What is the current situation with the UPC since Brexit?
Since the United Kingdom voted to leave the European Union in the Referendum vote of 23 June 2016, there has been a lot of uncertainty with regard to the future of the UPC. However, during the meeting of the Competitiveness Council of the European Union on 28 November 2016, the UK announced that it is proceeding with the preparations to ratify the UPC Agreement, aimed at bringing the UPC into operation as soon as possible and has largely done so. When the UK actually leaves the EU, some additional changes will be required to the Unitary Patent Regulation and additional rules will be needed on jurisdiction and enforcement, to replace the current effect of the Brussels I Regulation with regard to the UK. Those additional rules could for instance be part of the Exit Agreement.
Following the recall of UK Parliament after the general election on 8 June 2017, it is now necessary for the last element of secondary legislation required (which implements the UK part of the central division and the UK based local division) to be passed. In order for the UPC to be able to open its doors to businesses during 2018, as is intended, the UK and Scottish Parliaments need to pass this secondary legislation as soon as possible.
How does it work at the moment?
Patents protect inventions and, therefore, your investments in innovation. Until now, patents in Europe have been managed at national level so, although there is one system to apply for a patent for the whole of Europe, any European Patent needs to be registered at national level after grant. This involves a recurring fee per country. It also only provides protection in the countries where it is actually registered and, in general, actions against infringers need to be brought in the national courts on a country-by-country basis.
The European Patent Convention has 38 member states. International patent disputes tend to be litigated in up to six countries with the European Court of Justice only allowing national courts to decide for more than their own country in very limited situations.
What is the Unitary Patent?
The Unitary Patent is a new type of European Patent, which will cover the 25 EU member states that have signed up for the enhanced cooperation involved. It is not a Community-wide patent because it proved politically impossible to achieve agreement at EU-level. Instead, it was created as a form of enhanced cooperation between states that wanted it. However, since all except Poland and Spain will participate (with Croatia joining at a later stage), it is virtually identical in scope to Community rights, such as the Community Trademark. The prosecution will be exactly the same as for traditional European Patents. Within one month after grant, the applicant can decide to have his patent converted into a Unitary Patent. The patent owner will have to pay a recurring fee to the European Patent Office but does not need to register at national level anymore.
What is the Unified Patent Court?
The UPC is a real novelty: an international court for the enforcement of both traditional European Patents and Unitary Patents. For the 25 participating countries, this new court can decide on infringement and validity for all of those countries for which a traditional European Patent is registered. For the Unitary Patent, the court will decide for all 25 countries that participate in the enhanced cooperation. All EU member states participate, except Poland and Spain (Croatia joining at a later stage).
The court will have a central division with seats in Munich, London and Paris. It will also have local divisions in London, Paris, Düsseldorf, Munich, Mannheim, Hamburg, The Hague, Brussels, Milan, Helsinki, Copenhagen, Dublin and Vienna. There will be a regional division for Sweden and the Baltic states (the Nordic Division). Although not official yet, it seems there will also be a regional division for Hungary, Slovenia and Croatia. Finally, there will probably be a regional division for Romania, Bulgaria, Greece and Cyprus. Some countries however, such as Luxembourg, Portugal and Malta, will refer their patent cases to the central division. The Court of Appeal will be in Luxembourg.
Infringement cases will primarily be in local and regional divisions, including counterclaims for invalidity; independent validity cases will be in the central division. Local and regional divisions may refer validity counterclaims to the central division – the so-called bifurcation – but are not expected to do that regularly. The Rules of Procedure allow for a “couleur locale” per division (i.e. different approaches in the different divisions), but the Court of Appeal may develop and impose best practices over time.
The UPC will primarily apply its own law. The validity of traditional European Patents and Unitary Patents will be governed exclusively by the existing European Patent Convention. The basic criteria for infringement are in the UPC Agreement itself. The procedural law is also in the UPC Agreement and in the Rules of Procedure based on it. There already is a quite comprehensive draft of 382 detailed rules. However, in addition there is a whole body of existing international law that will also apply and if that does not provide a solution, the court will apply national law as indicated by private international law.
When will it start?
With the signing of the UPC Agreement on 19 February 2013 and the publication of the changes to the Brussels I Regulation on 29 May 2014, all documents have been signed, but the UPC Agreement still needs to be ratified by a sufficient number of countries and the system needs to be set up. Since early 2013, the Select Committee of the European Patent Office has been working hard on implementing the Unitary Patent and the Preparatory Committee has also been working hard on setting up the UPC.
The educational program for UPC judges started in February 2015 and a cross-border ICT-system is in development. This will handle the registration of opt-out applications and the case management for the Court. The central registry needs to be set up and facilities for court hearings need to be selected and refurbished.
The UPC Preparatory Committee issued a statement on 7 June 2017 confirming that the previously envisaged start date for the system of 1 December 2017 could not be maintained due to delays in national ratification procedures. Subsequently, a further statement was issued on 27 June 2017 confirming that it was hoped that the provisional application phase could start in Autumn 2017, with the opt-out sunrise period starting early 2018, and the Court later in the year.
What will it cost?
Costs and fees
The costs for the Unitary Patent have now been decided, whereas a final decision on the court fees still needs to be made.
Unitary Patent renewal fees will be equal to the combined renewal fees of the top 4 countries where a traditional European patent is granted. Over 20 years the sum would be:
- €35,555 - if the patent is granted in the year if application and based on a top 4 of Germany, the UK, France and the Netherlands, as decided by the Select Committee.
In May 2015, the following additional proposals on costs were published:
- Opt-out fee: There will be no fee to opt out
- Unitary designation: There will be no fee for unitary designation
- Basic infringement actions will cost €11,000, plus a sliding scale value-based fee of €0 - 325,000
- Revocation actions will cost €20,000 (fixed fee)
- Application for provisional measures will cost €11,000 (fixed fee)
- Scale of recoverable costs will range from €38,000 to €2,000,000 (depending on value of proceedings)
- Micro and small enterprises will be entitled to a 40% reduction on all Court Fees (fixed and value-based) which are incurred at the Court of First Instance as well as at the Court of Appeal
Is the system mandatory?
The Unified Patent Court will be the only venue to litigate Unitary Patents, but for the first seven years it will be optional for litigating traditional European Patents, with a possibility to extend that transition period for another seven years.
What are the advantages of the new system over the existing one?
Patent litigation: US vs Europe
Historically, the US has been perceived as a highly attractive location for patent litigation for obvious economic and business reasons, given that one patent decision can instantly provide you with access to one of the largest consumer markets in the world.
However, with a new patent system set to cover 25 European Member States and a consumer base of over 400 million, the Unitary Patent offers an attractive new alternative for global companies. In addition to covering a larger population base, infringement proceedings will be considerably faster and cheaper than in the US. UPC infringement proceedings are likely to be cheaper than equivalent US proceedings because at the UPC there will be:
- No or only limited documentary discovery
- No or very limited oral testimony at trial and
- Shorter hearings. In contrast to the US, there will be no jury trials under the Unitary Patent system (only specialist judges will be responsible for hearing trials at the UPC) and in most cases the losing party will be ordered to pay at least a proportion of the winning party's legal costs.
- Full proceedings on the merits in first instance will be concluded approximately 1 year.
Do I need expert counsel?
Every lawyer who is authorised to litigate in a national court can also litigate in the Unified Patent Court, as well as European Patent Attorneys who have obtained a special litigation certificate, so that provides a wide choice throughout Europe. However, this system adds a new dimension to patent enforcement that requires developing elaborate strategies. There are new options for forum shopping among divisions of the Unified Patent Court and national courts. Procedural practices and substantive case law need to be developed. That calls for true in-depth knowledge and involvement in all relevant countries. We believe our position as the only law firm with highly regarded patent experts on the ground in every major jurisdiction where there will be a division of the UPC puts us in a unique position to help you. Our unrivalled position as Europe's leading experts in patent law – we are ranked in the top tier for IP across all the major directories and this year we were recognised at the world's leading IP firm by Who's Who Legal– means we are ideally positioned to advise you in this area.
What do I need to do now?
Although the new system has not yet entered into effect, the final 18th draft of the rules of procedure was published in March 2017 and is now subject to review by the European Commission and formal adoption by the UPC Administrative Committee during Provisional Application. This means that patentees can and should start developing a strategy now. This should include:
- Drafting and filing divisionals: since 1st April 2014, divisionals can again be filed up to grant. This allows for having both a Unitary Patent and a traditional European patent for almost the same technology. Patentees should evaluate their pending applications to enhance future enforcement options. A Unitary Patent can only be obtained once the system goes live, so an application that is intended for unitary effect should be kept pending until that moment, whereas traditional patents can of course be granted at any time (but divisionals should be split off prior to such grant where appropriate).
- The PCT national route will probably be reopened in the countries where it is currently blocked, so this should also be considered.
- Patentees may want to exclude some patents from UPC jurisdiction by filing an opt-out, which prevents a central attack on validity. There will be a sunrise period – the sunrise opt-out register will most likely open in early 2018. Evaluation of existing portfolios before the sunrise starts will be required. This is not a simple task, especially for large portfolios. It requires developing a strategy, which may differ per sector and even per company and a subsequent portfolio evaluation, with special attention for crown jewels. Bird & Bird can work closely with clients in providing the necessary support based on in-depth knowledge of both the new system, industry sector’s and the client’s business.
- Licensees may want patentees to opt out, but existing licences will contain no such provisions. Licensees who want to prevent a central attack should look at this now and discuss with their licensors.
- Exclusive licensees will obtain the authority to enforce a patent without consent from the patentee, unless provided otherwise in the licence. Patentees should therefore check their existing exclusive licence agreements.
- On the other hand, non-exclusive licensees will not have this option unless provided in the licence, so they should also check their licences.
- If you are on the defensive side, the language of litigation may be a local language, but may often be changed to the language of the patent. This should be taken into consideration when choosing the language for a patent application