white-rabbit-late
1 February 2013Patents

Better late than never? The unitary patent

When the European Parliament approved a package for a Unitary Patent (UP) and associated court late last year, it was hailed by some as a triumph of negotiation and cooperation, and evidence that the EU is ready and willing to punch its weight on the world stage.

Benoît Battistelli, president of the European Patent Office (EPO), which will grant the UP, says the agreement is “in keeping with Europe’s continuous efforts to raise its competitiveness and attractiveness”.

“Looking back at the interminable, fruitless debates on this dossier over the decades, one realises the scale of this very recent achievement, establishing not only a simple solution for innovators—covering, for the moment, 25 European countries—but also creating a complete, dedicated litigation system with jurisdiction for so many countries with widely differing legal traditions.”

But as any watchers of European politics will know, having an agreement on something and having that agreement working are two different things. The Parliament’s endorsement paves the way, in theory at least, for the first UPs to be granted in 2014. If that seems not to leave very much time for all the kinks to be ironed out, that’s because it doesn’t.

However, in terms of the granting process, there shouldn’t be a problem. Patents will be filed in exactly the same way as the current European patent, right up to grant. At that point, applicants will choose whether to go for a UP or to designate countries under the current system. The EPO has repeatedly stated that it will have no problems in granting the new patents.

However, there’s a little more to it than that. While the logistics of granting the actual patents are fairly straightforward, what happens afterwards is not so clear-cut. The Unified Patent Court (UPC) is likely to prove more of a challenge to have working efficiently from the word go, not least because, with a seven-year opt-out from the court’s jurisdiction available for patent owners, there may not be sufficient cases early on to allow the court to establish a solid jurisprudence.

Add to this continued uncertainty over procedural rules (several drafts have already been published, the most recent in January), costs and judicial make-up, and it’s easy to understand why there might be some nervousness about the system.

Start date

Of course, before we can know how the system works in practice, it needs to be ratified, and while that should be a formality, there are a couple of threats which might stand in the way. Thirteen of the 25 signatory states are required to ratify the agreement, and those must include the UK, Germany and France. Given the work that has been necessary to get to this point, it would seem odd for many states not to ratify, but it’s not impossible.

“REMAINING OUTSIDE THE SYSTEM MAY RESULT IN INNOVATIVE INTERNATIONAL ENTERPRISES LOCATING THEIR PRODUCTION PLANTS IN OTHER COUNTRIES THAT DO JOIN THE UP SYSTEM.”

UK prime minister David Cameron recently delivered a speech on the UK’s relationship with Europe, in which he raised the spectre of an ‘in-out’ referendum in the country during the next parliament, should his Conservative Party be re-elected. Whether this will come to pass is difficult to say, given the variables involved, but it certainly has a bearing on the context of UK ratification. But even assuming for the moment that ratification does proceed without a hitch, it still might not happen this year as scheduled.

Alan Johnson, partner at Bristows LLP in London, says: “Our understanding (from the UK IP Office’s European Focus Group, of which I am a member) is that the UK expects to ratify the UPC agreement in spring or summer 2014.”

If another 12 countries ratified on time, that would mean the UP and UPC might feasibly be operational in late 2014 or early 2015. That shouldn’t be a problem, although some countries look like taking their time to ratify and, as Christof Karl of Bardehle Pagenberg points out, the European Patent Convention took eight years to ratify, albeit with more countries having to do so.

In January Poland’s government decided not to ratify the agreement until it has observed how the UP works in other countries, amid fears that it might harm native innovation by increasing the number of foreign-owned patents with effect in Poland.

Many Polish attorneys support the government’s stance, though Krystyna Szczepanowska-Kozłowska, head of DLA Piper LLP’s Polish IP department disagrees. “It seems that in the long term it would be detrimental for Poland to exclude itself from possible changes,” she says. “Certainly, failure to adopt the UP will limit access to new technologies and will slow down innovation in Poland—or will result in innovative Polish businesses leaving for countries that are part of the UP system.

“Remaining outside the system may result in innovative international enterprises locating their production plants in other countries that do join the UP system. Certainly, Poland’s staying outside the system will deprive it of any influence on the final structure of the system and may have a potentially negative effect on Poland’s image in the international arena.”

There is one other issue that could put a spanner in the works. The Court of Justice of the European Union (CJEU) has yet to rule on a case brought by Spain and Italy challenging the legality of the new system on the grounds that there will be no mandatory translation into Spanish and Italian.

Advocate General Yves Bot has already opined that the case should not be upheld, but until the CJEU actually rules, there remains uncertainty, albeit very small. Spain and Italy would both be allowed to opt in to the new system if they chose to later, and many observers expect Italy to do so.

Better late than never?

The UP will provide coverage across all participating states in one go, at a price yet to be finally determined, but which is expected to be a 70 percent discount on the current cost of designating all 25 countries for a European patent. If true, that’s a hefty reduction.

But it’s not as simple as that. At the moment, very few companies ever file a European patent designating all the countries covered by the UP. Indeed, apart from in the pharmaceutical industry, it is rare to find patents designating 10 countries, let alone 25. So the cost reduction works only if the extra coverage is genuinely desirable.

“IT IS RARE TO FIND PATENTS DESIGNATING 10 COUNTRIES, LET ALONE 25. SO THE COST REDUCTION WORKS ONLY IF THE EXTRA COVERAGE IS GENUINELY DESIRABLE.”

For some companies, it may well be. Nonpractising entities might like the idea of being able to assert patents across the all participating states at once. That’s a big stick to carry. But the same is true for small and medium-sized enterprises (SMEs), in theory at least. As Karl says, “A lot will depend on the costs of the court, but the incentive of an injunction and damages for all countries is a big one.”

The reverse is also true of course; some companies may well be terrified by the thought that their patent could be wiped out across the major European markets at a stroke, especially because the court system responsible for it is completely unproven. All businesses like predictability, and that’s going to be a difficult commodity to come by for the first few years.

The cost issue rears its head in unlikely ways too. Renewal fees for the patent will, necessarily, be for the patent as it covers all the participating countries. But in the current European patent system, companies that have chosen to designate multiple countries often allow registrations in particular countries to lapse before the patent term has ended. As a money saver, this flexibility is significant, and will not be possible in the new system. If renewal costs are high, there is no way to reduce them over the life of a patent.

Courting controversy

Absolutely key to the success of the new system will be the effectiveness of the UPC. It will be interesting to see how many patent owners choose to take advantage of the seven-year opt-out period from its jurisdiction.

After all, where’s the incentive for being one of the first into an unproven system? If lots of companies do opt out, then there will be fewer cases going through the system; with a small pool of cases, there will be limited jurisprudence; and limited jurisprudence provides no incentive to use the system. Of course, it will be possible to extend the opt-out period if required, but only time will really solve the problem.

The costs of the court are unclear, but it won’t be cheap. If the cost of litigating a case in the new system is high, that raises questions about the ability of SMEs to compete against those with bigger pockets. Indeed, when the system was being developed, some argued for allowing SMEs to be allowed to litigate the UP in the national court systems.

The question of who the judges in the court will be has yet to be answered, but much will depend on them. With good, experienced, multilingual judges from across participating states, the court system has a good chance of being effective. And with appeal courts spilt between Munich, Paris and London, there’s reason to be optimistic about the eventual quality of the decisions. Again, the main obstacle is whether enough companies choose to use the system in its early stages.

There are certainly going to be some bumps in the road for both the UP and UPC. But any major overhaul of any system, particularly when it comes to Europe, is going to present challenges. Assuming the system does come into effect, businesses in all industries and of all sizes will have to deal with it one way or another. And the more they do, the better the system should get. Time, as ever, will tell.

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Patents
27 March 2013   A European Patent Office select committee has begun discussing how much a Unitary Patent should cost users of the system.