IP Expert Talk: Third-party notices in IP litigation

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Hello everyone. Today, we will discuss the topic of “third-party notices” in IP litigation in Germany. This procedural instrument allows the Defendant of an infringement lawsuit to ensure that the findings in the judgment of such lawsuit, for example the confirmation of infringement, are binding for a court in a subsequent lawsuit between the Defendant and the Third Party, for example the supplier of the Defendant, when it comes to recourse claims of the Defendant. Moreover, a third-party notice usually triggers an intervention of the third party so that the Third Party is joining the lawsuit between the Plaintiff and the Defendant on the latter’s side. If so, the cost risk of the Plaintiff can be increased considerably.

But before we go into these details, Michael, could you please give us a short overview of the requirements and legal effects of a third-party notice under German law?

Yes, sure. Under German law, a party in the proceedings, usually the Defendant, may request that a third party intervenes in its support. This is called a third-party notice, or in German “Streitverkündung”. For example, the Defendant in an infringement lawsuit regarding a smartphone may file a third-party notice to the companies supplying the parts which realize the allegedly infringing functionality such as the antenna or mobile technology chipsets. For a third-party notice to be valid, the Defendant must potentially have a recourse claim against the third party, usually its supplier, in case it loses the proceedings.

The third party receiving the notice then has two options: It may choose to (a) join the proceedings as an intervener or (b) refrain from joining the proceedings. If the party joins the proceedings, it can file briefs and take part in oral hearings, almost like the Defendant. There is one essential limitation, though, which is that the third party’s submissions must not contradict the Defendant’s submissions.

But more importantly, as you mentioned before, in a subsequent lawsuit, for example regarding recourse claims, between the Defendant and the third party, the third party cannot argue that the findings in the judgement of the original infringement proceedings between the Plaintiff and the Defendant – for example the confirmation of infringement – were incorrect. In that regard, such findings have a binding effect on the subsequent lawsuit between the Defendant and the third party.

Notably, in case of a valid third-party notice, this binding effect applies even if the third party does not join the main proceedings. So, in other words, the third party cannot simply – or should not simply – stick its head in the sand. So much for the legal framework. From a practical point of view, Stefan, what would you say is important in the context of a third-party notice? From a practical standpoint, communication is very important taking into account that the third-party notice – served by the court – increases the pressure on the third party.

Thus, the Defendant should made clear to the supplier - preferably prior to sending the third-party notice - that (a) the Defendant and the third party are on the same side, (b) that the third-party notice is a common and usual procedural instrument under German law and (c) that this is not an unfriendly act but rather the opposite, namely the request to fight against the Plaintiff and to finally succeed which is in favour of both, the Defendant and the third party.

One piece of practical advice I would like to add is that, instead of filing a third-party notice, the Defendant and the third party may also conclude an agreement stipulating the binding effect. This was the first part of our IP Expert Talk on third-party notices. In the second part, we will talk about strategic considerations – why is it interesting for the Defendant to file a third-party notice?