Patent litigation is a growing headache for German business, as the hardware of its traditional machine-making industries becomes more dependent on software and electronics, and on the interaction of hundreds of patent-protected devices.
It's becoming expensive. Broadcom recently charged Volkswagen with 18 patent infractions in its navigation and entertainment systems in Passat, Porsche and Audi models, threatening to suspend delivery of its semiconductors.
VW declined to comment on the Broadcom claim, and board member Hiltrud Werner merely observed that in times of digital innovation and connected cars, "new conflicts arise for companies."
A single smartphone can contain a thousand patents, making it virtually impossible for companies to ensure they have rights to all the components. This heralds legal jeopardy, because a single cease-and-desist injunction can bring production to a halt. That spells further, ballooning costs.
So now, German industry is lobbying Berlin to implement European Union directives on patents because the EU law makes a clearer case for proportionate injunctive relief. That means the value of production halted has to be in proportion to the damage resulting from the alleged patent infraction.
German patent law in its current form endangers innovation and progress in our society, is the dim view taken by Thomas Kremer, a board member at Deutsche Telekom. “The automatic injunctive relief could lead to a blackout of the telecommunications network,” he said.
The legal exposure from patents goes beyond the telecommunications industry. The increasing digital component in all goods that are produced has opened the field to patent trolls – companies that don’t invent or innovate their own patents, but cobble them together with the sole purpose of making money via lawsuits.
Legislators must adapt the juridical context accordingly, according to VW’s Werner. She says the claim for injunctive relief in patent law must be supplemented by a proportionality review, or may only be directed against the person who first uses the patented device in the production chain.
But there is no straightforward way to proceed. Challenges to patent protection are a double-edged sword as many German companies also benefit from this protection. “From our point of view, weakening patent law would harm Germany as a location for innovation,” said Beat Weibel, head of Siemens' patent department.
Justice ministry officials denied that current German law automatically grants injunctive relief for claims of patent violation. German high courts have expressly ruled that decisions need to keep the principle of proportionality in mind.
But smart homes, connected energy, and the next stage in mobile communications, 5G, all are threatened by patent trolls. Often, patented devices are mingled together in a black box that companies can’t begin to unbundle. Unscrupulous patent trolls can just hope for a lucky punch against such a target.
The German industry association BDI wants to address both sides of patent protection and is looking for a compromise that would keep both Deutsche Telekom and Siemens happy. In the meantime, patent battles are on the rise and the law doesn’t discriminate according to purity of motive. Patent holders and enforcers will keep on battling for now.
Heike Anger covers economic policy for Handelsblatt in Berlin. Darrell Delamaide adapted this article into English for Handelsblatt Today. To contact the author: [email protected]