Suspension of compulsory execution: a shift in German practice?

In a recent article, "Suspension of compulsory execution as relief from patent injunctions", German patent litigation lawyer Philipp Ess explains how, for defendants in most patent infringement proceedings, the threat of an injunction halting production is of greater concern than the patentee's as yet unasserted damages claims.

The position of the alleged defendant in applications for provisional relief is particularly delicate since, while plaintiffs can themselves be held liable for losses incurred by the defendant if thre was no infringement and must post security bonds against this eventuality, the loss of income resulting from the defendant being ordered to cease production pending the full trial can easily exceed the value of the security bond and the solvency of the plaintiff. What's more, being ordered to halt production can seriously damage the defendant's reputation.

It is possible for defendants to seek protection against compulsory execution before the trial court renders a judgment, if they can show that an injunction would lead to severe and irreparable damage. However, this protection comes at a cost: in order to seek it the defendant must disclose business secrets regarding its solvency, sales figures and profit margins to the opposing party -- who in the context of patent infringement proceedings may very well be a competitor. The consequence of this is that, once the trial court has ordered an injunction, a defendant may play safe by accepting an unfavourable licence agreement rather than risking an appeal.

This article then goes on to explain the working of Section 719(1) of the Germany Civil Procedure Code, which empowers an appeal court to suspend the compulsory execution of a trial court injunction until the appeal court has decided on the merits. Courts are reluctant to do this in the context of patent infringement proceedings, given the short life and market sensitivity of a patent -- which tends to encourage courts to prioritise the patentee's interest in the expeditious enforcement of a patent. However some recent decisions have bucked this trend by granting motions for suspension.

To read the full article by Philipp Ess (Klinkert Zindel Partner) in International Law Office click here.