Germany: Transnational Effects of Patents

Legal protection in Germany against acts of infringement from outside countries
Last Updated: 10 March 2004
Article by Reinhardt Schuster

The growing number of infringements of German intellectual property rights by infringers operating from outside the country is posing a special challenge to IPR owners and their legal advisors to enforce these rights "outside Germany" and to bring also these infringers to court.

In particular the modern communication systems are making it possible to conduct internationa lbusiness from almost any point of the earth. Because of its anonymity and internationality, the virtual world is becoming a popular playground for those who do not take serious the property rights of others, thinking perhaps that the internationality of the Internet supersedes the applicability of national law.

Recent jurisdiction has confirmed possibilities to get legal protection against producers or suppliers of patent-infringing products, even if the infringer's administrative or operative center is based outside Germany or even beyond the borders of the EU - or even virtually on the Internet. Several ground braking decisions of German courts have pioneered a way that makes it possible for patent owners to effectively pursue an infringer (the producer or the supplier of the infringing goods) of a German patent who offers the infringing product from outside Germany, and to try the infringer before a German court. Based on the court practice of the author, which includes some of the cases cited this article, the legal situation concerning "extraterritorial scope" as reported in this article, can be characterized as settled and undisputed in German case law and jurisprudence.

International jurisdiction of German courts

The principal question in this context concerns the territorial jurisdiction of the German courts and judicial system. This means that the territorially limited boundary of the national law had to be overcome in order to fight infringements originating from outside the country and also infringements that were committed "virtually" on the internet.

Liability in the chain of supply

As a principle, due to the territorial limitation of the German law and German patents, only a person committing infringing acts in Germany can be liable for infringement of a German patent. However, an infringer cannot exculpate himself and try to escape his responsibility and liability by using an intermediary trader for putting patent infringing goods on the protected market. The decisive point is to prove that the infringer intends - whether by using an external distributor or not - to ship his patent infringing goods in a targeted and intentional manner into the protected territory.

In a 1997 decision of the Düsseldorf District Court involving infringing semiconductor chips from an Asian manufacturer which were installed in television sets during their manufacture in Germany and destined for distribution on the European market, it was ruled that the offering and sale in Germany of (both single and later embedded) elements of semiconductors constitutes a patent infringement in Germany, even if the semiconductor elements had been manufactured in a foreign country1. A further particularity of this case lay in fact that the court confirmed that, although the chip had been installed in the TVs - thus becoming a part of a "new" product, but not loosing their infringing qualities - they did still constitute direct products of the patented process for making semiconductor elements, thus leading to infringement by their offer and sale in Germany, whether embedded or not. These semiconductors were shipped to Europe and sold to Germany via a chain of subsidiaries of the defendant corporation. The court explained that the disputed question was irrelevant, whether the defendant had directly sold the semiconductor elements to the German-based subsidiary or whether it had priory sold them to a trade company in the Far East, who then sold them to the German distributor. What is decisive is only that the semiconductor elements were knowingly and a priori intended as their final destination also for the German subdivision of the parent company and were undisputedly meant for distribution also in the German market.

The manufacturing and the offering company are obliged to keep themselves fully informed on the existing protection rights in those countries where they intend to offer the product, and to exclude a priori any foreseeable potential patent infringements also by their subsidiaries or their commercial customers, independently of whether their place of residence is in Germany or in another country. In particular specialist manufacturing companies are expected to be familiar with or monitor the patents and other protection laws applying to their particular products.

One leading case was the so-called "Radio Clock" decision, concerning the unauthorized offer and import from Hong Kong of a patent infringing alarm clock triggered by radio wave impulse2. The defendants - a Hong Kong registered company, its managers and sales representatives in Germany had offered and sold the accused clocks via a third Hong Kong registered trading company. The Munich Appeal Court, confirmed by the German Federal Supreme Court, ruled that all defendants were obliged to compensate the plaintiff for damages on the grounds of participation in an infringement of the German patent-in-suit. The Courts held that despite the importation to Germany by a third (not sued) export company in Hong Kong, the defendants knew both the fact that the clocks will be imported to Germany and that there was a German patent which may affect the clocks.

The reported case law demonstrates that the suppliers of products patented in Germany - whether by a product patent or a process patent, whether imported directly or via third independent or subordinate trading companies, whether consumer products, intermediate or final products - may face problems with German patents and patent suits in Germany affecting such products.

Extraterritorial effects of German patents and the Internet

The international jurisdiction of German courts and exposure to German IP rights can result from the advertisement and offer of goods and services on the Internet. Anything "on the Web" can be easily retrieved - also in Germany. Can this expose patent problems in Germany?

In its very instructive "epson" decision, the Düsseldorf District Court had to deal with a case concerning an infringement committed via the internet3. With this decision the German jurisdiction broke through the fundamental territorial barrier which in principle prevents persecution and assertion of German IPR owner's rights outside the country and against acts outside the country. The Court confirmed that offer and sale on the Internet makes the advertiser or vendor responsible to respect IP rights valid in Germany. The supplier of infringing goods could no longer withdraw to any place in the world just by placing the server in some distant country where there is no effective legal protection.

However, the simple availability of an offer in Germany does not automatically result in an infringing act. The place where the infringement is coming into effect has to be narrowed down to the areas where the infringing act is intended to take effect. The make-up of the web site has to point very clearly to which particular circles of users the offer refers to. In view of the internationality of the internet for avoiding exposure to the jurisdiction of German courts and the application of German law, the possibility to order must be demonstrably excluded for those countries where the offer should not be available.

In another decision, the Frankfurt Appeal Court further pointed out that if an offer is in a different language than the language of the country where the offer is available, this is insufficient reason to eliminate certain groups of users from ordering, i.e. it is not necessary that the offer be written in German, since English is the common language of the World Wide Web4.

In other words: As soon as a customer/user/consumer residing in Germany, who is interested in a relevant internet offer, has the possibility to purchase the goods in question from the homepage of the supplier or following link chains originating therein, the jurisdiction of German Courts and the territorial scope of protection of the German law applies according to the Civil Procedural Code in combination with German Patent Law5.

That this extraterritorial reach of patent enforcement is not some extravagant German phenomenon can be seen, for example, in a recent decision of the High Court of England, which also dealt with a patent infringement via the internet and equally resulted in a ruling that the patent infringement doesn't depend on the server's location6. In this case, it was ruled that an Internet game played between a foreign server and UK clients would still infringe on the respective valid UK (EP) patent for a computer implemented system, whilst the fact that the server was placed outside the UK, and that consequently the use of the system as claimed did not physically occur within the UK jurisdiction, did not protect the defendant from liability.

Preventive patent protection

In this context, it does not matter whether the infringement has already occurred, or whether there is merely a specific possibility of an imminent patent infringing act (quia timet principe) : a claim for injunctive relief can be made in both cases. As a rule, such a danger of infringement is presumed on the Internet as soon as the possibility to purchase the infringing product in Germany is given, since by placing his offer on the internet, the infringer has already done everything to allow and provoke a business transaction with the interested client - and at the same time - to commit a patent infringing act. An actual "hit" (response) or purchase is not necessary for the described legal exposure.

Conclusion

For Germany, the idea has been eliminated that there may be multiple varieties of offering goods via modern communication systems, and that this could be perceived as a quasi law-free area with endless possibilities to circumvent the existing legal framework, including potential patent - or other protection rights existing in Germany. Today, owners of German patents have a number of attractive and practical possibilities to pursue committed infringements as well as to preempt imminent infringements, no matter from which place in the world the infringer conducts his illegal business. This does not require that Germany is the sole or main focus of the advertisement or offer affecting German IP rights.

Conversely, this means for the suppliers of goods which are - directly or via third countries, or even as a part of a further product - shipped or offered in Germany, constitute a patent infringement in Germany as long as the originator or the contributor to this shipment (or shipment chain) positively knew or had reason to know that Germany will be the final or one of the destinations.

For the suppliers of internationally marketed products and services, in particular if advertised on the Internet, this legal situation creates important legal obligations to take IP rights valid in Germany into due account, or to make sure with appropriate structures of marketing and advertising, potentially combined with appropriate contractual bases, that they do not face legal problems with patents and other IP rights valid in Germany.

*****************************

© by Reinhardt Schuster 2003. This article was first published with Patent World, London, December 2003 / January 2004.

Endnotes

1 District Court Düsseldorf, May 6, 1997

2 Munich Appeal Court, December 21, 2000, "Funkuhr"("Radio Clock"); Federal Supreme Court, February 26, 2002, "Funkuhr", ("Radio Clock").

3 Decision of the Düsseldorf District Court, April 4, 1997

4 Decicion of the Frankfurt Appeal Court of December 31st 1998 "Weltweites Internetangebot" ("World Wide Internet Offer")

5 Decision if the Düsseldorf District Court of February 5th 2002

6 Decision of the High Court of England & Wales of March 15th 2002, in the litigation "Menashe vs Hill", confirmed by Royal Courts of Justice, London, on November 28, 2002

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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