The defence against unjustified attacks based on IPR on the opportunity of trade fairs and exhibitions

2011/01/12,By Prof. Dr. Heinz Goddar, Dr. Carl-Richard Haarmann,[Comprehensive Reports]

Germany is one of the world’s leading locations for international specialist and consumer trade fairs. Numerous important trade fairs and exhibitions take place in Germany’s exhibition venues, including, for instance, the computer fair, CeBit in Hannover, the Hannover Trade Fair, the IFA (consumer electronics) in Berlin, the Nuremburg Toy Fair, the International Weapons Fair (IWA) in Nuremburg and the Frankfurt Car Show. These fairs and numerous other shows have a leading role in the world and as such draw large numbers of visitors and exhibitors each year from all over the world.
Increasingly, Chinese companies are also taking part in such trade fairs as exhibitors, using the outstanding opportunities offered to present products and technology as well as establish and develop international trade relationships. As Chinese companies and Chinese products gain a greater and greater foothold on world markets, such trade fairs and exhibitions in Germany become more and more important for these companies. This increased significance and market presence of Chinese companies, though, also leads to a greater potential for conflict with competitors. In this respect, Western companies have traditionally used especially intellectual property rights, namely patents, trademarks and copyrights in order to defend their market share against competitors. Whilst this type of competitive conflict has in the past been fought between Western industrial companies, such attacks have recently been directed, in particular, against the newly emerging competition coming from China. These companies are closing the technological gap to Western companies and this, coupled with an aggressive pricing policy has led many Western companies to view such Chinese firms as dangerous competition. In this context, the holders of industrial property rights often take advantage of the fact that the German justice system provides excellent opportunities to take swift and effective legal action against actual or alleged rights infringements due its more specialised courts, quicker and more efficient proceedings and traditionally more protection rights friendly court decisions.
As such, the assumption is at times not wholly wrong, that the – not exactly beneficial – possibilities for efficiently asserting intellectual property rights are not only used in cases of actual rights infringements but are used by some rights holders, sometimes apparently also with the help of the courts and authorities, in cases where a patent, trademark or competition infringement is not evident or even probable. In some cases, the accusation can certainly be made that the possibilities afforded by intellectual property rights are knowingly exploited and the courts, customs and police are intent not on investigating IP rights infringements but on attacking unwanted competitors with the sharp sword of intellectual property rights protection. Such actions are necessarily often taken against Chinese companies with trade fairs and exhibitions playing a central role as such events are crucial to companies’ market activities whilst also offering the opportunity to attack several competitors in a concentrated fashion to great, often devastating effect within a short period of time, at times with justification but at times, sadly, also with none. In light of the considerable damage which can be suffered by those subject to such attacks, it can be of the utmost importance for any company planning to participate in a trade fair or exhibition in Germany, to develop suitable strategies in good time, on how to defend themselves against attacks based on patents, trademarks and copyrights. This requires a precise knowledge of the legal sanctions which can potentially be applied in Germany as well as the preparation of suitable defence measures in good time.
I.         Potential risks: instruments rights holders’ can use to pursue infringements of patents, trademarks or copyrights
1.  Main action before the civil courts
The German legal system sees the primary and preferred way of asserting intellectual property rights to be the filing of a claim in the civil courts. Such claim proceedings are heard by highly specialised divisions of the responsible regional courts (Landgericht) and a judgement is usually reached within 12 to 14 months. The German courts, especially the patent infringement chambers, particularly those of the Regional Courts of Düsseldorf and Mannheim, enjoy an excellent reputation worldwide as leading rights infringement courts.
Such main proceedings are not, however, particularly significant as far as trade fair participation is concerned. The exhibition or sale of a rights infringing object on the occasion of a trade fair in Germany does constitute grounds for the jurisdiction of German courts, even if the exhibitor is based abroad and there are often cases where main proceedings are brought against foreign exhibitors in connection with trade fairs or exhibitions. However, this type of proceedings does not represent an acute risk to exhibitors as the infringement courts do not issue judgements which are directly enforceable whilst the trade fair is taking place. Thus, bringing proceedings in a civil court does not affect the current trade fair participation nor does it hinder the respective conclusion of business and presentation of goods.
2.    Preliminary injunctive relief at civil courts
An additional or alternative possibility for an assertion of intellectual property rights at short notice under German law is to effect a preliminary injunction at the responsible civil court. The object of such a preliminary injunction is usually a cease and desist order, furthermore, obligations to disclose information are usually also imposed. Where appropriate, in particular in connection with trade fairs and exhibitions, the court orders the allegedly rights infringing objects to be seized and impounded, for instance devices or machines displayed. A preliminary injunction cannot be used, however, to determine damages nor comprehensive claims for information.
The holder of a patent, a trademark registration or a copyright claim can file an application for injunctive relief through a duly licensed attorney at law at the court which has the respective jurisdiction ratione loci and ratione materiae. Claims in respect of the infringement of intellectual property rights, must always be addressed to the respective specialist court. In doing so it is possible but not necessary to give the opposing party a prior verbal or written warning demanding they cease and desist the rights infringing activity. In the application for injunctive relief to be filed at the court, the rights holder must argue and show credibly that he is the holder of an enforceable right, namely a granted German patent or German part of a European patent, a utility model, a registered German trademark or copyright exploitation right. Furthermore, it must also be credibly shown that there is a high probability that the protection right, on which the application is based, is legally valid. It must be argued and shown credibly that the case constitutes a clear case of infringement of a right, and the responsibility of the opposing party must also be evident. Finally, the applicant must show that the matter has a high degree of urgency; this is usually assumed by German courts provided the application for injunctive relief is filed with the court within one month of the applicant becoming aware of the infringing activity.  A further requirement for a court to grant a preliminary injunction is that the case and the protection right upon which it is based is not too complex. This is particularly relevant in respect of injunctive relief proceedings in connection with alleged patent infringements as the circumstances are often too complex in such cases to be dealt with in summary preliminary injunction proceedings.
After receiving a request for preliminary injunction, the civil court will usually rule within 48 hours, often without oral proceedings and without hearing the opposing party. In matters involving trade fairs, decisions are often reached even within a considerably shorter timeframe. The court can either grant the requested injunction, reject it or alternatively order oral proceedings at short notice. If the case is clear-cut, a preliminary injunction will often be granted with no further action. However, German courts generally tend not to make decisions in patent infringement cases without oral proceedings unless the patent on which the application is based has previously successfully passed opposition or invalidity proceedings. Once a preliminary injunction has been granted, the court notifies the applicant but not the opposing party. The applicant itself must then serve the decision, with the help of a bailiff, on the opposing party. This service must be undertaken within one month of the applicant’s receiving the preliminary injunction otherwise the decision is lifted by the court.
A preliminary injunction of a civil court must be unconditionally observed by the opposing party immediately upon being served. If the court has ordered a seizure of property, the bailiff secures the respective objects and takes them into his custody until a legally binding decision in later main proceedings. In the case of violations, the court then orders, upon application of the applicant, either a monetary fine, usually of considerable height, or imprisonment.
The legal remedy available to the opposing party is that he can file an objection with the court which granted the preliminary injunction. Upon receipt of such an objection, the court must order an oral hearing which can then take place with extremely short summons periods. In these oral proceedings, only the actual evidence available is admitted, arguments which have not been shown credibly and absent witnesses are not considered. Following the oral proceedings, the court passes a ruling against which the losing party can appeal – a decision on such an appeal will, however, generally only follow after some time has passed. If the court of first instance confirms the preliminary injunction in its ruling following oral proceedings, the opposing party must continue to observe such injunction. However, the opposing party can force the applicant to file a main action in order to have the dispute dealt with in non-cursory proceedings.
At this point, one may summarize that the possibility of obtaining and enforcing a preliminary injunction is a dangerous and effective weapon in the hands of a rights holder. It is relatively easy to effect and simple to enforce whilst the defence possibilities of the alleged rights infringer are restricted. Furthermore, the enforcement of a preliminary injunction is often unexpected and at an inconvenient time such as the beginning of a trade fair or exhibition thus placing the success of the participation in the event in jeopardy. The consequences of such a preliminary injunction for the opposing party are often comparable with those of judgement in main proceedings; in many cases the opposing party has lost the battle before he is even aware of any attack.
3.    Border seizure by customs
In addition to civil measures, the holder of intellectual property rights also has the possibility at his disposal to pursue infringers with the help of the customs authorities. Based on the harmonised directives for border seizures within the European Union which aim to effectively prevent the import of products which infringe patents, trademarks or copyright, the system of border seizure in Germany is very strict and efficient.
The holders of intellectual property rights can submit a general application for border seizure with the German customs authorities. In such cases, the customs officials merely receive general information about the protection rights on which the application is based as well as characteristics which can be used at customs control to identify goods which infringe such rights. In this process, officials responsible for the examination of imported goods should not and would not be able to assess complex technical or legal circumstances.
The customs authorities check goods sent both when they are imported into Germany and during trade fairs and exhibitions. Upon mere suspicion of rights infringements, the officials initially secure the goods and inform both importer (usually a shipping company, not the manufacturer or distributor of the goods!) and rights holder. Insofar as the importer does not object to the seizure within ten working days, providing grounds for such an objection, the goods are finally seized and destroyed.
If the importer (or a representative thereof) does object to the impounding within the 10 day limit, the rights holder has a further 10 working days to file either a claim for injunctive relief or a main action with the aim of effecting a court ordered restraint on disposal obligating the importer to tolerate the impounding of the goods until such time as the alleged rights infringement can be clarified in court. If the rights holder does not institute such civil law proceedings within the time limit, the impounding order will be rescinded and the goods released.
4. Police seizure
In addition to the measures available under civil law and customs seizure, a holder of intellectual property rights also has the possibility of reporting persons suspected of importing, offering for sale or distributing rights infringing products to the law enforcement authorities and thus effecting police seizure and the institution of a criminal investigation by the public prosecutor.
Any wilful, unlawful and culpable infringement of an intellectual property right constitutes a criminal act under German law. Provided the matter is respectively reported to the police or public prosecutor, a seizure of the allegedly rights infringing objects can be ordered. Only in rare, exceptional cases does the police act directly. Usually, a search of business premises, trade fair stands or vehicles requires a court order which is granted upon application of the public prosecutor. The requirement for the granting of a search and seizure order is the existence of a well founded initial suspicion in respect of the existence or imminent occurrence of a criminal act. In such cases, the investigating judge must assume that the infringement of one or more intellectual property rights is being committed or is imminent. This in turn requires that the responsible investigating judge is convinced that the intellectual property right concerned is legally valid and being infringed.
Insofar as a police seizure then follows, the criminal proceedings are then often ceased, whereby a fine is set against those responsible and the confiscation and destruction of the goods is ordered. In bigger cases, it can indeed be the case that the criminal proceedings are carried out resulting in significant fines and in extremely rare cases even prison sentences being imposed. It is very rare that the objects seized by the police are released again, usually these are confiscated and destroyed.
5.    Interim conclusion
It is evident, in light of the possibilities described above for asserting intellectual property rights claims against actual or alleged infringers on the occasion of trade fairs and exhibitions, that companies who present their goods at such events are faced with many and various risks. Even simply the risk that the exhibition and offer of possibly rights infringing goods may provoke main proceedings before a German court is significant in that it represents a danger for foreign exhibiters of being drawn into a costly court battle in an unfamiliar legal system. Furthermore, in the case of a conviction, the exhibiting company faces not only a permanent ban on sales but also claims for damages, recall and destruction all due to a rights infringement of which the company was previously unaware. In light of the fact that claims for injunctive relief exist under German law regardless of whether the infringer acted with intent or not, the exhibitor of products which – possibly without his knowledge – infringe patent rights, trademark rights or copyrights of another, has possibly to deal with considerable negative consequences and, in particular, costs.
The risk is still higher, that an exhibitor may be confronted with a civil law preliminary injunction on the occasion of a trade fair or exhibition. Unlike in cases where main proceedings are brought, which can be precipitated by the presence at a trade fair but do not initially affect the participation therein, injunction proceedings can directly lead to a lasting impairment of the immediate trade fair activities. If important objects to be presented are impounded on the basis of a preliminary injunction during the trade fair itself, the granting and enforcement of a preliminary injunction can often ruin the success of the entire participation in the trade fair.
Particular risks for foreign companies who present products at trade fairs in Germany are also harboured in the system of border seizure. The danger is, on the one hand, due to the extremely short time limits which apply as well as that an immediate and energetic reaction of the importer is required as soon as the customs authority has ordered a border seizure. If the seizure of trade fair exhibits is undertaken directly prior to the trade fair taking place, it is often impossible, even in cases where no infringement has occurred, to effect the release of the impounded goods in time for the trade fair. A particularly problematic element for foreign trade fair exhibitors is the fact that the customs officials tasked with the enforcement of border seizures inevitably cannot have the requisite knowledge in order to legally assess technically complex situations. Whilst customs officials are indeed often able to form an opinion on the possible existence of trademark or copyright infringements, this is regularly not the case where border seizures are based on the alleged infringement of patents. In such cases, the customs officials rely heavily on the information provided by the patent owner when assessing whether an infringement has occurred. This, in turn, means that patent owners have lasting opportunities to remove particular products, whose patent infringing nature is more than questionable, from the market, with the help of the customs officials in border seizure proceedings, or at least to keep such products away from the trade fairs.
Similar risks are posed, for exhibitors of products which could potentially be the target of attacks on the basis of actual or alleged rights infringements, by a preliminary criminal investigation. This is true, in particular, as the persons responsible for assessing the existence of a suspicion of a rights infringement, as in the case above, often lack the necessary specialist knowledge. Whilst the civil courts which handle patent, trademark and copyright infringements are highly specialised, a comparative specialisation is not seen in the law enforcement agencies, i.e. public prosecutor and criminal court judge. This has the effect, especially in the case of alleged patent infringements, of increasing the risk for the “suspects” and in particular where these are foreign exhibitors. Whilst the public prosecutor tasked with evaluate the respective criminal complaints may indeed normally be in a position to check for the existence of a trademark or copyright infringement using his own knowledge and skills, in cases where an alleged patent infringement is reported, the public prosecutor usually has no possibility of understanding the special legal situation and thus of being able reliably to adjudge the legal validity of the allegedly infringed patent and the realisation of its protective characteristics. Since, however, only a reasonable initial suspicion is required for the institution of preliminary criminal proceedings and thus the ordering of a police seizure on the basis of the trade fair, there is a risk that a forcefully argued criminal complaint by a patent owner prior to a trade fair can lead to a police seizure during the fair. The consequences can be drastic for the exhibitor, in any case the success of the exhibitor's participation in the trade fair can be put in jeopardy.
II.   Strategies and measures to reduce the risk
In light of the considerable risks and unknowns which in particular foreign exhibitors face in the course of trade fairs and exhibitions in connection with attacks based on – actual or only alleged – infringements of intellectual property rights, it is highly advisable, in respect of participation in such trade fairs, to prepare suitable measures in advance in order to fend off any attacks from competitors based on alleged infringements of patents, trademarks or copyrights. This requires more than simply taking individual protection measures. Rather, it is necessary to develop a consistent defence strategy in good time prior to the participation in a trade fair. Such a strategy must be aimed at first ruling out, where possible, an infringement of intellectual property rights through a thorough analysis of the situation whilst also identifying potential dangers. If such an analysis reveals indications that even just a small conflict potential exists, precautions should subsequently be taken which are suitable at least to significantly reduce the danger posed by attacks which could directly jeopardise the success of the trade fair participation.
1.    Infringement (freedom-to-operate) research in advance of trade fair participation
A central element of any defence strategy must be to check, far in advance of the specific trade fair preparations, whether the products intended for presentation may possibly infringe intellectual property rights. For this, it is necessary that a decision is made at least six weeks in advance, as to exactly which products are to be presented at the trade fair or exhibition. Taking into account the complexity of the search to be then undertaken, one should allow much more time.
Once the products have been selected, it is urgently necessary to analyse these objects in respect of whether the import, exhibit or sale thereof, could infringe intellectual property rights in Germany. Depending on the type and nature of the objects to be exhibited, one must ascertain whether patent rights, trademark rights or copyrights could be infringed. This then requires the respective objects to be analysed in detail and then property rights to be identified which could be infringed. Finally, at least those protection rights for which a certain probability of an infringement exists should be checked in respect of their legal validity.
Such “freedom-to-operate” search can certainly be prepared in the exhibitor’s own country, for instance in China. The final assessment is, however, only possible in Germany as it is only here that all relevant protection rights can be identified and checked for their infringement and legal validity using German legal  criteria and detailed knowledge of German law and jurisprudence.
Ultimately, a properly performed "freedom-to-operate" search can localise all possible risks and evaluate them according to their risk potential. In this way, the exhibiting company is in a position to decide on any further strategy even before the trade fair or exhibition begins.
2.    Filing protective letters at the civil courts
If the “freedom-to-operate” search reveals information suggesting that a particular product intended to be shown potentially infringes a legally valid intellectual property right, it makes little sense to import that product into Germany nevertheless, for the purpose of making it the object of a trade fair presentation. This would constitute knowingly provoking an attack from the holder of the protection right.
A possible solution would be arranging licensing negotiations at short notice whereby the aim could be both the granting of a long term license or a so-called trade fair license. In any case, an integral part of the negotiations should be the demand for an agreement to abstain from any attacks based on the right to be potentially licensed, for the duration of the negotiations.
If, as a result of the “freedom-to-operate” search, attacks due to patent, trademark or copyright infringements cannot be ruled out, but reasonable doubts exist as to the existence of an infringing act or as to the legal validity of the respective right, appropriate protection measures should be put into place with the help of which unjustified attacks could be completely prevented or at least reduced in effectiveness.
The most efficient means which can be employed to defend against preliminary injunctions in civil courts is the protective letter. This legal instrument, long since standard practice in Germany, can be described as a pre-emptive pleading; it is not officially regulated within the code of civil procedure. It is widely used, however, especially in disputes involving intellectual property rights; it is customarily recognised. As such a submission does not constitute a writ as foreseen by the German code of civil procedure and thus not an act of procedure, there is no obligation to be represented by an attorney for the filing. In fact, any person can sign a protective letter and deposit it with the courts which have jurisdiction ratione loci and ratione materiae. Usually, the filing is made with all courts in Germany which are competent in terms of the subject matter, as often in matters of intellectual property rights, there exists the possibility of free choice of venue. Furthermore, there is the possibility of depositing the protective letter in the central protective letter registry, where the protective letter can be uploaded to a centrally run database. Today, many German courts who are competent in such matters utilise the central protective letter registry, hence the physical depositing of protective letters at the respective courts is superfluous. However, as some relevant courts still do not use the online registry, it is recommended to file a paper version with all competent courts in addition to the online registration.
In the protective letter, firstly the parties to the expected proceedings are named whereby where possible all potential applicants are to be listed in order to guarantee the court takes the protective letter into account. Potential applicants include the actual right holder as well as related companies and licensees or licensors. Furthermore, the party depositing the protective letter requests the court not to disclose the protective letter to the rights holder, except after the right holder will have filed a request for preliminary injunction. Such a request is always followed by the court.
Next, a short description of the protection rights on the basis of which an attack is expected follows. Thereafter, the facts of the matter and the history of the case so far should be briefly laid out. The core of the protective letter is then in the arguments, which from a legal perspective justify the refusal of injunctive relief, thus in particular which argue against the fulfilment of the constituent elements of an infringement or which show a lack of legal validity of the protection rights upon which the application is based. In many cases, one can argue that the conflict in question has existed between the parties for some time or that the assumed applicant has been aware of the alleged infringing activity for some time so that the degree of urgency necessary for a preliminary injunction to be granted is no longer given.
Whoever deposits a protective letter is also well advised to show in detail that the matter is too extensive and complex for a decision in cursory proceedings of preliminary injunctive relief and why this is the case. As German legal practice dictates that the granting of a preliminary injunction can only be considered if the matter is simple, it is clear that the activity in question fulfils the constituent elements of an infringement and the legal validity of the protection right on which the claim is based is unambiguous, it must be the natural aim of anyone who deposits a protective letter to call these three requirements into question.
The main aim of the protective letter, however, is not necessarily to convince the competent court, through the arguments therein, to reject the feared injunction application. The court is often inclined, through the submission of a protective letter, not to grant a preliminary injunction without an oral hearing. In this way, the depositor of the protective letter obtains the possibility to make the court aware of his opinion and to argue his legal position in oral proceedings on an equal footing. The danger for the alleged infringer associated with preliminary injunctions of being confronted with an enforceable court decision dispensed ex parte, that is without the alleged infringer having been heard, is thus crucially reduced.
Generally, protective letters submitted are retained by the court for a time period of 2-6 months, the time limit in respect of the central protective letter registry is two months, this can, however, be extended.
Upon receipt of an application for injunctive relief, the court seized of the case checks whether a protective letter has been deposited in relation to the particular case in hand. This is then submitted to the court together with the injunction application. The court then examines both writs. The court is fundamentally free in its decision: it can reject the injunction application on the basis of the protective letter, it can issue a preliminary injunction despite the existence of the protective letter but it can also first hear the parties in writing or even arrange an oral hearing at short notice.
The value of a protective letter is thus in the fact that it is the only possibility for the alleged infringer to present his own legal position in the case of an injunction application. With the help of such a letter, unjust preliminary injunctions can be avoided. In particular, the protective letter provides an opportunity for the party being attacked to win some time and improves the possibilities for responding in the case of an intellectual property right based attack.
It can thus be said that protective letters are the best and most effective means with which to tackle civil law attacks of aggressive rights holders.
3.    Filing protective letters with the customs and law enforcement authorities
In addition to filing a protective letter at the civil courts having jurisdiction ratione materiae, it is advisable to deposit copies of this protective letter with the respective local public prosecutor as well as with the central office responsible for the Germany-wide border seizure process for intellectual property. This measure serves primarily to make the customs and law enforcement authorities aware of the fact that one should not assume the legal validity of the allegedly infringed intellectual property rights or the fulfilment of the constituent elements of infringement purely on the basis of a possibly subjectively formulated criminal complaint lodged by the rights holder. One must, in particular, take into account that customs officials, like officials from the police or the state prosecutor’s office or criminal judges generally do not possess the required technical and patent law expertise. Hence, there is always the risk that the court seized of the case follows a convincingly worded criminal complaint or application for border seizure and institute respective sanctions against alleged infringers without being able to appropriately evaluate the entire circumstances. This risk can be reduced by submitting copies of the protective letter which has been filed with the civil courts anyway. This often leads to search and seizure proceedings at trade fairs not taking place as could certainly be expected as the responsible investigating authority, due to the arguments in the protective letter, can no longer assume reasonable initial suspicion exists.
III.        Summary
In light of the substantial risks which a company in Germany can be exposed to when introducing new products as well as when participating in trade fairs, if an infringement of intellectual property rights is claimed, a thorough “freedom-to-operate” search should certainly be undertaken in advance. If this or the actions of competitors or other rights holders indicate that a rights conflict is imminent, it is highly advisable to refrain from offering, exhibiting or launching products onto the market where there is a high probability that a legally valid protection right will be infringed. If, on the other hand, the search reveals that attacks by rights holders are to be anticipated however reasonable doubts exist as to the presence of an infringement of a legally valid protection right, protection letters should be formulated in good time prior to the beginning of the respective use and filed with the competent civil court as well as the central protection letter registry. Furthermore, copies of this protective letter should be filed with the locally competent state prosecutor as well as the central office for intellectual property. In this way, there is a considerable chance of avoiding a preliminary injunction being ordered without oral proceedings and to avoid confiscation of the respective goods by customs or the police.
Heinz Goddar)                                        (Carl-Richard Haarmann
* The authors are partners in the IP law firm Boehmert & Boehmert, Munich, Germany

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