In principle, the company that manufactured or distributed the infringing products is liable for damages resulting from a patent infringement. Under German law, however, the CEO can also be held liable. This can be very unpleasant, especially if the company becomes insolvent. In a new decision, the BGH has ruled that it does not intend to change the liability of the CEO.

In many years of practice, the X. Civil Senate of the Federal Court of Justice has affirmed the liability of the CEO for patent infringements in the past, without the Lawsuit having to present specific, culpable actions by the CEO.

In contrast, the First Civil Senate has only affirmed the liability of the legal representative for an infringement of intellectual property rights committed by the company if the legal representative was aware of the infringing acts and did not prevent them.

More recently, the First Civil Senate has taken the view, both for acts of infringement in the area of unfair competition and for infringements of copyright law, that a legal representative is only liable for acts of infringement by the company if he was involved in them through positive action or if he should have prevented them on the basis of a guarantor position established under general principles of tort law.

In a recent ruling, the X. Civil Senate of the Federal Court of Justice sees no reason to change its previous jurisprudence on managing director liability. It is of the opinion that a guarantor position of the CEO exists, for example, if the protection of third party rights is an organizational task to which the legal representative is first and foremost appointed. The CEO is responsible for the actual and legal possibility and reasonableness of controlling a risk situation with regard to Patents of third parties.

This applies in particular if a company manufactures technical products or imports them into the domestic market.

A large number of Patents are in force for practically every field of technology, covering a wide variety of subject matter. A company must therefore check whether its products or processes fall within the scope of protection of third-party rights before commencing any of the aforementioned activities.

This obligation is an expression of the so-called “increased risk situation” to which technical IP Rights are typically exposed. The protection resulting from Patents and Utility Models would not be sufficiently guaranteed if other market participants only attached secondary importance to the question of whether their activity infringes third-party IP Rights.

By virtue of his responsibility for the organization and management of the business operations and the associated risk that these are set up in such a way that the company’s production or sales activities result in the ongoing infringement of third-party IP Rights, the legal representative of a company is therefore generally obliged to arrange for the necessary checks or to organize the business operations in such a way that the fulfillment of this obligation is ensured by employees responsible for this. In particular, he must ensure that fundamental decisions about the company’s business activities are not made without his consent and that the company’s employees entrusted with development, production and distribution take the necessary precautions to avoid infringing third-party Patents.

In this initial situation, it is generally not necessary to establish in more detail that the culpable infringement of a Patents by a company is based on culpable misconduct on the part of its legal representatives.

Note: This ruling confirms the importance of clarifying property rights before launching a new product. In principle, the CEO must personally inform himself about the risk situation and help shape the decision on how to proceed.

Links: juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py