ECJ on Interim Measures in Germany – Reactions in Case Law and Literature

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After the Munich District Court asked for clarification, the European Court of Justice (ECJ) has commented on German court practice regarding preliminary injunctions in patent infringement cases where the validity of the patent in question has not already been confirmed in opposition or nullity proceedings. While the ECJ ruling seems to favor patent owners, it remains to be seen whether the ruling will actually lead to a change in the practice of the German courts.

The decision of the ECJ

In its judgment of April 28, 2022 (Case C-44/21), the ECJ ruled that a court practice that in principle rejects interim injunctions in patent infringement cases where the validity of the patent in question has not (yet) been confirmed in first instance opposition or revocation proceedings is incompatible with European law. Furthermore, national case law that is incompatible with this judgment may not be applied by the competent courts.

The reason for the Munich Regional Court to ask the ECJ for a decision was the adoption by the Munich Higher Regional Court of a practice already applied by other courts in a high number of patent cases. According to this practice, preliminary injunctions in patent infringement proceedings are regularly rejected by the courts if the validity of the granted patent has not already been unsuccessfully challenged at least in the first instance proceedings. This has led to criticism, as patent owners have found themselves unable to obtain a preliminary injunction against an infringer if the validity of their patent had not previously been challenged – a circumstance over which the patent owner has no direct influence. Both the development and the current practice in this regard vary from court to court.

Reactions to the ECJ decision

The ECJ decision has caused quite a stir and has been widely criticized.
For example, in his opinion (GRUR 2021, 466) on the order for reference of the Munich Regional Court (21 O 16782/20), the presiding judge at the Düsseldorf Higher Regional Court, Dr. Thomas Kühnen, criticized the fact that the case law in question had not been accurately reproduced by the Munich I Regional Court in the order for reference. The exceptions developed by this case law, in which a temporary injunction can be issued despite unexamined legal status, were incorrectly presented as conclusive, and the reasons which led in the case law in question to not issue a temporary injunction in patent matters simply for the sake of the granted patent were not discussed. It was also disregarded that only one out of three patents survives an attack on the validity of the patent. The technically often very complex subjects of invention are frequently not reliably verifiable for an infringement court staffed only with legal experts as to whether they are new and inventive compared to the prior art. The principle of proportionality must also be observed in Directive 2004/48/EC (Enforcement Directive), so that the interests of the alleged infringer must also be taken into account when deciding whether to issue a preliminary injunction. The approach of the LG München I, he argues, takes the grant of the patent and its technically amateurish review by the infringement court as the basis for whether or not the patent is provisionally enforced, and therefore does not make any assessment of the circumstances of the individual case.

Pichlmaier, presiding judge at LG München I (GRUR 2021, 557), responds to this comment and rejects the criticism of the incorrect presentation of the facts. The order for reference was merely based on the case law of the Munich Higher Regional Court, which had been correctly reproduced and which, for example, unlike the Düsseldorf Higher Regional Court, ¬ assumed conclusive exceptions. Moreover, the subject of the submission was the practiced principle of the OLG case law and not an individual question. The error rate of the patent offices cited by Kühnen, which often leads to a destruction of the patents in retrospect, was not mentioned in the OLG case law and thus was not taken into account in the submission. The argument of technical complexity cited by Kühnen could only apply to individual cases, but could not be used for the principle developed in the case law in question. This argument had also not been mentioned in the case law of the Munich Higher Regional Court.

The presiding judge at the BGH Deichfuß also notes (GRUR 2022, 800) that the ECJ in its decision had proceeded from a factual situation incorrectly reproduced by the LG München I in its order for reference. According to this decision, the issuance of a preliminary injunction for patent infringement “regularly” requires that the patent for the injunction has already survived opposition or nullity proceedings in the first instance; existing exceptions are not applied. This paints a false picture of German case law practice. However, it follows from the recitals and provisions of the Enforcement Directive that a schematic approach is prohibited, which results in the requirement for legislation and national courts to duly consider all objective circumstances of the individual case. Since the case law to date is completely different from that reproduced in the order for reference of the Munich Regional Court I, the decision of the ECJ does not give any reason to deviate from the previous case law practice; this is factually convincing and should be retained.

This ruling is also viewed critically in the literature. Although the decision is considered to be consistent (Keßler/Palzer in EuZW 2022, 562), it is noted, similarly to Kühnen, that German case law is significantly more differentiated than assumed by the ECJ decision. The ECJ answered a reference question that in fact did not arise in this form, which is why it is doubtful whether the court practice will change. In any case, there was no compulsion under EU law to adapt, since the Enforcement Directive did not require enforcement of intellectual property rights at any price, because all measures made possible by it were subject to proportionality. This is due to the fact that the enforcement of intellectual property rights regularly leads to collisions of conflicting fundamental rights. Doubts as to the existence of rights must therefore be taken into account in the context of the balancing of interests required by this reservation. In addition, the threat of liability under Section 945 of the German Code of Civil Procedure would sufficiently inhibit the patent proprietor’s frivolous application for preliminary injunctions.

It is further noted (Schmitz/Zilliox in GRUR-Prax 2022, 314) that although the ECJ rightly points out that a presumption of validity applies to patents as of the publication of their grant, the case law developed by the higher regional courts in practice leads to the refusal of interim relief for granted patents because the courts generally reject the urgency due to the lack of a validity procedure. With the present ruling, it is to be expected that the number of applications for injunctions based on patents without a completed validity procedure will increase. Whether the courts will be more generous in issuing preliminary injunctions in the future as a result of the ruling seems questionable, since the national judges had understandable
reasons for setting high requirements for the legal validity of the patent for invalidity. Moreover, the securities in favor of the defendant mentioned by the ECJ would practically rarely provide sufficient protection against the economic consequences of an unjustified injunction. All in all, one of the main hurdles for applicants seems to have been removed and there is now at least the possibility of obtaining a rapid injunction in preliminary injunction proceedings, even if the legal validity is uncertain.

Outlook

Overall, it therefore remains to be seen whether the ECJ ruling will actually lead to a change in case law.

New consumer protection law for digital goods

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With the Digital Content Directive (Directive (EU) 2019/770), the EU is further expanding the European digital single market and making it easier for consumers to access digital products. The EU’s stated goal was to ensure a balance between a high level of consumer protection and promoting the competitiveness of companies. Nevertheless, the drafting of contracts that have as their object the provision of digital content will have to be adapted in some fundamental respects as a result of the new legal framework, which has been in force in Germany since January 01, 2022.

Legal regulations and scope of application

The new legal framework for the provision of digital content was created in Germany by several amendments to the German Civil Code. The following overview focuses on the new regulations in sections 327 et seq. BGB, which have a significant impact on the design of general terms and conditions in the B2C sector.

These regulations apply to all consumer contracts that have as their object the provision of digital content or digital services (digital products) by an entrepreneur in return for payment of a price. A significant change is that the new legal regulations also apply if the consumer provides personal data as a means of payment, unless this data is processed solely to fulfill the contractual obligation to perform or legal requirements. Since free digital content is often provided with the aim of using users’ collected personal data beyond what is necessary to provide the digital product itself, this expansion of the scope means that many previously unregulated use cases, such as free apps, will now be subject to stricter consumer protection law requirements.

Obligation to provide the digital product

Within the scope of application of §§ 327 et seq. BGB, the entrepreneur is obligated to provide the digital product that is the subject of the contract. If the entrepreneur breaches this contractual obligation, the consumer may terminate the contract and claim damages or compensation for futile expenses. If the digital product is defective, the consumer may also demand subsequent performance or a price reduction. Particularly for digital products that are offered “free of charge” and for which the consumer only “pays” with personal data, this represents a paradigm shift compared to the previous regulations, which gave the entrepreneur greater leeway to amend or withdraw from the contract and also provided for milder legal consequences in the event of defects.

Obligation to update the digital product

Another controversial issue was regulated in Section 327f of the German Civil Code (BGB), which now requires the entrepreneur to provide the consumer with updates that are necessary for the digital product to remain in conformity with the contract and to inform the consumer of these updates accordingly. These mandatory updates explicitly include security updates. The obligation to update the digital product applies for as long as the digital product is provided and may therefore even go beyond the general warranty obligations. The trader is even liable for product defects if it has provided an update but the consumer has not installed it because the trader has not sufficiently informed the consumer about the availability of the update and the consequences of not installing it, or because the failure to install is due to faulty installation instructions.

Changes to the digital product

Another important provision is found in the new Section 327r of the German Civil Code, which implements Article 19 of the Digital Content Directive. If the contract provides that the digital product will be made available to the consumer on a permanent basis, the trader may only make changes to the digital product that go beyond what is necessary to maintain conformity with the contract if

  • the contract provides for this possibility and contains a valid reason for it,
  • the consumer does not incur any additional costs as a result of the change, and
  • the consumer is informed about the change in a clear and comprehensible manner.

If these conditions are not met, the consumer has the right to terminate the contract. However, Recital No. 77 of the Digital Content Directive explicitly states that if the changed digital content no longer meets the subjective and objective contractual requirements, the consumer should also be able to demand subsequent performance, reduce the price, and claim damages or reimbursement of futile expenses.

According to Recital No. 75 of the Digital Content Directive, valid reasons for modifying the digital product may include cases where the modification is necessary to adapt the digital content to a new technical environment or to a larger number of users, or for other important operational reasons.

Especially in the case of free apps, it is not uncommon to change the feature catalog during the lifetime of the app, sometimes perhaps with an expansion of features, but often with the removal of features that prove to be impractical or not economically viable. However, according to the examples given in recital 75 of the Digital Content Directive, neither the practicality nor the economic viability of a function should be a valid reason for its removal from the app. If the removal of such features proves to be a defect, the user could theoretically demand that the app be restored to its previous version.

Consequences for contract design

The new regulations significantly tighten legal obligations when providing digital products, especially in cases where the product is provided free of charge and access is paid for only through the consumer’s data. The previous legal framework did not explicitly recognize personal data as a valid means of payment and therefore did not oblige the entrepreneur who received the data to provide any consideration. With the new legal framework, the entrepreneur’s performance obligations are now structured similarly to a normal purchase or rental contract. Since the legal requirements under Section 327s of the German Civil Code (BGB) can hardly be modified by contract, the new regulations will require a redrafting of most existing contracts. Even more than in the past, it will be important to define the scope of performance carefully so as not to expose oneself to subsequent performance obligations and to reserve the right to make changes at a later date. Additional information obligations will also be imposed on the entrepreneur, which he must fulfill in order to avoid warnings from competitors. If you have any questions about the new legal framework, we will be happy to advise you.

From the land of the “Beetle smile” or on the protection of the famous shape in Germany

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The Porsche 911 decision of the Federal Court of Justice (I ZR 222/20) and Ur-Käfer decision of the Higher Regional Court of Braunschweig (2 U 47/19)

The Volkswagen Beetle and the Porsche 911 are indisputably among the great classics of automotive engineering. On March 10, the Higher Regional Court of Braunschweig ruled on the claims of the heiress after a body designer of the then Porsche Konstruktionen GmbH to the appearance of the original VW Beetle, from which she derived participation claims in the sales success of the VW New Beetle, which had been produced by VW in the years 1997 to 2010. Shortly afterwards, on April 7, the Federal Court of Justice pronounced its verdict in a dispute in which the same heiress had asserted similar claims relating to the Porsche 991 series of the Porsche 911 type from a comparable set of facts. The testator had died in 1966, so that the copyright protection period in both disputes would still run until 2036, if copyright protection existed for the respective designs. The Higher Regional Court of Braunschweig dismissed the action outright, while the Federal Court of Justice referred the case pending there back to the Court of Appeal for a new hearing.

Both cases involved a whole series of important copyright issues that may well also arise in the case of other iconic designs that have been perpetuated in constantly changing form, but still as part of a line of development over decades. From the abundance of legal problems that were dealt with here, three legal questions and one factual one are to be highlighted.

Is fame of the design sufficient for copyright protection?

In the case of famous and particularly long-lived designs from the field of applied art, factors come into play that otherwise play no role in copyright disputes. The fact that a shape becomes iconically famous at some point does not mean that it was particularly original at the time of its creation.

The VW Beetle in particular is a good example of this, and the richly illustrated Braunschweig decision shows a whole wealth of amazingly similar vehicles from the time when the “Volkswagen” was created, to which the later global corporation owes its name – and which no one knows today. Of all these vehicles, only the “Beetle” survives in the consciousness of the global public. It had already become a kind of “living fossil” long before the last production decades of the original model series, when it was only produced in Central and South America, the last survivor of a way of building cars that had long since become obsolete.

Therefore, the legal assessment must be made on the basis of the set of forms known at the time of creation, even though this may have later fallen into oblivion. The Higher Regional Court of Braunschweig correctly recognized this in its decision. In the Porsche decision, there is only a brief reference in the same sense (para. 31).

“Cultic”, at any rate, must be concluded from the decision of the OLG Braunschweig, is not a copyright category, just as little as “famous” or “groundbreaking in art history”. Other courts are not so stringent in this respect, as is shown by the very generous case law on the protection of tubular steel furniture from the Bauhaus period, in which copyrightability seems to be inferred from art historical significance.

Which standard of protection is decisive?

Separate from the question of the set of forms to be used for comparison is the question of which of the legal standards that have changed again and again in the decades since famous designs such as the Beetle or the Porsche 365 or 911 were created is to be used as the standard for the examination. Which standard of protection is to be applied to an ancient design – especially in the field of applied art?

  • The standard of protection at the time it was created?
  • The standard of protection before the Seilzirkus and Geburtstagszug decisions of the BGH (GRUR 2014, 175 – Geburtstagszug)?
  • The standard of protection before the ECJ’s Cofemel and Brompton decisions (C-683/17 – Cofemel; C-833/18 Brompton)?

The BGH clearly measures against the latest standard harmonized by the ECJ. The OLG expresses itself misleadingly in this respect, but would apply today’s standards to the actual situation at the time of creation and deny protection to an object which, according to today’s standards, was not protectable on the basis of the facts at that time (in particular in view of the then known set of forms).

Questions of copyright law

Both the BGH and the OLG Braunschweig apply the current rules of copyright contract law also to an author who, like the plaintiff’s father as an employee of the defendant’s legal predecessor, is subject to Section 43 UrhG (authors in employment and service relationships). Both decisions consider the fairness compensation of Section 32a UrhG to be applicable without further ado even in such cases. However, this only concerns new cases that arose after the new regulation came into force at the end of March 2002.

Visualization aids for the court

Time and again, it becomes apparent that two worlds collide in copyright law: That of the creators and that of the lawyers who have to deal with the creators’ output. In a legal dispute over a piece of music, how does one convey the essence of the dispute if the court is not musically trained? In the field of applied art, how can one make it clear what is at stake? The designers usually have a well-developed spatial imagination, which the discerning judges, on the other hand, do not necessarily have.
That is why many a trial in this field has been won (or lost) because the two samples, “original” and “alleged imitation” were physically expedited into the courtroom – this may involve a not inconsiderable effort in the case of bulky objects.
But what can be done when the object in question does not fit into the courtroom or – as in the Braunschweig case concerning the authorship of the VW “Beetle” – the supposed original only exists as a design drawing? One of the questions at issue was whether the formative shapes of the later “Beetle” were already present in the subsequent drawings.

From the decision discussed in ZUM-RD 2022, 342, 366

 

Here, the defendant party broke new ground with a visualization aid for the court in the form of a virtual model that could be displayed three-dimensionally in all conceivable views and juxtaposed with the subsequently executed vehicle.

 

From the decision discussed in ZUM-RD 2022, 342, 367

Thus, even the layman could see that the design of the plaintiff’s side was by no means “smiling”, contrary to the plaintiff’s claim, because the hood in the alleged original was completely straight. The view from diagonally behind also shows that the executed Beetle followed a completely different design concept than the alleged original, recognizable from the protruding fenders, the running board and the rear section, which also ends in a bulge, in the executed vehicle. The OLG Braunschweig correctly subsumed on this basis.

Such visualization aids can be produced with current CAD technology with manageable effort, even if under certain circumstances not always in such high quality as shown here.

Conclusion

The great willingness (one could almost say relief) with which the recognizing court made use of this assistance shows how important it can be, especially in the field of applied art, to argue as much visually as linguistically.

The UPC roadmap

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After delays, the Unified Patent Court started its work on June 1, 2023.

With the deposit of the instrument of ratification by Austria as the thirteenth member on January 18, 2022, the UPC had already entered into force provisionally in accordance with the “Protocol to the Agreement on a Unified Patent Court concerning Provisional Application” (PPA). Under this provisional applicability, preparations for the operation of the UPC were underway. In particular, the UPC Administrative Committee already officially confirmed the locations of the Court of First Instance and adopted the Rules of Procedure and the Table of Costs, which entered into force on September 1, 2022. Also, the judges’ disbursement and the finalization of the IT infrastructure already took place within the framework of provisional applicability.

With the deposit of the instrument of ratification by Germany on February 17, 2023, the preparations were completed. Thus, the 3-month “sunrise period” started and the Unified Patent Court could finally start its work on the first day of the fourth month after the deposit of the instrument of ratification on June 1, 2023, according to Art. 89 EPCÜ.

Already during the “sunrise period” an opt-out could be declared ahead of time in order to keep patents out of the UPC system and to prevent a central attack on the patent directly after the entry into force of the UPC. This op-out can be withdrawn at a later date.

  • January 2022

    Preliminary application of UPC starts with 13th ratification (Austria)

  • Beginning until end 2022

    Preparatory work

  • Beginning of 2023

    Deposit of German ratification document (February 17, 2023)

  • Sunrise period

    3 months, starting with the first of March 2023

  • 1st of June 2023

    UPC enters into force

    First day of fourth month after deposit

 

Back to UPC overview

The Unitary Patent system on the home straight

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Over the past months, the European Unitary Patent system has been taking shape, and it is expected that the system will become operational in late 2022 or early 2023. It’s time to prepare.

The Unitary Patent system will comprise a new European patent with unitary effect in all participating EU member states (currently all EU member states except for Spain, Poland, and Croatia), and a new Unified Patent Court (UPC) to rule on these Unitary Patents, but ultimately also on all (conventional) European bundle patents granted by the European Patent Office. The system will provide, for the first time in history, a quasi-EU wide patent right.

For many years, the Unitary Patent system has progressed two steps forward, one step back. But after many setbacks, it now appears much more likely than not that the system will become operational in the near future. Despite Brexit, the political determination to move ahead with the project remained strong, and the preparations took up speed after the German constitutional court dismissed two constitutional complaints against the project in June 2021. In January 2022, Austria became the 13th member state to participate in the provisional application of the UPC Agreement, which triggered the entry clause of the Provisional Application Period. During the Provisional Application Period, the Court is being set up, including the IT system and the sophisticated electronic Case Management System. In parallel, interviews are taking place for the selection of the judges.

As soon as the Administrative Committee has signaled that the Court is operational, Germany will deposit its instrument of ratification with the Council of the European Union. This step will mark the start of the so-called “sunrise period”. During this period, patent owners will already be able to opt-out their existing patents from the Court, to avoid being trapped in the new system by commencing litigation. The Court will then start operating three to four months later, possibly in the first quarter of 2023.

The European Patent Office (EPO) has meanwhile implemented some transitional measures with a view to supporting users in an early uptake of the Unitary Patent. During the “sunrise period”, users will already be able to file their request for unitary protection for all patent applications for which the EPO has issued a communication regarding the intention to grant, and the EPO will inform applicants filing requests about formal deficiencies in their requests at an early stage. Moreover, during the “sunrise period”, the patent applicants will be given the opportunity to request a delay in issuing the decision to grant for all European patent applications for which an intention to grant communication has already been dispatched but not yet approved by the applicant. This will make a European patent eligible for Unitary Patent protection that would otherwise have been granted before the start of the new system.

Should you request unitary protection for your newly granted patents? Should you opt out your existing patents? It’s a tough decision that depends on many factors. Find here an overview of the new system and of the preparations that you should make already now to get your patent portfolio ready for the UPC!

In case of any questions relating to the Unitary Patent System or the preparations that you may want to make, please contact our UPC-Team.

CJEU on preliminary injunctions in Germany – change in court practice required?

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Upon submission of the Munich Regional Court (see our June 2021 article), the Court of Justice of the European Union (CJEU) has ruled on German court practice regarding preliminary injunctions in cases of patent infringement where the validity of the patent in question has not already been confirmed in opposition or nullity proceedings. While the CJEU ruling seems to favor patent proprietors, it remains to be seen whether the ruling in fact leads to a change in practice by the German courts.

The CJEU, in its judgment of April 28, 2022 (Case C-44/21), has ruled that a court practice denying in principle interim measures for infringement of patents in case the validity of the patent in question has not (yet) been confirmed in first instance opposition or nullity proceedings is incompatible with European law. Furthermore, national case law that is incompatible with this ruling must not be applied by the competent courts.

The Munich Regional Court was prompted to submit the matter to the CJEU upon the Munich Higher Regional Court adopting a practice already applied by other German courts handling the majority of patent infringement cases in Germany. According to this practice, preliminary injunctions in patent infringement proceedings are regularly refused by the courts if the validity of the patent in conflict has not already been challenged without success at least in first instance proceedings. This practice has led to criticism, as patent proprietors saw themselves unable to attain a preliminary injunction against an infringing party when the validity of their patent had not previously been attacked – a factor outside the proprietor’s direct control.

It is to be noted, however, that both the development and the current practice in this regard vary between different courts.

Düsseldorf Jurisdiction

According to the case law of the Düsseldorf courts, a preliminary injunction in patent cases can only be issued if both the question of patent infringement and the validity of the right to injunctive relief can be answered clearly in favor of the proprietor.

According to this case law, a sufficiently certain legal existence of the right to injunctive relief can generally only be assumed if it has already survived opposition or nullity proceedings in the first instance (Düsseldorf Higher Regional Court, judgment of May 29, 2008 – 2 W 47/07; Düsseldorf Higher Regional Court, judgment of April 29, 2010 – 2 U 126/09).

Therefore, in order for a preliminary injunction to be issued on the basis of a patent, a positive decision on the validity of the patent must already exist. However, this requirement may be waived in exceptional cases. Such an exceptional case exists, for example, if the party accused of infringing the patent has already participated in the granting procedure with their own objections, so that the granting of the patent is factually equivalent to the decision in a two-sided opposition procedure. Another example is the case where the patent relied upon is generally recognized as eligible for protection, e.g. due to the existence of well-known licensees. If objections to the legal validity of the patent prove to be groundless even on summary examination, or if there are exceptional circumstances which make it unreasonable for the owner of the patent to wait for the outcome of the opposition or nullity proceedings, this is also considered an exceptional case (Düsseldorf Higher Regional Court, judgment of April 29, 2010 – 2 U 126/09).

Karlsruhe Jurisdiction

The Higher Regional Court in Karlsruhe agrees with the Higher Regional Court of Düsseldorf regarding this issue, applying the same standards (cf. e.g. Karlsruhe Higher Regional Court, judgment of September 23,2015 – 6 U 52/15).

Munich Jurisdiction

The case law of the Higher Regional Court of Munich regarding this issue has recently changed.

According to the previous practice of this court, it was not necessary for the patent to have survived first instance opposition or nullity proceedings for the issuance of a preliminary injunction in patent matters. A high probability, i.e. sufficient certainty, of legal validity of the patent was considered sufficient for granting an injunction (Munich Higher Regional Court, judgment of July 26, 2012 – 6 U 1260; Munich Higher Regional Court, judgment of May 18, 2017 – 6 U 3039/16). The court based this practice on the fact that interim legal protection arising from a granted patent would otherwise be factually excluded for a certain period of time.

In this previous practice, prospects of success of an appeal against the patent were included in the required weighing of interests. In this context, remaining doubts about the legal status of the patent usually led to the rejection of the request for an injunction. Thus, the interest of the alleged infringer in not being sued on the basis of an IP right without a certain validity in summary proceedings, which limit the possibilities for knowledge and defense, were preserved. An assessment was to be made of the prospects of success of legal validity proceedings in the specific case in dispute. (Munich Higher Regional Court, judgment of, July 26, 2012 – 6 U 1260/12)

However, this view was overturned by the higher regional court of Munich in its decision of December 12, 2019 (6 U 4009/19). In this decision, the court, in a deviation from its previous practice and following the Higher Regional Courts of Düsseldorf and Karlsruhe, assumed that the issuance of a preliminary injunction based on a patent or a utility model can only be considered if both the question of patent infringement and the validity of the right to injunctive relief can be clearly affirmed in favor of the applicant.

If there are no exceptional circumstances which sufficiently prove the validity of the injunction right (patent or utility model), it would be reasonable for the applicant to assert his claims in main proceedings and for the defendant, on the other hand, not to be exposed to the risk that the validity is assessed incorrectly by the infringement courts in infringement proceedings. The patent proprietor’s interest in enforcing his property right was found to be sufficiently satisfied by the possibility of raising injunctive claims in main proceedings. This is considered to be justified by the fact that it is not the task of the infringement court to anticipate the outcome of proceedings on the validity of rights by way of a summary decision made in proceedings for interim legal protection. In this regard, it is noted that proceedings for interim relief are not geared towards a decision on the validity and proceedings on the validity usually conclude at a considerably later time.

Perspective

In view of the exceptions explained above that were already applied by the courts to the general rule of “no interim measures without previous confirmation of the patent in opposition or nullity proceedings”, some courts have already hinted that they saw no need to adapt current practice, since interim measures were not denied “in principle”.

In his comment (GRUR 2021, 466) on the order for reference of the Munich Regional Court (21 O 16782/20), Dr. Thomas Kühnen, Presiding Judge at the Düsseldorf Higher Regional Court, states that in his view the principles developed by the case law of the higher courts represent a balanced approach that takes into account the interests of both sides. According to such assessment, the risk of an unjustified injunction was only accepted where necessary in view of the legal interest of the patent proprietor because his legal action could not be postponed, but the risk was avoided where no immediate intervention was required or the potential damages were so serious that they could not be reasonably accepted in an overall assessment.

It therefore remains to be seen whether the CJEU judgement will in fact lead to a change in court practice.

New consumer protection regulation for digital products

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With the Digital Content and Digital Services Directive (EU Directive 2019/770), the EU is further expanding the European Digital Single Market, facilitating the consumer access to digital products. The outspoken goal of the EU was to ensure a balance between a high level of consumer protection while promoting the competitiveness of businesses. Nevertheless, the contractual design of the provision of digital content must be adapted in some fundamental points due to the new legal framework that has been in force in Germany since 01 January 2022.

1. Relevant provisions and scope of application

The new legal framework for the provision of digital products in Germany came with several amendments to the German Civil Code (BGB). Nevertheless the following overview will focus on the new regulations in Sections 327 et seq. BGB, which have an essential impact on the design of Terms & Conditions in B2C-relations.

Those regulations apply to all consumer contracts on the provision of digital content or digital services (digital products) in payment of a price. A major change is that the new legal regulations shall also apply if the consumer provides personal data as payment, unless the personal data is exclusively processed for the purpose of supplying the digital content or digital service or for complying with legal requirements. As free digital content is often provided with the specific goal to harness the collected personal data of users beyond the extent which is necessary for supplying the digital product itself, this expansion of the scope of application means many use cases like free Consumer Apps, etc., which have been previously rather unregulated are now subject to a stricter consumer protection regulation in Germany.

2. Obligation to provide the digital product

If the Sections 327 et seq. BGB apply, the trader is under a contractual obligation to provide the digital product. If the trader fails to provide the product, the consumer can terminate the contract, claim damages or claim reimbursement of futile expenses. In the event of a lack of conformity or defective performance, the consumer shall be entitled to have the digital content or digital service brought into conformity, to receive a proportionate reduction in the price, or to terminate the contract. The consumer may further demand damages or reimbursement of futile expenses. In particular for digital products offered “free of charge” and for which the consumer only “pays” with personal data, this means a paradigm change compared to the former regulations, which left the trader greater leeway to change or withdraw the product and which also offered a more lenient regulation in case of product defects.

3. Obligation to update the digital product

Another controversial topic has been regulated in Section 327f BGB, stipulating that the trader must ensure that the consumer is provided with updates necessary for the digital product to remain in conformity with the contractual conditions and that the consumer is informed about these updates accordingly. These mandatory updates explicitly include security updates. The obligation to update the digital product applies as long as the digital product is made available and can therefore even go beyond the general warranty obligations. The trader is even liable for product defects if he has provided an update but the consumer has not installed it, either because the trader has not sufficiently informed the consumer about the availability of the update and the consequences of failing to install it, or because the failure to install was due to defective installation instructions.

4. Modification of the digital product

A particularly challenging provision can be found in the new Section 327r BGB, which implements Article 19 of the Digital Content Directive. Where the contract provides that the digital content is to be supplied to the consumer over a period of time, the trader may modify the digital content beyond what is necessary to maintain the digital content in conformity, only if

  • (1) the contract allows, and provides a valid reason for, such a modification,
  • (2) such a modification is made without additional cost to the consumer and
  • (3) the consumer is informed in a clear and comprehensible manner of the modification.

If these requirements are not met, the consumer has the right to terminate the contract. However, Recital No. 77 of the Digital Content Directive explicitly states that, if the modified digital content is no longer in conformity with the subjective and the objective requirements for conformity, the consumer shall also be able to demand cure, to reduce the price as well as to demand damages or reimbursement of futile expenses.

Pursuant to Recital No. 75 of the Digital Content Directive valid reasons to modify the digital product could encompass cases where the modification is necessary to adapt the digital content to a new technical environment or to an increased number of users or for other important operational reasons.

In particular with free apps, it is not uncommon to change the catalogue of features during the runtime of the app, sometimes maybe expanding the features, but often also removing features which prove to be impractical or not economically viable. However, according to the examples given in Recital No. 75 of the Digital Content Directive, neither the practicality nor the economic viability should be valid reasons to remove features from the app. If the removal of such features proves to be a defect, the user could theoretically demand the app to be restored to the previous version.

5. Consequences for contract design

The new regulations significantly tighten the legal obligations for the provision of digital products, especially in those cases, where the product is provided free of charge and access is only paid by the consumers data. The former legal framework did not explicitly recognize personal data as a valid mean of payment and therefore did not oblige the trader who received the data to perform for it in return. With the new regulatory framework, the trader’s performance obligations are now very similar to those of a normal purchase or rental contract. Since the legal requirements can hardly be altered by contract according to Section 327s BGB, the new regulations require a redesign of most existing contracts. Even more than in the past, it will be important to define the scope of performance carefully in order not to expose oneself to supplementary performance obligations and to reserve the right to make changes at a later date. Also, the trader is imposed with additional information requirements which need to be complied with in order to avoid cease and desist letters from competitors.

Should you have any questions regarding the new regulatory framework, we will be happy to offer our support.

GDPR – New Standard Contractual Clauses

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Since the CJEU annulled the EU-US Privacy Shield in July 2020, the European Commission’s Standard Contractual Clauses have in practice formed the most relevant basis for cooperation with service providers and partners outside the EU. The Standard Contractual Clauses have now been fundamentally reformed and the new clauses must be implemented since 27 September 2021. We summarise the most important changes and the resulting need for action.

Background

The GDPR protects personal data of EU citizens also outside the EU. Personal data may only be transferred to countries outside the European Union (so-called third-countries) if an adequate level of data protection comparable to the GDPR is guaranteed in these third-countries. For a number of countries, such as most recently the United Kingdom, the adequate level of data protection has been positively established by an adequacy decision of the Commission. For most countries, however, no such adequacy decision exists. This also applies to the USA since the CJEU declared the EU-US Privacy Shield, which has been in force since 2016, null and void in 2020 (judgment of 16.07.2020 – C311/18 – Schrems II). As an alternative, the focus shifted to the possibility of ensuring an adequate level of data protection on a contractual basis by executing the European Commission’s Standard Contractual Clauses.

These Standard Contractual Clauses have now been thoroughly revised by the European Commission and adopted in their latest edition on 4 June 2021 (Implementing Decision (EU) 2021/914). The new Standard Contractual Clauses are to be applied to all new agreements as of 27 September 2021. For legal relationships established by then, the old Standard Contractual Clauses will remain applicable for another 15 months. However, by 27 December 2022 at the latest, all data transfers to third-countries must be adopted to the new Standard Contractual Clauses or an alternative instrument to ensure an adequate level of data protection.

Modular construction principle for different constellations

To cover the different scenarios of international data transfers, the new Standard Contractual Clauses rely on a modular building block principle instead of the previous separate sets of documents for each scenario. On the one hand, this leads to increased flexibility, especially since data transfers between processors and (sub)processors and between processors and controllers are now also covered. On the other hand, the application of the Standard Contractual Clauses thus gains in complexity, especially since the principle remains that the clauses are only considered a suitable guarantee for ensuring an adequate level of data protection if they are used essentially unchanged.

Model order processing agreement included

In addition to guaranteeing an adequate level of data protection, the new Standard Contractual Clauses also explicitly serve to fulfil the obligations under Article 28 (3) and (4) of the GDPR to conclude a data processing agreement. They are thus at the same time a model data processing agreement. For this purpose, the European Commission also adopted separate model data processing clauses, which can be used in domestic processing scenarios (Implementing Decision (EU) 2021/915). Since the use of these clauses is not mandatory, it remains to be seen whether they will prevail in practice compared to the numerous freely available templates for data processing agreements.

New testing and documentation requirements for the implementation of Schrems II

The new Standard Contractual Clauses are in parts obviously designed as a response to the risks identified by the CJEU in Schrems II in the context of third-country transfers, in particular regarding excessive access to personal data by public authorities. However, they do not solve the practical problems arising for implementing companies. For example, the CJEU explicitly requires implementers of the Standard Contractual Clauses to assess the legal provisions applicable in the recipient’s country to see whether the statutory framework even allows the data recipient to comply with the provisions of the Standard Contractual Clauses. If, as in the USA, the legal regulations permit access by public authorities that the CJEU considers incompatible with European standards, the parties must take additional organisational and technical measures to effectively counter these risks.

The new Standard Contractual Clauses manifest this obligation by requiring the contracting parties to conduct a prior impact assessment, the outcome of which must be documented. As a result, both parties must explicitly confirm that there are no concerns about the ability to comply with European data protection standards. The clauses also contain obligations for the data recipient to notify the sending entity about requests from public authorities and to exhaust legal remedies where such remedies are prohibited.

Outlook and recommendation for action

The new Standard Contractual Clauses undoubtedly fit better into the regulatory system of the GDPR and offer practical advantages, such as an increased flexibility and the implementation of the CJEU’s requirements from Schrems II. The mandatory transfer impact assessment on the first view appears to be an intensification of the legal obligations, but ultimately merely implements the situation that applies since Schrem II. Furthermore, the explicit implementation of this requirement in the Standard Contractual Clauses could increase the practical willingness of third-country service providers to participate in a transfer impact assessment as well as the remediation of identified risks through technical and organisational measures.

If no real alternative to the conclusion of the Standard Contractual Clauses is established at the political level, which currently is not foreseeable, there is no way of avoiding the new Standard Contractual Clauses for a cooperation with service providers in third-countries, such as the USA. The current relevance of the topic is also shown by recent measures of the German data protection authorities, which in July 2021 sent questionnaires to companies throughout Germany in a coordinated focus audit regarding the handling of third-country transfers in accordance with Schrems II. Corresponding audits are to be expected in particular in connection with the changeover deadlines for the use of the new Standard Contractual Clauses on 27 December 2022.

Against this background, all EU-based companies should be prepared, whereby the following measures seem advisable for a practicable implementation of the legal requirements:

  • Conducting an internal screening for processes that involve the transfer of data to third-countries, such as the USA (e.g., in the context of website tracking, software tools, etc.).
  • Evaluating the possibility of suitable alternative providers based within the European Union.
  • Preparing different sets of the Standard Contractual Clauses according to own needs.
  • Preparing a standardised impact assessment process for third-country transfers and a catalogue of appropriate, technical and organisational measures to reduce identified risks.
  • Ongoing documentation and review of the measures taken, as evidence for submission to the data protection supervisory authority in case of an audit.

If you have any questions about the new Standard Contractual Clauses or about third-country transfers in general, please do not hesitate to contact us.

Health Claims Regulation: The use of trademarks containing health claims finally banned

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As of 20 January 2022, the use of trademarks containing health claims will be definitively prohibited.

Many products are advertised by the food industry as having health benefits. Margarine were “low in cholesterol” and dried fruits would “promote digestion.” Even in the case of sweets, the vitamin content is emphasised. By doing so, it is intended to provide incentives to buy. Many consumers are willing to spend more money on “healthy” foods.

Increased consumer protection through the Health Claims Regulation

Due to the risk of misleading consumers about alleged health effects, the European legislator passed the Health Claims Regulation (Regulation (EC) 1924/2006) in 2006. It regulates the requirements for nutrition and health claims on foods. The Regulation has a wide scope of application. The term “claim” includes any labelling or advertising of the product that declares or even implies that a food has positive nutritional characteristics or that establishes a link between the food and health.

Nutrition claims are only permitted if they are truthful. The Health Claims Regulation lists over 200 common claims such as “sugar-free” or “low-fat” and sets limits for the product name. For example, if a product contains less than 0.5 g of sugar per 100 g, it may be advertised as “sugar-free”.

Health claims are generally prohibited under the Regulation. Products may not simply be associated with a specific health effect (“helps strengthen the immune system”). However, there is the option of going through an approval procedure at the German Federal Office of Consumer Protection and Food Safety (BVL). In 2012, the EU additionally adopted another regulation (Regulation (EU) No. 432/2012), which contains a list of permitted health claims for foods. According to this Regulation, a product with a specified minimum calcium content, for example, may refer to its positive influence on bone preservation.

Need for action by trademark owners

Word and figurative marks are also to be understood as identification of the product. Therefore, they may not readily contain nutrition or health claims such as “low carb” (Hamburg Court of Appeals, 24.04.2014 – 3 W 27/14 ). Terms such as “vital”, “fit” or “healthy” are also affected. A well-known German drugstore chain found themselves forced to rename its own brand “Das gesunde Plus” to “Mivolis” due to the Health Claim Regulation.

To protect trademark owners, the Health Claims Regulation contains a transitional provision. According to Art. 27(2), products with trademark protection existing before 1 January 2005 (also by virtue of reputation or renown) may be marketed until 19 January 2022. Only from 20 January 2022, the requirements of the Regulation will also be applying to these trademarks. Trademark owners who nevertheless use trade names that are prohibited under the Health Claims Regulation after 19 January 2022 face the risk of warnings and official measures.

In this context, trademark owners from the food industry should conduct a review of their older trademarks.

Authors: Dr. Andreas Dustmann, Attorney at Law, and Tim Stripling, Research Assistant

 

Protection of the Swiss Army Knife

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With judgement rendered on 15 June 2021 in the case 33 O 7646/20, the Regional Court of Munich ruled on the use of various indications of geographical origin with reference to Switzerland. Specifically, the ruling concerned the famous Swiss Army Knife of the traditional Swiss company Victorinox. The court clarified that the indications “SWITZERLAND”, “SWISS” as well as the national flag of Switzerland enjoy a high reputation as indications of geographical origin in relation to pocket knives and multifunctional tools.

Background

In the underlying case, the traditional Swiss company Victorinox objected the offer and sale of pocket knives and multifunctional tools bearing the indications “SWITZERLAND” and the national flag of Switzerland. In the proceedings Victorinox has alleged that the defendant was appropriating the reputation of these indications of geographical origin for its own products. While Victorinox manufactures the Swiss Army Knife and multifunctional tools in Switzerland, the defendant’s products are produced in China and belong to the low-price segment. Nevertheless, these products were labelled with the words “SWITZERLAND” and the national flag of Switzerland. Only a small sticker on the back of the packaging of the defendant’s pocket knives and multifunctional tools suggested that the products originate from China.

Decision of the court

The Regional Court of Munich granted the action and specifically ordered the defendant to cease and desist from further offering and selling the pocket knives and multifunctional tools at issue. The indications of geographical origin “SWITZERLAND”, “SWISS” and the Swiss national flag are associated with special values in relation to pocket knives and multifunctional tools and therefore enjoy a high reputation. In the court’s opinion, this is even obvious in the legal sense and hence does not require proof in the proceedings. Consumers would expect a high quality from products from Switzerland; this is also true for the Swiss Army Knives sold by Victorinox. Accordingly, such products are associated with special quality and enjoy a high degree of recognition. By transferring this special reputation to the products manufactured in China by means of “Switzerland-related” labelling, the defendant exploits this reputation. The public would inevitably make an association with the quality and tradition of Swiss pocket knives, with the result that the target public would associate the defendant’s products with similar ideas of quality and value. For these reasons, it was irrelevant whether or not the indications on the defendant’s products misled customers as to the geographical origin of the products. Delocalising references on the products, such as a reference to their origin from China, were irrelevant.

Conclusion

The Regional Court of Munich has confirmed that the indications of geographical origin “SWITZERLAND”, “SWISS” as well as the national flag of Switzerland enjoy a special reputation with respect to pocket knives and multifunctional tools. Accordingly, there is an extended scope of protection with regard to these and similar indications. Whether or not an indication referring to Switzerland in connection with pocket knives and multifunctional tools may actually mislead the public, is of no relevance. Insofar as the products are not from Switzerland, the use of such indications is per se unlawful.