More than Half of all Patent Infringement Litigations End Without a Verdict

In the last 15 years, some 600 patent infringement litigations were heard in Germany each year. This is the highest number in Europe, and it is largely due to the combination of relatively low costs and quick, reliable court decisions. Interestingly, however, clearly more than half of these lawsuits end without a verdict because the parties involved agree to a settlement or drop the case after the beginning of the court proceedings. A study conducted by the Centre for European Economic Research (ZEW) in Mannheim explains the reasons for this phenomenon: the setting of an unexpectedly high value in litigation, which includes the risk of high legal expenses for the losing party; the danger of a revocation action brought before the German Federal Patent Court, which could threat the monopoly position of the patentee; the approximation of the claimant’s and the defendant’s expectations regarding the outcome of the trial due to external experts’ assessments before the court.

Usually, patentees bring a dispute to court if they discover an infringement of their patent by another company and want a court to confirm and sanction this infringement. In only 40 per cent of all cases, however, a verdict is reached, while 62.3 per cent of patent infringement litigations end with a settlement or are cancelled, according to ZEW. Yet there are significant differences between the several state courts. The value for Düsseldorf is 59.8 per cent, followed by Mannheim with 66.5 per cent, and Munich with 70.1 per cent.

Based on comprehensive research and evaluations of patent courts and patent offices, ZEW scientists have recently investigated which reasons are decisive for the cancellation of a case or a settlement (ZEW Discussion Paper No. 12-084). All patent infringement litigations brought before the regional courts of Mannheim, Munich, and Düsseldorf between 2000 and 2008 were considered for the evaluation. This corresponds to some 80 per cent of all cases throughout Germany. Furthermore, ZEW obtained information on these patents, for example the number of countries in which applications for the patents were made, from data of the German Patent and Trade Mark Office (DPMA) and the European Patent Office. Altogether, ZEW analysed some 2,500 cases.

The investigation shows that it is mainly three scenarios which made the companies involved drop the case. If the judge sets a high value in litigation, significant cost increases may result for the company losing the court case. Out-of-court settlements hence become more attractive. However, legal expenses are rather small compared to lawyers’ fees. So it is not surprising that this effect, albeit statistically significant, is relatively small.

Another factor which may lead to the cancellation of a case is the defendant's option to bring a revocation action before the German Federal Patent Court. Patent holders would run the risk of losing their monopoly if the defendant succeeds and the patent (or parts of it) is being revoked. This scenario can make claimants consider an out-of-court settlement.

The third event which can lead to the settlement of a case is the consultation of external experts by the judge. Experts' assessments provide both parties with equal information, thereby approximating their expectations regarding the outcome of the case. This scenario increases the probability of a settlement by a remarkable ten per cent.

The ZEW study also shows that a company's propensity to go for a settlement heavily depends on firm-specific characteristics and strategies. Companies with high patent values, a strong confidence in their chances at court, and the strategy to achieve a robust verdict consider a settlement less frequently. This strategy has impact on a company’s preferred court to appeal to. Düsseldorf has the reputation to deliver robust and reliable decisions. Choosing Düsseldorf as the place of jurisdiction hence reduces the possibility for a settlement clearly.

For further information please contact

Dr. Katrin Cremers, Phone 0621/1235-297, E-mail cremers@zew.de

Paula Schliessler, Phone 0621/1235-186, E-mail schliessler@zew.de