Case Law: Infringement of German Patents by Sup­plying Goods outside of Germany

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With its judgement “Abdichtsystem”, the German Federal Court of Justice has recently specified its previous case-law concerning the infringement of German (national or EP) patents by the supply of goods outside of Germany, if these goods later on reach the German market. It also provides some practical guidance on how foreign suppliers are supposed to behave towards their foreign customers, if they want to limit their risk of being held responsible for patent infringement in Germany.

In its decision “Funkuhr I” (decision of February 26, 2002, ref. X ZR 36/01) the Federal Court of Justice had decided that, notwithstanding the general principle of territoriality, the supply of goods from a foreign supplier (i.e. a supplier located outside of Germany) to a foreign customer (i.e. a customer also located outside of Germany) may in fact constitute patent infringement in Germany, in case the customer later on supplies these goods to the German market. However, at that time, it remained rather unclear which exact legal preconditions need to be met for the foreign supplier’s liability, especially with regard to his awareness of and / or participation in selecting the final destination of the patent infringing goods.

The decision “Audiosignalcodierung” (Federal Court of Justice, Decision of February 3, 2015, ref. X ZR 69/13) confirmed and expanded on this case law, but again provided only little guidance going beyond the specifics of the case. Still, it was made clear that a foreign supplier’s existing knowledge of his customer’s intent to bring the supplied goods onto the German market would constitute a sufficient degree of wrongdoing, and would thereby make him liable. In this case, the supplier’s knowledge was determined because his foreign customer had expressly named an enterprise in Germany as its distributor for the relevant products on its website.

Content of the Decision “Abdichtsystem”

The recent decision “Abdichtsystem” (“sealing system”) contains, for the first time, comprehensive and much more general guidance on when a foreign supplier’s liability is to be assumed, and which criteria are to be observed in practice. Furthermore, the decision determines the scope of claims to be asserted in case of the foreign supplier’s liability.
According to the Federal Court of Justice, a foreign supplier’s liability is not to be assumed by and in itself (i.e. unless there are other relevant circumstances), if he rightfully considers his foreign customer’s supply to Germany as a possibility only, which would be the case in the following examples

  • (A) the foreign customer maintains general business relations to Germany only,
  • (B) the foreign customer has supplied only similar, but not the same (i.e. patent infringing) goods to Germany before,
  • (C) the foreign customer has attached to the goods an instruction manual that contains, among others, some instructions in German, if the foreign customer always uses multi-lingual manuals for its products.

According to the Federal Supreme Court, a foreign supplier’s liability is generally (i.e. unless there are other relevant circumstances) to be assumed if

  • (A) the foreign supplier is aware of a previous or planned delivery of identical goods by the foreign customer to Germany,
  • (B) the quantity of the supplied goods is of a volume that, based on experience, one would need to expect its geographically unlimited distribution, including Germany,
  • (C) the mode of procurement by the foreign customer conspicuously correlates with its known patent infringing activities in Germany.

While being quite specific on these examples, the Federal Court of Justice has nevertheless stressed that the circumstances of the individual case are of importance and require individual assessment. Similarly, the aforesaid examples are mentioned not to be exhaustive.

In these named (or any other) circumstances where a foreign supplier has reason to be suspicious, however, the foreign supplier is then required to apply special diligence, in order not to be held liable for patent infringement:

  • Any foreign supplier having reason to be suspicious has to expressly inquire with the customer, whether he intends to supply the products concerned to the German market.
  • The supplier needs to advise his customers that, if they do so, this constitutes a possible patent infringement.
  • If thereupon the customer fails to warrant that he does not intend to supply to the German market, the supplier has to immediately discontinue supplying.

If he fails to do so, the foreign supplier may find himself being held liable for patent infringement in Germany, even if not being active on the German market.

Consequences of the Decision

For the first time, the Federal Court of Justice provides also some reasoning regarding the application and consequences of its decision. It holds that the above-mentioned examples are already to be examined within the framework of the injunctive relief, as they decide on the effective participation, i. e. the involvement in patent infringement as an independent perpetrator. Also, while in its decision “MP3-Player-Import” (Judgement of September 17, 2009, Xa ZR 2/08), the Federal Court of Justice had left open the question if further preconditions would need to apply for a claim for damages, it now affirms an unrestricted liability for damages in case of any such patent infringement. Finally, the Federal Court Of Justice clarifies that also the right of recall from the distribution channel and the right to destruction can be asserted in these cases.

Conclusion

In view of the judgement “Abdichtsystem”, the risk for foreign suppliers delivering to their foreign customers of being successfully sued for patent infringement in Germany has increased. At the same time, the Federal Court of Justice has established some reliable criteria which can reduce the above-mentioned risks by means of early consultation and precautionary measures.