After almost 40 years of preparation, Europe will finally get a unitary patent and a unified court to enforce it. This will allow for one patent application, resulting in a uniform right throughout Europe, which can be enforced through a brand new court at the European level.
The relevant Regulations were adopted by the European Parliament in first reading on 11 December 2012, whereas the agreement that will set up the court system will be signed on 18 February 2013. Provided the agreement will be ratified by at least 13 states in time, unitary patents and their enforcement will become available early 2014.
The new system will create a unitary patent that will be granted by the European Patent Office (EPO). It has a simplified language system and no longer requires registration in individual countries. The system provides for a new Unified Patent Court, which will be mandatory for the enforcement of the new Unitary Patents and for a transitional period optional for the enforcement of European Patents. The court will have local divisions in at least those countries that are experienced in handling patent litigation, regional divisions for other countries and also a central division. There will be one Court of Appeal. The role of the Court of Justice of the European Union has been limited as far as possible.
Of course, national patents will remain an option even after the transitional period and those will remain subject to the jurisdiction of the national courts. Thus, patentees will need to make careful decisions regarding their prosecution strategy. Bird & Bird can provide strategic advice at an increasing level of detail as the implementation progresses in the course of 2013.
This newsflash will give a first overview of the relevant aspects of the new system, in as far as these are available now. We will follow up with updates on further developments. There will be a series of seminars dealing with all relevant aspects in detail, as well as additional white papers. Finally, we have developed and will further develop the tools for tailor-made strategic advice to clients on how to best use the options that will become available with the introduction of this new system, both with regard to prosecution, litigation and logistics.
A new system for Europe, creating uniform patent protection
European patents have been around since 1970, but the system has its flaws. Although it allows for filing a single application for Europe and centralized prosecution until grant, it results in a patent that needs to be registered in each European country separately. The costs involved cause many patentees to register in a limited number of countries, only to find out years later that their business or the business of their competitors has expanded to countries where they do not have protection. After grant, the European patent in fact is not a unitary right, but a right that is subject to national patent law in each country of registration.
Since the European patent was introduced, the European Union managed to create several unitary intellectual property rights, namely the Community Trademark and Community Design Right. Creating a unitary patent however was not as simple, language issues being one of the main problems. Industry preferred a single language for patents throughout Europe, or at least a limited number of languages, but most of the 27 EU Member States insisted on the prerogative of using their national languages.
In addition, there was no single system to enforce a European patent or litigate its validity. This was governed by national laws in each of the EU Member States and actions had to be brought before the national courts. Although many disputes are settled after a limited number of court actions, in theory the parties would need to go to court in a large number of countries. This does not reflect the increasing globalisation of trade and innovation and it puts Europe at a disadvantage compared to other regions of comparable scale, such as the US or – increasingly important – China.
After many attempts to solve the problem at European Union level, a number of countries decided to take a different approach some two years ago. They opted for a multilateral solution amongst themselves, at the same time bringing the solution as closely to an EU solution as possible. To this end, the option of a so-called enhanced cooperation among EU member States was employed for the first time in EU history. This turned out to be a fruitful approach, in which 25 of the 27 Member States will participate. Italy and Spain will not participate in the Unitary Patent, but it seems that Italy will take part in the Unified Patent Court (UPC).
The new solution, which comprises three elements, should be fully operational in spring 2014. In order to achieve this, the participating states will not only sign the Agreement on a Unified Patent Court (UPC Agreement) in Brussels on 18 February, but also a Declaration on the Preparations, in which they undertake a large number of obligations aimed at the implementation of the system, ranging from making premises available and setting up an ICT system to the education and training of judges. This preparatory work will be picked up immediately, under the management of a Preparatory Committee. The agenda for the Preparatory Committee is already developed and deals with the legal framework, IT, financial aspects and human resources and training. This is also the agenda for the implementation by the member states.
Unitary Patent Regulation
The Unitary Patent Regulation provides for the grant of so-called Unitary Patents – officially named “European Patent with Unitary Effect” – which will have effect throughout the EU, for now with the exception of Italy and Spain. The prosecution of the applications will be handled by the EPO. The prosecution is the same as for the current European patents, the only additional requirement is a request to register in the Register for unitary patent protection, which will be kept by the EPO. Such Unitary Patent shall have a unitary character, it shall provide uniform protection and shall have equal effect in all the 25 participating Member States.
Scope of protection
The scope of protection of the Unitary Patents is not governed by the Regulation itself. Through a complex legal instrument, the scope of protection is governed by the UPC Agreement. The purpose of this solution is to offer uniform protection throughout Europe, separate from the quirks of national law, but with the exclusion of the jurisdiction of the Court of Justice of the European Union (CJEU). This was a crucial demand from both industry and patent law professionals, given the extremely poor track record of the CJEU in intellectual property matters, especially in relation to trademarks and design rights. The CJEU simply does not comprise intellectual property professionals, since its members are mainly selected for their knowledge of constitutional law, competition law and other specialism that are important to the functioning of the EU. Due to the achieved solution, unitary patents will be adjudicated by judges specialised in patent law.
Whether the CJEU will be effectively kept out of the system completely remains to be seen. It will of course retain jurisdiction for EU instruments of law, such as the Biotech Directive.
Property rights concerning Unitary Patents are governed by the national law of the place of residence or place of business of the patentee. For patentees outside the EU German law will apply, as this is the law of the EPO headquarters. The Regulation also provides an option to submit a declaration of willingness to license under FRAND conditions with the EPO, which is a first result of the laws on standard essential patents that the European Commission intends to develop.
The fees involved in obtaining and maintaining a Unitary Patent still have to be established, but the intention is that these should be considerably lower than for European Patents. An important advantage of course is that only one renewal fee has to be paid each year to the EPO, instead of the national renewal fess that are due for European Patents.
Thus, industry will have the option of applying for a Unitary Patent for all 25 Member States, a European patent - and subsequent registration in a selected number of European countries – or national patents. National patents are enforced in the national courts. Unitary Patents are enforced in the Unified Patent Court. European patents are in principle enforced in the UPC too, but can be enforced in national courts on the basis of an opt-out declaration for the first 7 years, which period will almost certainly be extended for at least another 7 years.
Regulation on applicable translation arrangements
The second instrument is the Regulation on applicable translation arrangements, also an instrument of enhanced cooperation between 25 Member States, in which Italy and Spain will not participate (for now).
Applications for Unitary Patents and European patents are filed and prosecuted in one of the three official languages of the European Patent Convention, namely English, German or French. For a transitional period of at least 6 years, a translation into English shall be submitted along with applications in German and French, and a translation into German or French shall be submitted along with an application in English. The Regulation on applicable translation arrangements provides that no further translations of a Unitary Patent are required after grant, until a dispute arises.
In case of a dispute, the patentee will have to provide, upon request by the alleged infringer, a full translation of the Unitary Patent into an official language of either the participating Member State in which the alleged infringement took place or the Member State in which the alleged infringer is domiciled. A court handling a patent case may also request a translation into the language of that court. The language regime for European patents is not affected.
Stray provision on damages
This regulation also contains a totally unrelated provision, which stipulates that courts shall take into account whether an infringement on a Unitary Patent was made knowingly, when assessing a claim for damages against an SME, a natural person or a non-profit organisation, a university or a public research organisation.
Agreement on a Unified Patent Court
The third and probably most important instrument is the UPC Agreement itself, which will introduce a single litigation system at European level, which will hold hearings in many cities throughout Europe. The big advantage is that it is a single court with a single set of rules on jurisdiction and procedure. However, the organisation of the court and the rules are quite complicated. In addition, the rules are drafted to allow for maximum flexibility to maintain a certain “couleur locale” in patent litigation. Within that flexibility, litigation in the United Kingdom may comprise cross-examination of expert witnesses as the London courts are used to, litigation in Germany may comprise bifurcation of infringement and validity claims as the German courts apply and many other variations from country to country, some small, some major may occur.
Thus, the new system will still allow for forum shopping and litigation strategy within the UPC and will thus call for a considerable amount of expertise – including cross-border expertise – of the advocates involved. The expectation of the Member States is that the Court of Appeal will develop best practices in due time, which will limit local variations, but this will take time to create and will probably never result in complete uniformity. Litigation in the UPC will provide a one stop shop – or two stops in case of bifurcation of infringement and validity – for enforcement in Europe, but it will be crucial which entrance to the shop is taken. Bird & Bird is particularly experienced in developing such strategies and is at the forefront of developing such strategies tailored to the essentials of the UPC.
Organisation of the Unified Patent Court
The Unified Patent Court will consist of a Court of First Instance (CFI) and a Court of Appeal. The Court of Appeal will be in Luxemburg and all hearings will be held in Luxemburg. This guarantees a uniform approach at the appeals level and thus allows the Court of Appeal to develop uniform best practices that will need to be applied by the CFI.
The CFI will consist of a central division, regional divisions and local divisions. The central division will hear electronics cases in Paris, life sciences cases in London and mechanical engineering cases (including automotive) in Munich. The headquarters of the central division will be in Paris.
The participating countries will have to decide in the coming months whether they want to set up a local division of their own, join forces in a regional division or refer all their cases to the central division. However, it is clear that the currently most experienced countries such as Germany, the United Kingdom, The Netherlands, Belgium, France and Italy will have local divisions. The Italian local division will of course only handle litigation on European patents, since Italy for now is not joining the Unitary Patent.
In addition to this there may be up to several regional divisions. Those are the ones that will need to develop an approach of their own, since there will be no tradition to rely on at the division level and often not even much of a detailed tradition at the level of the participating countries. Some of these countries do not have a pool of experienced judges or even patent litigators. Of course, Bird & Bird will have local teams ready to do the litigation in all those divisions and those teams will ensure that they have full knowledge of the peculiarities of the division at hand.
Cases are heard by multinational panels of 3 judges. In local divisions, 2 out of those 3 judges will be local in countries that on average handled 50 or more patent cases in the 3 years prior to the start of the UPC. Otherwise, only 1 judge on the panel will be local. This means that the local divisions in countries that are experienced in handling patent litigation will indeed be able to maintain their "couleur locale". A technically qualified judge may be added to the panel upon request of one of the parties.
Jurisdiction of the UPC divisions
Infringement actions, including for declarations of non-infringement, shall be brought before the local or regional division of the place of infringement or domicile of the defendant. Actions against defendants who have no domicile or place of business in Europe may be brought before the local or regional division of the place of infringement or before the central division. The division first seized shall handle all cases on the same patent. This will allow for quite a bit of forum shopping.
Actions for a declaration of non-infringement and validity actions shall be brought before the central division. However, if an infringement action is pending in a local or regional division, a validity action or a declaration of non-infringement may only be brought before that same division. That division may then (1) keep both the infringement action and the validity action, (2) refer both to the central division or (3) bifurcate, meaning that the validity action is referred to the central division, but the infringement action is kept at the local or regional level, although it may be suspended awaiting the outcome on validity.
Finally, if an action is pending before a regional division where the alleged infringement has occurred in the territories of 3 or more of such regional divisions, the defendant can demand a referral to the central division. This way he can prevent the bifurcation of such a case and also – and maybe even more importantly – that a complex major multi-jurisdictional case is heard by an inexperienced regional division. The threshold however is rather high and the rule does not apply to local divisions, which means that the German local divisions will remain fully free to bifurcate as they are used to.
Of course, parties may also agree on a division of their choice. This is particularly interesting if an action would otherwise end up in an inexperienced division. It is clear that these jurisdiction rules call for a carefully developed litigation strategy.
The litigation before a local or regional CFI division shall be conducted in any of the official languages of the participating countries, which may be the language of the defendant, but does not need to be. However, each country may in addition designate English, German or French as a litigation language and the parties may then agree to use that language. If the panel refuses to follow that choice, the parties may request referral to the central division. The CFI itself may also propose to use the language of the patent and if a party contests that proposal, the President of the CFI can take a binding decision. Litigation at the central division shall be done in the language of the patent, while litigation on appeal shall basically be done in the language used in first instance.
The participating countries will have to decide in the coming months whether they will designate English, German or French in addition to their national languages. The Netherlands will designate English.
The type of procedure for the UPC will of course be a blend of what is customary in the participating countries, but it will be an independent regime of its own. The agreement provides that it will include a written, an interim and an oral procedure, organized in a flexible and balanced manner. Technically qualified judges may be added and the court may appoint experts. Access to confidential information can be restricted by the court. Basically all instruments available to the various national courts in Europe will also be available to the UPC, including provisional and protective measures and orders to preserve evidence and inspect premises.
An extensive set of rules of procedure has already been developed by a drafting committee. The most recent version was established on 29 November and will be subject to a consultation that starts in February.
Bird & Bird will provide more detailed updates on the rules of procedure and on the implementation in the coming months, but all companies interested in patent law should now start considering the effects this new system will have on their business. Of course, we are ready to assist in the process.
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