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20 March 2020PatentsSarah Morgan

UPC analysis: is a UK 'litigation hub' on the horizon?

Earlier today, the German Federal Constitutional Court concluded that the country’s Act of Approval to the Agreement on the Unified Patent Court (UPC) is void, seemingly ringing the death knell for the system. But could this decision be a boon for UK patent litigation? WIPR investigates.

A window of opportunity

The Law Society of England and Wales has claimed that the potential delay to the implementation of the UPC (or its ultimate death) could give the UK time to mitigate the risks of not participating in the system.

The type of mitigation suggested includes investing in its own patent litigation system and appointing more technically qualified judges.

Simon Davis president of the Law Society, says: “There is a crucially important window of opportunity to make this investment before the UPC is off and running. By increasing training, recruitment and by appointing more technically qualified judges to hear patent litigation matters, the UK could sustainably bolster its jurisdiction on the world stage.”

He adds that it’s the availability of judges—which has fallen recently—that is most “crucial to a fast, high quality and reasonable cost system with which the UK can confidently expect to maintain a very substantial share of high-value patent litigation”.

Alex Wilson, partner at Powell Gilbert, adds: “While the UPC was in limbo the English Patents Courts were shoring up their position for complex high-value international patent disputes. One of the biggest selling points has been the commercial and technical patent experience of its judges ... and the first instance pool has been broadened with new fair, reasonable and non-discriminatory (FRAND) enthusiasts.”

While the life sciences section of the central division of the UPC had been allocated to London, it will now need to be moved. However, the vacant premises could become the exclusive home of the UK IP courts, according to the Law Society.

Robert Watson, partner at Mewburn Ellis in the UK, adds that the delay may provide some time to find a resolution to the location of the life sciences section.

“It seems an amendment to the UPC Agreement could be concluded to relocate this court and then be ratified by the German parliament, and possibly the other signatory states,” he says.

For Jonathan Radcliffe, partner at Reed Smith, a UK patent system outside the influence of the EU will have “great scope to develop even more competitive procedures to enhance its standing as one of the key European jurisdictions”.

He adds: “This may lead to a fracturing of the European patent litigation landscape, as the individual EU countries reflect on their positions and whether they may incorporate aspects of the Anglo-Saxon influenced UPC rules into their national ones.”

A tussle over accountability

The constitutional complaint also questioned the democratic accountability of the regulatory powers overseeing the UPC’s operation and argued that the UPC breaches existing EU law.

Turning to the alleged violations of EU law, the court concluded that the democratic principle laid down in the German Constitution is not violated.

“EU law does not contain any formal or substantive requirements which could cast doubt on the validity of a German act or even violate the identity of the German Constitution,” explains Tilman Müller-Stoy, partner at Bardehle Pagenberg in Germany.

He adds: “The principle that the court has to exercise its review cautiously and in a way that is open to European integration does not alter this conclusion, since, according to the court’s case law, this principle does not have the consequence that EU law becomes a standard of review for German law.”

Importantly, says Müller-Stoy, the court has left open whether this might be different with respect to the fundamental rights as laid down in the European Charter of Human Rights, if a legal point is exclusively dealt with in European law in the process of European integration.

However, in the present case, the UPC is an international body on its own outside of EU law.

Is this the end?

But does today’s ruling, which stemmed from a constitutional complaint filed by Düsseldorf-based attorney Ingve Stjern in June 2017, truly mark the end of the system?

Not according to the court’s preparatory committee.

In a response to the news, it said: “Despite the fact that the judgment will result in further delay the preparatory work will continue, while the judgment and the way forward is further analysed.”

However, Wilson says: “The UPC has been sent back to GO on the Monopoly board, twice in a few weeks, first by the UK government and now by the German Constitutional Court. The UPC Preparatory Committee is putting on a brave face, but they will need to get a few double 6s if they want to get the project back on track.”

Watson adds that while the decision is an “undoubted blow for those driving the UPC project”, which has already encountered significant delays and obstacles, it doesn’t spell the end of the project.

“It appears a new attempt to ratify the agreement in the German parliament (Bundestag) could be brought forward, but this time requiring a two-thirds majority,” he says.

However, in light of the COVID-19 pandemic, a new attempt is likely to face further delays and difficulties. Add this to the renegotiations that must take place because of the UK’s withdrawal, and the future of the UPC seems bleak.

Gordon Harris, global co-head of IP at Gowling WLG, says that it is almost “inconceivable” that this will go back before the German parliament until that renegotiation process is complete.”

He adds: “We all know from experience that it can take a long time for the member states to agree this sort of thing. The UPC Agreement may survive and even thrive in the long term, but it is just as likely to fall at this hurdle.”

However, if the UPC Agreement is revised, Müller-Stoy suggests that there’s an opportunity to be seized, which could make the system more attractive. Issues to be considered include the criticised opt-out/opt-in regulations and the (high) reimbursable attorney fees, he says.

He concludes: “There are still many aspects that need to be considered and clarified before a version of the UPC Agreement exists which can be considered for ratification. This will take time, if there is even sufficient political will. The COVID-19 crisis is another delaying factor. Yet, that does not change anything about the fact that most of industry is rightly in favour of the system even without the UK, and time for improvements isn’t a bad thing, is it?”

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20 March 2020   The German Federal Constitutional Court has upheld the constitutional complaint filed against the country’s Unified Patent Court legislation, less than one month after the UK said it would not be seeking involvement in the system.
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