The arbitrability of disputes concerning the validity and existence of patents has always been the subject of debate. Traditionally, the prevailing opinion among scholars and courts has been that such disputes are not arbitrable.[1] More recently, this view has been challenged, with some scholars finding that arbitral tribunals should be, and are, competent to decide disputes concerning the validity and existence of patents – at least with inter partes-effect by ordering one party to apply for the deletion of a patent with the competent patent office.
In a decision of 5 May 2021, the District Court of Munich I (Landgericht München I), sided with the second view and confirmed the arbitrability of disputes concerning the validity and existence of patents in an obiter dictum.[2]
Factual Background
In the case at hand, the claimant seated in France brought a claim for the vindication of a European patent application and corresponding damage claims against the respondent seated in Germany. The claimant is active in the construction and production of blow molds for plastic PET bottles. The respondent is a leading provider of production facilities for the beverage industry, including machines to produce blow molds. In June 2013, the parties concluded a Non-Disclosure Agreement (NDA) prior to performing certain tests of blow molds in July 2013. The NDA provided for the applicability of Swiss law and included an ICC arbitration agreement for “all disputes arising out of or in connection with” the NDA. The place of arbitration was Zurich, Switzerland.
Two months after the tests, in September 2013, the respondent filed for a patent application with the German Patent and Trademark Office. The patent application concerned a certain form of base mold.
Subsequently, the claimant filed a claim for the vindication of the respondent’s patent application and corresponding damage claims before the District Court of Munich. The claimant argued that the subject of the patent application is based on the blow molds which the claimant had tested in the production facilities of the respondent in July 2013. Therefore, the claimant was convinced that he was entitled to the patent application which respondent had filed. The respondent argued that the claims are without merit, and that in any case, the claims must be dismissed as inadmissible because they were subject to arbitration based on the arbitration agreement contained in the NDA.
The Decision of the District Court of Munich
The District Court of Munich (the “Court“) dismissed the claimant’s claims as inadmissible pursuant to Section 1032(1) of the German Code of Civil Procedure (arbitration objection). The Court held that – pursuant to the applicable Swiss law – the claims brought by the claimant are covered by the NDA and the arbitration agreement contained therein.
At the outset, the Court noted that the scope of contractual agreements must be determined by way of contract interpretation, which follows similar rules under Swiss and German law: the starting point is the wording. Here, the wording of the arbitration agreement (“all disputes arising out of or in connection with“) was very broad and evidenced the parties’ interest to provide for a comprehensive competence of an arbitral tribunal to resolve all disputes in connection with the NDA. The Court confirmed that the claims brought by claimant directly concern the factual basis of the NDA, namely the tests of the blow molds conducted in July 2013. In reaching this conclusion, the Court extensively considered and quoted case law of the Swiss Supreme Court. Furthermore, the Court held that the claims are covered by the arbitration agreement in the NDA regardless of the fact that the claimant based its claims on German statutory law (namely the German Patent Act).
The Court then discussed and held that the arbitration agreement was valid and the claims for vindication of the patent application and corresponding damage claims were objectively arbitrable both under Swiss and German law. The Court explained that it must answer the question of arbitrability in this case both according to Swiss law (as the applicable law under the NDA) and German law (as the lex fori).
Pursuant to Section 1030 of the German Code of Civil Procedure, any claim involving property rights (“vermögensrechtlicher Anspruch“) is in principle arbitrable. The Court found that the right to an invention on which a patent application is based involves both personal and property rights (“erfinderpersönlichkeitsrechtliche und vermögensrechtliche Komponente“). Consequently, a patent application also involves property rights and is therefore arbitrable.
The Court then explained that this conclusion is true irrespective of the fact that patents are granted based on a sovereign act by the state (“Verwaltungsakt“). In an obiter dictum, the Court noted that the legislator created special state courts to decide about the validity and existence of patents with erga omnes-effect with the argument that the validity and existence of patent rights are not subject to party autonomy. The Court criticized this position, holding that for example an inventor can voluntarily waive any rights to the invention (Section 20(1) No. 1 German Patent Act), thereby indeed making the validity and existence of such rights subject to party autonomy. Against this background, the Court noted that some scholars argue that disputes concerning the validity and existence of patents should not per se be non-arbitrable. According to this view, although an arbitral tribunal might not be able to render a decision on the validity and existence of a patent with erga omnes-effect, the tribunal could at least order one party to apply for the deletion of a patent with the competent patent office. Sympathizing with this view, the Court held that disputes about the vindication of a patent application are in any case arbitrable. In reaching this conclusion, the Court relied on the European Patent Convention (EPC) which confirms that patents and patent applications are tradeable property rights that can be freely transferred between private individuals. If that is true, the Court held that there is no reason why an arbitral tribunal should not be competent to order such transfer (by way of a vindication of a patent application).
Finally, the Court analyzed Swiss law and concluded that also under Swiss law patent vindication claims are arbitrable. In particular, there is no violation of the Swiss ordre public.
[1] See, e.g., Born, International Commercial Arbitration (Third Edition), p. 1080.
[2] Case no. 21 O 8717/20; SchiedsVZ 2022, 98.
