For a while now this blog has been pointing out that the German court system – which is relatively cheap, quick and happy to grant successful plaintiffs of all kinds injunctions – is potentially of great interest to NPEs. You might not get huge damages from a German court, but what you will get if you are successful in bringing an action is an awful lot of leverage, especially if you do not manufacture and/or sell products and services which are not dependent on patents. Armed with an injunction, you have the potential to block your opponent out of Europe’s most populous and lucrative marketplace – something that once again is being demonstrated in the smartphone battles which are currently being fought in Germany’s courts.

With all that in mind, a post published today on Florian Mueller’s FOSS patents blog is essential reading. In it Mueller focuses on a decision by Microsoft to relocate a logistics centre from Germany to the Netherlands, specifically because of concerns over Germany’s legal system and the way it deals with standards-essential patents. Writes Mueller:

I regret to say that certain developments in patent enforcement have really turned Germany into a dangerous location for business, a problem that other high-tech companies, such as Apple, are also experiencing. Standard-essential patents are lethal weapons, a fact that Motorola proudly highlighted to the Mannheim court by saying that such patents are like bullets in a gun: "it takes only one bullet to kill". Once a patented invention becomes a mandatory part of a standard, the patent can no longer be engineered around. A country in which such patents can be easily abused to win injunctions is not an advisable place for a European distribution operation. It's also an irresponsibly risky location for hosting websites that implement industry standards such as H.264.

I'm based in Germany (where I frequently attend patent trials) and watch smartphone-related patent lawsuits around the world. Clearly, the German legal system lends itself to the abuse of standard-essential patents, by strategic patent holders like Motorola as well as so-called patent trolls, like no other jurisdiction I know.

Terms like abuse and troll may not be much to my liking, but the central point is well made: those who are vulnerable to NPE actions in the US may well want to check whether they could be in Germany too. What’s more, they may also want to find out more about certain provisions of the proposed rules governing the mooted EU patent court and patent. Many of them are based on current German practices and could mean that what applies in Germany now could apply across most of the EU should we ever get an EU patent.

That said, the current state of affairs in Germany may not last. As Mueller notes in his final paragraph:

Lawmakers, judges and competition regulators should use the means at their disposal to fix the system before it destroys more jobs. Actually, a "workshop" (roundtable) hosted by the Federal Ministry of Economics and Technology discussed this issue in June 2011. The official conclusions of the discussion state that "the workshop also identified as a problem that the owners of certain standard-essential patents have disproportionate leverage in negotiations due to their entitlement to injunctions".

So far, though, nothing has actually been done. Perhaps Microsoft’s action is the kick that lawmakers, judges and regulators need to “fix the system”. If it is, then you can bet your bottom Euro that steps will also be taken to ensure there is nothing in the EU proposals that will provide loopholes for NPEs (and others) to exploit. The danger, however, is that in seeking to eliminate certain types of behaviour the authorities deem unacceptable, many others who do not engage in that behaviour – universities and research institutions, for example – may find that they are adversely affected too.

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Licensing, IP politics, IP litigation, Patents, IP business

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