Germany’s major patent courts, in Munich, Mannheim and Düsseldorf, systematically order orders, or temporary sales bans, for products subject to a patent lawsuit. That makes them attractive legal venues for patent holders.

The primary targets of the legislation are so-called non-practical entities, or NPEs, that accumulate a portfolio of patents they license instead of using them in their own products. Critics call them patent trolls.

The proposed rules aim to make it harder for plaintiffs to win court decisions. The initiative has divided Germany’s usually united business community, pitting some of the country’s biggest patent users against its biggest patent holders.

Volkswagen AG

,

SAP SE,

Deutsche Telekom AG

and others support the bill.

Bayer AG

,

Siemens AG

and BASF SE has opposed it.

Foreign companies have joined. Apple, Samsung,

Nvidia Corp.

and

Microsoft Corp.

, among others, have joined European lobby groups pushing for the move. On the other hand are similar companies

3M Together.

,

Panasonic Corp.

,

Ericsson

A band

Nokia Corp.

, which over the years has accumulated many patent libraries.

Multinational corporations often steer cases to lucrative legal venues around the world using their remote subsidiaries. Patent litigators say the ability to get a court order could be key for patent holders choosing jurisdiction for a lawsuit.

“In the German legal tradition, if you are doing something you shouldn’t be doing, then first you have to stop,” said Florian Mueller, an independent intellectual property analyst. “Repair is an afterthought.”

Such orders are more difficult to enforce in the US, following changes in law and a series of Supreme Court decisions. This is especially so if the plaintiff is an NPE. Other friendly legal venues for patent holders have emerged outside the US, including China, Turkey and Russia, all of which have established frameworks for intellectual property protection.

Germany’s almost automatic orders, its large consumer market, and the fast working speed of its patent courts compared to other European countries have made it the venue of choice for some of the biggest patent fights in the West.

In December 2018, a court in Munich ordered Apple to stop selling some iPhone models after the chipmaker

Qualcomm Inc.

filed a lawsuit, alleging that a fellow California company had infringed on Qualcomm’s patents on the iPhone modem chip. That command forced Apple to briefly deliver a custom made phone to Germany. Both the company then settled down.

The previous year, chip maker

Broadcom Inc.

sued Volkswagen and its Audi subsidiary, accusing the automaker of infringing Broadcom’s patents in navigation and entertainment systems. Rather than risk an order that would stop production, Volkswagen paid nearly 500 million euros, the equivalent of about $ 598 million, according to people with knowledge of the matter. Volkswagen declined to comment on the settlement. Broadcom did not respond to a request for comment.

Proponents of the proposed law say that Germany’s patent law, which has its roots in the 19th century, is out of date. When Carl Benz received a patent for his car in 1886, “it was one patent for one product,” said Ludwig von Reiche, managing director of Nvidia in Germany. He heads Germany’s IP2Innovate branch, the European lobby group that pushed for the bill.

Today’s increasingly digital vehicles may involve more than 100,000 patents on everything from internet connectivity, sensors and algorithms to individual microchip circuits, he said.

Proponents of the bill say the current system puts too much pressure on companies to choose expensive solutions. They also said the changes would curb the NPE, which they accuse of preying on the company in German courts to increase licensing fees from its sometimes large patent portfolio.

“Germany has undeniably become a haven for patent trolls,” said Stephan Altmeyer, vice president of patent strategy at Deutsche Telekom.

Lawsuits in the European Union pursued by the NPE tripled between 2011 and 2017 – the last year for which figures were available – according to

Clarivate,

a data provider that tracks intellectual property litigation. In Germany, one-fifth of patent cases were brought by the NPE in that period, compared with 4% to 6% in other European countries.

The bill currently being processed in the German parliament was drafted by Chancellor Angela Merkel’s government last year but has undergone changes following pressure from lobbyists on both sides. Proponents of the reshuffle hope the law can be adopted before general elections in September. Failure to do so could force subsequent governments to restart projects from scratch.

The law will require judges to carry out a proportionality check before rendering a decision, to ensure that the charges charged against the offender do not massively exceed the revenue claimed by the claiming party. It will also force courts to consider the impact of court orders on third parties – customers whose telephone service will be interrupted, for example, or patients who may not be given life-saving drugs.

It also promises to overcome the peculiarities of the German legal system. Patent infringement cases are handled in regional courts, which can reach a decision in less than one year. But a patent invalidity lawsuit – which tests whether the patents claimed by the plaintiffs are actually valid and is the preferred defense of companies sued for infringement – goes through the special German patent courts, which can take up to three times as long to render a decision.

The NPE says the planned changes are worrying. A ban on sales that the court imposed during the litigation level on the ground, they said. The order could “bring large companies to the negotiating table,” Pio Suh, managing director of IPCom GmbH, Germany’s NPE owned by Fortress Investment Group LLC, a New York-based investment management firm.

The pharmaceutical industry is particularly worrying, where investments to develop new drugs can run into billions of euros and patent infringements could wipe out revenue from certain drugs within months, according to industry executives, creating a strong disincentive to innovation.

Bill critics also argue that since damage in Germany is lower than in the US, and punitive damages do not exist at all, removing the automated order would skew the system and remove most of the barriers to abuses.

“It’s like making a fine for the fare of avoiding ticket prices,” said Beat Weibel, chief intellectual property advisor at Siemens. “We need serious consequences such as automated orders to balance the system.”

Write to Bertrand Benoit at [email protected]