In a post entitled “Rather no Patent court than a bad one?” published on this blog on 23 April 2012 comments were made to the ongoing development of a Unified Patent Court. At that time, the project of creating a common Patent Court was under process, but it had not yet become reality. In March 2011 the Council had authorized an enhanced cooperation in creating a Unified Patent Court. However, this authorization was challenged by both Italy and Spain, and at the time of the last blog post, the issue was pending before the ECJ. Italy and Spain claimed, inter alia, that the adopted language regime infringed their rights to take part in the cooperation. Nevertheless, on 16 April of this year the ECJ dismissed all pleas made by Italy and Spain (Joined cases C-274/11 and C-295/11).
In the blog post of last year the authors were of the opinion that many problems had to be resolved before the creation of a common Patent Court could become reality. Hence, the biggest news since then is undoubtedly the signing of the Agreement on a Unified Patent Court (“the Agreement”) by 24 Member States on 19 February this year (in March, Bulgaria also signed the Agreement). The only Member States not participating in the cooperation are Poland and Spain. Thus, even Italy has now opted in. The Agreement will enter into force on 1 January 2014 or when it will be ratified by 13 of the signing states (art. 89 of the Agreement, see the status of the ratification process here).
Since the 1970s the Member States of the Union have agreed that there is a need for a unified system for patent. The current system consists of two different patents: national patents granted by the competent national authorities and a European patent granted centrally by the European Patent Office (EPO). However, today the European patent involves a single procedure only for granting patents. Thereafter, the patent proprietor must validate the patent separately in the various countries within a short time limit. Hence, the existing European patent is only a bundle of national patents and there is no single jurisdiction for disputes about them. The new unified system will enable applicants to seek a European patent with unitary effect from the EPO, which will be valid across all the Member States. Also, the new unified court will have jurisdiction over all European patents. Thus, the February signing is definitely a momentous step towards the completion of a uniform patent system.
As mentioned, the Agreement entails the creation of a Unified Patent Court (UPC), which will have an exclusive jurisdiction to settle disputes regarding European Patents and future European Patents with unitary effect. The UPC is to be a common court to the participating Member States, and is therefore under the same obligations of EU law as any national court (art. 1 of the Agreement). The UPC will consist of a Court of First Instance, a Court of Appeal and a Registry (art. 6 of the Agreement). The Court of First Instance will be composed of a central division located in Paris, as well as of local and regional divisions which will be set up upon requests of the Member States in accordance with the Agreement (art. 7 of the Agreement). The Court of Appeal will have its seat in Luxembourg, and every panel of the Court shall have a multinational composition of five judges (art. 9 of the Agreement). The UPC will consist of both legally and technically qualified judges, all judicially independent (art. 15 and 17 of the Agreement).
As mentioned in the post published in April 2012, one of the main concerns expressed by the ECJ in their opinion (of 8 March 2011) on the draft agreement was that it might jeopardize the autonomy of Union law. The ECJ held that, since the UPC would be a judicial institution outside the framework of the EU, the drafted agreement both barred national courts from interpreting and applying Union law, as well as the ECJ from giving preliminary rulings to questions falling under the exclusive competence of the UPC (para. 89). After the ECJ had delivered its opinion, the Council started to revise the agreement. To resolve the concerns expressed by the ECJ a new chapter on the primacy and interpretation of EU law was included in the Agreement. First of all, article 20 in the Agreement now demands the UPC to apply Union law in its entirety and to respect the primacy of Union law. Furthermore, article 21 demands the UPC to refer questions for preliminary rulings to the ECJ, which will be binding on it.
Another concern expressed by the ECJ was the lack of liability of the contracting states for judgments by the UPC which results in a breach of Union law. The Court held that a decision made by the UPC, which infringed EU law, could neither lead to infringement proceedings against the states, nor to any financial accountability for the contracting parties (para. 88). This issue is now addressed in article 22 of the Agreement, which gives the contracting states a joint liability for infringements of Union law by the Court of Appeal in the same way as the Member States can become liable for infringements of Union law by their national courts.
Despite the many concerns expressed regarding the development of the Unified Patent Court, many actors seem to welcome the signing of the Agreement. The current system gives several national courts and authorities of the Members States jurisdiction over infringement and validity proceedings concerning European patents. The EPO emphasizes that this regime leads to a number of difficulties, such as; high costs, a risk for diverging decisions, a risk of forum shopping and a lack of legal certainty. By giving the UPC exclusive jurisdiction over litigation concerning European patents and Unitary Patents, the EPO means that these risks will be reduced (see here). Most importantly, the new unified system will radically reduce costs for filing patents. The European Parliament has estimated that the possibility to obtain patent protection in one single forum will reduce the costs for European patent with 80 percent (see here). Moreover, the new system will of course create uniformity and legal certainty, since a party only has to apply to a single entity to receive a patent valid in all contracting states.
Despite the advantages, there are also a few negative aspects of the new system. First of all, it is completely new and untested. It is not similar to any other existing European system and it is therefore very difficult to predict its outcome. On the other hand, it has been argued that the system has certain similarities to the U.S. federal court system, which includes district courts and a U.S. Court of Appeals for the Federal Circuit. In the U.S., an application does not have to be filed in multiple states but only on a federal level. The comparison to the U.S. system can therefore provide a prediction of the future ahead. A consequence that has been long dealt with by the U.S. system is litigation brought by non-practising entities, so-called “patent trolls”. These entities often acquire patents with a very vague scope, using them to target companies to pay for licenses for their patents. However, the Agreement includes some procedural safeguards to prevent this, e.g. the provision that the losing party must bear the legal costs (art. 69 of the Agreement). In the U.S., these “patent trolls” have preferred to sue multiple defendants in one location in order to reduce the costs of the litigation and make it more difficult for the defendants. In the Agreement, however, there is a limitation on the joining of multiple defendants, stating that this is only allowed when the parties are sufficiently related (art. 33 of the Agreement). The Agreement also includes structural safeguards (read more here). Although, since the system is new it is impossible to know beforehand if these safeguards will be enough.
Moreover, the original and innovative nature of the new system means that other issues could arise. As mentioned, there has been debate on the relationship between the UPC and the ECJ and on the interpretation of EU law. The judicial structure of the Union has been clarified over the years through case-law and Treaty provisions and there is now a clear balance between the ECJ and the national courts. However, this “two party system” is now going to expand with a third-party – a third-party interpreting EU law. The Agreement clearly states that the UPC shall cooperate with the ECJ in order to ensure the uniformity of EU law (art. 21 of the Agreement) and lists the areas in which the UPC shall have exclusive jurisdiction (art. 32 of the Agreement). Despite this, there is still uncertainty on whether the judicial balance within the Union will be unchanged and if the uniformity of EU law actually will be preserved. Only the future can provide the answer.
Finally, although a uniform decision throughout all the Member States provides legal certainty as to what is protected and where it is protected, there is also a downside. A negative decision either by the EPO or by the UPC will have effect in all the Member States. Thus, there is no possibility to turn to another institution, gaining a positive decision valid in another part of the continent. However, the national patents will still exist. Applicants who are worried about this aspect can therefore still choose to apply for national patents in all the Member States, avoiding the risk of a negative opinion valid all over Europe.
There has been a long road leading to the Unified Patent Court. Many problems have been discussed and many essential features remained unsettled for a long time. On 19 February 2013, finally an agreement was reached. The new court will reduce costs related to applications and disputes regarding European patents, it will increase legal certainty and it will also create a base for uniform decisions. However, the system is new and untried and it is impossible to predict what consequences it will have in practice. Although, the original nature of the Court creates an opportunity to customize the system and to shape it according to the needs of the participating Member States. The EU itself is a great example of an innovative cooperation between states. Perhaps the UPC can be almost equally successful.
by Amandine Douma, Petra Enmalm and Ida Karlsson