Systematic Guide for SMEs and Start-ups on Effective Defense Against Patent Infringement Claims from Non-Practicing Entities in Germany

A letter strikes you like a bolt from the blue: A company that has never manufactured a single product holds you accountable. It claims that your technology infringes their patent and demands a licensing fee or even a substantial damages payment. This is no hypothetical scenario – it is the daily reality for thousands of SMEs and start-ups across Germany.

→ NPEs are involved in over 35 percent of all patent disputes in Germany. The economic damage amounts to several billion euros annually. Yet there are effective defense strategies you can employ to successfully fight back.

What are Non-Practicing Entities?

Non-Practicing Entities – also referred to as Patent Assertion Entities (PAEs) in English terminology – are companies or holding organizations that hold patents but are not themselves commercially active in the manufacture or distribution of products. In contrast, “Practicing Entities” are companies that manufacture products themselves and use their patents to protect and market their own products.

The Business Models of NPEs

Licensing Enforcers

They acquire patents and attempt to compel companies to pay licensing fees, often without using the patents themselves.

Patent Aggregators

They pool patents to use them as leverage in licensing negotiations or damages claims.

Litigation-Funded NPEs

These finance their lawsuits through third-party investors and shift the financial risk onto the investors.

Shell Companies

NPEs often operate under numerous different company names that are not easily identifiable.

Typical Modus Operandi of NPEs

The typical sequence unfolds as follows:

• Patent Acquisition: NPEs acquire patents – often for broad, vaguely formulated inventions.
• Target Identification: They search databases and identify potential target companies.
• Intimidation: Initial letter requesting “licensing” of the allegedly “infringed” patent.
• Pressure Tactics: Threats of expensive court proceedings, public hearings, and damages claims.
• Coercion: The goal is to pressure the company into settlement without ever filing a lawsuit.

Why are SMEs and Start-ups Particularly Vulnerable?

SMEs and start-ups are particularly susceptible to NPE attacks for several reasons:

7 Strategies for Effective Defense

Strategy 1: Early Research and Monitoring

The best defense is prevention. Before launching a product onto the market, you should conduct comprehensive patent research.

Practical Steps

• Conduct patent research in the DPMA register, at the European Patent Office (EPO), and at WIPO PATENTSCOPE.
• Use free search tools such as Google Patents to identify potential conflicts.
• Create internal monitoring that informs you about new patent publications in your technology areas.

Strategy 2: Attack the Patents

Many patents used by NPEs are attackable. They are often formulated too broadly, are based on already existing technologies, or contain formal errors.

• Opposition proceedings at the DPMA: Within five years of patent grant, you can file oppositions with the German Patent and Trade Mark Office (DPMA).
• Invalidity action before the Federal Patent Court: After the five-year period has expired, the invalidity action remains as the last option.
• Technical analysis by a patent attorney: Have the contested patent reviewed by a specialist to determine whether it is attackable.

Strategy 3: Obtain a Non-Infringement Opinion

A non-infringement opinion is a document prepared by an independent patent attorney stating that your technology does not infringe the contested patent.

• It can deter a lawsuit or facilitate a settlement.
• It demonstrates to the opposing side that you are represented professionally.
• It forms a solid foundation for negotiations.

Strategy 4: Submit a Protective Order (Schutzschrift)

If you anticipate an impending preliminary injunction, you can submit a protective order to the competent court.

• The court must review your defense arguments before issuing the preliminary injunction.
• You gain time and can prepare for the actual proceedings.
• It prevents you from being surprised by a preliminary injunction.

Strategy 5: Negotiate Licenses Strategically

In some cases, a license may be the most economical path. But the negotiating position should be strong.

• Do not give in immediately under pressure.
• Analyze the patent technically before entering negotiations.
• Estimate the costs of the entire legal dispute.
• Assess whether the patent is attackable.

Strategy 6: Assert Counter-Allegations

Many NPEs operate with a limited patent portfolio. If your company possesses patentable innovations itself, a counter-strategy can be effective. Often NPEs themselves infringe their own or third-party patents – particularly if they use their own products or services commercially.

Strategy 7: Build Networks and Alliances

Since NPEs often proceed systematically, a collective defense strategy can be highly effective. When multiple companies take action against the same NPE, the negotiating position strengthens and the costs are shared.

The formation of alliances and the exchange of information between affected companies are legal and recognized by jurisprudence.

Legal Framework in Germany

German law offers a range of instruments you can use against NPEs:

1. Patent Act (PatG) – The foundation of German patent protection.
2. Code of Civil Procedure (ZPO) – Framework for patent disputes.
3. European Patent Convention (EPC) – International level.
4. Courts Constitution Act (GVG) – Jurisdiction of specialized courts.
5. Competition Law – Injunctive relief and damages claims.
6. Act Against Unfair Competition (UWG) – For unfair cease-and-desist notices.

The Role of Specialized Courts

The Federal Patent Court in Munich and the Regional Courts – particularly Mannheim, Düsseldorf, Munich – are known for their specialized patent chambers. Mannheim alone handles over 500 patent proceedings annually and is thus the largest patent court in Europe.

Prevention: How to Proactively Protect Your Company

Case Study: Nokia vs. Daimler

A famous example is the patent dispute between Nokia and Daimler in 2021. Nokia demanded licensing fees of several hundred million euros. Daimler objected and initiated invalidity actions. In the end, both parties agreed on a significantly lower amount. This case shows that even large companies are affected, but successful defense is possible.