Highlights:

lIn Germany, infringement and invalidity proceedings are handled by different courts. Under the previous legal framework, the Federal Patent Court took longer to resolve invalidity proceedings compared to regional courts handling infringement cases. This allowed patent holders to obtain preliminary injunctions from regional courts, even if the patent's validity was weak. The revised German Patent Act addresses this timing gap between infringement and invalidity rulings (the so-called "injunction gap"). The revised law requires the Federal Patent Court to issue a preliminary opinion on the patent's validity within six months of receiving the invalidity lawsuit. This opinion can usually be presented around the oral hearing of the infringement lawsuit, enabling regional courts to decide whether to stay the infringement proceedings based on this opinion. This change makes the analysis of patent validity more critical than before.

lAccording to German case law, claim interpretation must consider the patent specification and court rulings, as accurate interpretation directly affects the determination of infringement and validity, with significant risks associated with misinterpretation. In contrast, the European Patent Office (EPO) only interprets claims when they are unclear, leading to different validity and infringement judgments between regional courts and the EPO. However, this discrepancy is gradually diminishing as the EPO aligns its practices with those of German regional courts.

lWhen facing infringement, patent holders can seek relief through preliminary injunctions or proceedings on the merits. While preliminary injunctions provide quick protection, they require urgency. If urgency is not met, patent holders can pursue their rights through proceedings on the merits. During these proceedings, it is crucial to carefully coordinate arguments and timelines between infringement and invalidity cases to ensure effective protection of rights.

Germany is by far one of China’s most important trading partner in Europe. Conversely, China is Germany’s number one economic partner country in Asia. Due to this interdependence, IP disputes involving Chinese companies are commonplace in Germany. This article will provide examples of litigation strategies for Chinese companies and focus on some key aspects of first instance proceedings, as well as provide salient suggestions.

It is self-explanatory that a Chinese enterprise can be faced with IP litigation actively, by suing competitors or passively, by being sued. It is, however, not straightforward, to know which strategy applies in different cases. Even if there was prior opportunity to gather experience in German patent litigation, it has to be considered that mayor developments are going on.

For example, the German Patent Act was amended a few years ago to close the so-called injunction gap, among other things. German case law is also being developed continuously. Another important change was the introduction of the UPC as an alternative to national patent disputes. In addition, the case law of the Boards of Appeal of the European Patent Office (EPO) is constantly updating. It is therefore important to check in each individual case; whether it is advantageous to use a patent that is still in the opposition period for a patent dispute, or not.

In addition to these recent developments, the risks of the proceedings must be properly assessed at a very early stage, as these will determine the right strategy and next steps. One of the key elements to this is a thorough interpretation of the claim based on the relevant German case law. Furthermore, the strategy also depends on whether preliminary injunction (PI) proceedings, or proceedings on the merits are to be, or have been filed. Moreover, the costs associated with a potential loss or success may factor into deciding how to proceed with the litigation.

Last but not least, it is paramount that the right team is selected for the patent dispute. In Germany, patent disputes are usually handled by specialized teams of attorneys-at-law on the one hand, and patent attorneys on the other. Usually, the attorneys-at-law focus on the infringement proceedings and the patent attorneys on the validity proceedings.

1. The impact of closing the "injunction gap"

In the past, Germany was known for being patentee friendly, as it was possible to get an injunction on a preliminary basis, already with the first instance judgement. This is because Germany has a bifurcated system, where infringement proceedings and invalidation proceedings are handled separately by separate courts. As the invalidation proceedings at the German Federal Patent Court sometimes took more than one year longer than the infringement proceedings at a regional court, the parties usually experienced a delay between the first instance judgement on infringement, and the first instance judgement on invalidity, the so-called injunction gap.

As a result, it was possible to obtain an injunction in the first instance, which was enforceable on a preliminary basis, while the first-instance judgment on validity was not yet available. This means that even patents with weak legal validity could be provisionally enforced until the first-instance judgment on the invalidity of the patent was issued.

This gap was now closed by an amendment of the German Patent Act, by introducing the requirement that a preliminary non-binding opinion (PNBO) shall be issued by the German Federal Patent Court six months after the service of the nullity action to the patentee. Although, it is not always possible for the German Federal Patent Court to keep this deadline. Usually the preliminary non-binding opinion is available around the oral hearing of the infringement proceedings, so that the responsible regional court is able to decide based on this opinion of the specialized German Federal Patent Court on the stay of the infringement proceedings.

In a similar way, the opposition divisions of the EPO also try to issue a preliminary non-binding opinion six months after the opposition has been filed, if it has been notified that a patent litigation based on a European patent is pending in a contracting state.

The main impact of these changes is, that strategies established at the outset of litigation may lose their effectiveness, if the proceedings are based on patents, whose validity has not been thoroughly examined in advance. The fact that in the past less than 30% of patents survived the first instance nullity or opposition proceedings, as granted, shows that a thorough analysis of validity is an important factor.

Therefore, the thorough examination of the validity of a patent in German litigation has become more important today than in the past. Such an assessment requires a deep understanding of the underlying German case law, as well as extensive experience in patent litigation practice at German courts.

2. The importance of claim interpretation

In order to obtain a proper understanding of the validity and infringement of the asserted claims, claim interpretation is of utmost importance in German patent litigation. It is not uncommon to start the proceedings with a certain understanding of the patent claim, only to arrive at a completely different understanding, in the course of the proceedings, if the assessment has not been prepared thoroughly enough. This does not mean that surprises can be completely ruled out, but they can at least be significantly reduced, if the claims are interpreted correctly.

German case law plays an important role in this process. Since Germany is by far the European country with the most patent litigation proceedings, there is a wealth of established case law that must be applied when interpreting the claims.

According to German case law, the claims must always be interpreted, even if the wording of the claims appears to be clear on its own. The claims must be interpreted in accordance with the description, and there are also a number of judgments of the Federal Court of Justice that must be taken into account in this process.

An important aspect of this practice is that the patent is its own lexicon. The skilled person who only reads the claim, but not the description, may have a certain understanding of certain technical terms in the claim. However, according to German case law, this is not necessarily the correct interpretation of the terms, if the description uses these technical terms in a completely different context, or with a different meaning. A sole consideration of the patent claim therefore leads to an increased risk, that the assessment of validity and infringement may be incorrect with regard to German patent practice.

Another aspect of German patent practice is that the prosecution history is not used for claim interpretation. Nevertheless, the prosecution history can play a role in exceptional cases, e.g. if the patent expressly mentions in the description that it intends to distinguish itself from certain features of the prior art.

This case law may therefore result in the scope of protection being narrower than originally expected or in the scope of protection containing an aliud, which may have a significant impact on the assessment of the infringement or the validity of the claims.

This German practice is in contrast to the practice of the EPO, which only interprets claims in exceptional cases, e.g. if they are unclear. This entails the risk that the regional courts will apply a claim interpretation that differs from that of the EPO. This may result in the regional court taking the view, on the basis of its claim interpretation, that the claim is infringed, but not valid, while the EPO upholds the patent on the basis of its deviating claim interpretation.

The possible deficiencies arising from not taking the description into account when interpreting the claims were recognized by the EPO. Therefore, a referral to the Enlarged Board of Appeal on claim interpretation is now pending (G1/24). This referral asks; whether, and when, the description and figures can be used to interpret the claims when assessing patentability in proceedings before the EPO.

Although the referral is still pending, the recent practice of Boards of Appeal case law already shows a certain tendency that the description should or will be used more frequently to interpret claims. It therefore appears, that the gap between the EPO's approach, and German case law, on claim interpretation is closing at least a little.

Although it is still too early to describe the UPC's approach in detail, it appears that it follows a similar approach to German practice. However, there is no definitive decision from the Court of Appeal that provides clear guidance.

In summary, incorrect or incomplete claim construction can pose significant risks for both infringement and invalidity proceedings. This applies to both sides; both the plaintiff, and the defendant. For the plaintiff, this can lead to non-infringement and the loss of the patent. For the defendant, the risks of infringement may be misjudged, and the chances of the patent being declared invalid overestimated. An experienced team of attorneys-at-law and patent attorneys usually helps to make a realistic risk assessment and to reduce the risks during the proceedings.

3. Which procedure is best suited (PI or proceedings on the merits)?

a) PI proceedings

Applying for a preliminary injunction (PI) appears to be an attractive way for companies facing patent infringement by competitors to enforce an intellectual property right. On the other hand, it can be a “worst case scenario” for a company under attack from a competitor.

Regardless of the case law, a preliminary injunction can primarily serve to quickly enforce a claim for injunctive relief, for example the exhibition of infringing products at a trade fair or the importation of the infringing product into Germany. It is however not limited to such cases.

An application for a PI can be filed in very urgent cases instead of, or in parallel with, proceedings on the merits. An important prerequisite for the application for a PI to be granted is urgency. Urgency is given, for example, if an infringing product has just been launched on the German market.

According to German case law, there is generally a time limit of one month for filing the PI request, typically as soon as the patent proprietor becomes aware of the possible infringement. As soon as the patent proprietor has the allegedly infringing product in his hands, he is obliged to immediately and comprehensively examine the object in question in order to assess whether there is an infringement of property rights. This means, that all necessary investigations must be initiated as quickly as possible. In the event of a positive finding, the application for a PI must be pursued without delay.

Next, there must be sufficient certainty for the court, that the patent or utility model in suit is both valid and infringed. This means that it must be more likely that the contested property right is valid and infringed than not.

Moreover, according to German case law, it is also generally recognized that such a degree of certainty has to be obtained e.g. by first instance decision in opposition or nullity proceedings, so that a wrong decision is not seriously to be expected. Also, the European Court of Justice (ECJ) emphasized in a decision that a preliminary injunction can only be considered for a “patent which it [the trial court] considers to be legally valid and infringed”. According to the case law of the ECJ, the trial court must therefore be certain that the patent is legally valid and that it has been infringed. Consequently, a review of the validity of the patent in suit is required in PI proceedings, if this has not already been proven in nullity or opposition proceedings.

In order to contest the validity of the patent or utility model, prior art needs to be filed with the court together with arguments which clearly show that the patent or utility model is not valid.  

It is therefore difficult to obtain a PI for a utility model, as this is not an examined property right and the legal uncertainty for the courts deciding on validity is too great. An exception could be, that a parallel patent application with the identical claims has been deemed patentable, but has not yet been granted. To save time, a utility model could be used instead of a patent in such a case.

In addition, not only the validity, but also the infringement must be proven with a high degree of probability. In order to defend against a PI application, clear and convincing arguments should be presented to the court to prove the non-infringement of the patent or utility model. In this context, it should be noted that the judges at the German regional courts are very experienced in patent disputes and have a good technical understanding. However, they typically have a legal background and generally no technical background. It is therefore advisable to use clear language to explain complex technical issues.

If infringement and validity can be explained convincingly and some formal requirements are met, such as the sending of a warning letter to the alleged infringer, it is possible for the court to issue a PI without hearing the defendant (ex parte). However, these exceptional cases only occur, if the infringement situation is not technically complex, and the validity of the intellectual property right has already been proven or the defendant has already reacted to it in another context.

To reduce the risk of an ex parte PI, a protective letter can be filed with the German courts. In this protective letter, arguments for non-infringement, or invalidity, or both, can be put forward. This protective letter is kept for a certain period of time in a register to which only the courts have access. As soon as a request for a PI is filed, the competent court checks; whether a protective letter has been filed for the patent in dispute, and takes it into account for the further proceedings. Only in such a case will the plaintiff receive a notification of the protective letter and the corresponding arguments.  

The normal case is an inter partes procedure, with an oral hearing or at least, the opportunity for the defendant to respond to the plaintiff's application, with a written statement on infringement, validity and formal aspects such as urgency, etc. As the deadlines for responding to the plaintiff’s application are usually very tight, the defendant must react very quickly in order to prepare the relevant defense arguments. Usually, oral hearings can take place within a few weeks of the application for a PI.

The defendant may lodge an appeal against the preliminary injunction, if it was issued without an oral hearing. If a preliminary injunction has been issued with an oral hearing, an appeal against the decision can be lodged within one month of the decision. In any case, it is not advisable to lodge the appeal only formally. Instead, we recommend, submitting a well-founded appeal, with strong and convincing arguments, that have a chance of overturning the first instance decision. As a rule, only in such a case can an early summons to an oral hearing in the appeal matter be obtained.

In summary, the high requirements of urgency and validity must be met by the claimant in addition to an infringement of intellectual property rights, to ensure that there is a reasonable prospect of a PI being granted. On the other hand, a defendant already has a good chance of preventing the granting of a PI, if it can prove that; either the strict requirements of urgency, or the infringement, or validity of the IP right, have not been met by the claimant.

b) Proceedings on the merits

As outlined above, urgency is a strict requirement for a chance to obtain a PI. If this requirement cannot be met, proceedings on the merits are necessary to enforce the rights arising from an intellectual property right.

An infringement action can be based on a patent or a utility model. It must be filed with a regional court. Court fees must be paid, which are based on the amount in dispute, and to a certain extent, reflect the assumed value of the proceedings. The amount in dispute is usually between 250,000 euros and several million euros, but is limited to 30 million euros. The resulting court fees range from a few tens of thousands of euros to several hundred thousand euros.

As soon as court fees have been paid, the infringement action is served on the defendant. As long as the defendant is a company with its registered office in Germany, service is fairly quick. However, if the defendant company is based outside Germany, and especially outside Europe, service of the infringement action can take some time - even several months. Therefore, if the proceedings are to proceed quickly, it is advisable to pay the court fees,  when the action is filed, and to sue a company or subsidiary based in Germany. If a subsidiary is sued, care must be taken to ensure that this subsidiary is actually involved in the infringing act, e.g. by advertising or selling the infringing product.

When the action for infringement is served, the regional court usually requests the defendant to respond within two weeks, for example, as to whether he intends to defend himself against the infringement action. This response must be submitted by a German lawyer. If the defendant or his representative does not respond within this period, a default judgment will be issued. The defendant is therefore strongly advised to find an experienced law firm, within this short period of time, that can successfully handle the infringement case.

With the statement that the defendant wants to defend against the infringement action, the defendant can demand security from the plaintiff, if the plaintiff is not domiciled in a member state of the EU. This security usually covers the court fees, statutory attorney's fees, and other costs, such as reimbursable expert opinions, as the losing party must bear the costs of the proceedings. In order to avoid such a security deposit, the infringement action can be filed in the name of a German or European subsidiary. To do this, the subsidiary must be entitled to use the property right, which can be regulated by a simple contract between the parent company and the subsidiary.

In addition, the regional court sets a deadline for filing a reasoned statement of defense, if the defendant wishes to defend itself against the infringement claim. This deadline is usually two months, but may be extended upon request by one or two months. The statement of defense should cover all formal aspects, such as standing to sue, arguments for non-infringement, arguments for invalidity and, if the patent is a standard-essential patent (SEP), all issues related to FRAND.

In order to have a chance of staying the infringement proceedings with regard to a possible invalidity of the patent, an opposition or nullity action should be filed no later than the expiry of the deadline for the statement of defense. Therefore, in addition to searching for suitable attorneys-at-law, experienced patent attorneys should also be selected at a very early stage for the preparation of the nullity action against the patent in suit. The nullity arguments should be aligned already at a very early stage of the proceedings, with the non-infringement arguments. Coordinating the arguments and strategy in both proceedings significantly increases the chances of a successful defense against the infringement action.

As already mentioned, claim interpretation is one of the key issues in the proceedings. Thus, the defendant may be faced with the situation that, on one claim interpretation the patent is not infringed but valid, and on another claim interpretation the patent is infringed, but not valid. Faced with such situations, the arguments in both proceedings must be carefully selected so as not to lose either option, as it is difficult to predict how the courts will ultimately rule. In some cases, even non-infringement arguments may need to be weakened somewhat to strengthen the invalidity arguments, as they are more likely to succeed - or vice versa. However, this requires the team of attorneys-at-law and the team of patent attorneys to work hand in hand.

After the statement of defense has been submitted, the plaintiff is given the opportunity to respond to the defendant's submission. The deadline for this is usually set by the court at two to three months and can be extended upon request. In the next step, the defendant has the opportunity to refute the plaintiff's arguments within a further deadline set by the court. In exceptional cases, the parties may submit further written submissions before the hearing, and outside the time limit set by the court. As a rule, these pleadings will not be ignored by the regional court, unless they are submitted less than seven days before the oral hearing.

Expert opinions of the parties can be submitted at any time with the pleadings. However, as a rule of thumb, it is not advisable for the plaintiff to submit such an infringement expert opinion, as this could give the impression that the argumentation regarding the infringement is not clear, but rather far-fetched.

Invalidity proceedings or opposition proceedings take place in parallel to the infringement proceedings. The nullity action or opposition is generally used to challenge the lack of enablement, the added matter, the lack of novelty, and the lack of inventive step. It is strongly recommended to present all arguments clearly and precisely in the nullity action, as this is usually the only chance for the opposing party to present the arguments before the preliminary non-binding opinion.

If the contested patent is still within the opposition period, there is a choice of challenging the patent; either with an opposition or with an action for revocation. In this context, it is important to know that the opposition proceedings do not begin before the expiry of the opposition period. This means that it can take up to nine months for opposition proceedings to begin, if the patent has just been granted. Alternatively, a nullity action can also be filed with the Federal Patent Court, which begins once the court fees have been paid and the action has been served. However, the nullity proceedings can be suspended if an opposition is filed at the same time. At least the oral hearing in the nullity proceedings may only take place once the opposition proceedings have been concluded.

Also bearing in mind that lack of enablement and added matter are handled more strictly at the EPO than at the Federal Patent Court. Therefore, even if one might lose a few months before the opposition proceedings to start, it may be the better choice to file an opposition, if there are clear problems with lack of enablement and added matter.

Similar to the infringement action, a court fee must be paid for filing the nullity action. As in infringement proceedings, the court fee is calculated on the basis of the value in dispute. If the nullity plaintiff is not domiciled in Europe, the nullity defendant can also demand a security. If the infringing defendant is not domiciled in Europe, the nullity action could be filed by a subsidiary domiciled in Germany or Europe, in order to avoid the provision of security. As in infringement proceedings, the unsuccessful party must bear the court costs and the statutory legal fees of the opposing party.

Please note that only a court fee of approximately 1,000 euros is payable in the opposition proceedings at the EPO. In addition, there is no reimbursement of costs for the winning party. Only in exceptional cases does a party have to bear certain costs of the proceedings.

Once the nullity action or opposition has been filed, and the court fees have been paid, the Federal Patent Court or the Opposition Division of the EPO will serve the action which takes several weeks. It is therefore advisable for the nullity plaintiff to pay the court fee immediately, preferably when filing the nullity action. If payment is delayed by several weeks or even months, the infringement court may interpret this as a lack of will on the part of the defendant to expedite the proceedings. As a result, the infringement court may not be inclined to stay the infringement proceedings in view of a possible nullity of the patent.

When the nullity action or opposition is served, the nullity defendant/patent proprietor is set a time limit for responding to the action. This period is usually two months and can only be extended in very rare cases. Work on defending the patent must therefore commence immediately. Even if there appears to be only minor risks to the granted claims, it is advisable to submit auxiliary requests with the statement of defense, which dispel certain objections raised by the invalidity plaintiff. If the preliminary non-binding opinion is then positive, for at least one of the auxiliary claims, and these auxiliary claims are still infringed, the infringement proceedings could be continued with these claims.

The oral hearing in infringement proceedings usually takes place 10 to 15 months after the complaint has been served. A decision in the oral hearing is announced a few weeks after the oral hearing. The provisional, non-binding decision of the Federal Patent Court or the EPO is usually also issued at this time.

Even if the preliminary non-binding opinion is not issued before the oral hearing, it can be taken into account by the regional court in its judgment. In the meantime, the regional courts and the Federal Patent Court are in contact about the Federal Patent Court's PNBO, so that the regional court can adjust the announcement of its decision if necessary. In the event that the preliminary non-binding opinion is issued after the oral hearing, and contains relevant aspects that were not considered at the oral hearing, the regional court may schedule another oral hearing, to give the parties the right to be heard on these relevant aspects.

In summary, one of the general aspects of the proceedings, on the merits is the appropriate alignment of the arguments in the infringement and nullity proceedings on the one hand, and the timing with the nullity or opposition proceedings on the other. The infringement plaintiff must win both infringement and validity. Therefore, the patent should be carefully selected in advance so that it is highly likely to survive invalidity or opposition proceedings, at least with an amended claim. The infringing defendant appears to be in a seemingly better position. However, in order to avoid a first instance preliminary injunction, at least one of the defenses must be 100% successful. This also requires careful coordination of the arguments in both proceedings and, in particular, timely preparation of convincing non-infringement and nullity arguments. Experienced attorneys-at-law and patent attorneys can make a significant contribution to the success of both parties.

For more information, visit the BDPE website.