From October 2016 to March 2017 the team is joined by Guest Kats Rosie Burbidge and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Tian Lu and Hayleigh Bosher.

Thursday, 30 March 2017

The Unitary Patent and Unified Patent Court - where are we now?

Over the last few weeks, this moggy has been scampering between several conferences and events about Brexit and Intellectual Property, and the progress of the Unitary Patent and Unified Patent Court.  At other events, these topics have loomed over the proceedings.

Back in the days before it was announced that Tim Moss would be the new Chief Executive of the UK IPO and he was happily in charge of Companies House, CIPA held a seminar on "The UPC: Where we are and why".  Laura Starrs, head of the IPO's hastily re-convened UPC Task Force, set out what the UK needs to do before being able to formally ratify the UPC Agreement.  All of the legislation to implement the provisions of the UPC Agreement itself into UK law were complete long ago in the heady era before the fateful referendum of 23 June 2016.  The legislative basis was provided in the IP Act 2014, and the detailed provisions are enshrined in the snappily-named The Patents (European Patent with Unitary Effect and Unified Patent Court) Order 2016 (analysed in painful detail by this Kat here), which was made on 12 March 2016.

It starts with the Isle of Man
It however remained to extend this legislation to the Isle of Man.  The Isle of Man is not part of the United Kingdom, but the Patents Act extends there, and apparently the Isle of Man wished to be included in the new system.  Laura Starrs was back in action at the MIP International Patent Forum on 8 and 9 March to inform this moggy that The Patents (Isle of Man) (Amendment) Order 2017 was made in Privy Council on 15th February (under the provisions of section 132(2) of the Patents Act 1977) and laid as a negative resolution of Parliament on 22 February (as required by section 124(2) of the Patents Act 1977), during which period either House of Parliament could in principle object (apparently by means of a "prayer").  Astute observers of the minutiae of UK constitutional matters will know that the Order must sit for 40 days, but it seems unlikely that anyone will object to this territorial extension.

But there is more to be done by the UK
More significant is the Protocol on Privileges and Immunities. This is required for the UPC to sit in London as an international organisation, and the Protocol was signed on 14 December 2016 in Brussels, shortly after Baroness Neville-Rolfe (the then IP Minister - the position is now occupied by Jo Johnson) announced at Competitiveness Council meeting that UK would proceed to ratify UPCA.  It was laid before Parliament on 20 January 2017.  21 sitting days (days when both Houses are sitting) are required before a treaty can be ratified, but this period has now passed.  The (then) only UKIP MP Douglas Carswell did put forward a motion that the Protocol on Privileges and Immunities not be ratified, but this attracted no support.

However, before the Protocol on Privileges and Immunities can be ratified, secondary legislation is needed in both the Westminster and Scottish Parliaments to give effect to the Protocol under both English and Scottish law.  This is apparently in draft and should be appearing soon.

The UPC Task Force is expecting ratification of the UPC Agreement in "Spring".  Rumours that it might be before the Article 50 notification was sent have turned out to be over-optimistic.

But what about Germany?
Germany has of course still not ratified either, and parliamentary consent to ratification is apparently hoped for in May 2017 (which would allow the provisional application of the UPC to begin, provided enough countries have signed the Protocol allowing provisional application of the Agreement by then, and so enable judges to be appointed and other preparations to be completed).  Germany has long been of the view that it should be the last to ratify the Agreement and so determine the timing of its coming into force (being the first day of the fourth month after the deposit of its instrument of ratification, provided the UK has already ratified by then).  The Preparatory Committee hopes that German ratification will occur in September 2017, allowing the sunrise period to begin (when opt-outs from the UPC jurisdiction can be filed), leading to the Court opening in December. Merpel always expects some slippage, so maybe early 2018 is more realistic for the Court opening.  That also sets the date for when unitary patents can be obtained - if the grant date is after the UPC Agreement comes into force, then unitary effect can be registered for a European patent.

There was a rumour that Germany might be seeking to delay ratification in order to include the UPC as an aspect of the Brexit negotiations, but Merpel has not been able to establish any serious basis for them.

But will anyone want to use it?
This is the crux of the matter.  At an event on Brexit and IP convened by IPAN, there was some doubt about the attractiveness of a new patent and litigation system whose membership was, from the very beginning, in doubt.  Those interested in the effect of Brexit on IP should look out for IPAN's forthcoming report: “IP, Brexit and beyond – a blue-print for action in IP”, which will be based on the event.  Similar concerns were voiced at the MIP International Patent Forum.

On the one hand, some voices, especially from industry, have criticised the Government for taking the UK into UPC/UP system without the question of continuing membership being resolved.  On the other hand it was argued that there was never going to be any guarantee of the situation post-Brexit, and the alternative would have been for the UK to be definitely out of the system, which nobody really wanted as an ultimate outcome.  The latter view accepts short term uncertainty for a chance of a better long-term result.

This Kat believes that there must be a very high degree of confidence that if the UK leaves the Unitary Patent system, there will be provided a mechanism by which existing unitary patents can revert to having national effect in the UK as an EP(UK).  Such a mechanism is actually easier to provide than to provide continuing protection in the UK after Brexit for EU trade marks and designs (the issues of which are admirably set out by CITMA) and plant variety rights (as this Kat is reminded to mention after the IPAN event).  For patents, it would only be necessary to provide that a Unitary Patent revert to the status it had, with respect to the UK, before the unitary effect was requested.  But with all the uncertainties inherent in a new system and a new court, is the additional certainty of what happens after Brexit one variable too far?  Will potential users simply decline to request unitary effect and opt out their patents?  For patentees with a significant presence in the UK, this may well be the case.  But readers are invited to give their own opinions.

If the UK is peripheral to the operations of a company, then the question of whether the UK is in or out of the scope of the unitary patent is simply the quantum of possible damage in an infringement action, so there must be at least some patentees who will not care much either way.  But will they be enough to get the system off to a reasonable start?  There will be likely at least a year of uncertainty between the UPC opening, and the question of the continuing participation of the UK being resolved.  If there are no enough users of the system, it may not be financially viable and then again its future would be open to doubt.  Here again, readers will doubtless have their views.

13 comments:

MaxDrei said...

I remember 1978 when the PCT and EPC got started. Applicants were very cautious, but the economics of filing PCT/EPC were so much more attractive than continuing to file national. The EPO did nothing to dent confidence in its procedures or in the way it examined substantive patentability. So then, after a few years of caution, and of keenly monitoring EPO performance on thousands of cases, everybody simply piled in.

That was the level of cautiousness then. I cannot imagine it is much different today.

But think about when the deciders ask: Unitary patent? Why should I?

Is there any persuasive answer why they should? we are always being told that industry hates uncertainty. Is saving on annuities enough of a reason to switch to unitary? In Big Pharma, who is going to volunteer to go first?

Anonymous said...

"If the UK is peripheral to the operations of a company...."

Here's the rub.

For most major patent filers, and thus most major litigants, and thus most of the (potential) major users of the court, the UK is indeed peripheral to the operations of the company (emphasis on company).

However, for the patent litigation system, both: (i) as it stands at the moment; and (ii) as projected under the UPC, the UK is a very important component. The UK has been a significant contributor to the design of the UPC system, and is also significant in terms of the contributions from judges, the patent jurisprudence, and (to be honest) the lawyers.

How is the circle going to be squared?

Proof of the pudding said...

I can't imagine anyone in their right mind who would put their Crown Jewels into the Unitary Patent system.

The UPC is a different question entirely. However, it will be several years before those who can afford to opt their cases out take a look at whether they should revisit their decision.

With all "important" cases opted out by all those with deep pockets, what will there be left for the UPC to work with in the early years? There will of course be some cases where the proprietors can afford to lose their patent. But there will not be too many of those. There is only one group of operators for whom the UPC will be very attractive from the off: non-practising entities.

So, the UPC will be a troll's paradise. With not many cases to go around, what is the betting that the various local divisions will end up "competing" against one another for the biggest source of "work"? And so what is to stop the UPC creating a European outpost of the Eastern District of Texas?

It's not looking good. The only crumb of comfort that I can cling on to is that the Unitary Patent Package appears to contravene general principles of EU law, and so there is a faint chance that it could end up being struck down by the CJEU.

MaxDrei said...

Comment #2 asks how the circle will be squared.

It seems to me that England is an extremely important jurisdiction for high value patent litigation where fact-finding is key to the outcome. Mainland Europe doesn't understand equity, disclosure, cross-examination. Time and again, business people in civil law jurisdictions get burned by English law fact-finding. The arrogant assertion "That's for me to know, and you to find out" doesn't end the matter if you litigate in England (or the USA).

So unitary patent or not, I see England having on ongoing important role to play, when patents get litigated in Europe.

Acrimoanymouse said...

I still fail to understand how the UK government, while trumpeting loudly about being freed from the shackles of the ECJ, can boldy come along and ratify a treaty of which it knows full well it will be stepping out in 2 years time...could someone please explain the rationale behind this, other than some cynical attempt to gain negociating points with regard to the EU - after all, if the UK does ratify, and the whole thing kicks off, how long is the UK going to hold the system in a suspended state of animation pending negotiation of some kind of acceptable exit deal ? Listening to Theresa May in parliament at PMQs on March 29th, and David Davis yesterday, one gets the impression the UK government is going to do what it jolly well pleases legislatively as and when the time comes. Irrespective of the legal arguments presented in support of a Brexited-UK still being able to be a member of the UPC, what happens to the supremacy of the ECJ over UK law in this so bright and rosy independent future ?

Millipede said...

Proof of th epudding is very sceptical about the success of the UPC. Where I can understand that from a European point of view, things are regarded differently at the other side of the ocean(s). For non-Europeans the scattering in Europe (the capital of Denmark is Amsterdam, right? And something terrible is happening in Sweden. Sweden, by all means!) is gruesome and should be ended as soon as possible.
I thus expect that many American, Japanese and Chinese companies would welcome this one court fits all principle.

It has been announced that the court will have experienced judges: most of the leading patent jaudges in the UK, Germany, France and The Netherlands will appear as UPC-judges. Thus, quality of teh court will not be a problem.
A problem in the first years of the existence of the court will be the harmonisation of the procedures, where local habits may tend to be persistent.

The fear for NPEs as mentioned by Proof seems to be justified. At this moment already the number of NPE cases in Germany is rising steeply and the NPEs more and more tend to litigate outside of the USA (and thus in Europe). On the other hand: is the attitude of NPEs objectionable? I do not see that you should be a producer yourself in order to be allowed to stop others producing.

So, I do not share the bleak view of Proof of the Pudding and I share Max Drei's comparison with the start of the PCT and EPC: in the long run (which hopefully may not be that long) the UP and UPC will be a success.

Proof of the pudding said...

@Millipede

I do not object to NPEs. I object to "trolls". There is a subtle difference between the two. A troll engages in abusive (threats of) litigation in order to extract income from a patent of highly dubious validity (or from patent claims that cannot validly be "stretched" to cover the activities complained of).

I say that the UPC will be a troll's paradise because of two main factors. Firstly, the ridiculously high fee for filing a counterclaim for revocation. For the victim of abusive litigation, that's effectively a tax on defending yourself. Secondly, there is still no functioning market for (patent) litigation insurance. This will leave SMEs in Europe as "easy pickings" for trolls... no doubt heavily backed by investment groups that will view all of this as a wonderful wheeze.

Proof of the pudding said...

@Millipede

Upon reflection, I take issue with your assertion that you would "expect that many American, Japanese and Chinese companies would welcome this one court fits all principle".

The problem that I have with your assertion is not that such companies won't perceive the potential advantages to the UPC. Of course they will. Instead, my issue is that all such companies will surely have European advisors... who will no doubt be pointing out to them that it is a complete no-brainer to opt out all of their important patents and applications (at least for the time being). And if their European advisors are not doing that, then I would question why not.

On a totally separate theme, Max is of course correct to point out that users were initially hesitant to utilise the EPO. No doubt the same theme will play out with the UPC. However, there is a crucial difference between the EPC and the UPCA. For the former, it has taken over 40 years for fundamental flaws in the governance structure set out in the EPC to be exposed (by a ruthless and self-serving borderline psychopath). For the latter, anyone who cares to consider in detail how unitary patents and the UPC can be made to work will realise that the system is already horribly broken before it has even started... not to mention that is also has similar flaws as the EPC in terms of governance.

I should point out that I am all for a well-designed, fully functional "unitary" patent system for Europe. I just haven't seen one yet.

MaxDrei said...

Just one observation on that last posting by Pudding and his use of the term "self-serving":

How convenient it was for the EPO President (on secondment from Paris) to skewer the EPO's patent law-making Appeals Directorate DG3. Not only did it wreak revenge on his troublesome judges in Munich, but it has also helped the Paris Seat of the UPC to get up and running with an enhanced flow of pan-European patent disputes.

The CJEU always did have French as its working language so the "seat" of pan-European patent law in Munich always was an affront to La Grande Nation. Till now, that is.

Observer said...

One of the comments above made it clear who will be the beneficiary of the UPC: the US, Japanese and Chinese companies. Where is the benefit for European industries and especially European SMEs? Being generous, may be a good third comes from Europe. And where does the rest come from?
The problem with the judges is not only of procedural nature. Interpreting the EPC is also at stake. When one sees that how decisions of the the boards of appeal are superbly ignored by national courts (and vice versa), why should this change under the UPC? Remember that in the big countries there will be two national judges in a panel, hence conclusions are easy to draw. Any idea how to resolve the necessarily upcoming of conflicting case law between the BA and the UPC? May be by not just sending the BA to Haar, but in orbit, as once Mr Pedrick suggested to do for the search documentation.....
As for Max Drei, what he says is exactly confirming what I have just said. Let's do it the British way, which is the only right one! And that should represent a unified legal system? Please do not abuse the credulity of the reader. And on top of it there are so many unresolved legal issues following the Brexit, that any legal adviser suggesting his client not to opt out should be struck of the list of qualified representatives be it before the EPO or the UPC. The only thing such a representative does is to insure that his purse is well filled and that is it.
Hypocrisy has to stop. The UPC is so laden with errors of conception, that the Brexit is the opportunity to see how thing could be made better, and really to the benefit of European industry and SMEs. Already now the share value of companies depends on the litigation started. Do we really want this in Europe?

MaxDrei said...

Observer, you suggest that pan-European benefits litigants from outside Europe more than domestic industry. The EU Registered Design Right was also supposed to help domestic industry against competitors from outside Europe. You know: nobody ever files for design registration outside their home country, that logic.

Yet my feeling is that EU Design Registrations are mainly used by non-European claimants against European defendants.

Here we go again?

Compare jurisdictions outside Europe: US, JP, CN. Who can deny that litigants in those jurisdictions go on enjoying huge "home advantage" by playing at home, in their own courts?

But this is why I cherish my European heritage. More fairness, and less nationalism and protectionism than in other jurisdictions. At least, in the recent past that is.

Outraged said...

When one sees the sudden increase of grants, but without loss of quality...., and the way the boards of appeal are ill treated, with the fees having to go up, and the posts being only sparingly filled, one wonders if we do not have here the secret agenda of the president of the EPO. Let everything go down the drain, so that the only place to litigate will be the UPC. And this is a good forum for companies having deep pockets. But no it is just for the SMEs. Convenient, n'est-ce pas?

MaxDrei said...

Of course, another way to pump up business for the UPC is to push for more patent applications at the EPO to go through to issue without carefully policing prosecution amendments under Art 123(2) EPC. That would serve very nicely, wouldn't it?

I recall that grants at the EPO have recently risen by 40%.

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