The New EU Unitary Patent and Unified Patent Court – On Track but Issues Remain…

After some 40 years of stop-start progress, recent months have seen a steady build-up of momentum in relation to the proposed EU Unitary Patent and Unified Patent Court (UPC) regime. Provided all goes to plan in the coming months, a 2016 start date for both is beginning to look an achievable target.

The Unitary Patent

The Unitary Patent will be a single patent applied for following one central application at the European Patent Office. It will have effect in all those EU Member States that ratify the UPC Agreement, which will govern the UPC Regime. At present, it is anticipated that Spain, Italy and (probably) Poland will not participate in the Unitary Patent (although Italy does intend to ratify the UPC Agreement).

The Unitary Patent will co-exist with existing and future European patents which do not have unitary effect. National patents will also remain available.

How much will it cost?

The much-touted selling point of the Unitary Patent is that, for those seeking patent protection across the participating Member States (bearing in mind though that not all will participate in the Unitary Patent), there will be substantial costs savings. Unlike a standard European Patent, a Unitary Patent will not require validation in each individual country (and the translation costs will also be less). However, the level of fees (including, importantly, the renewal fee) of the Unitary Patent remains a big unknown. This makes it difficult for patentees to make a proper financial comparison with the standard European patent (which many only validate in a key number of states) or indeed a portfolio of national rights. Recently, the EPO President (Benoît Battistelli) confirmed that information on fees for the Unitary Patent would be forthcoming in 2014 and suggested that lower fees for SMEs was an option under consideration.

The UPC

Another key benefit of the Unitary Patent is that it will have pan-EU effect and can therefore be enforced across the EU through a single court action – but it can also be invalidated across the EU in one fell swoop. The UPC will govern disputes concerning the Unitary Patent (and related SPCs) from day one. It will also have jurisdiction over existing and future European patents (and related SPCs) but, for a transitional period, holders of existing European patents (and ones granted during the transitional period) can ‘opt-out’ their patents out of the UPC (for the

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life of the patent) and opt them back in again when it is to their advantage. The UPC will not have jurisdiction over national patents.

The likely fee for opting European patents out of the UPC system – and for withdrawing that opt-out further down the line – is a concern for patentees, particularly those with large portfolios. There will be a sunrise opt-out period before the UPC Agreement comes into effect and a significant number of patentees are expected to exercise the opt-out across their standard European patent portfolios. Those looking to opt out are understandably very concerned at the prospect of paying more than a nominal fee to avoid a court system that they did not sign up for in the first place.

Ratification of the UPC Agreement

The Unitary Patent will only become available once the UPC Agreement is in force. 25 EU Member States signed the UPC Agreement in February 2013 but the Agreement must now be ratified by those Member States that intend to participate – 13 Member States (which have to include Germany, the UK and France) must ratify before the Agreement can come into effect.

Austria was first off the blocks back in August 2013 and, to date, is the only Member State to have deposited its ratification instrument in Brussels. In the last couple of months, Malta and France have also approved the Agreement and ratification is on track in Belgium, where the Senate approved the Agreement on 13 March. Denmark is holding a referendum on 25 May 2014 but early indications suggest that the vote will be in favour of ratification.

In the UK, the Intellectual Property Bill (which recently had its Third Reading in the House of Commons and is now about to enter the ‘ping pong’ stage – during which a Bill may go back and forth between the House of Commons and the Lords before agreement is reached) enables the requisite changes to be made to UK patent law. However, the UK Government has promised that it will not ratify until it has issued a financial Impact Assessment – and, to do that, it needs information on the likely fees involved.

What else needs to happen?

Setting up a new EU-wide patent litigation regime is no small task. The UPC Rules of Procedure are still to be finalised: the 16th draft was recently issued following a consultation period and an oral hearing will take place shortly where stakeholders can make further submissions. Examples of issues raised during the consultation include those in two open letters from a number of technology companies which highlight, for example, concerns about bifurcation, with the Agreement allowing for claims of validity and infringement to be dealt with separately – the concern here is that a UPC infringement panel may order remedies consequential on a finding of infringement, before the question of validity is resolved. In practice, however, many doubt that the UPC Local and Regional Divisions will routinely bifurcate proceedings.

The Brussels I Regulation (which contains EU rules on the jurisdiction of courts and recognition of judgments) must also be revised in order to clarify how the jurisdictional rules will work in the context of the UPC and also in relation to defendants in non-participating states. The European Parliament will be voting on the proposed changes shortly.

In addition, many practical aspects are being dealt with, ranging from financing of the new court and IT, through to appointment of both legal and technical judges (some 1300 expressions of interest to be a UPC judge were submitted) with the Judicial Training Centre in Budapest already in operation.

In the meantime, information is beginning to come through on the locations of the various UPC Local and Regional Divisions. In addition to a Nordic/Baltic Regional Division comprising Sweden, Lithuania, Latvia and Estonia (which will conduct its proceedings in English), Germany has announced (as expected) that it will have the maximum 4 Local Divisions. News of the number and location of the UK Local Division(s) is awaited. Whilst each participating Member State is entitled to have 1 Local Division (and it is not certain that all will, due to the costs involved), the ability to set up additional Local Divisions will depend on the number of patent cases in the relevant Member State.

Many do not doubt (but some certainly do) that the UPC and Unitary Patent will be in operation at some stage in the future (although the UPC Preparatory Committee’s recently revised hoped for start date of the end of 2015 may be overly optimistic). However, it is likely to take a substantial period of time for the new regime to bed down and for patentees and other users of the patent litigation system to become truly comfortable with it. For all the sceptics, however, there are also many ‘good Europeans’ who intend to embrace the new system and the benefits it offers fully.

To keep track of developments in relation to the UPC and Unitary Patent, please visit our EU patent team’s dedicated Unitary Patent/UPC webpage and introductory analysis of the background to the new regime.