The top seed, who was attending the small clay court event for the first time since winning it nine years ago, was also dealing with the added stress of testing a new larger racquet, coping with his physical limitations and facing a big hitter in Daniel Brands.
The German produced a 6-3, 6-4 win to make the quarter-finals, coming good after taking the Swiss star to three sets in Hamburg last week.
Federer, 31, who has been troubled occasionally in a relatively injury-free career by back spasms, said that he has been dealing with them for a few weeks now.
He hinted that he will be taking a late decision on whether or not to play the Montreal Masters, a key US Open warm-up event, which begins on August 5th.
"I've had serious problems with the back, I had to get some anti-inflammatories last week in Hamburg due to the pain," he said after Thursday's loss, his third of the summer against an opponent ranked outside the top 50.
Federer is currently ranked fifth in the world, his lowest level in a decade after going out in the Wimbledon second round to Sergiy Stakhovsky and then losing last week in the Hamburg semi-finals to Argentine qualifier Federico Delbonis.
Federer had been hoping to both build confidence as well as test out a new larger racquet. Instead, he must now work on his back and hope for the best.
"I will have to do a lot of exercises and see how it all feels. My main priority now is to fix my back. I would love to be able to train at 100 percent," said the former world number one.
"I'll have to see if the rehab is enough to let me play in Montreal. If it is, I'll go; if not, then it gives me another week."
The Swiss said that due to his physical problems, it is hard for him to tell where he is with his new racquet anyway.
"A change like this is very important but I honestly can't tell right now due to my low level. It's hard to analyse anything.
"I still don't have even enough information to try and explain. I have no clue where I am right now with the racquet change."