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Historic moment as Unified Patent Court Agreement is signed

David Knight
05/04/2013

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United Kingdom

On 19 February 2013, the Agreement on a Unified Patent Court (the "UPC Agreement") was signed by the majority of the EU member states.

First appeared in Intellectual Property Magazine, 1 April 2013

On 19 February 2013, the Agreement on a Unified Patent Court (the "UPC Agreement") was signed by the majority of the EU member states.  This is a significant step forward in the drive to establish a unitary patent system across the EU which, if ratified, is expected to represent the most dramatic change in the European patent landscape for 40 years.

The UPC Agreement is the third and final component within a "package" of proposals to make it easier to obtain patent protection across the EU and to create a new Court system for dealing with EU patent disputes.  The other two elements are two EU Regulations on implementing enhanced cooperation between participating member states in the creation of unitary patent protection and applicable translation arrangements [1]

Three member states did not sign the UPC Agreement on 19 February: Bulgaria, Poland and Spain.  Bulgaria has since signed the agreement after overcoming certain administrative hurdles.  Poland decided late in the day to adopt a "wait and see" approach and not to sign until it has comfort that the new system is not going to be detrimental for the Polish economy.  Spain is not participating as it does not agree with the language regime.

This is not the end of it and there is still some uncertainty as to whether and when the patent package will come into force.  Among other things the UPC needs to be ratified by 13 member states including the UK, France and Germany.   

This article does not propose to set out the new system in full but to focus on a number of specific areas.

Brief summary

The new European patent package will bring two main changes:

  1. The ability to apply to the European Patent Office (EPO) for a single European patent with unitary effect (referred to in this article as the "Unitary patent") across all participating member states.  This is different to the current position of granting a bundle of national rights on grant of a European patent.
  2. A Unified Patent Court with exclusive jurisdiction to hear all infringement and revocation cases in participating member states concerning European patents [2] and Unified patents, as well as any infringement and validity questions concerning supplementary protection certificates (SPCs) issued for a product protected by such patents.  Currently, such disputes have to be brought in different national courts with varying outcomes.

Translation requirements

As long as the application for a Unitary patent is in English, French or German and there are translations of the claims in all three languages, no further translations will be needed.  However, under the transitional provisions any such application needs to be submitted with:

(a) translation of the specification into English, if filed in French or German; and

(b) a translation of the specification into any other EU official language, if filed in English.

The transition period will last for a minimum of 6 years and will terminate once high quality machine translations into all EU languages are available, or after 12 years whichever is sooner.

In the event of a dispute concerning a Unitary patent, the patent owner will, on request, need to provide to the alleged infringer a translation of the patent into the official language of either the state where the alleged infringement takes place or where the alleged infringer is domiciled.  Further the patentee may need to provide a translation into the language of that Court if the Court so requests. 

Therein lies a costs benefit of the new system as it removes the need for translating a Unitary patent into many different languages, but at the possible disadvantage to those not conversant in one of the official languages.

Transitional arrangements

Owners of existing European patents with the same set of claims in all participating countries will be able to opt-in to obtain unitary effect.

For seven years after the system comes into play, infringement or revocation proceedings concerning European patents may still be brought before the national courts until one month before the end of the transitional period (provided that an action has not been started in the UPC).  A patentee of a European patent can also opt-out at any time unless an action has already been brought.  These transitional arrangements may be extended for a further seven years. 

The UPC will not have jurisdiction over patents that are applied for and granted at the national level.

The Courts

The UPC will comprise a Court of First Instance (made up of a central division, together with local and regional divisions), a Court of Appeal and a Registry.  The central division will be in Paris, with specialist sections in London (chemistry, pharmaceuticals and life sciences) and Munich (mechanical engineering). The Court of Appeal will be in Luxembourg.

Every contracting member state can ask to have a local division.  If a contracting member state hears more than 100 patent cases per year over a three year period, they can request an additional local division, up to a maximum of 4 local divisions. A regional division can be set up for two or more contracting member states, which may hear cases in multiple locations.

Patent infringement cases will be heard by the local or regional division where the infringement takes place or is threatened or where one of the defendants is located.  If the defendants do not have a location in a contracting member state, the case should be brought before the local/regional division where the infringement takes place or is threatened, or before the central division. 

Once an infringement action is commenced in one of the divisions, the same parties cannot bring a case concerning the same patent before any other division. 

Local and regional divisions will also hear counterclaims for revocation, although the court will have the option to "bifurcate" the proceedings and refer the counterclaim to the central division.  Alternatively, it can hear the counterclaim and suspend or proceed with the infringement action.  It may also refer the entire case to the central division if all parties are in agreement.  The extent to which first instance Courts will practice bifurcation is expected to follow the current practice of the particular territory in question.  Whilst bifurcation is alien to UK patent courts, it is standard procedure in Germany.  To those lawyers, who do not practice bifurcation, this system is seen as biased in favour of patentees who are often able to obtain injunctions before the question of validity of the patent is determined.  This can be crippling for infringers and the deciding factor in proceedings. 

The central division can hear infringement cases if the defendant is located outside of the EU.  In addition, applications for declarations of non-infringement of patents and SPCs, as well as actions for revocation of patents and for declaration of invalidity of SPCs are to be brought before the central division as long as there is no prior infringement action before a local or regional division.  Where there is a pending revocation action before the central division, an infringement action may be brought before any division, though it may be suspended pending the result of the revocation action.

Composition of the Courts

The Court of First Instance will generally have three Judges.  A local division which has on average 50 or more patent cases per year for three successive years will have two legally qualified Judges who are nationals of the host division and one legally qualified judge who is not a national and is allocated from a pool of Judges.  A local division with fewer cases, will have one legally qualified judge who is a national of the host division and two legally qualified Judges who are not nationals and who are allocated from a pool of Judges.

Regional divisions will have two legally qualified Judges chosen from a regional list of Judges who will be nationals of the relevant contracting member states and one legally qualified judge who is not a national and who is allocated from a pool of Judges.

The central division will generally have two legally qualified Judges who are nationals of different contracting member states and one technically qualified judge allocated from the pool of Judges. 

The parties can request an additional technically qualified judge with qualifications and experience in the relevant field of technology to join the panel.  The local or regional division Judges may also request this.  Parties can also agree to have their case heard by a single legally qualified judge.

The Court of Appeal will generally sit in a multinational composition of five Judges composed of three legally qualified Judges who are nationals of different contracting member states and two technically qualified Judges. 

Language of proceedings

The language of proceedings before any local or regional division will be the official language or one of the official languages of the relevant contracting member state hosting the relevant division or sharing a regional division.  Contracting member states may, however, decide for the language to be one or more of the official languages of the EPO (i.e. English, French or German).  In addition, under certain circumstances (for example, where the parties and the Judges agree), the language will be that in which the patent was granted.

The language of proceedings at the central division will be the language in which the patent was granted.  At the Court of Appeal, the language will be that of the first instance proceedings, though the parties may agree for the language to be that in which the patent was granted and, in exceptional cases, the Court of Appeal may decide to use another official language subject to the parties' agreement.

The Judges

There is some concern that the level and quality of legal judge will be inconsistent due to the different qualification criteria in different states, despite the requirement that "Judges shall ensure the highest standards of competence and shall have proven experience in the field of patent litigation".  Technically qualified Judges will have to have a degree and proven experience in a field of technology, as well as proven knowledge of civil law and procedure relevant in patent litigation.  The extent of such technical and legal knowledge is, however, unclear.

The pool of Judges will comprise all legally and technically qualified Judges including at least one technically qualified Judge per field of technology.  The allocation of Judges is to guarantee the same high quality of work and the same high level of legal and technical expertise in all panels of the Court of First Instance.  To achieve this objective, a training framework is included in the UPC Agreement but if the level of expertise between Judges of different countries differ greatly it is difficult to see how consistency as to quality and expertise will be achieved, at least in the beginning.

References to the CJEU

There has been much controversy surrounding the legality of the current European patent package which has undergone a number of iterations.  Draft Regulation 1257/2012 included Articles 6-8 which defined the rights conferred by a Unitary patent and what constituted an infringement.  Concern was raised in June last year, particularly by the UK, that these Articles would be subject to the jurisdiction of the CJEU a non-specialist patents court which could cause unnecessary delays and increased costs.

A compromise was reached, which removed Articles 6-8 from the Regulation and inserted a new Article 5(3) stating that the substantive law will be the national law applicable to the patent.  There is still, however, ongoing debate as to the scope of the jurisdiction of the CJEU because similar provisions have been included in the UPC Agreement.

Indeed, the UPC Agreement confirms that the UPC shall apply Union law in its entirety and shall respect its primacy.  Thus the UPC is to cooperate with the CJEU to ensure the correct application and uniform interpretation of Union law and make references to the CJEU as necessary.  As for many of the provisions of the European patents package, only time will tell how the system will work in practice.

Procedure before the UPC

As the Rules of Procedure are still in draft form, we do not comment on the specifics of court procedure as we would only be able to paint a partial picture.

Comment

Strong views have been voiced in favour and against the European patent package. 

On the one hand, to some, the UPC system is seen as good news by creating a patent environment similar to the US which has a similar market size.  Whilst there will be some uncertainty for businesses in the short term as the system settles down, further debate could have delayed the implementation of a pan-European patent system for another generation which would not have been beneficial to the EU economy.  It is argued that the new system will make it cheaper to obtain patent protection across participating countries, particularly by reducing translation costs.  Patent disputes will be cheaper and easier to litigate as such disputes will be dealt by a single court rather than having to start proceedings in many different national courts.  In addition, inconsistent decisions in different EU countries will be avoided by litigating in a single court.

On the other hand, critics of the new system are concerned that the proposals have been rushed through without full consideration of their implications, and that the proposals will be prejudicial to SMEs.  Some big industry players had urged the European Parliament to reject the system for creating legal uncertainly and by providing a forum (particularly through bifurcation) for increased activity from Non-Practising Entities (so-called "patent trolls" that own portfolios of patents which they do not exploit themselves but instead engage in patent litigation and licensing activities).  The potential to obtain an injunction over the whole of the EU contracting countries before the question of validity is heard is a powerful tool which patent trolls may well exploit. 

Given that renewal fees have yet to be determined, whilst it may well be cheaper to obtain patent protection across the EU, it may not necessarily be cheaper to maintain that protection.  Whether litigation becomes cheaper and easier will depend on the actual Court costs and the mechanics of the litigation itself.  There is also a concern that local and regional divisions will compete for work by making themselves as attractive as possible to patentees.  This will lead to forum shopping much like in the USA where certain courts have become a popular forum for patent litigation by creating a reputation for being pro-patentee.

Only time will tell if any of the concerns on either side eventually materialise.

So what should I be doing?

Participating member states appear confident that the UPC Agreement will be ratified by sufficient members and that applications for Unitary patents will be possible by April next year.  Companies need to actively review their existing patent portfolios and decide whether any of their European patents can be registered to have unitary effect and, if so, whether they wish to opt-in or opt-out of the new system during the transitional period.  They also need to consider whether, once the UPC package is in force, they wish to obtain full-EU wide protection for their new inventions using the new system or whether they wish to continue relying on national patents.  In very basic terms, for companies trading across the whole of the EU, it is likely that using the new system will prove to be more cost-effective but this will come at a price – such patents could be revoked centrally in one stroke at the UPC, a court which has yet to prove the quality of its Judges and decisions.  Those who only trade in a small number of EU countries will need to consider the costs involved more thoroughly.

During the transitional arrangements, patent owners should also keep an eye on how quickly cases are determined by the UPC and how sound the judgments appear and constantly review whether to opt-in or out of the UPC system.  

David Knight is a partner in the European law firm Fieldfisher.  David specialises in the field of patent litigation, and has had the conduct of some ground-breaking cases.  David also advises generally in relation to patent and other IP rights.

Dr Beatriz San Martin is a senior associate at Fieldfisher.  Beatriz has a broad practice area advising clients in all aspects of intellectual property, with a particular focus on patents, SPCs and the life sciences sector.

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[1] Regulation (EU) No 1257/2012 and Council Regulation (EU) No 1260/2012

[2] In this article, European patent means a patent granted under provisions of the European Patent Convention  but which does not have unitary effect.

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