VDA warns of costs in billions and production halted due to insufficient patent law reform

    Berlin, February 01, 2021

    Threat of production stoppages with costs running into billions – Current patent law is a clear location disadvantage – VDA calls for fair patent procedures and criticizes a wave of lawsuits.

    The automotive industry is one of the leaders when it comes to filing patents in Germany and Europe. A strong German patent law is indispensable for the companies. At present, many of them are facing patent disputes with firms from the ICT (information and communications technology) sector, which demand vast license fees for incorporated subcomponents, and threaten to halt entire production lines. This is most commonly the case with technologies used for vehicle connectivity and autonomous driving.

    “In the automotive industry it is essential to have access to the technologies needed for connected vehicles and we are happy to pay fair and reasonable license fees. However, license negotiations must not be overshadowed with threats of shutting down whole plants,” stated Hildegard Müller, President of the German Association of the Automotive Industry (VDA).

    The plaintiffs are exploiting a legal gray area in patent law injunction proceedings, whereby plaintiffs can prohibit delivery of the entire production – for example of an automobile – even if the allegedly infringed patent protects only one subcomponent of little value. The validity of the patent is not examined in detail in these proceedings. That makes it easier to impose disproportionately high license fees. The draft amendment to German patent law currently being debated should therefore introduce an effective proportionality test, so that the courts take the economic effects of extensive production stoppages into consideration.

    “The gray legal situation is a serious location disadvantage,” Hildegard Müller stressed. “In many proceedings against German vehicle manufacturers, a complete shutdown of production lines is threatened even though the disputed patent applies only to one subcomponent. This mismatch cannot continue.” ICT firms from the US and the Far East in particular are also following the patent law reform with interest, because such “hard” cease-and-desist injunctions are not possible in other countries in Europe or elsewhere. The VDA therefore welcomes the inclusion of the proportionality criterion in section 139(1) of the Government’s new draft patent law. However the criterion should be codified as set out in the justice ministry’s draft bill, so the proportionality test can be applied effectively. The Government’s draft does not satisfy this objective.

    Revised cease-and-desist injunction proceedings with a proportionality test would not jeopardize the patent portfolios of German companies. The German automotive industry also wishes to protect its patents. But the innovative capabilities of industrial companies benefit from fair cooperation on accessing protected technologies, and that needs equitable rules.