Microsofts recent decision to relocate its European logistics and distribution HQ out of Germany has reignited the debate over patent law in Germany, writes KEVIN J O'BRIEN

IS GERMANYS system of litigating disputes over patents bad for business? Microsoft’s decision to move its European logistics and distribution headquarters to the Netherlands from Germany has generated a debate over patent law in Germany, where it is easy to block the sale of a rival’s product even before an infringement claim is verified.

Microsoft cited the potential consequences of a lawsuit brought against it in Germany by Motorola Mobility as a factor in its decision to move its logistics centre to the Netherlands from Duren, a small German town near the Dutch border.

Motorola Mobility has asked a court in Mannheim to stop Microsoft from distributing its Xbox game consoles and Windows 7 operating system software because they employ a video-streaming technology that Motorola claims to own. The court is scheduled to rule on Motorolas request on April 17th.

Microsoft is taking no chances. Thomas Baumgartner, a Microsoft spokesman, said the possibility that the court in Mannheim might grant Motorola’s request and ban the European distribution of the Xbox and Windows 7 had prompted Microsoft to seek a friendlier base.

The company began transferring its operations this year to a location in the Netherlands, which it will not disclose. “The move is taking place as we speak,” Baumgartner said last week.

In the past two years, Apple, Samsung, Nokia, Microsoft and Motorola Mobility have either introduced or defended themselves against patent claims in Germany. In one case, Apple won a ruling at a court in Dusseldorf that banned the sale of the Samsung Galaxy Tab 10.1 tablet computer in Germany. Samsung quickly modified the device, releasing the Galaxy Tab 10.1N a month later. Apple sued to block sales of the new device, but a court in Munich denied its request.

In March, Apple won a Munich court ruling against Motorola Mobility because Motorola had used one of Apple’s patented photo-management technologies on its mobile phones. Motorola said it had modified the devices to remove the infringing technology.

Nokia is suing Apple in Dusseldorf and Mannheim, as well as in Britain and the Netherlands, accusing Apple of using 13 Nokia patents without authorisation in its iPhone, iPad and iPod Touch.

The lawsuits, often claiming violations of patents that are considered essential parts of globally recognised mobile technology standards, prompted the European Commission to open investigations this year against Samsung and Motorola Mobility.

Joachim Henkel, a professor of management at the Technical University of Munich, said big international companies were often seeking to exploit the German system for strategic advantage. Henkel said the prominent patent and intellectual property disputes in the mobile phone sector, which have also involved courts in Asia, Britain and the US, were bogging down cutting-edge companies in court.

“All of these infringement cases in Germany, Europe, the United States and Asia are having a hampering effect on innovation globally,” Henkel said. “Usually, what masquerades as a patent dispute is in actuality a dispute motivated by business strategy.” The process has turned the German patent courts in Mannheim, Dusseldorf and Munich into some of the most overworked in Europe.

Two-thirds of all patent claims in Europe are now filed in Germany, according to the Munich law firm Meissner Bolte, which does patent litigation. In a sense, Germany has become a destination for fast, effective one-stop patent challenges, much as Britain is for libel and the state of Delaware is for registration of US companies.

While these may benefit German law firms financially, technology experts and smaller German technology firms say the system is being abused to generate nuisance claims. Determining the substance of a patent claim in Germany can take years. During that time, a rival can effectively be stopped from using a basic piece of technology, often without a legal reason that holds up in the end.

That was the case with Unitedprint, a company in Radebeul, Germany, that does online printing for small and mid-size businesses. In 2006, Unitedprint was sued by a competitor, Vistaprint, of Bermuda, which said Unitedprint was using a piece of its patented design technology that enabled users to print business cards and fliers in high resolution.

The German Patent Court rejected Vistaprint’s claim in 2007, but Vistaprint appealed. Five years later the German Federal Court of Justice set the matter to rest, siding with Unitedprint. In its ruling, the German court said the European Patent Office had erred in 1994 when it issued the patent at the centre of the dispute.

Although Vistaprint lost on the legal issues, the company did succeed in getting Unitedprint to change its business operations. Beginning in July 2007, Unitedprint stopped using the patented technology at the heart of the dispute. It has since devised new methods of printing that do not make use of it, but the lawsuits were costly to defend.

Anja Sebald, the head of the legal department at Unitedprint, said it was simple for companies to obtain ownership rights to technology that was already in the public domain. “It is often too easy to obtain a software patent from the European patent authorities,” she said. “Many times, the people awarding the patents don’t have the direct relevant expertise to make an informed judgment.”

In Germany, if a court determines that a company legally holds a patent, it can issue an injunction to ban competing uses if asked. There is no option of granting proportional monetary damages. Some German businesses are clamouring for changes to better shield themselves from nuisance suits. In 2009, 200 small and midsize businesses created a lobbying group, the Bundesverband Informations-und Kommunikationstechnologie, based in Hamburg, with the goal of altering the legal system.

But the group has so far been unable to persuade German lawmakers. In 2005, the German Parliament unanimously approved a non-binding resolution urging changes to the system to limit abuse. But the call was never followed by action.

The last activity came in 2009, when the German Justice Ministry produced a favourable report on the issue, said Johannes Sommer, the managing director of the association. "The topic is too complicated and the pressure from the German Mittelstand of small and medium-sized businesses has not been strong enough," Sommer said. Microsofts decision to move a business unit from Germany could prompt change. - (New York Times service)