23 May 2003

Dick Fawcett

Long History of Failure

Attempts to establish a unitary patent system across the European Union go back over 30 years and these attempts have not yet seen success; even the recent political agreement discussed below may not result in a unitary patent system that industry will use to any significant extent. The attempts started in the 1960s when applying to each patent office for a national patent was the only way to obtain patent protection in Europe. Disputes on the infringement and validity of such a national patent were decided by the national court(s) of the country in question. This system survives today and indeed is still well used especially by private inventors, Small to Medium sized Enterprises (“SMEs”) and universities.

In the 1960s and 1970s, the National Patent Offices (“NPOs”) in Europe could not cope with the large number of patent applications filed with them. To deal with this overload problem, the European Community’s member states first considered establishing a unitary patent system for the Community but they subsequently decided to negotiate a centralised national patent obtaining system with a broader geographical scope. These negotiations culminated in the Convention on the Grant of European Patents (usually called simply the European Patent Convention or “EPC”) agreed in Munich in 1973; EPC came into force in 1978. It created the European Patent Organisation consisting of the European Patent Office (“EPO”) and the Administrative Council. The EPO has the task of receiving, searching and examining European Applications filed with it. If the Application satisfies EPC’s provisions, the EPO grants a European Patent generating, if necessary after satisfying certain formalities, a national patent in each of the countries designated in the European Patent. The latter is thus only a bundle of national patents that must be maintained and litigated on a country-by-country basis in the just the same way as national patents obtained directly from NPOs.

During the 1970s, the Community member states were also negotiating a Convention establishing a unitary patent system for the Community. Such a system would provide a Community Patent that would be obtained and maintained, and could be assigned, licensed and litigated, as a single unit across the Community. Originally, the Community Patent Convention (“CPC”) was planned to come into force shortly after EPC but this did not in fact happen. Indeed, although CPC was signed in Luxembourg in 1975, it did not come into force at that time, and CPC was then amended by an agreement reached in 1989. The amended CPC also never came into force because not all member states ratified it during the early 1990s. The costs (especially the translation costs and the renewal fees) of obtaining and maintaining a Community Patent under CPC were unacceptable to industry as the CP had to be translated on grant into every Community language and the renewal fees would clearly be too high. Further, industry objected to CPC’s judicial system wherein a national court sitting as a Community Patent court would decide the infringement and validity of a Community Patent across the entire Community. Only on appeal would disputes be heard by a central court (usually known as “COPAC”). The CP project then slumbered for a few years until the European Commission started taking an interest in the mid 1990s.

The European Commission Tries

In 1997, the European Commission issued a Green Paper [COM(97) 314 final, of 24 June 1997] on the Community patent and the European patent system. It called for new initiatives on patents in Europe. The Commission had concluded that weaknesses in the patent system in Europe had contributed to the so-called innovation deficit in Europe as compared to the USA and Japan. Subsequently, the Commission consulted users of the patent system and convened a meeting of experts from the member states. This led to the Commission’s adoption in 1999 of a Communication [COM(1999) 42 final, of 5 February 1999] describing the Commission’s various measures and new initiatives to provide a more attractive patent system for Europe. One of these initiatives would be a proposed Regulation setting up a unitary patent system and introduced under Article 308 of the EC Treaty (for such a Regulation to be adopted, unanimity in the Council of Ministers is required; the European Parliament must be consulted but cannot veto the Regulation). On 1 August 2000, the Commission put forward its Proposal [COM(2000) 412 final] for a Council Regulation on the Community patent. The Proposal sought to integrate the proposed Community Patent system with the European Patent system administered by the EPO by creating a “symbiosis” between the proposed EU Regulation and EPC (a classical international instrument). The effect of the symbiosis was that the EU would accede to EPC, the Community Patent would be granted by the EPO in accordance with EPC’s patentability standards applying to the grant of European Patents, and the further development of the Regulation and EPC should be consistent with each other.

The Proposal sets out the main features of the Community Patent, i.e. it must be of a unitary and autonomous nature; it must stem from a body of Community patent law, be affordable, have appropriate language arrangements and meet information requirements, guarantee legal certainty and coexist with existing patent system.

EU Heads of Government Join the Fray

The heads of government agreed at their summit in Lisbon in March 2000 that the EU would by 2010 “become the most competitive and dynamic knowledge-based economy in the world, capable of sustaining economic growth with more and better jobs and greater social cohesion”. They asked that, as part of this project, “a Community patent is available by the end of 2001 …… so that Community-wide patent protection is as simple and inexpensive to obtain and as comprehensive in its scope as the protection granted by key competitors”, i.e. Japan and the USA. This deadline has been missed already by over a year!

Sweden, Belgium, Spain and Denmark all Try their Luck

Successive holders of the EU Presidency in 2001-2 tried hard to persuade the member states to agree to the political parameters for the Community Patent but they all failed. One major difficulty concerned the extent to which translations of the patent specification into all EU official languages should be provided. Another major stumbling block was the litigation arrangements for the Community Patent. The Commission had originally proposed a central court system to decide at first and second instance the infringement and validity of CPs across the EU. This proposal and variants of it suggested by the Swedish, Belgian, Spanish and Danish Presidencies never attracted the necessary unanimous support of the member states. Problems included whether there should be branches of the court in the individual member states and whether local judges should be used, as well as the language(s) of the court proceedings. Furthermore, some member states wanted their patent offices to be involved in the grant process and all wanted to share in the fees paid by users (thus increasing the costs for the latter). Deadlock!

Greece Achieves Agreement

At the beginning of 2003, Greece took over the EU Presidency and its final proposals to the EU’s Competitive Council were unanimously agreed on 3 March 2003 as a “Common Political Approach” [“CPA”; see pages 15-18 of the record, 6874/03 (Presse 59), of the Competitiveness Council meeting] on the Community Patent. The key political issues decided (hopefully) by the CPA are (1) the language regime for obtaining CPs, (2) the jurisdictional arrangements for them, (3) the role of NPOs in the obtaining process and (4) the official fees charged to applicants/patentees and their distribution to the member states.

The Common Political Approach

The CPA deals with the above four issues as follows:

Language Regime The language regime approved in the CPA is essentially that originally proposed by Spain a year ago. The applicant seeking a CP can file at the EPO an application (actually a European Application designating all EU member states) in any EU official language. However, if it is not in an EPO official language (English, French or German), a translation of it into a selected EPO language must be filed. This translation would be financed by the CP system itself (according to the principle of “mutualisation of costs”, i.e. the users broadly pay through inflated official fees). The CP would be granted in that selected language and, as under EPC, a translation of the claims into the other two EPO official languages would be required on grant.

The CPA says that “for reasons of legal certainty – in particular in connection with actions or claims for damages – non-discrimination and dissemination of patented technology”, the patentee would have to file on grant translations of all the claims into all other EU official languages (except if a member state renounces the translation into its official language). It is also agreed by the CPA that the “translations will be filed at the EPO and the costs borne by the applicant, who decides on the number and the length of claims to be included in the patent application, thereby having an influence on the cost of translation”.

How will the costs of this language regime for obtaining a Community Patent compare with the translation costs for obtaining a European Patent? On the latter, the Commission (see for example its press release of 7 March) always refers to an average European Patent having 17 pages of description and 3 pages of claims, and designating 8 countries (Germany, the UK, France, Italy, Belgium, the Netherlands, Sweden and Spain are the most frequently designated EU member states); such a Patent is maintained in force for 10 years. The cost of translating claims is estimated at €85/page and descriptions at €76/page. After EU enlargement to say 25 member states, the number of EU official languages will increase to about 20 so the claims of a CP must on grant be translated into say 19 languages; the Commission estimates the cost of doing this at €4,845 as compared to a translation cost for the average European Patent (8 countries with 6 translations) at €10,200. However, many patentees only really want patent protection in say four EU member states in which case the CP language regime costs them about the same as the present system. Of course, if a patentee does really want protection in 25 member states, the CP system is more financially attractive.

Judicial Arrangements The Commission published last year its Working Document [COM(2002) 480 final, of 30 August 2002] on the planned Community Patent jurisdiction. The Commission’s proposals, now approved by the member states in the CPA, require that a judicial panel (called the Community Patent Court) attached to the European Court of Justice’s Court of First Instance and with its seat in Luxembourg be established under Article 225a of the EC Treaty (Nice) with exclusive jurisdiction to decide disputes on Community Patents at first instance. This Court will have “exclusive jurisdiction in actions and claims of invalidity or infringement proceedings, of actions of a declaration of non-infringement, of proceedings relating to the use of a patent or to the right based on prior use of the patent, or requests for limitation, counterclaims for invalidity or applications for declaration of lapse, including requests for provisional measures. The Community patent may also be the subject of proceedings or claims for damages.”

The Court may hold hearings outside Luxembourg. Proceedings will be conducted in the official language of the member state where the defendant is domiciled but the Court can however decide, at the request of the parties, that the language of the proceedings be any EU official language. The parties and witnesses can be heard in an EU official language other than the language of the proceedings (and translation/interpretation would be provided). Appeals from the Court’s decisions would lie to the Court of First Instance itself.

The Court’s chambers would sit in sections of three judges who will be appointed by the Council on the basis of their expertise and taking into account their linguistic skills; in particular, they must have a high level of legal expertise in patent law (but seemingly not necessarily any technical knowledge). Technical experts will assist the judges.

The above arrangements discussed above are quite similar to those proposed by the Commission in 2000 and approved by industry. However, industry will not like the new compromise required to buy the support of some member states for the CPA, i.e. the Community Patent Court shall be established by 2010 and in the meantime each member state shall designate a limited number of national courts to have jurisdiction over CP disputes. National courts hearing such disputes was rejected by industry in the old CPC that never came into force.

The CPA does not mention the Commission’s proposal last year to establish a regional chamber of the Community Patent Court each time the number of cases in the central court exceeded 150 per annum. The first regional chamber would be established in the member state in which the greatest number of parties involved in litigation before the central court were domiciled. No doubt as the time of this Court’s establishment in 2010 approaches, the question of regional chambers will be revived by some member states.

Some government officials say that as the new CP system will not come into operation until say 2005-6 and CPs will not be granted in significant numbers until say 2008-9, the national courts sitting as CP courts will have few CP disputes to decide in the period up to the new Community Patent Court opening its doors in 2010. However, what if the member states agree to delay its opening until say 2015, or even until it is clear that the national courts are not applying Community law consistently? In that case, the national courts could have to decide many of the early disputes under the Regulation, and industry would be unhappy with their doing this.

Role for National Patent Offices The CPA stresses that the EPO will play a central role in the administration of CPs and will alone be responsible for examination of applications and the grant of CPs. However, there will be a role for NPOs to play. All NPOs will have the role of advising potential applicants for CPs, receiving applications and forwarding them to the EPO, disseminating patent information and advising SMEs. Those NPOs having an official language other than English, French or German can, at the applicant’s request, perform any task on the EPO’s behalf up to and including novelty searches in their respective languages. To illustrate, this means that the Spanish Patent Office will be able to search Spanish language applications filed by for example Spanish companies. The NPOs, such as the UK and German Patent Offices, having English, French or German as an official language can also do searching work but only if such work is necessary to maintain staffing levels above critical mass (this seems unlikely to happen). About 10% of the CP search work is envisaged for the NPOs. The EPO and some in industry oppose strongly the NPOs have any searching role on CPs.

Official Fees and Their Distribution to Member States The Commission originally proposed that the official fees including the renewal fees would be no higher than is required to compensate the EPO for running the CP system. This proposal was rejected by member states which want significant amounts of renewal fee money be paid to them. The CPA says the renewal fees must not exceed the level of the corresponding renewal fees for an average European Patent, e.g. one designating eight countries and maintained for 10 years. The Commission says the renewal fees for such a Patent are €8.5K (of course, if the same Patent is renewed for its whole term, the total renewal fees are much more at about €50,000 and higher fees will be chargeable on a CP to renew it in the later years). The EPO will keep 50% of the CP renewal fee money and the rest will be distributed to the NPOs according to a distribution key to be decided by the Council. The key will be based “on a basket of fair, equitable and relevant criteria. Such criteria should reflect patent activities and the size of the market. In addition, considering the role paid by NPOs” in the CP system “a balancing factor should also be applied where Member States have disproportionately low level of patent activities.”

The CPA also invites the Commission to study the possibility of further savings in costs for the CP system, for example in respect of services rendered by patent agents.

What are now the Prospects for the Community Patent?

Now the CPA has been agreed, the Regulation will no doubt be adopted in due course but difficult negotiations still lie ahead. The details of the Regulation must still be decided. Moreover, EPC may have to be revised at a Diplomatic Conference to enable the EU to accede to EPC. Another difficult task for the member states will be agreeing to the procedural arrangements for the new Community Patent Court. Thus the CP system may not come into force until 2005-6 and CPs may not be granted in significant numbers until 2008-9.

How much will industry use the CP system? Many companies will use it occasionally but may well not use it regularly. This is partly because of the costs. Originally the objective was to provide a CP system with costs about the same as in the USA and Japan (see the 2000 Lisbon summit mentioned above). The US and Japanese costs were given by the Commission as €10,330 and €16,450, respectively, as opposed to €49,900 for an average European Patent (see page 11 in the Commission’s Proposal in August 2000). This objective has now been quietly forgotten. Government politicians are currently boasting that the cost of a CP is only about €25,000, i.e. half the cost of the average European Patent at about €50,000, and further a CP gives protection in 25 member states not 8! The Commission’s press release of 7 March gives the less impressive figures of €23,145 for the CP and €28,500 for the average European Patent. On costs alone, many companies may well be discouraged from using the new system very much.

Obtaining European Patents via the EPO has of course been attractive to most companies even though the cost of doing this is deemed too high as are the renewal fees for maintaining the national patents generated by European Patents. Users have appreciated the flexibility of this route giving the opportunity to regularly tailor the protection according to the up to date assessment of the Patent’s value. While most European Patents designate all countries at the start, countries are often dropped subsequently through failure to file the required translations on grant and later to pay the national renewal fees. This “cherry-picking” possibility will not exist with the all or nothing CP system and this could deter some companies from using the new system.

The jurisdictional arrangements will concern many companies who may decide against using the system until the Community Patent Court has been established and seen to be working well for a few years. The language regime in the Court looks potentially too expensive and inconvenient. In addition, until the procedural arrangements in the Community Patent Court become clearer, some companies may decide not use the new CP system at all. Some companies will be reluctant to risk such valuable patent protection across the EU by obtaining a CP and then see it eradicated by an incorrect decision from a single, possibly national, court (the “all eggs in one basket” syndrome). Some large companies say they like the present fragmented litigation system with European Patents because it gives them greater flexibility when dealing with infringers.

First published in the May 2003 issue of WIPR.