The German Federal Court of Justice heard the appeal by the Defendant, a Greek DVD manufacturer, in a patent infringement proceeding on August 20th 2012, and decided that the case is part of a series of actions encompassing several proceedings. The Defendant who is a major Greek DVD producer did not agree to enter into the worldwide standard pool license agreement offered by the pooling company and requested a limited, per country, pool licence which was denied during the discussions withMPEG LA. The Plaintiff and other patent holders placed a joint test order with the Defendant fromGermany in 2007.For this purpose, the placer of the test order sent a DVD master to the Defendant, which produced the requested 500 DVDs from it and sent these to the tester inGermany. The Plaintiff then filed an action for patent infringement before the Regional Court of Düsseldorf. TheRegional Court in essence decided in favour of the action, and theHigher Regional Court denied the Defendant’s appeal.

Upon the Defendant’s appeal, the 10th Civil Division of the German Supreme Court which is competent for, among other things, patent disputes, has dismissed the action, to the extent that the Defendant was sued for damages and patent-infringing actions. In this case, the Court held that  the DVDs produced by the Greek DVD Producer were products that had been generated directly by a method relating to a coding process according to the patent, within the meaning of Sec. 9 Clause 2 No. 3 Patent Act*.

According to the German Supreme Court, the Defendant, by doing so, did not infringe the patent when he manufactured  the DVDs, since the DVD master, which was supplied to the Defendant (by the Plaintiff, as part of the test order), was marketed with the consent of the Plaintiff and the patent right in this respect had been exhausted. Precisely because the DVD master, like any other DVD manufactured on this basis, embodies one and the same direct product of a process, no differentiation can be made, as far as the exhaustion of the patent right is concerned between the supply of the master tape (with the Plaintiff’s consent) and the sending (back) of the DVD (without the Plaintiff’s consent).

Finally, the Federal Court of Justice, contrary to the view of the Higher Regional Court decided that the delivery of the DVDs produced by the Defendant did not constitute “indirect infringement” of another claim of the patent in suit, that was directed at a decoding process, as carried out in a display device that can read video data code according to the MPEG -2 standard.

Additionally, the Court held that a DVD coded in MPEG-2 standards is not in fact a “means that refers to an essential element of the invention” within the meaning of Sec.10, Patent Act**. The Federal Court of Justice said that the DVD does not, as it is required according to German case law contribute to the realization of the invention, i.e. in this case to the decoding of the video data, but rather merely represents an object on which the decoding is carried out. As a result the Federal Court of Justice held that “a direct patent infringement could have happened only in the unlikely event that the DVD had been played back in a non licensed video display”.

This decision is of paramount importance for the whole DVD industry inEurope, since it approaches the issues of “exhaustion” of patent rights and “direct patent infringement” in a way that can radically change the relevant market conditions and practices.

Kriton Metaxopoulos

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