For scholars interested in the geography of law and institutional dynamics of harmonizing legal regulatory frameworks (
Tofan and Bostan 2022), the German patent system is suited to look at two opposing processes for understanding the relationship between law and space (
Orzeck and Hae 2020;
Reiz and O’Lear 2016). On the one hand, it accounts for interregional differences in legal practice that result from the operation of multiple “spaces of legal proceedings” (
Brickell et al. 2021, p. 559) in the form of regional courts, the right of plaintiffs to freely choose their preferred regional courts (forum-shopping), and the resulting incentives for competition among courts for plaintiff-friendly reputations. On the other hand, the German legal system includes two hierarchical levels of appeal, which enable litigation parties to seek reassessment of their interests by independent chambers of judges at different courts. The UPC will face the same opposing forces. Indeed, forum shopping will be limited in that plaintiffs can only choose the forum where the infringement occurred or where the defendant resides. Because the UPC is one single court with regional chambers in each member state (
Gombos and Orbán 2022), the Court of Appeal will have to reassess interregional differences in legal practice under the umbrella of a transnational, harmonized system. In this respect, the German system is to some extent comparable with the UPC system. We will explore the tension as well as the interplay between diversity and convergence in judicial practice at the German national level, and we mainly focus on decision reversals and the mechanisms used to balance geographical differences in court rulings.
2.1. Forum Shopping and Interregional Reputational Advantage
Germany is the most important jurisdiction for litigating patent infringements within the European regime of intellectual property, both for German and international IP owners. Its twelve regional courts account for more than two-thirds of all patent infringement cases heard in Europe (
Fei 2014). They are known for their friendliness toward intellectual property owners and for relatively fast proceedings compared to other European jurisdictions (
Cremers et al. 2017). Two features are important in the German patent regime:
(a)
Bifurcation. Due to the principle of bifurcation, the Federal Patent Court (Bundespatentgericht) litigates all cases of validity, whereas the ordinary jurisdiction, including RCs, HRCs, and the FCJ, exclusively litigates infringement cases (
Cremers et al. 2017;
Henkel and Zischka 2019;
Khuchua 2019).
(b)
Forum shopping (
Cremers 2004;
Gaessler and Lefouili 2017;
Moore 2001b). It allows the plaintiff to choose freely among twelve regional courts with specialized chambers of IP and patent law (
Kraßer and Ann 2016) as long as either the accused party resides (‘lex domicilii’), or the infringement was committed (‘lex loci delictus’) in the (national) jurisdiction (
Cremers 2004). Hence, infringers domiciled in Germany or businesses that infringe a patent in the German patent market can be sued before one of the twelve regional courts.
Given this choice, the plaintiff will bring his case before the court “most suitable for his action” (
Marshall 2000, p. 652). The practice of forum-shopping provides several incentives for competition between regional courts for attracting additional suits to their chambers. These chambers do not cover all civil law, but are specialized chambers for patent litigation at the regional courts. Since civil courts have to financially sustain their court business, patent litigation, with their high litigation costs compared to other areas of civil law, are an important source of income. The establishment of a third chamber at the Munich Regional Court in 2021 has been considered as a successful measure to attract cases and as a reputation signal for competing courts. Moreover, judges benefit from a higher caseload to develop their expertise in this area. Naturally, plaintiffs facing high litigation costs would choose a court with experienced judges to receive a reliable trial. This, in turn, increases the reputation effect, which is why it is important for courts to attract cases.
This competition has led to a marked concentration of at least 80% of all patent cases litigated in Germany in only three out of twelve regional courts (
Graham and van Zeebroeck 2014): Duesseldorf, Munich, and Mannheim, and the concentration has become even more pronounced in recent years (
Table 1). Despite a slight decrease in 2021, the lion’s share of 92.2% of all first-instance infringement proceedings were heard by these three courts.
The competition between courts creates cumulative advantages. The higher the number of cases, the more experience the judges can gain, which makes the court not only more visible, but also increasingly reliable and competent. Lawyers and attorneys appraise the high quality of court trials and convince their clients to choose courts accordingly. For litigants, it makes a difference whether a judge tries their first patent case or draws on hundreds of previous cases. Apart from the expanded experience, the speed of proceedings is also crucial in growing the reputation of a regional court because litigants may lose money unnecessarily if a dispute drags on. Patent litigation proceedings in Germany are expeditious also because expert witnesses are rarely heard, resulting in hearings without delay and at a low cost (
Cremers et al. 2016). The cumulative advantage of experience gained through case volumes is further supported by the fact that Duesseldorf RC established a third specialized chamber for patent litigation back in 2012 (
Klos 2012) and, more recently, in 2021, the Munich RC also opened a third patent chamber (
Richter 2021). As the literature shows, forum shopping, interregional reputational competition, and economies of scale enable interregional differences in legal practice to emerge. These differences do not originate from bias or normative discrimination but from formal local rules of procedure as well as informal procedural conventions among judges, e.g., types of schedules, speed of internal processes, restrictions in the number of hearings, the decision whether to consult experts, etc.
2.2. Legal Interpretation of Patent Claims
Apart from the differences in the application of procedural rules triggering reputational competition, another source of potential regional variation in legal practice is the sensitivity of patent law to the interpretation of patent claims (
d’Amato 1983). It is the task of judges in patent litigation to interpret the scope of patent claims, which entails linguistic, technical, as well as legal challenges. Therefore, interpretation is fraught with uncertainty (
Easterbrook 1984;
Gruner 2010;
Ost and van de Kerchove 1999) and patent law offers greater judicial discretion than other areas of civil law, as the drafting of patent claims as part of the patent specification is an act of speech and expression (
Bender 2001;
Mullally 2010). The following quotation from a disputed patent claim illustrates the scope of a patent as determined by a patentee with respect to technical details, the choice of words to describe the operation of the invention, and the specific limitations and ideas on the scope of the patent introduced by the patentee. Here, the patentee asserts a claim for patent infringement against the defendant. The patent relates to a drum unit as part of a toner cartridge. To remanufacture these cartridges, the defendant replaces the used image drum with parts that have the same function but do not originate from the plaintiff. Based on this initial situation, the plaintiff sued for injunctive relief and additionally demanded that the defendant destroy and recall the parts in question:
An electrophotographic photosensitive drum unit (B) usable with a main assembly of an electrophotographic image forming apparatus, the main assembly including a driving shaft (180) to be driven by a motor, having a rotational force applying portion, wherein said electrophotographic drum unit is dismountable from the main assembly in a dismounting direction substantially perpendicular to an axial direction (L3) of the driving shaft, […] wherein said electrophotographic drum unit (B) is adapted such that when said electrophotographic drum unit (B) is dismounted from the main assembly in the dismounting direction substantially perpendicular to the axis (L1) of said electrophotographic photosensitive drum (107) said coupling member (150) moves from said rotational force transmitting angular position to said disengaging angular position.
Despite the invention’s detailed descriptions and technical features, the language of the description may be insufficient, ambiguous, or limited (
Surden 2011), resulting in a lack of definiteness in the description of the patent claims (
Mullally 2010). The linguistic ambiguity opens leeway for interpretation of the claims by the court. In addition to linguistic understanding, determination of a patent claim calls for the technical understanding of a given invention within the context of the relevant industrial sector, which is equally challenging (
Goodman 2016;
Seuba 2018). The scientific difficulty of modern technologies, highlighted in the cited case, has even raised the dilemma of whether and how much judges should engage in independent research when deciding patent cases (
Cheng 2006). The linguistic and technical apprehension of a specific case needs to be reconciled with the relatively general legal norms and notions to be able to adopt a decision that fits within the accepted legal framework. For example, determining the nature of an improvement by a competitor to an existing invention based on the linguistic and technical considerations of patent claims amounts to finding (or not) the ‘novelty’ of the allegedly infringing invention, which together constitutes a legal imposition with another essential legal requirement of ‘inventive step’. Hence, the interpretative delineation of claims by the judges is crucial for patent infringement proceedings (
Nard 2000). Some legal scholars have focused on how courts practically apply interpretation methods under the given uncertainty (
Wagner and Petherbridge 2004); for example, by the utilization of dictionaries (
Miller and Hilsenteger 2005). Others have put emphasis on the impact that interpretive uncertainty has on case law, such as examining the discrepancy in interpretation between regional and appellate courts (
Bender 2001;
Chu 2001;
Lii 2013;
Moore 2000,
2001a,
2005;
Newman 1992;
Schwartz 2008;
Sichelman 2009;
Zidel 2003). Because of the possibility of alternative interpretations of the patent claim, the court of appeal may reverse the judgment of the first instance, which also applies to the case in Germany cited above, where the FCJ (third instance) overturned the decision of the HRC (court of second instance). The FCJ’s interpretation differs as to whether the technical effects of the invention are reflected in the replaced parts, and thus constitute infringement, or whether this is not the case, and thus there is no infringement of the patent. The HRC’s interpretation that the drum unit was a new manufacture was wrong, as the FCJ did not see any inventive step in the replaced parts:
The decisive factor in deciding the dispute is therefore whether the replacement of the photosensitive drum is to be regarded as the new manufacture of a drum unit within the meaning of patent claim 1. Contrary to the opinion of the Court of Appeal, this is not based on a fictitious conception of the market. Rather, the only decisive factor is whether the technical effects of the invention are reflected in the replaced parts. […] In the above constellation, a new production can only be affirmed if the technical effects of the invention are found in the replaced parts. […] Against this background, the Court of Appeal wrongly regarded the replacement of the photosensitive drum and flange as the remanufacture of a drum unit.
2.3. The Appellate Process: Decision Reversals, Case Citations, and Guiding Principles
In Germany, the appellate process includes up to two appeal instances. Litigants may appeal the decision of an RC to one of the twelve HRCs for patent disputes, each of which has jurisdiction over a specific RC. This second instance hearing builds on the facts already presented in the first instance with no further collection of evidence. With the decision of the HRC, the court provides information as to whether further appeal before the FCJ in third and final instance will be allowed. If the FCJ decides to allow the appeal, the proceedings are reviewed, considering possible previous errors of law, but grounded on the facts asserted at the RC (
Harguth 2019). One possible consequence of contested cases being heard on appeal is the reversal of lower court decisions by the HRC or the FCJ in the second and third instance, respectfully. Regardless of its cause, a reversal means that a court decision is to the disadvantage of the previously prevailing party. Judgments partially upholding the first-instance courts’ decisions are also categorized as reversals.
Reversals are essential not only for legal scholars but also for human geographers interested in the geography of law because the appellate system and the opportunity for decisions reversals are key mechanisms to balance variation in IP case law, both substantively and spatially, and to convey accountable and equal justice across the respective jurisdiction. Research on decision reversals has focused particularly on the United States (
Moore 2005). It has confirmed high reversal rates in terms of the number of judgments issued and the type of reversal within a given period (
Chu 2001;
Moore 2001a,
2005;
Schwartz 2008;
Zidel 2003). Between 1996 and 2007, for instance, almost a third of all cases were reversed by the United States Court of Appeals for the Federal Circuit (
Gruner 2010). Taking the reversal rate as an indicator of good or bad decisions and casting a critical light on predictability and certainty in patent litigation, these studies call for improved claim construction standards to reduce interpretation errors.
In contrast,
Gruner (
2010) argues that contested litigation is subject to a selection effect and a minority of exceptional cases is filtered out of the overall population of patent litigation cases. In other words, he criticizes the attention paid to reversal rates in the above studies as misguided, citing
Priest and Klein (
1984), who argue that cases that go to court are simply cases that result from failed settlement negotiations between the parties. They apply the selection argument more generally to all instances of court trials, which are thus subject to the same filtering process (
Eisenberg 1988). Fraught with uncertainty, these cases are viewed as not representative of patent litigation but rather as a small proportion of cases with ‘abnormal characteristics’ (
Gruner 2010, p. 1071;
Priest and Klein 1984). Thus, improvements in claim construction standards, however desirable, will never be a sufficient solution to this problem, because the filtering process will continue to ensure that complex, uncertain cases are selected from successful settlements and brought to trial.
In addition, the appellate process is important because “[…] increasing trial court accuracy reduces the frequency with which the appeals process is needed but not its desirability when errors are made“ (
Shavell 1995, p. 387). The occurrence of errors and their correction by reversals on appeal are keys in ensuring the adaptability and accuracy of the judicial process. At the same time, one should acknowledge that the appellate process is not a panacea, as an adversely affected party is not always in the position to appeal a decision due to the financial or other constraints which might render the first-instance decision enforceable, even with an error without the possibility of reversal. However, beyond its specific application in a particular case, the multi-stage appellate process improves the justice system in general; i.e., appellate court decisions are seen as contributing to the development of court rulings (
Drahozal 1997). Consequently, “rather than attempting to define what we mean by ‘error’ we might profitably focus on better delineating what the process of error correction ought to look like” (
Oldfather 2010, p. 52). In this context, especially in German patent law, multiple levels of appeal prove useful in checking the accuracy and consequently the efficiency of economic justice in detail (
Shavell 1995), if both parties have the means to bring the process to this level. The appellate process thus serves two functions: correcting errors and advancing case law.
In this context, the question arises as to how the appeal procedure is maintained in the German patent system, apart from its inherent characteristic that decisions are likely to be overturned, and how the convergence mechanisms are to help balance regional diversity and improve legal coherence and guidance for further decisions. Concerning the latter, case citations by judges in their appellate decisions are an important feature, provided that these citations are themselves used in subsequent local, lower-level decisions. Citations of earlier decisions lend legitimacy to the underlying reasoning (
Shulayeva et al. 2017) and are thus a principal tool for the realization of precedential legal principle, according to which the precedents are binding. Although this principle is a feature of the common law tradition (
Pojanowski 2015), courts in civil law countries, which include German courts, increasingly rely on precedent in their daily practice by citing earlier decisions (
Gaessler and Lefouili 2017). One can imagine that a reversal of a decision in the second or third instance, regardless of its content, requires a good reason. Therefore, we consider case citations not only as error correction but also as a source of mitigating the uncertainties mentioned above.
To provide guidance for the general application of law and legal principles in subsequent judicial decisions, guiding principles may also be used as a judicial tool, especially in the third instance. Guiding principles contain the substantive core of a judicial decision and are considered to provide guidance for lower instance decisions (
Verwaltungsgerichtshof Baden-Württemberg 2013). This is also the case in the abovementioned final judgment of the FCJ in relation to the drum unit patent:
For the assessment of the question whether the replacement of parts of a device placed on the market with the consent of the patent proprietor belongs to the intended use or constitutes a new manufacture, the protected product is to be taken as the relevant reference point. This also applies if the person entitled to use a copy of the protected product (here: an image drum unit) is used as a component of a more comprehensive article (here: a process cartridge).
Therefore, we view the appellate process as an additional alternative for improving first-instance standards, as well as an opportunity to focus on contested cases and their reversals, rather than sidelining them as outliers. Hence, if the interpretation of the law is fundamentally fraught with uncertainty, as has been argued (
Mullally 2010), and claim construction is malleable rather than rigid, a consideration of the entire appellate process is necessary to illuminate the forces of uncertainty and the countervailing effects of patent litigation in Germany.
Moreover, the appellate process in the German system plays a crucial role regarding institution building at the transnational level. The UPC, expected to begin operations in June 2023, will bring together international judges rooted in different ideas and practices of legal cultures to hear infringement cases of European patents. The diverse international composition of the court chambers is likely to expose litigants to uncertainty about court-specific expectations for their case. Transnational institution building and harmonization processes rely on the negotiation of norms and recursive learning among the actors involved (
Kuus 2018), and shared beliefs facilitate this process toward common grounds on judicial alignments (
Braithwaite and Drahos 2000;
Friedman 1996;
Quack 2007;
Halliday and Carruthers 2007). Because variation and its harmonization at the transnational level are based on similar dynamics, it will be helpful to understand the convergence mechanisms operating at the interregional level of German jurisdiction to assess how responsible, reliable, and consistent litigation potentially operates within the UPC.