12/16/09/10 – Experiences at DE Exhibitions Recent Experiences of Chinese Companies at Exhibitions in Germany – A Case Study from Berlin Heinz Goddar and Carl-Richard Haarmann Boehmert & Boehmert

12/16/09/10 – Experiences at DE Exhibitions Outline n The Importance of German Trade Exhibitions n Legal Pitfalls of Exhibiting in Germany n Case Study from Berlin – Police Raid at IFA 2008 n Current Status of Proceedings

12/16/09/10 – Experiences at DE Exhibitions The Importance of German Trade Exhibitions n Germany is the leading economy in Europe and among the leading economies of the world n Germany has a very long tradition of trade exhibitions for various products n The German Infrastructure is providing for excellent exhibition facilities in various Cities like Frankfurt, Hanover, Berlin, Düsseldorf, Leipzig, Munich, Hamburg n Some of the most important trade exhibitions are held in Germany - CeBit (Hanover) - ISPO (Munich) - Frankfurt Motor Show - IFA (Berlin) - Hanovermesse - BOOT (Düsseldorf) - many other important trade exhibitions

12/16/09/10 – Experiences at DE Exhibitions Legal Pitfalls of Exhibiting in Germany n In order to exhibit products in Germany you first need to bring the items which are to be exhibited into the country n Many IP owners are making sure to cover Germany with their portfolio of patents, trademarks, design registrations etc. n Any act of exhibition, offering, selling, distributing, importing, exporting or transit of goods may be considered to be an act of infringement of such IP rights, provided that the respective IP right is valid and an infringement is found n According to the jurisdiction of German IP courts it is totally irrelevant if the exhibitor finally intends to offer/ sell his product to German customers. n Even if the exhibitor makes it very clear that he will not or can not import the items on exhibition into Germany, still exhibiting the product will be considered an IP infringement n No exhibitor can defend himself by claiming that the item on exhibition is only a sample to demonstrate his technical abilities

12/16/09/10 – Experiences at DE Exhibitions The „Arsenal of Weapons“ used on Trade Exhibitions Many actions can be taken against exhibitors in Germany by owners of patents, utility models, trademarks, design registrations and copyrights: n Customs Seizure upon importation n Customs seizure during exhibition n Preliminary injunctive order issued by civil court including seizure order n Main court action filed with civil courts and served with exhibitor during the exhibition n Criminal Action: Police raid and seizure

12/16/09/10 – Experiences at DE Exhibitions Case Study from Berlin –Police Raid at IFA 2008 n IFA = Internationale Funkausstellung (International Broadcasting Exhibition): annual trade exhibition held in Berlin n World leading exhibition for radio, TV, video, DVD, electronic consumer/ entertainment products n In 2008 IFA was held before start of world economical crisis n Exhibitors from all over the world were exhibiting their products n Exhibition is open to the public but attracting many professionals from all over the world n Many new products launched traditionally during IFA n More than 150 companies from PR China exhibiting, among them some of the leading manufacturers of consumer electronics in China

12/16/09/10 – Experiences at DE Exhibitions The Events of August 29, 2008 n In the morning of August 29, 2008, IFA was opening its doors to the public n German Chancellor Ms. Angela Merkel directed an opening address to the public, welcomed all exhibitors and invited the public to visit the exhibition n Thousands of visitors had already gathered at the entrance doors and waited to be admitted

12/16/09/10 – Experiences at DE Exhibitions Police Raid against IFA Exhibitors n At the same time, more than 200 police officers, customs officers and officers of the customs investigation police started a raid on exhibition booths n The raid was focused on patent infringing items: flat screen TV sets and digital terrestrial TV receivers n About 150 different exhibition booths were visited and searched, officers were investigating not at random, instead they were visiting exclusively the stands of pre selected exhibitors n In many cases police/ customs seized items which were on exhibition or used to operate the exhibition booths, in addition a lot of advertising material was seized n The raid took about 6 hours n All seized items were collected and then transferred into storage facilities n All in all, thousands of different items, most of them state of the art electronic entertainment equipment, were seized

12/16/09/10 – Experiences at DE Exhibitions Police Raid against IFA Exhibitors

12/16/09/10 – Experiences at DE Exhibitions Who were the Target Companies? n Most of the companies whose stands were searched were producers or distributors of TV sets from China, Taiwan or India n Many of them were later more or less unable to continue with their activities because they had lost their exhibition objects and did not dare to replace the seized items in fear of renewed seizures

12/16/09/10 – Experiences at DE Exhibitions Who ordered the Seizures? n The seizures were not initiated by customs and not the result of a seizure order issued by a civil court n Instead the raid and seizure had been ordered by the Criminal Court of Berlin (Amtsgericht Tiergarten) upon request of the public prosecutor of Berlin n The prosecutor had requested for the search and seizure order as the result of a criminal complaint which had been filed by a patent licensee n This criminal complaint expressively named the target exhibitors and was based on the allegation that all exhibitors were offering patent infringing items

12/16/09/10 – Experiences at DE Exhibitions Who was behind the Police Raid? n The criminal complaint had been filed by a company specializing in taking licenses and commercializing such licenses by sublicensing n This company is exclusive licensee for some “essential patents” in the field of MP3 technology which is needed for modern flat screen TVs n It is also holding licenses on some essential patents in the field of digital terrestrial TV receivers

12/16/09/10 – Experiences at DE Exhibitions The Strategy behind the Criminal Complaint n The idea is very simple: - the patents are “essential patents” - allegedly everybody making use of the related technology must make use of these “essential patents” - whoever is offering such items without holding a valid license must necessarily be infringing said “essential patent” - every exhibitor at the IFA exhibition with products falling under the “essential patents” and not holding a license is a patent infringer

12/16/09/10 – Experiences at DE Exhibitions Why no Civil Court Action? n The usual procedure in cases of patent infringement is patent infringement action before a civil court n Occasionally, in urgent cases, patent owners can obtain preliminary injunctive orders against patent infringers n But it is not easy for patent owners to obtain a preliminary injunctive order - the case must be technically easy - the court must be convinced that the patent is valid - infringement must be obvious n This does not apply to the IFA cases: the technical implications are complicated, the patent not easy to understand and the infringement not obvious

12/16/09/10 – Experiences at DE Exhibitions Why Criminal Action? n Usually public prosecutors are not interested in prosecuting cases of IP infringement: to complicated, unimportant, unspectacular n But: if a prosecutor wants to start investigations, the threshold for initiating a raid is much lower than the threshold for a civil patent infringement court to issue a preliminary injunctive order n For prosecutor to initiate a raid it is sufficient that he has “sufficient reason to suspect a criminal act” n Willful patent infringement is a criminal offence under German Patent Act n So, if a patent owner/ exclusive licensee manages to find a prosecutor who is willing to start an investigation it is easier to initiate a police raid and seizure instead of trying to obtain a preliminary injunctive order from a civil patent infringement court

12/16/09/10 – Experiences at DE Exhibitions The Patent Owner‘s/Licensee ‘s Arguments n The patent licensee managed to convince the public prosecutor that the relevant patent were “essential patents” to the consequence that all non- licensees must be patent infringers n He also managed to convince the prosecutor that basically he does not have to understand the underlying technology nor the details of the patents n He further avoided the question of validity, the prosecutor did not have any knowledge of IP and did not even ask for evidence regarding the validity of the “essential patents” n For the prosecutor it looked like an easy but spectacular case and a just action in the fight of IP owners against “product piracy”

12/16/09/10 – Experiences at DE Exhibitions Immediate Legal Relief for the Exhibitors? n The German Criminal Procedure Code (StPO) is providing for the possibility to file an appeal against a search and/ or seizure n During the police action there is no legal remedy: you can complain, but you can not stop the police n An appeal against a police seizure will usually be handled swiftly by the prosecutor and the Criminal Court n But in cases of “mass seizures” involving complicated technical issues it is impossible for the prosecutor and the court to quickly and efficiently handle appeals n Thus it can take months until a decision on an appeal is issued

12/16/09/10 – Experiences at DE Exhibitions The Consequences of Criminal Investigations n At the end of a criminal investigation the prosecutor can - close his file and discontinue proceedings - fix a penalty against the offender without bringing formal charges - bring criminal charges to the court and request for a court sentence n In many IP related criminal cases proceedings are discontinued n Often the prosecutor will fix a penalty and decide not to bring formal charges n In copyright and trademark cases sometimes formal accusation is brought against infringers and criminal sentences are issued

12/16/09/10 – Experiences at DE Exhibitions Criminal Changes for Patent Infringement? n In cases of alleged patent infringement it is very hard for the prosecutor to formally accuse an infringer for willful patent infringement and to obtain a criminal sentence from the court: - the court must be convinced of the validity of the patent - the court must fully understand the patent and all technical issues involved - the court must be convinced of the infringement - the court must be convinced that the alleged infringer willfully committed the infringing act, mere negligence is not sufficient n All these questions cannot be answered by the prosecutor or the criminal court n Thus, a criminal sentence can only be achieved by the prosecutor if previously a civil patent infringement court has decided on all patent related issues

12/16/09/10 – Experiences at DE Exhibitions Current Status of Proceedings n All seized goods in store with Berlin customs n 150 criminal cases under investigation n Some exhibitors have filed appeal against the seizure n Prosecutor knows that he can never finalize all these cases because he cannot obtain the necessary evidence on validity and infringement n He will close all the cases and fix penalties against exhibitors not having filed appeal against the seizure n All other cases have been discontinued without any penalty or other criminal sanction against the exhibitors n The main damage has been caused to the exhibitors in the moment of the raid n At the time of finalization of criminal proceedings the seized items can now be requested for release, but are worthless in the meantime

12/16/09/10 – Experiences at DE Exhibitions Recommendations to Foreign Exhibitors n Conduct freedom to operate searches before attending trade exhibitions! n Avoid preliminary injunctive orders, customs seizures and police seizures by obeying to the rules as outlined in my following lecture! n If you face a police seizure, at the time of the seizure do not oppose but immediately obtain legal support by an experienced IP lawyer! n After a police seizure file an appeal against the seizure with the Criminal Court n Launch a counterattack by filing nullity action against the patent and court action for negative declaration against the patent owner