EU leaps into unknown with Unitary Patent agreement

The European Council and European Parliament have both approved the latest proposal for a Unitary Patent (UP) in Europe, while Advocate General Bot rejected Spain and Italy’s attempt to derail the project.

The key votes on the package all passed the Parliament with comfortable majorities, the day after the Council gave its approval to the project.

The endorsement paves the way, in theory at least, for the first UPs to be granted in 2014, though is still subject to ratification by member states, and the Court of Justice of the European Union (CJEU) has to rule on the legality of the enhanced cooperation agreement between those states that forms the basis for the current proposal.

The proposed patent would provide protection throughout signatory member states, while disputes would be handled by a specialist patent court system across the EU, with regional or national first instance divisions in the member states and a central, second instance division headquartered in Paris.

Italy and Spain have opted out of the proposal, and are waiting for the CJEU to rule on its legality. AG Bot recommended that the court dismiss their case, and while the court is not obliged to follow the AG’s opinion, most practitioners expect that it will.

The UP system will run alongside the current European Patent (which allows companies to designate member states for their patent), and like that, will be granted by the European Patent Office (EPO).

Companies will be able to opt out of Unified Patent Court (UPC) jurisdiction (which will also cover the European Patent) for a seven-year transitional period, but can choose to opt in at any time.

Reaction to the Parliament’s decision was mixed. Benoît Battistelli, president of the EPO, welcomed the developments. "The European Union is to be congratulated on this decision, which clears the way for the completion of the European patent system with a unitary patent and a Unified Patent Court, which we have been waiting for in Europe for 40 years,” he said.

“The significant lowering of the cost of patenting inventions in Europe will strongly benefit European enterprises, especially research centres and SMEs [small and medium-sized enterprises]. The vision of the founding fathers of the EPO to equip the European economy with a truly supranational patent system now can become a reality, strengthening Europe's competitiveness.”

The fees for the patent and the cost of the court system have not been released, but Battistelli told journalists last week that he expected the UP to be approximately 70 percent cheaper than a current European Patent designating 25 member states, though a relatively small proportion of European Patents do designate that many.

Some have expressed reservations about the new system. Morag Macdonald, partner at Bird & Bird in London, pointed out that “one of the difficulties is that the outlying patent regulation we have at the moment is actually quite minimal. There is no indication at this stage of what the procedure will be.”

The UPC is of particular concern, because it will be starting from scratch and there will be no jurisprudence to begin with.

“Who's going to want to be the guinea pig, and who's going to want to pay for it?” Macdonald said. “The first few decisions will go to appeal on law and probably procedure. If you're a business, you want certainty; this means you're not going to have certainty, and it will cost you money.”

She expects many companies to consider opting out of the system. “If you do not opt out, the patent will be liable to revocation across Europe in one go. One does have to wonder why a patentee would leave their patent vulnerable in this way, especially because you can opt back in if you want to enforce the patent.”

Jochen Pagenberg, of Bardehle Pagenberg in Munich, was involved in the initial development of the current proposals, but said: “the discussions have all been in secret since May 2011.”

“They don't want to disclose the rules of procedure and the costs before they have signed. This is not democratic behaviour."

Pagenberg said his major concern is what will happen to SMEs. “You get something which only big industries and organisations are happy about,” he said. “There should have been no exclusivity for this court for the [European] patent. SMEs should have the option of litigating in one country - most patents are not litigated cross border at the moment.”

Macdonald agrees that SMEs may be concerned by the proposals: “SMEs will have difficulty in deciding whether it will be a good thing for them or not and how to take advantage of it. It's always likely to be the small guys that suffer from a new system, because they don't have access to all the advice they might need.”

Pagenberg is also concerned that the seven-year transitional period is not long enough to test the court system properly. “It took 10 years in Germany and 12 years in France to litigate one case to the highest instance after the opening of the EPO in 1978.”

Some attorneys are more optimistic. Will Cook, partner at Marks & Clerk in London, said that while there are still concerns around the new system, the UP and UPC have a very real chance of reducing the costs and complexity of enforcing patents throughout much of Europe.

"Whether the new patent enforcement landscape proves to be cheaper, simpler and more effective than the current - fragmented - system will depend not on the politicians or administrators in Brussels but on the actions of the lawyers around Europe servicing the system,” he said.

“Technology-driven industry will welcome a system with straightforward, reliable and cost-effective procedures. But will we get one? That will surely be down to how the judges run the court: with strong leadership from an experienced judiciary, we will get there. The current proposals are not perfect but - if the right judges are selected and supported - they are good enough to work.”

The agreement is due to enter into force on January 1, 2014, providing 13 contracting states have ratified it including the UK, Germany and France. The EPO said it expects to validate the first UP in 2014.