Context: The Munich I Regional Court’s Seventh Civil Chamber, the best-known patent infringement panel there, has recently taken a highly skeptical approach to the security amounts requested by defendants in the event of a provisional (i.e., while an appeal is pending) enforcement of an injunction. One noteworthy case in which a rather low amount of collateral was required by the court is Atlas Global v. TP-Link, a WiFi 6 standard-essential patent (SEP) case, where a router maker would be shut out of the German market against security of only €4 million (May 22, 2024 ip fray article).
What’s new: On August 1, the Munich Higher Regional Court adjusted the security amount, raising it to a total of €26 million (between two defendant entities), as ip fray learned from a spokeswoman for the court. Apparently the appeals court rejected the lower court’s legal standard and applied the more conventional German approach to enforcement collateral.
Direct impact: While Atlas Global is well-resourced, it remains to be seen whether it will actually enforce in these new circumstances. Atlas is also trying to build settlement pressure through new actions in the Unified Patent Court (UPC) (August 19, 2024 LinkedIn post by ip fray)
Wider ramifications: Lenovo is facing a similar situation against InterDigital, and today ip fray learned from the same spokeswoman for the court that a decision on provisional enforceability has been scheduled for September 12. The question of enforcement security is an important one to make sure that defendants will be made whole in the event of wrongful enforcement. At the policy level, however, it is also important to consider that high security requirements may effectively delay enforcement by the duration of the appellate proceedings (easily a year), thereby enabling hold-out by high-volume implementers.
The distinction between an injunction that is actually being enforced and one that exists on paper, but which cannot be affordably enforced, is an important consideration when attempting to strike a reasonable balance between SEP holders and implementers.
The German situation is characterized by bifurcation: there is no full invalidity defense (such as the UPC’s revocation counterclaim) in the infringement proceedings. That fact alone significantly increases the probability of wrongful enforcement. But injunctions sometimes get overruled on non-infringement grounds as well. Furthermore, the FRAND situation in Germany is in flux after the European Commission flagged the manifest error that is the country’s Sisvel v. Haier doctrine (August 4, 2024 ip fray article). For all those reasons, it’s not unlikely that TP-Link may, at the end of the appellate proceedings, get Atlas Global’s infringement win reversed, and Lenovo could easily achieve the same against InterDigital.
When there is a significant (even very significant) probability of a first-instance injunction not withstanding appellate scrutiny, it is indeed important to make sure that wrongful enforcement damages could be collected. That’s what the collateral is all about. The actual wrongful-enforcement damages would still have to be determined further down the road and could deviate from the security amount in one direction or the other. The security amount is just based on an initial estimate, which the Munich appeals court has made clear again does not (unlike what the lower court argued) have to be based on incontrovertible evidence and which has nothing whatsoever to do with whether the patentee can afford enforcement (an argument that one could at least try to raise in the UPC, but which gets you nowhere in German national court).
Whether the appeals court should actually have lifted the injunction rather than merely raising the security amount is another question. In light of the European Commission’s amicus brief that effectively declares Sisvel v. Haier bad law, the argument could certainly be made.
Atlas Global is represented by the Wildanger firm, with the two recently-filed UPC cases listing, respectively, Dr. Alexander Wiese and Eva Geschke as lead counsel.
TP-Link’s lead counsel is Dr. Tobias Hessel of Clifford Chance. who frequently acts on both sides of SEP litigation: enforcement and defense.