In 2004, the European Union adopted the Directive on the Enforcement of Intellectual Property Rights (IPRED).  Article 3(2) of IPRED requires that EU member states’ IPR enforcement measures and remedies “be effective, proportionate and dissuasive and shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse.”  (Emphases added.)  Sadly, not all member states have heeded that directive.  Rather, some opt for innovation-killing automatic injunctions that ignore any equitable considerations.

In Germany, for example, injunctions are essentially automatic upon a finding of patent infringement, regardless of what equitable considerations would dictate.  In addition to all of the harms that such a regime would cause in the U.S., the German system manages to exacerbate the damage to innovation and business.  For example, in Germany, patent invalidity actions are separate from patent infringement actions.  Due to court understaffing, those invalidity actions tend to take longer than the corresponding infringement actions.  This leads to the terrible result of a defendant being automatically enjoined for infringing a patent that may well be invalid.

Germany’s automatic injunction regime has been a boon for patent trolls.  By asserting a (potentially invalid) patent that covers a trivial portion of a complex consumer device (e.g., a smarthone), the patent troll can threaten to have the entire product removed from the market.  Such lopsided leverage enables the patent trolls to extract far higher payments from the accused infringers than are warranted by the patented technology.  This poses an existential threat for a number of industries, such as the telecommunications sector .  Likewise, a number of technology companies, both large and small, have urged the EU to adopt guidelines for courts to use in determining whether an injunction is appropriate.  Those proposed guidelines would include:

• Whether the patent owner’s primary goal is to exclude competitors or simply collect royalties;

• Whether an injunction would give the patent owner disproportionate leverage, as in the case where the patent covers a trivial portion of a complex product;

• The harm the injunction would cause the infringer versus the benefit to the patent owner; and

• The injunction’s impact on the public and third parties.

Intellectual Property 2 Innovate has issued a concise white paper that lays out the damage to innovation caused by Germany’s automatic injunction regime.  It proposes several improvements that could alleviate the harm to defendants, particularly small and medium businesses, such as (i) applying equitable principles to the injunction determination, (i) delaying injunctions until a co-pending patent validity determination is made, and (iii) providing a design-around period for the infringer before the injunction takes effect.