Innovations in Europe: the New Unitary Patent System

Dr. Matthew Barton, UK and European patent attorney

Forresters

Dr. Holger Tostmann, German and European patent attorney

Wallinger Ricker Schlotter Tostmann

Headnote

The Unitary Patent (UP) and Unified Patent Court (UPC) aim to strengthen and simplify the patenting procedure in Europe, thereby benefitting innovators seeking protection for their inventions. The Unitary Patent will provide blanket protection across up to 26 EU member states – a unified market of around 400 million people. The Unified Patent Court will handle validity and infringement of these Unitary Patents and ultimately European patents too, in a single forum providing legal certainty and avoiding costly parallel litigation. This paper will discuss the proposed operation of the new systems as well as providing an update of the latest status, including an explanation of the delays caused by Brexit in the UK and the constitutional complaint filed in Germany. Most importantly we will look into how the unitary systems will benefit innovation in the chemical industry and whether the aims of the systems are achievable. Also what potential problems might arise with a unified patent regime?

A brief history of the Unitary Patent and the Unified Patent Court

The current European patent system is based on the European Patent Convention (EPC), which provides a common examination procedure for all EPC member states, administered by the European patent office (EPO). However, after grant, the EP Patent dissociates into a “bundle” of national patents that need to be maintained and enforced in each member state separately. The EPC member states are 38 in total and this number includes all 28 European Union (EU) member state. Ever since the creation of the EPC and the European patent office in 1973, there has been the desire to create a European patent which provides unitary or blanket coverage and enforcement (much in the same way as a European Union trademark or design provides protection for the entire European Union). A Community Patent was already mooted in the 1970s, but no real progress was made until 2009.

In 2012, the European Parliament reached agreement on EU regulations required to create the Unitary Patent (UP) and the Unified Patent Court (UPC). The legal basis for the Unitary Patent came into force on 20January 2013, but this law is not yet applicable. The agreement for the Unified Patent Court was also signed on 20January 2013, but the UPC is not yet in force.

As will be described further below, the UPC still requires ratification. Once the UPC has been ratified, then both the UPC and the Unitary Patent will come into force. The EPO is already geared up toward assuming responsibility for the granting of Unitary Patents and for maintaining the Unitary Patent Register. For its part, the United Kingdom has already prepared premises to host a central division of the UPC. However at the time of writing there is still uncertainty about when the UP and the UPC actually can begin to operate.

Operation of the Unitary Patent

At present, there is no true unitary European patent. When a patent is granted by the European patent office it is validated in the countries of interest, resulting in a “bundle” of national patents. The aim of the unitary patent is to provide true blanket patent coverage and enforcement across Europe.

The new system will eventually cover all EU member states except for Spain and Croatia (i.e. 26 countries in total). Spain has elected not to take part in the system and Croatia, a relatively new member of the EU, has not yet had the opportunity to join. Once the UP system is in place, an applicant will have his or her EPO application examined and granted in exactly the same way as, at the present time, by the European patent office. However, at the grant stage the applicant will have the choice of obtaining a unitary patent alongside the “traditional” validation approach for a “bundle” of national patents.

Request for unitary effect

In order to obtain a Unitary Patent, the EPO patent must be granted with the same claims for all participating countries at the time of the filing of the request, and the designation of any of these countries must not have been withdrawn.[1] A request for unitary effect must be made at the latest one month after the EPO patent grant date, and this date is not extendible (note that the “traditional” validation period is three months, for most countries).

The European Patent Convention presently has 38 contracting states and two extension states. Some of the EPO countries are not part of the unitary patent, because they are not part of the European Union; examples are Switzerland and Turkey. Therefore in the future it will be possible for applicants to choose only a unitary patent, only traditional validations or a mix of unitary patent and validation, for example the unitary patent with “add on” validations for all or some of those countries, which are EPO countries but not part of the unitary patent. Thus a patentee will have the choice of strategies at the grant stage, depending on whether unitary protection, national protection, or a mixture is required. Also, as is the case now, an applicant also may pursue national patents (prosecuted before the national patent offices) in addition to EP validation and/or a unitary patent.

Translation Requirements

An advantage of the proposed system will be the minimal language requirements compared with the present system. For an initial 6 year transitional period a single translation of the patent will be required[2] – into English if the patent was granted in French or into German or into any official language of the EU if the patent was granted in English. In practice, because translation of the claims into English, French or German is already required by the EPO at the grant stage, the patent holder will just need to provide a translation of the description. This translation is only for information purposes and has no legal effect.

Compared with the present situation, in which many validation countries require a translation of the claims or the entire patent specification, the UP language regime will result in a highly beneficial cost saving for those patent holders desiring protection in a large number of jurisdictions,in particular encompassing Southern and Eastern European EU member states.

Renewal fees

The unitary patent will be kept in force by the payment of a single renewal fee set at the level of the combined fees for the four most widely validated states (Germany, France, UK and The Netherlands). The expectation is that this level of fees will be attractive to applicants, who will effectively get coverage in up to 26 countries for the cost of the renewal fees of the 4 most important IP jurisdictions in Europe.

Additionally because only a single yearly payment is required, the patent holder will save indirect costs because he or she only needs to instruct the European representative to pay one fee – saving on attorney or agent costs from having to instruct in multiple countries. The renewal fees are payable to the EPO in euros.

The fee level is particularly attractive in the early years, with annual fees for maintaining a Unitary Patent for ten years – the current average lifetime of a European patent – amounting to less than EUR 5 000.[3] On the other hand, no “de-escalation” of annual fees at a later stage is possible, i.e. it is not possible to lower the annual fees of a unitary patent by selectively abandoning less relevant jurisdictions.

Management of Unitary Patents

At present, once a patent is validated, any management aspects need to be completed individually in each of the validated countries. For example, the recordal of an assignment or other right needs to be implemented country-by-country. Registration of such rights is important because national legislation can allow for a reduction in damages awarded by a court during infringement proceedings if the transfer is not promptly recorded at the respective national industrial property office. Furthermore, in order to launch proceedings in a given country, it is necessary for the proper rights holder to be recorded on the national patent register.

The Unitary Patent system will provide a central registry which will be administered by the European patent office which will allow for the simple and cost-effective central registration of transfers, licences and other rights. The registration of rights will be implemented according to the EPO’s prevailing practice for European patent applications.

This will present an important reduction in cost and complexity as compared with the traditional validation system. For example, at present the recordal of a simple assignment can be administratively burdensome and expensive in some states in particular which require translations of agreements, powers of attorney, notarisations and the like.

Licensing

A Unitary Patent may be licensed for the entire 26 participating countries in one block, or for a single country or a part of the block.[4] Exclusive licences may be recorded in the Register for Unitary Patent Protection held by the EPO, if required.

Operation of the Unified Patent Court

At present, once a European patent is granted and validated, infringement and validity (after lapse of the opposition period) of the patent must be asserted/challenged separately, in each validated country. As well as causing complexity and expense, this also leads to legal uncertainty because different courts in different countries can reach different conclusions about the same patent, based on specific national approaches.

The Unified Patent Court (UPC) will be a specialised patent court with exclusive jurisdiction for litigating unitary patents. Eventually, the court will have jurisdiction for litigation of all patents granted by the European patent office, including “traditionally” validated EP patents. However, as will be outlined in more detail below, during an “opt-out” period, holders of existing European patents granted under the previous system and holders of future European patents which are not unitary patents will be able to opt-out of the jurisdiction of the Unified Patent Court and use the national courts instead.

Structure of the Court

The UPC will comprise a Court of First Instance, a Court of Appeal and a Registry. The First Instance Court will have a Central Division (with branches in Paris, London and Munich) and Local and Regional Divisions in contracting member states. The Court of Appeal will be located in Luxembourg. Concerning the Central Division, the three branches are to be involved in litigation across different IPC classes: the London branch is to deal with patents in classification sections A (human necessities) and C (chemistry, including pharmaceuticals) whereas Munich deals with mechanical engineering (class F). The seat in Paris has competence for the remaining classes B (performing operations and transporting), D (textiles, paper), E (fixed constructions), G (physics) and H (electricity).

Forum Selection

Actions for infringement, including applications for injunctions, will be brought in the divisions of the Court of First Instance either at the local division hosted by the Member State where the actual or threatened infringement has occurred or may occur, or the regional division in which the Member State participates, orthe local division hosted by the Member State where the defendant is domiciled, or the regional division in which this Member State participates. In other words the forum is chosen according to where the infringement takes place or where the defendant is located.

Revocation actions will be brought at the central division of the Court of First Instance in the branches in London, Paris or Munich depending on the IPC classification of the patent in question, as set out above. Furthermore the Central Division will hear actions which would otherwise be held in countries having no local or regional division. Invalidity challenges in infringement proceedings may also be separated from infringement and may be referred to the Central Division.

Status of the UP/UPC (ratification) as of November 2017

In order or the UPC to come into force (and therefore for the entire Unitary Patent system to be applicable), the UPC needs to be ratified by 13 participating states, mandatorily including the three key jurisdictions with the most EP patents validated, namely Germany, France and the United Kingdom.

At the time of writing, 14 countries including France have ratified the agreement on a Unified Patent Court. Therefore, whichever other countries now ratify, the system hangs on the ratification by Germany and the United Kingdom.

United Kingdom: Brexit

With the referendum of June 2016, the UK voted in favour of withdrawal from the European Union. The UK government initiated the withdrawal process in March 2017, which is expected to be concluded by March 2019.

The Brexit vote has cast doubt on the future of the unitary patent package because the United Kingdom is a mandatory signatory to the UPC court agreement. Without the UK’s ratification of the court agreement the unitary patent package will not come into force. Furthermore the primary legislation of the UPC requires a branch of the Unified Patent Court to be hosted in London.

It is presently unclear what the UK government intends to do about UPC ratification. If the UK government takes no steps to ratify then it is possible that the Unitary Patent will simply be paused until such a time that the UK has left the European Union. At that point it seems that Italy would take the place of the United Kingdom as the third mandatory ratifying country (together with France and Germany). Clearly, this situation would lead to a further delay to the implementation of the unitary patent system.

On the other hand, in November 2016 the UK government confirmed that it was proceeding with preparations to ratify the Unified Patent Court Agreement. So it is also possible that the UK government might yet ratify the agreement, thereby bringing the UPC into effect before the UK leaves the European Union. However, once the UK has left the European Union it seems likely that the UK would also need to withdraw from the UPC (because the UPC is an EU initiative). Additionally the UPC includes the possibility of referrals to the Court of Justice of the European Union (CJEU) whereas the UK government has consistently maintained that Brexit will completely remove the UK from the jurisdiction of the CJEU. Therefore the UPC appears to be contradictory to the UK government’s asserted policy.

Despite this apparent contradiction, the UK government continues to take steps toward ratification. For example in November 2017 the UK Parliament has set up a committee to discuss the draft Statutory Instrument to give the UPC the privileges and immunities it requires. However, while legislative steps like these continue, the consequences of Brexit on UK ratification still cannot be predicted.

In the meantime, and irrespective of this, despite Brexit, the position of the UK as part of the European patent system (i.e. the European Patent Convention) remains unchanged.

Germany: Constitutional complaint

As noted above, Germany also needs to ratify the UPC in order for the entire system to come into force. The ratification process in Germany was paused in the summer of 2017 due to a legal challenge filed at the German Federal Constitutional Court (“Bundesverfassungsgericht” or “BVerfG”). This caused the Constitutional Court to request that the German President withhold his signature from the UPC ratification pending the outcome of the constitutional complaint. Apparently, theBVerfG did take the initial assessment that a complaint was not completely without merit.

Details of the complaint have since come to light and the complaint broadly consists of four separate objections:

  1. The act to bring the UPC into ratification was approved by the German Parliament with an insufficient majority.
  1. Alleged lack of independence of the UPC judges.
  1. Alleged democratic deficiency of the UPC administrative committee.
  1. Alleged incompatibility of the UPC agreement with European Union Law.

Following the filing of this complaint, the German Federal Constitutional Court invited submissions from third parties with an initial deadline for response of 31October 2017. That deadline has since been extended to 31December 2017. Unless the complaint is then deemed inadmissible or clearly unallowable, the Federal Constitutional Court is likely to decide on the complaint mid-2018. If the court rules that the UPC is constitutional (i.e. the complaint is dismissed), then this could open the way to a 2019 launch for the UPC.

On the other hand, if the court decides to refer the issue to the CJEU then this will add at least a further year to the process, pointing to a 2020 start date. Furthermore and importantly, such a delay means that ratification would have not concluded before the UK actually is expected to leave the EU (March of 2019). Once the UK has actually left the EU, i.e. Brexit has been completed, ratification of the existing UP/UPC package would no longer be possible and the entire package would need to be re-negotiated [then without the UK, which also may (further) diminish the attractiveness of the overall package].