Author(s):Several

The Unitary Patent Court – caution ahead!

The Unified Patent Court (Immunities and the Privileges) Order made on 8 February 2018 is recently making a lot of clatter in the European Union. The UK took a step towards the ratification by the Privy Council approving the Unified Patent Court (UPC) agreement which deliberates legal capacity and grants immunities and rights to the UPC and its representatives. The UPC is built up using a universal understanding and is an international treaty between 25 of the 28 Member States of the European Union (EU) excluding Spain, Poland, and Croatia creating the Unified Patent Court.

A unitary patent system will offer additional rights to national and European patents, in contrast to the traditional patents which give domestic rights enforced by country to country basis. A Unitary Patent will enforce a unitary license that will be applicable in all the participating member state countries and will be prosecuted through the European Patent Office (EPO) and implemented by UPC. It will enable all the UP owners to enforce patents across Europe by bringing proceedings under one jurisdiction. The UPC will grant a better framework for all parties involved in patent litigation in Europe. In particular, costs will cut down as it will not be required for the parties to participate in parallel patent litigation in various member states. Presently, the national judicial system decides on the encroachment and legitimacy of European patents. However, this causes a hassle when a patent proprietor wishes to uphold a European patent in a few countries or when a third party pursues the renouncement of a European patent. The UPC Agreement addresses these inadequacies by creating a unitary patent court with particular jurisdiction for litigation relating to Unitary and European patents and harmonizing the scope and limitations of the rights conversed by a patent, and remedies available beyond EU Directive (2004) (48/EC) (Enforcement Directive).

The transitional arrangements in the Agreement on the Unified Patent Court have stirred debates among prospective clients. There are numerous differentiating interpretations, and however various contend that the position is clear, it is a long way from specific what impact it will have when practically practiced. It is an issue of utter significance given that every European patent application as of the date of the UPC appearing will be liable to this agreement. This article will investigate these vulnerabilities, and their effect on patentees and prospective clients, and the post-Brexit consequences.

Building Blocks of UPC – The UPC Agreement

The aim of the Unified Patent Court Agreement (UPCA) is to decide in on one decision for the countries where European Patent is registered unless the patent has chosen not to be part the system by the patentee. The UPCA gives effect to a Unified Patent Court (UPC) with specific jurisdiction for litigation to unitary patents bound by the Union Law. Article 5 of UPCA confirms that contractual liability of UPC will be consistent with the law applicable to the agreement in question and per Regulation EC Number 5932 of 2008 (Rome I). The non-contractual liability of the Court for losses caused by the Court or its staff members as stated under the laws of the Member State where the damage occurred provided such damage is not a civil and commercial matter as per Regulation EC Number 864 of 2007. Article 6 sets out the Court's composition that includes the First Instance Court (composed of three judges), a Court of Appeal (five judges) and a Registry (one Registrar). The Court of First Instance will comprise of central, local and regional divisions. The central division to locate in Paris, with sections in London and Munich. Article 11-14 describe the various committees appointed from each Member State to ensure the effective implementation of the Agreement. Article 15 and Article 16 deal with the eligibility criteria for appointment of judges and appointment procedure. Article 20 describes the primacy of Union Law where decisions of the CJEU are binding on the UPC, liability, and responsibility of the participating Member States. Article 24 states that the UPC will base its decisions on Union Law, UPCA, international agreements applicable to patents and binding national laws on contracting member states. Article 25 deals with direct infringement giving the right to the patentee to prevent the unauthorized third party from direct use of the invention. Article 26 gives the patentee the right to prevent unauthorized third parties with indirect infringement. Article 32 confirms exclusive competence of the Court and Article 32 (2) expressly grants power to national courts for actions relating to unitary patents and supplementary protection certificates. The UPC will have exclusive competence in regards to civil litigation with matters on European Patents. Articles 36-39 mentions the budget of the UPC that is financed by its revenues. Article 33 encompasses a detailed regulation on the competence of the divisions of the UPC's Court of First Instance. Article 33 (3) leaves it to the discretion of the regional division to decide whether to proceed with the infringement and the counterclaim for invalidity or to refer the counterclaim for the decision to the central division. Article 48 concerns the representation before UPC. The representation is mandatory, and parties can get representation from a lawyer authorized to practice before a court of contracting member state or a European Patent Attorney who has acquired appropriate qualifications. Article 49-50 refers to the language of proceedings before the Court. In the Court of First Instance, the official language will be of the Contracting Member State hosting the local division or the official language(s) chosen by the Contracting Member States sharing a regional division. Articles 56 – 72 lays down the power of the courts and concerns the remedies available to the parties involved. Decisions of Court of First Instance are appealable as mentioned in Article 73. As with the Court of First Instance, the events before the Court of Appeal comprise a written procedure, an interim procedure, and an oral procedure, followed by the decision of the Court. Article 76 describes the grounds for decisions and the right to be heard where the decision gets heard based only on case facts and evidence which were the question of the proceedings and on which the parties had a chance to retort. Article 83(3) stipulates that a patentee shall have the opportunity to opt out from the exclusive competence of the Court. Once an opt-out notification gets issued and registered with the UPC, it does not have any jurisdiction anymore with regards to the European patent or the application for the European patent concerned. The patent or its application will only be subject to the jurisdiction of the specific national courts. The court fees will comprise of a fixed fee, shared with a value-based fee when the amount of a case is above the set maximum of € 500,000 (Euro Five hundred thousand). The UPC will be a part of the legal framework and a court common to the Contracting Member States of the EU. It will have competence in regards to European patents and European patents with unitary impact subject to exceptions during the transitional period. The UPC's decisions will have an effect in the domain of those Contracting Member States having approved the UPC Agreement at the given time. The main benefit of having a UPC is to establish an active forum for implementing and testing patents in EU. Creating a UPC will end the requirement of litigation in different countries and enhance legal certainty through orchestrated case law in the area of patent violation and legitimacy. It will give less demanding, faster and more proficient legal methodology to fit the substantive patent law.

There is a considerable amount of work to be done for the agreement to come into effect. The Preparatory Committee is composed of signatory states to the UPC. The Preparatory Committee has divided the tasks into five areas; legal, financial, human resources, IT and infrastructure. The committee will exist until UPC gets established and operational.

A shift to a new horizon

This new approach to the intellectual property will serve as a new judicial execution framework to reinforce a new unitary patent system among the EU. It will create a golden circle for businesses and corporations as they will be able to apply to the EPO for unitary patents granting them patent protection for their invention referring to every member state recognizing the patent regime. UPC aims to provide an easier and a cost-effective way to protect and exploit patent rights in the EU. It will also offer a way for innovative businesses to enforce or challenge patents in up to 26 EU countries with a single court action that will be valuable and significant for patent-intensive industries. The majority of past cases in the UK litigated between the same parties in other European jurisdictions; a single unified patent court will make the process smooth.

The debate and criticism surrounding the UPC agreement are rising considering the post Brexit announcement. Regardless of the fact that the UPC agreement is an international agreement, and the membership of the Agreement is open only to the EU Member States. It isn't clear whether the UK could legitimately proceed as an individual member of the Agreement in the wake of leaving the EU regardless of whether it endorses the Agreement before Brexit Day. Another concern is whether the membership of a non-EU state would be compatible with the European treaties, even if the UK agrees to abide by relevant EU law and CJEU decisions of relevance to the UPC.

Post-Brexit Consequences

With Brexit casting its shadow over EU, it is making it difficult to understand how specific this decision of ratifying UPC will turn out for the UK. In spite of the fact that the UPC Agreement is (entirely) a global agreement as opposed to EU law, it remains an open analysis concerning whether the UK can lawfully continue as an individual from the UPC framework after Brexit, or significantly whether it will look to do as such. UK is in plans to leave the EU in March 2019 which would imply that a unitary patent framework without the UK would be less appealing which would put the entire idea of the unitary patent court in peril. The UK government has clarified in its Brexit policy document that it will bring a termination of the implication of CJEU in the UK and EU agreements will no longer apply to the UK. This clarification creates a hazy subject around the whole idea of whether legally or politically, how the UK could remain included and possibly still be liable to the EU courts.

London is one of the three expected locations for the establishment of UPC's Central Division. However, criticism surrounds the eventual fate of a London-based court. After Brexit, will the EU leave a lofty EU foundation sitting in a non-EU nation? If the UK figures out how to keep on participating in the UPC after Brexit, which is a long shot then conceivably the court will remain, and life sciences organizations would contest licenses that cover the whole EU in the London court.

The fate of the UPC framework remains in the air and corporations need to plan for all projections, whether UPC with UK or UPC without the UK. Whatever the result, patenting and litigation strategies depend on careful formulation with all possibilities especially with the political instability.

The German Question: Answer yet Awaited

For UPC to establish in the EU; three member-states are required to ratify the agreement including UK, France, and Germany for it to officially commence. If all goes well with the UK approving the agreement, the constitutional issues that surround Germany is also a vital reason which has stalled the ratification of UPC Agreement. The matter will take a while before UPC takes its charge in the EU, regardless of UK’s post-Brexit consequences.

Businesses need a new game plan

The effect on businesses that rely on patents, a significant number of whom will have put their UPC and UP arrangements on hold following the Brexit vote, will now need to tidy down their plans and start over the way towards considering their future European patenting tactic.

One strategy could be to wait and watch how the post Brexit revolution unfolds; Patentees will then have the capacity to keep a watch out how the UPC creates, and whether the potential advantages of the framework are getting conveyed before focusing on it. They would then be able to decide when looked at evident infringement of a patent whether to withdraw from UPC or to continue in the national courts considering particular situations surrounding Brexit. Once the UPC becomes effective, businesses will choose whether to assign conceded applications before the UPC or as national patents. It is probably going to be a more of a difficult choice for patentees requiring a broad patent scope, given the advantage of the lessened cost and authoritative weight of UPC over national patents. In this specific circumstance, the mystery will unfold only with passing the time whether the threat that the UK will stop to be a member in the UPC post-Brexit and the vulnerability around how UK rights will get managed from there on implies the relative significance of the UK market to the patentees. It stays to be seen whether the legal uncertainty around the future of UK cooperation will have results on the general framework.

Conclusion

In conclusion, the current debates may eventually result as the last fold that is to overcome before the Court opened its doors to EU patents, but they might also signal a more significant issue with the implementation of the Court and possibly, in a worst-case scenario, the beginning of the end. The UPC Agreement grants the UK to have one of the three branches of the vital Central Division of the UPC. If the UK leaves the UPC framework, that capacity of work will get transferred to another participating member state. However, the departure of one of Europe's biggest economies would make the UPC less appealing for businesses. Time is the medicine and time will tell what the decision holds for patents in the EU.