UPCA - Principle Developments
UPDATED 6 December 2016
Principal developments since signature of the Unitary Patent Court Agreement
The Unified Patent Court Agreement ("UPCA") was signed on 19 February 2013 by 24 of the then 27 EU Member States. (Bulgaria, Poland and Spain did not sign at that time although Bulgaria signed in March 2013). Croatia joined the EU on 1 July 2013 but has not yet signed the UPCA.
Since the UPCA was signed, there have been significant changes in the position relating to the introduction of the proposed new patent regime (i.e. the unitary patent itself and the Unified Patent Court ("UPC")), which are noted below.
The unitary patent is unlikely to become operational until 2017 at the earliest. Although there has been progress on ratification of the UPCA in many EU Member States, remaining preparations for ratification are unlikely to be completed until later this year - and "Brexit" (the withdrawal of the UK from the EU) could have a significant impact, possibly meaning that the introduction of the unitary patent is delayed or even never comes into being.
How will Brexit affect the Unitary Patent regime?
In a referendum on 23 June 2016, the UK voted in favour of Brexit. This has caused considerable concern and uncertainty – not least in respect of the unitary patent regime where thirteen EU Member States (specifically including the UK) must ratify the UPCA for the unitary patent to take effect.
However, the UK remains a member of the EU until formal withdrawal.
Once the UK Parliament votes in favour of Brexit (the result of the referendum is not legally binding upon the UK Parliament) and formal notification under Article 50 of the Lisbon Treaty is given to the EU of the UK's proposed withdrawal and arrangements, the EU and UK will negotiate and conclude an agreement setting out the arrangements for the UK's withdrawal, taking account of the framework for the UK's future relationship with the EU.
The UK will leave the EU from the date of entry into force of the withdrawal agreement or, failing that, two years after the Article 50 notification referred to above, unless the Member States unanimously decide to extend this period.
What will happen to the new patent regime now that the UK has voted in favour of Brexit?
While the UK had made preparations for ratification of the UPCA (see below), formal ratification had not taken place prior to the referendum on 23 June 2016. However, until the date on which the UK finally leaves the EU (most likely in 2018), the UK can still ratify the UPCA. A bigger question is if and when it will choose to do so.
What if the UK decides to ratify the UPCA?
Before the Brexit vote, the UPCA seemed likely to come into force towards the end of 2017 (i.e. before the UK's EU withdrawal agreement is likely to become operative). Ratification by the UK would reduce any potential for delay in implementation of the UPCA and would allow the UK to participate in the new regime while exit negotiations take place.
However the new regime does not provide for a party to leave the EU. Thus, the UK would need to negotiate appropriate provisions. There has been some suggestion that non-EU countries (such as Switzerland) should be allowed to participate in the UPCA. This would require amendment of the UPCA, but (as with many other matters relating to Brexit) the position should become clearer over the next few months.
What if the UK decides not to ratify the UPCA?
Under Article 89(1) UPCA, the UK is one of the three necessary ratifying countries along with Germany and France. If the UK decides not to ratify the UPCA at all, unless the UPCA is amended, the unitary patent regime would have to be delayed until the UK left the EU. This would probably be in 2018 and the third ratifying country would be likely to be Italy.
What is the current position of the UK concerning ratification?
On 28 November 2016 the UK government confirmed it is proceeding with preparations to ratify the UPCA – but said the decision to proceed with ratification should not be seen as pre-empting the UK's objectives or position in the forthcoming negotiations with the EU.
Thus the UK will continue with preparations for ratification over the coming months, working with the Preparatory Committee to bring the UPCA into operation as soon as possible. However, it is noteworthy that, even if the UK does ratify, the UPC still requires ratification by Germany before it can come into effect.
Impact of Brexit on patent protection
The EU has waited a long time and has had to overcome many hurdles for a unitary patent regime. Unitary patents which exclude UK protection would be less attractive for businesses both in and outside the UK both in terms of seeking patent protection and in terms of seeking injunctive relief.
One of the likely ways forward for the UK is to ratify the UPCA and then seek some compromise over its departure and contracting member status under the new regime (and this may be used as leverage in the Brexit negotiations). However, at this stage it is impossible to predict next steps.
Other recent developments
Signatories to the UPCA
Bulgaria signed the UPCA on 5 March 2013. However, Poland and Spain still have not signed the UPCA.
Croatia joined the EU on 1 July 2013 but has not yet signed the UPCA. This will have no impact on the overall introduction of the new regime.
Progress on ratification of the UPCA by Member States
Eleven European Union Member States have now ratified the UPCA (Austria, Belgium, Bulgaria, Denmark, Finland, France, Luxembourg, The Netherlands, Malta, Portugal and Sweden). Thirteen European Union Member States (specifically including Germany and the UK) must ratify the UPCA for the unitary patent to take effect (but see above concerning Brexit).
(The Statutory Instrument amending the UK Patents Act 1977, paving the way for the unitary patent system in the UK, has been made. The legislation will come into force when the UPCA takes effect. The UK could still ratify the UPCA during 2016.)
Rules of Procedure for the Unified Patent Court – now adopted
In October 2015, the UPC Preparatory Committee adopted the Rules of Procedure of the Unified Patent Court (in the form of the 18th Draft of the Rules), subject to some further adaptations once the Committee has decided on UPC fees.
The Rules of Procedure, the result of collaboration between the Preparatory Committee's Legal working group and the Drafting Committee, underpin the UPC's framework and functioning. The Rules take into account comments from stakeholders submitted during the written consultation and the oral hearing.
Fees – court fees published
In February 2016, the UPC Preparatory Committee agreed and published the Rules on Court fees and recoverable costs for the unitary patent regime. The Rules will be subject to further legal scrutiny but have been published in order to keep users updated on the current work programme of the Committee. A fixed fee (€11,000) will apply to infringement actions, counterclaims and declarations of non-infringement with a scale of value-based fees for actions valued over €500,000. Revocation actions will incur a fixed fee of €20,000. A previously proposed fee for an opted-out patent has now been dropped.
Concerning recoverable costs, the Rules provide for ceilings on recoverable costs depending on the value of the proceeding.
Fees – proposal for renewal fees adopted
Following consultation, the Select Committee of the Administrative Council of the European Patent Office (EPO) adopted the "Top 4" proposal for Unitary patent renewal fees in June 2015.
The proposed fees correspond to the sum total of the renewal fees currently paid for the four countries in which European patents are most frequently validated today (Germany, France, UK and the Netherlands).
The main advantage of the Top 4 fee structure is that fees will be low for the first ten years of the unitary patent (this is likely to be attractive to small businesses, universities and individual inventors). In addition, there will be financial compensation for translation costs for small businesses in Member States which do not have an EPO official language as a national language.
It is hoped that the fee structure will encourage small and medium sized companies to apply for unitary patent protection (the costs of applying for patent protection in all Member States has been prohibitive for such businesses under the current regime).
What is not clear at this stage is how the UPC system fees will be apportioned between participating Member States.
Following the recent announcement of Italy's participation in the regime, the European Commission called on all remaining participating EU countries to ratify the UPC Agreement as soon as possible. However, the unitary patent is unlikely to become operational until 2017 at the earliest – and, of course, Brexit is likely to have a significant impact on the timetable.
In October 2015, a Protocol to the Agreement on the UPC was signed, to allow preparation for the court (including judicial recruitment and testing of IT systems) to take place.
London location of UPC
The London section of the Central Division and the UK Local Division of the UPC is intended to be based in central London at Aldgate Tower (near the Tower of London).
Confirming that a lease for the premises had been signed, IPO Minister Baroness Neville-Rolfe said:
"The signing of this lease represents a milestone in the UK's preparations for the introduction of the Unified Patent Court. Aldgate Tower, with its superb central location, will provide an ideal home for a modern court to support the UK's and Europe's leading edge innovative companies. This will further strengthen UK's legal and professional services sector, and reinforce London's status as a world leading centre for dispute resolution."
The UPC Court of Appeal will be based in Luxembourg.
Earlier developments of interest
The CJEU dismissed Spain's UPC challenges
In May 2015, the CJEU dismissed both of Spain's actions challenging the regulations implementing enhanced cooperation in the area of the creation of unitary patent protection. Spain brought the two actions in March 2013 challenging the UPS proposals and seeking an annulment of two regulations forming part of the UPS proposals (concerning unitary patent protection and applicable translation arrangements). Spain's actions followed Spain's and Italy's earlier unsuccessful challenges, dismissed by the CJEU in April 2013.
The CJEU ruling followed Advocate General Bot's opinion on the Spanish challenges. It is interesting to note that the Advocate General observed in his opinion:
"the sole purpose of the contested regulation is to incorporate recognition of unitary effect through a European patent already granted under the Convention. To that end the EU legislature limited itself to stating the nature, conditions for grant and effects of unitary protection, covering only the phase subsequent to the grant of the European patent. The regulation only attributes to European patents an additional characteristic, namely unitary effect, without affecting the procedure regulated by the Convention. The protection conferred is regulated by the uniform implementation provisions of the regulation. That protection brings real benefit in terms of uniformity and hence of integration compared with the situation resulting from the implementation of the rules laid down by the Convention (rules which, in every one of those Contracting States, guarantee protection whose extent is defined by national law)".
Italy changes its stance on the unitary patent regime
Following the CJEU's dismissal of Spain's recent challenges, Italy formally notified the Council of the European Union of its intention to participate in the enhanced cooperation regime. The European Commission formally announced Italy's participation on 30 September 2015. It is expected that Italy will ratify the UPCA in due course.
Amendments to "Brussels I Regulation"
EU Council Regulation No.44/2001 on jurisdiction and the recognition and enforcement of judgments in the European Union (the so-called "Brussels I Regulation") required amendment for the UPC Agreement to be able to come into effect. Although EU Regulation 1215/2012 on jurisdiction and the recognition and enforcement of judgments in the European Union was adopted on 12 December 2012, this did not contain the necessary provisions.
However, on 30 July 2013, the European Commission ("EC") published its proposal for amendments to the Brussels I Regulation; this provided clarification on certain matters: that the Unified Patent Court and the Benelux Court of Justice are 'courts' within the meaning of the Brussels I Regulation, the operation of the rules on jurisdiction, the application of the rules on lis pendens and the operation of the rules on recognition and enforcement.
EU Regulation 542/2014, which incorporated the EC's proposals for amendment, applied from 10 January 2015.
EPO and UK IPO studies
The European Patent Office ("EPO") has published the results of a study on the effects (advantages and disadvantages) of the UPC regime.
The main concerns raised relate to court fees, costs (unknown) and procedural uncertainties of the UPC.
On 19 March 2015, the UK Intellectual Property Office ("UK IPO") published a study examining the volume of litigation at the UP Patents Court and Intellectual Property Enterprise Court. The report states that UK businesses face difficult decisions – should they or should they not seek to obtain unitary patent protection; and whether or not to opt-out their existing European Patent portfolios from the UPC's jurisdiction?
Divisions and Judges
Sweden, Lithuania, Latvia and Estonia have agreed on the creation of a regional division of the UPC. This is the first agreement by a group of member states who are signatories to the UPCA to set up a regional division; there is expected to be at least one more, for the Benelux countries (ie., Belgium, Netherlands and Luxembourg).
A dedicated training centre for judges for the UPC was officially opened on 13 March 2014 in Budapest. Following the UPC Preparatory Committee's call for expressions of interest in becoming judges of the UPC, a list of potential candidate judges was approved in July 2014. Formal applications will follow in due course. The target date for appointment of judges is not yet known.
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