This is an informal case summary prepared for the purposes of facilitating exchange during the 2024 WIPO IP Judges Forum.
Session 2: Standard Essential Patents
Federal Court of Justice, Germany [2023]: Case No. X ZR 123/20 – CQI-Bericht II
Date of judgment: January 24, 2023
Issuing authority: German Federal Court of Justice (Bundesgerichtshof)
Level of the issuing authority: Final Instance
Type of procedure: Judicial (Civil)
Subject matter: Patents (Inventions)
Plaintiff: G.
Defendant: H.
Keywords: Exhaustion in the supply chain, Covenant to be sued last, Consent for chip manufacturer, Implementation in larger device
Basic facts: Plaintiff owns a patent concerning a method for requesting and transmitting a channel quality information report (CQI report) to the base station in a mobile radio system. Defendant sells mobile phones in which, according to the findings of the lower courts, the patented method is implemented. The defendant claims that the plaintiff has agreed a covenant to be sued last with the manufacturer of the chipsets that are installed in the mobile telephones manufactured by it, according to which a patent infringement may only be asserted against these chipset manufacturers if all third parties in question have previously been sued. The defendant invokes this as exhaustion of the rights from the plaintiff’s patent, which also includes the use of the patented teaching for the mobile phones manufactured by the defendant.
The Court of Appeal, as the lower court, found a patent infringement on the basis that the defendant makes use of the teaching of the patent in its mobile phones and the patent rights are not exhausted. The asserted contracts only contained a covenant to be sued last. According to the Court of Appeal, since a mere covenant not to sue does not constitute consent to the distribution of patented products, this prerequisite for exhaustion is even less fulfilled by the asserted covenant to be sued last.
In its appeal before the Federal Court of Justice, the defendant argues, inter alia, that a covenant to be sued last fulfills the prerequisites for exhaustion. This also applies to the mobile phones manufactured by the defendant.
Held: The Federal Court of Justice reversed the decision of the Higher Regional Court and referred the case back to this court for a new hearing, finding that a covenant to be sued last could suffice for an exhaustion.
Relevant holdings in relation to standard essential patents: In relation to the consequences of a covenant not to sue and a covenant to be sued last, a covenant not to sue generally leads to the exhaustion of rights with regard to products put on the market on this basis.
As to the question of whether a covenant to be sued last leads to exhaustion, it is of particular importance whether the contracting party, in the normally expected course of events, is at risk of being held liable by the patent proprietor for infringement of the patent.
In relation to the question of whether an exhaustion by consenting to the manufacture of a chipset covers also the manufacture of a mobile phone, consent to the placing on the market of a product may be deemed to be consent to the placing on the market of a larger device incorporating it if this is the only commercially reasonable use.
Consent to the placing of a product on the market may lead to the exhaustion of rights in respect of a larger device equipped therewith if all the properties and functions defined in the patent are realized by the product covered by the consent, and if the other components of the larger device are of no importance in this respect.
Relevant legislation: None. The law of exhaustion in patent law is not part of the statutory patent law in Germany; the law is developed by the courts, similar to other jurisdictions.