German Court Issues First-Ever Anti-Suit Injunction

Overview


On July 11 2019, the Munich I District Court (Landgericht) issued an anti-suit injunction in patent litigation, preventing an automotive company from further pursuing proceedings in the United States. The Munich decision might become a landmark case because German courts have historically not been amenable to granting anti-suit injunctions.

In Depth


Background

This case arose against the backdrop of the emerging “internet of things,” which is bringing mobile connectivity to the automotive sector. Amid this disruption, members of the automotive supply chains and owners of mobile connectivity technology patents are having to deal with one another for the first time. Of particular pertinence are standard-essential patents (SEPs), which claim subject-matter that must be used for compliance with wireless communication standards such as 4G, 5G or WiFi. SEPs must be licensed to implementers on fair, reasonable and non-discriminatory (FRAND) terms—but the industries involved are still fighting hard to determine important details regarding what is considered FRAND and what is not.

Former mobile phone giant Nokia holds patents for mobile connectivity technology. Nokia sought to license its alleged SEPs to Daimler. However, the parties could not agree on a license deal, or even on whether Daimler itself or Daimler’s suppliers should obtain any Nokia SEP licenses. Daimler and its suppliers alleged that Nokia’s licensing behaviour violated Nokia’s FRAND obligations and filed respective antitrust complaints with the European Commission.

While the antitrust complaints before the European Commission were pending, Nokia filed a total of 10 patent infringement lawsuits against Daimler on 21 March 2019 before the Munich I District Court and further German courts. Nokia alleged that its patents in suit were standard-essential. Among other Daimler suppliers, two companies of the Continental group joined the patent infringement lawsuits as third-party interveners in support of Daimler.

On 10 May 2019, Continental filed a lawsuit against the patent pool Avanci, Nokia and other Avanci members in the US District Court for the Northern District of California, alleging a violation of FRAND and antitrust obligations by the defendants. This lawsuit is pending before Judge Lucy Koh.

As part of its US lawsuit against Avanci, Nokia and others, Continental requested on 12 June 2019, by way of an interim injunction (motion), an anti-suit injunction against Nokia. Continental requested that the US court enjoin Nokia from further pursuing the patent infringement lawsuits that Nokia had filed earlier in Germany against Continental’s customer Daimler. Continental also requested an order enjoining Nokia from instituting against Continental or any of its customers any action alleging infringement of Nokia’s global 2G, 3G and 4G SEPs during the pendency of the FRAND proceeding before the US court.

On 9 July 2019, Nokia in turn filed a motion for preliminary injunction before the Munich I District Court for what could be called an “anti-anti-suit injunction”, this time prohibiting Continental from applying for any anti-suit injunction, or further pursuing the above mentioned anti-suit injunction for which Continental had already applied before the US court.

Nokia told the Munich court that the US court had given Nokia an opportunity to respond to Continental’s request for an anti-suit injunction by 24 July 2019, and Nokia further submitted that the US court could grant the anti-suit injunction requested by Continental any day after 24 July 2019. In order to prevent such decision by the US court, the Munich court assigned particular urgency to Nokia’s Munich “anti-anti-suit injunction”. On 11 July 2019, the Munich court granted the preliminary injunction that Nokia had sought against Continental, and the Munich court did so in ex parte proceedings (without hearing Continental before the decision). It should be noted that this is not a final decision; Continental can appeal the preliminary injunction that the Munich court granted.

Scope of the Munich Injunction

The Munich I District Court ordered Continental to refrain from applying for an anti-suit injunction intended to directly or indirectly bar Nokia from pursuing its German patent infringement lawsuits, under penalty of a fine up to EUR 250,000 (approx. US$280,000) or detention for up to six months for each case of contravention (in case of repeated contravention for up to a total of two years). The Munich court also ordered Continental to withdraw its motion for an anti-suit injunction of 12 June 2019 before the US court.

Reasoning of the Munich court

From a procedural perspective, the Munich I District Court found that a decision in ex parte proceedings was necessary, as an exception, due to the particular urgency of the matter. Usually, under the principle of procedural equality of arms, the opposing party (here, Continental) must be heard before a court renders any decision. However, it is accepted that under exceptional circumstances a prior hearing can be dispensable in preliminary injunction proceedings, if a prior hearing would frustrate the purpose of the proceedings (for further information on the topic of ex parte proceedings, see IP Update, Vol. 21, No. 12 of December 2018).

In the case at hand, the Munich I District Court stated that it could have scheduled an oral hearing for 19 July 2019 at the earliest. Filing, execution and service of any decision on Continental thus might not have been feasible prior to the expiry of the 24 July 2019 deadline for Nokia’s response in the US proceedings. After such date, the US court would have been able to issue an anti-suit injunction against Nokia, and Nokia therefore ran the risk of losing its rights. If Continental had been heard, it would have led to delay in the Munich preliminary injunction proceedings. Moreover, there would have been cause to fear that Continental, knowing of Nokia’s Munich injunction motion, would notify the US court of the Munich injunction motion and request preliminary measures against the Munich injunction motion. Nokia thus would risk its rights in Germany being thwarted. Continental’s right to be heard was to be remedied in possible appeal proceedings against the Munich injunction.

The Munich court considered that if the anti-suit injunction sought by Continental before the US court were issued, it would interfere with Nokia’s interests in due protection of its patent rights, which interests are legally protected under § 823(1) German Civil Code (BGB). The granting of a US anti-suit injunction was sufficiently imminent to justify a Munich preliminary injunction against such US anti-suit injunction.

The mere grant of a US anti-suit injunction would not directly prevent Nokia from further pursuing its German patent infringement lawsuits, because a US anti-suit injunction would not have legal effect or be enforceable in Germany. However, if Nokia continued its German patent infringement lawsuit after a US anti-suit injunction had been granted, the injunction would likely have far-reaching consequences and economic disadvantages for Nokia in the United States. Hence, there could at least be an indirect prejudice to Nokia’s legal interests as protected in Germany.

Although the Munich court acknowledged that anti-suit injunctions are an admissible remedy under US law, the court still found that the particular anti-suit injunction Continental sought in the United States would be unlawful under German and European law because it was intended to deprive Nokia of its right of action in Germany. The injunction would thus jeopardise the rule of law, the proper course of justice and the freedom of parties to file necessary motions without any restriction.

It is somewhat remarkable that the Munich court deemed the applied-for US anti-suit injunction unlawful because of its impact on German proceedings, only to then issue an anti-suit injunction of its own, with an impact on US proceedings. The Munich court did not expressly argue in this context that Nokia’s German patent infringement lawsuits, including the patent infringement lawsuits pending before the Munich court, were pending earlier than Continental’s US antitrust lawsuit.

Concluding its decision, the Munich court clarified that its preliminary “anti-anti-suit injunction” (in contrast to the anti-suit injunction Continental requested in the United States) was not intended to deprive Continental of its rights to bring an action. The Munich injunction was not directed against Continental’s main proceedings in the United States, only against the motion for an anti-suit injunction in the United States.

Continental’s Reaction and Remaining Questions

Continental is reported to have replied in the US proceedings on 19 July 2019 that Nokia obtained the Munich injunction under false pretences, or by misleading the Munich court about the immediacy of the risk of an US anti-suit injunction being granted. Continental also claimed a lack of due process before the Munich court and that it was not properly served with the Munich injunction.

It remains to be seen whether the Munich injunction will be upheld upon appeal and whether anti-suit injunctions will become an accepted remedy under German and European law. At least in view of proceedings before other European courts, anti-suit injunctions may still be inadmissible, under the European “Brussels Ia” Regulation on procedural law.