Incidence, settlement and resolution of patent litigation suits in Germany

Abstract

Patents are government grants of an entitlement to enforce a legal right. This means that, although the safeguarding and enforcement of property rights are essential for investment, trade and eventually for economic growth, patents are far from ironclad property rights. Their limits of validity have to be enforced when facing potential infringing actions. Within the European Union there is a vital discussion going on about the design of the European Patent System and consequently about the enforcement system. There are detailed planes about creating a European Community patent. The establishment of a unique enforcement system in the sense of one central patent court in Europe creates a number of technical and jurisdictional problems which seems hardly to be solved. The experiences of the various European enforcement systems should be evaluated and taken into account when shaping a European Patent system. This thesis offers a unique empirical investigation of the enforcement of German patent rights. It contains three essays on various aspects of patent litigation in Germany and adds empirical evidence to the existing literature, most of which is built on large data sets for the United States. To date, however, relatively little research has focused on Germany. The investigation of patent litigation in the German patent system is interesting owing to certain important features which distinguish it from the U.S. system. First, for Germany there is an estimated litigation rate of about 1 percent of all patents in force at any given time. Lanjouw and Schankerman estimate a probability of a patent suit being filed of about 2.1 per cent for the United States. Twice as many patent lawsuits per patent are therefore pursued in the US than in Germany. Second, in contrast to the patents analyzed for the U.S., the type of German patents analyzed in this thesis is subject to the European and German system of applying for and granting patents. Third, the enforcement of patents is strictly separated into infringement disputes where the validity of the patent is not questioned and invalidity suits which are filed at a different court. As legal enforcement of patent rights depends crucially on the judicial system I introduce the German patent system and its enforcement mechanism in Chapter 2. As already noted, German patents, when they are applied for at the European Patent Office (EPO), are subject to the European patent system. Opposition procedures are regarded as the first legal test of patent validity and can be filed by any third party. All three essays consider the impact on the enforcement system of this distinctive feature of the German patent system. All essays draw on the same unique data set which was collected by the author using information retrieved from written court files as part of an ongoing procedure. The data set contains all patent litigation suits filed from 1993 to 1995 at two of the three main District Courts in Germany which have jurisdictional responsibility for disputes relating to intellectual property rights. 715 litigation cases involving more than 900 patents were identified for this time period. Detailed information about the course of the case as well as patent characteristics from various different data bases have been merged to the patentee data. Chapter 3 includes a detailed description of the database. In Chapter 4, I estimate the determinants of patent litigation at the two District Courts in Mannheim and Düsseldorf. I analyze the probability of litigation as a function of a set of exogenous variables which reflect characteristics of the patent, market conditions, and characteristics of the patent owner. As one of the main results, I find a significant higher probability of litigation for patents which are more valuable than the average. Small firms are more often involved in patent litigation suits than larger ones which points to the high relative value the litigated patent has for small companies compared to larger ones. Contrary to results for the U.S., I did not find that individual patentees are more likely to be involved in patent suits. These results have direct implications for the calculation of risk based litigation insurance fees, of the type planned in the EU. In addition, Chapter 4 contributes to the existing literature by providing evidence of a positive relationship between the incidence of opposition procedures and the probability of litigation. This result contributes to the discussion in the U.S. about whether installing an opposition system there would lead to qualitatively more valuable patents and, hence, to a lower probability of involvement in litigation and challenge suits. Chapter 5 extends the analysis of Chapter 4 to consider the reasons why trials, which are themselves generally the outcome of a failure to reach settlement during pre-trial negotiations, nonetheless often result in settlements. I look at the settlement decision at various stages of the trial: before the hearing, after the hearing, at first appeal (after court decision at the District Court). The results suggest that, at the time of litigation, almost all available information is used to decide whether to file a suit or not. Additional information evolving in the course of time, for example because of annulment suits, influence the pattern of settlement at later stages of the trial. The results suggest that the legal environment exerts a powerful influence on the settlement decision at each stage of the trial. The general settlement rate not only differs considerably between the District Courts, but also at each stage of the trial. The overall conclusion of the analysis in this Chapter is that, at each stage, the decision to settle is made independently of the preceding decision. The results from Chapter 5 lead directly to the key issue dealt with in Chapter 6. This Chapter sheds light on how the duration of trials is determined: the speciality of the infringing action may result in efforts being made to terminate the suit, or its duration may be affected by the general characteristics of the patent or of the patentee. In particular, I tackle the question of whether the outcome of a patent litigation suit is influenced directly by the efforts the litigant undertake in order to terminate a legal patent dispute. This analysis goes one important step further than the existing literature by using detailed information about the course of the case. I particularly take the means of defense into consideration: filing an annulment suit, the procedural details of a hearing and requests of suspension. The results of this Chapter reveal that annulment suits as a means of defense of the potential infringer delays court adjudication but not settlement in German patent litigation suits. Only if suspension is requested is the hazard of termination of both types of patent suit termination decreased. The results suggest that courts are experienced in handling complex litigation claims and expert reports. \n

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 6 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.