IP Insights: Proportionality considerations in IP

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What do we do if an infringement does not cover the whole product but only a part of the product? Take, for example, the light of a car, not the whole car. This has become a hot topic in patent litigation as there are new legal developments and a draft bill that is discussed. Before we speak about this draft bill, what is the current situation? Can you give us an overview?

In patent law, one has to distinguish between the various claims resulting from patent infringement. On the one hand, we have, for example, claims for recall and destruction which are excluded if they lead to disproportionate results. This is stipulated in Section 140a of the German Patent Act. And, on the other hand, we have the claim for injunctive relief which is almost automatically granted – and the chances to successfully raise a disproportionality defense are not very promising currently. There is a recent case by the FCJ, the “Wärmetauscher” case, in which the court said that you can, in principle, raise the defense of proportionality, but there are high hurdles and, in the case at hand, the application of this defense was denied. How is this in in trademark and design law?

It’s quite similar. My impression is only that it’s a more established and elaborated system. It’s not as hot, as new, as in patents. We have been discussing this for years. But as you said, we need to distinguish between recall and destruction, or damages, where you have these considerations, and injunctive relief, where it’s more complicated. Especially if you take a case, as I said before, the light of a car: Do we prevent the whole car from being distributed and manufactured, or only that light, if you cannot isolate them - you cannot take the light off the car very easily – in most cases, typically, you have the whole car being subject to a court decision.And, in some cases, granting grace periods has been discussed. Meaning that you get more time to actually comply with the judgment on the infringement, so you have more time to make changes, implement changes that are necessary. Is that something discussed in the patent bill as well?

Indeed. The draft bill suggests that the claim for injunctive relief is excluded insofar as its fulfilment would lead to disproportionate disadvantages for the infringer or for third parties considering the specific circumstances of the case. And “insofar” (in German “soweit”) indicates that the courts have discretion with regard to legal consequences, and the reasoning of the draft bill expressly mentions the possibility of ordering a grace period, for example to sell off infringing products, or to change the production so that the infringing functionality is deleted from the product.Which arguments do you have to make, and which facts do you have to present in trademark law and design law to make that case?

Infringers need to show actual facts and circumstances why complying with the court order immediately is not possible. So, the burden to show that is very high: You need to present facts and arguments showing that the change cannot be made easily and that, balancing all the interests, you need more time. For example, if you have to change your company name, your labels for products, etc., it may not be possible to make the changes now, right away. And then, you can argue “We need a grace period, we need more time to implement the changes.” And another question which is expressly mentioned in the draft bill: Can the owner of the protective right demand a compensation if the claim for injunctive relief is completely denied or partially limited, for example by means of a grace period?

There is little case law on that, confirming such of compensation. But I would say, it would be extremely difficult to get such compensation, because the claim for injunctive relief is limited insofar it would be disproportionate. So, you don’t really have a culpable infringement, which means that you would probably not get a compensation. But, if there is this draft patent bill, of course, even in trademark and design cases, there will be considerations whether we have to apply the same principles here on that topic. When exactly can we expect to have that bill in place?

That is a very good question. The draft bill is currently discussed, and a final vote by the German parliament, the Bundestag, is expected for the spring of 2021. But, of course, the wording may still change because there is an active and hot public debate. And public statements are being presented, for example, by the association of German car manufacturers. So, it will be interesting to see when and in what form there will be a change to the ...