The European Unitary Patent and Unified Patent Court - what are we worried about?

It can hardly have escaped the notice of those with even just a toe in the IP world that Europe is now on the brink of a new and more "unified" patent system.  All EU member states except Spain and possibly Italy are expected to participate in the system and the touted advantages include lower translation costs, cheaper pan-European protection, and a single court covering all member states leading to reduced litigation costs and the removal of the possibility of different infringement and validity outcomes in different member states.  However, despite all these alleged benefits, the proposed system seems to be far from perfect and critics, quite rightly, have not shied from voicing their concerns.

This article will look into the new system, consider its strengths and its weaknesses, and examine the concerns that have been raised.

Under the new Unitary Patent system, applications will be filed at and examined by the European Patent Office (EPO) as they are today.  It therefore seems likely that the pre-grant process and costs will remain much as they are now.

At grant, applicants will be able to choose whether to bring their patent into force as a Unitary Patent or as separate national patents.  In either case, the patent may also be brought into force in EPC states that are not members of the Unitary Patent (e.g. Spain, Italy, Norway, Turkey, Iceland, Switzerland).

Much has been said about the Unitary Patent's reduced need for translations.  Under the transitional arrangements (which will apply for up to twelve years after the system comes into force), if an application is brought into force as a Unitary Patent, this will only require translation of the patent into English or, if the application was filed in English, another official language of an EU member state.  However, once a "high-quality machine translation" system is fully operational, there will be no translation of Unitary Patents required at all at grant.

For patentees who usually only bring their patents into force in say France, Germany and the United Kingdom, where no translation of the granted patent is required, these changes will not have much, if any, impact on their translation costs.

However, for patentees who usually bring their patents into force in countries where a translation of the entire granted patent is required, these changes could result in significant savings.

Notwithstanding the above changes to the translation requirements at grant, in the case of a dispute and at the request of the court or an alleged infringer, a patentee may be requested or obliged to provided a human translation of their patent into the relevant language.

In order to maintain a Unitary Patent, a single annual renewal fee will be payable to EPO.  The exact amount of these fees has not yet been decided.  It is expected to be considerably less than paying renewal fees at the current rates individually in all member states and this has been advertised as one of the Unitary Patent's big advantages.  However, few patentees actually bring their patents into force in all member states and what is not clear is whether the single renewal fee will be comparable to or more than paying renewal fees in around three member states, which many patentees currently choose to do.  Also, there will be no mechanism by which a patentee would be able to trim down their geographical coverage over the life of the patent in order to reduce costs depending on how valuable the patent turns out to be.

According to its unitary nature, a Unitary Patent may only be limited, transferred or revoked in respect of all participating Member States.  The revocation aspect of this in particular may be viewed as a disadvantage by many: a single decision could revoke a patent across the majority of the EU states, whereas currently each patent would have to be challenged separately with the possibility of different outcomes in different states.  On the other hand, such a system will of course give much greater legal certainty.

A further issue with the Unitary Patent is that a single prior national right could invalidate an entire Unitary Patent across all member states, even though separate national rights could, in many states, still be valid.  However, disappointingly, if such a situation arises there is no mechanism for conversion of a Unitary Patent into separate national rights.

Turning now to the Unified Patent Court, the UPC will have exclusive jurisdiction for the enforcement of Unitary Patents.  The UPC will hear actions related to infringement of Unitary Patents and SPCs, counterclaims for revocation, revocation actions, actions for provisional and protective measures and injunctions, actions against decisions of the EPO relating to Unitary Patents and actions for damages or compensation from provisional protection by published applications.

It is hoped that by providing a single court for enforcing patents across all member states, this will provide a more efficient and cost-effective system as patents will not need to be enforced separately in each state.  However, the number of multi-jurisdictional cases across Europe at present is not all that high anyway and, on the downside, litigation costs at the UPC could potentially be significantly higher than they are currently in the national courts, particularly where translation into a local language is required.

When the UPC Agreement comes into force, any European patents granted as individual national patents may also be litigated centrally and could be enforced or revoked across all states by a single court.  Whilst the option of such a simplified procedure will have certain advantages, it will also make any patents granted by the EPO more vulnerable.  It will be possible to opt out of this and many patentees may be well advised to do so (there will be the option to opt back in at any point).  However, from 2021, the UPC will have exclusive jurisdiction for all patents granted by the EPO which are brought into force in UPC member states. 

The UPC will be formed of a Court of First Instance, a Court of Appeal in Luxembourg and a Registry at the Court of Appeal.  The Court of First Instance will be formed of a Central Division with its seat in Paris and sections in London and Munich.  There will also be Local and Regional Divisions of the Court of First Instance in Contracting Member States. 

The Local and Regional Divisions will have the discretion to deal with counterclaims for revocation themselves or to refer such claims to the Central Division.  There is therefore a concern that courts will bifurcate the hearing of infringement and validity and that, based on an infringement hearing at a Local or Regional Division, a patentee could receive an injunction across all member states until validity is considered by the Central Division.  It is thought that if different Local and Regional Divisions have different approaches to this then this could result in forum shopping and Divisions which do bifurcate could provide a fruitful playground for so-called patent "trolls".

Of course, it may well turn out that such concerns are unfounded.  In Germany, for example, courts already bifurcate the hearing of infringement and validity and there is no evidence that this has resulted in an increased number of court cases brought by "trolls" there.  On this basis, we could perhaps allow ourselves to be slightly more optimistic in our views on the likelihood of the EU turning into a "trolls' paradise", as some critics have suggested.

Another concern about bifurcation is that it might lead to inconsistent infringement and validity decisions based on different interpretations of the patent claims.  Although there is the Court of Appeal, not all patentees will have the funds to rely on this.

A further concern about bifurcation, which is specific to the new UPC system, is that by bifurcating this may result in the infringement hearing being in one language and the validity hearing being in another.  This would of course increase translation costs and may also mean that a patentee would need to be represented by different lawyers at the different hearings, increasing legal costs as well. 

Besides the bifurcation issue, there is also concern that other aspects of the UPC could lead to forum-shopping.  For example, actions for infringement will be brought before the Local Regional Division where the actual or threatened infringement occurred, or the Local Regional Division where the defendant (or one of multiple defendants) has residence or their principle place of business (if that is a Member State).  The language of proceedings at the Local or Regional Division will be that of the Local or Regional division or (if parties agree) the language of the patent as granted.  It therefore seems likely that parties will choose to bring actions in the most inconvenient court for the other side or the court where they think they have the most likely chance of success.  Of course, while these may well be valid points, they do not necessarily raise issues which are not also present in the current system.

However, a further source of complication, uncertainty and potential increased costs is the requirement that, in certain circumstances, various national laws and languages will need to be used.  For example, if a UK company is sued for infringement of an English language Unitary Patent in Greece, by a US patentee, the language of proceedings will be Greek and the applicable national law (e.g. in relation to the Unitary Patent as an item of property) is German.  In another example, if a UK company sues for infringement of an English language Unitary Patent in Greece, the language of proceedings is Greek and the applicable national law is English.  It is perhaps questionable how well the various Local and Regional Divisions will be able to apply the national property law of another country.

In December 2012, when the European parliament voted in favour of the two draft Regulations for the Unitary Patent system and the draft Agreement on the Unified Patent Court, it was suggested that the whole system could come into force as early as January 2014.  However, the UPC Agreement is yet to be ratified by the required member states and considerable work is still needed on the Rules of Procedure, which have not yet been finalised, and fundamentals such as a robust and functioning IT system for the new court.  There is also an outstanding legal challenge from Spain which may yet overturn the whole system.  It therefore seems unlikely that the 2014 estimate will be realised and more likely estimates for the system to come into force would be 2015 at the earliest.

We will, therefore, have to wait a while longer before we will know exactly how, and how well, the new system will work.  However, for companies who are not interested in obtaining European-wide protection, or are particularly concerned about some of the problems discussed above, they could of course get around many of these issues by obtaining separate national patents via the national offices.  Whilst it seems there will be many cost and efficiency advantages to the new system, the potential issues post-grant mean that companies should think carefully before deciding which form of European patent protection will be best for them.

Catherine Noronah, Associate
First published in Intellectual Property Magazine, August 2013