The European unitary patent system

June 2013 | PROFESSIONAL INSIGHT | INTELLECTUAL PROPERTY

Financier Worldwide Magazine

After decades of false starts, agreement has been reached on a unitary patent system for Europe which will bring significant changes to the patent litigation landscape. While obstacles still remain, the adoption of the Unitary Patent Regulations on 17 December 2012, and the signing of the Unified Patent Court (UPC) agreement on 19 February 2013, mean that the Unitary Patent system now looks more likely than not to become a reality. Despite initial optimism that the system would go ahead from 2014, it has become clear that the need to ratify the UPC agreement and the extensive practical preparations needed to implement the new court system, mean that a realistic start date is now late 2015 or early 2016. Even if adopted as planned, the real impact on business is far from clear, with the costs of the system yet to be determined and with some major European Union (EU) economies choosing to stay outside the system altogether.

The principal aims of the Unitary Patent system are to provide a single European patent and a new court system capable of issuing decisions that are effective across the whole of the European Union, to address the perception that the current system is expensive and fragmented.

At present, there are two routes to obtaining patents in Europe. The first is the traditional route of filing patent applications at individual national patent offices, which are then prosecuted independently of each other. The second route is via the European Patent Convention (EPC), which provides a single patent prosecution process at the European Patent Office (EPO). A patent granted by the EPO can then be validated in any of the 38 contracting states of the EPC, usually requiring the filing of a translation of the patent description or claims into the local language. Renewal fees are also payable annually in each contracting state. As a generalisation, companies in the electronics industry validate in a small number of key markets, often just UK, France and Germany, with relatively low validation and renewal costs. In contrast, companies in the pharmaceutical sector validate in many more countries, so incurring a much higher level of translation and renewal costs.

The Unitary Patent system does not replace the existing system, but adds a further option. It uses the existing EPC procedures, enabling a patent application granted by the EPO to be validated as a single granted patent in the participating EU states. This central validation is the key to the cost benefit of the Unitary Patent, avoiding the need to file expensive translations in individual countries. However, renewal costs remain an issue. Although a single renewal fee payable to the EPO annually will replace individual renewal fees payable in each country, the level at which this fee is set will be critical in determining the uptake of the system. If set too high, companies, particularly those in the electronics field, will simply continue to file traditional European patents.

The new system will start once the UPC agreement is ratified by 13 states, which must include the UK, France and Germany. Despite the current debate around EU membership in the UK and concerns about the transfer of more power from the UK to the EU, the ratification process in the UK has started with the first reading of the Intellectual Property Bill on 9 May. This process has undoubtedly been helped by the fact that the UK will host one part of the Central Division of the Court specialising in pharmaceutical patents, an area in which the UK is traditionally strong.

Nevertheless, reaching this stage has been an exercise in political compromise, with national interests playing a strong role. Spain, Italy and Poland have stayed outside the system. Indeed, Spain and Italy have opposed the implementation of the system through the Court of Justice of the European Union (CJEU). While the first of those actions has been dismissed, Spain continues to challenge the Regulations.

In the meantime, Italy, while not being party to the Unitary Patent Regulations, has signed up to the UPC Agreement. Poland, in contrast, is a party to the Regulations, but has not signed up to the Agreement, preferring to adopt a wait-and-see approach.

The role of the CJEU has itself provoked much controversy. While it is the highest court in the EU, strenuous efforts have been made to keep it from having a significant role within the UPC system, at least in part due to its perceived lack of technical and legal expertise in the patent field.

As a result, the Unitary Patent system will have a new court structure and a new set of court procedures, with sole jurisdiction for Unitary Patent matters. The Court of Appeal will be in Luxembourg, with a Court of First Instance split between a Central Division (with branches in Paris, London and Munich) and Local/Regional Divisions. The court procedures for each Local/Regional Division will be the same, and these procedures have been chosen with an emphasis on the need for speed and efficiency. Litigation will be a mostly written procedure with one day trials, in stark contrast to the lengthy litigation in some European countries. As a result, it is expected that litigation under the UPC will be cost effective and fast, which must be a prerequisite for an effective patent system.

In addition to having jurisdiction for Unitary Patent matters, the UPC will also have jurisdiction over traditional European patents granted by the EPO, although complex transitional provisions provide a long period during which such patents can be opted-out of the new system. A high level of opt-outs could therefore delay the extensive use of the court system for many years to come.

A major consequence of the Unitary Patent system is that central enforcement will result in one litigation action for the whole of the EU (or at least for those states participating in the system). There will also be a central revocation process, enabling a party to revoke a patent for the whole of the EU with a single action. Whether this is an advantage or a disadvantage depends on whether you are a patent owner or challenger, on the area of technology, the strength and value of the patent and many more factors besides. These factors, as well as the ability to litigate in different divisions depending on where the infringement takes place, or where the defendant has a place of business, or to opt-out altogether, mean that strategic considerations as to where and how to litigate will remain as important as ever for the foreseeable future.

We are at the beginning of a long road. The system has its supporters and its opponents. But if we are to have a true single market in Europe, then a unitary patent system and court would seem to be an essential first step in the right direction.

Jan Walaski is a partner at Venner Shipley LLP. He can be contacted on +44 (0)20 7600 4212 or by email: jwalaski@vennershipley.co.uk.

Jan Walaski

Venner Shipley LLP