of an infringement is given, and if the inspection is necessary to substantiate the asserted claims for infringement. This inspection claim is often asserted in preliminary injunction proceedings and is - in particular in patent matters - combined with the independent procedure for the taking of evidence (selbständiges 6

9 Beweisverfahren) under sec. 485 et seq. of the German Code of Civil Procedure. In these proceedings, the applicant can request that the court orders the inspection of the accused product/method by a court-appointed expert, who then renders a corresponding expert opinion. This expert opinion serves as suitable evidence in subsequent infringement proceedings on the merits, and is often decisive for the outcome of the proceedings. VII. What are the Remedies? The first and most important remedy is injunctive relief. If the infringing party continues to sell products which fall under the scope of an asserted IP right, after injunctive relief is granted and after this decision is enforced, a fine is levied which can amount to up to 250, This fine is assessed by the infringement court and is payable to the Federal State in which the infringement court has its seat. In addition to injunctive relief, the plaintiff may request that the infringing party renders the accounts relating to the infringing activities and submits pertinent documentation (e.g. bills, invoices, shipping orders, etc.). This information claim is, to a certain extent, an auxiliary tool to the claim for damages by the plaintiff. The damage claim presupposes that the infringing party acted with fault (i.e. intentionally or negligently) which is generally the case, however, since it is assumed that a person undertaking business in a certain field knows of the existing IP rights which might conflict with business activities. The precise amount of the damages incurred by the plaintiff is determined in separate proceedings. In practice these proceedings rarely take place, since in most cases a settlement is reached before such proceedings are initiated. The plaintiff is free to calculate the damages which are incurred according to the following three methods: lost profits, reasonable royalties (so called licence analogy method ), or surrender of the profit generated by the infringer. 7

10 Since 2001, as a result of a decision from the German Federal Supreme Court, the third method (surrender of infringer s products) has become very attractive and is generally the standard method of calculating damages. In this decision, the German Supreme Court limited the options of the infringer to deduct overhead costs from the turnover generated with the accused products. In practice, the infringer s profits amount to between 20% and 50% of the turnover, depending upon the nature of the infringed IP right. Furthermore, the infringing party is under obligation to destroy the infringing products in its possession, and to recall or remove the infringing products present in the distribution chain. Ultimately, in special cases, the plaintiff may even request a publication of the decision (i.e. its material parts). VIII. The Cost Risk In Germany, the costs involved with infringement litigation tend to be lower than in most other jurisdictions. The governing principle is that the winner takes it all. This means that the losing party has to reimburse all of the costs incurred by the prevailing party, i.e. court fees paid, attorneys fees as well as patent attorneys fees. This reimbursement claim does not cover the actual fees asked for by the attorneys and patent attorneys of the prevailing party, but is limited to statutory fees according to the German Code on Attorneys Fees. In practice, these statutory fees are significantly lower than the actual fees. In addition, the precise court fees are stipulated by statutory provisions. The calculation of both the court and the attorneys fees is made using the amount in contention (Streitwert), which equates to the economic interest of the plaintiff in pursuing the case. NOTE: The amount in contention is not equal to the estimated damages. This amount is assessed by the infringement court, which enjoys discretion in this respect. In patent matters, the amount in contention is rarely below 250,000.00, in design and trademark matters rarely below 150,

11 Costs Infringement Action Set out below is a list providing an overview of the cost risk associated with certain standard amounts which are in contention: Infringement Action District Court Fees Mio. 1,5 Mio. 2 Mio. Attorney 5.632, , , , , ,50 Patent Attorney 5.632, , , , , ,50 Court 6.312, , , , , ,00 Cost Risk* , , , , , ,00 Court of Appeal Fees Mio. 1,5 Mio. 2 Mio. Attorney 6.308, , , , , ,40 Patent Attorney 6.308, , , , , ,40 Court 8.416, , , , , ,00 Cost Risk* , , , , , ,60 German Supreme Court Fees Mio. 1,5 Mio. 2 Mio. Attorney 8.561, , , , , ,40 Patent Attorney 8.561, , , , , ,40 Court , , , , , ,00 Cost Risk* , , , , , ,60 Nullity Action Federal Patent Court Fees Mio. 1,5 Mio. 2 Mio. Attorney 5.632, , , , , ,50 Patent 5.632, , , , , ,50 Attorney Court 9.468, , , , , ,00 Cost Risk* , , , , , ,00 German Supreme Court Fees Mio. 1,5 Mio. 2 Mio. Attorney 6.308, , , , , ,40 Patent 6.308, , , , , ,40 Attorney Court , , , , , ,00 Cost Risk* , , , , , ,60 * Cost risk = plaintiff s attorney and patent attorney; defendant s attorney and patent attorney and court fees

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