European Union: Turn On, Tune In, And Drop Out? BREXETING UK Signs Up For The UPC, Whilst Germany Is Lingering To Ratify

Last Updated: 22 May 2018
Article by Wolfgang Schönig and Robert Grohmann

The Unified Patent Court ("UPC") will be a Court common to 25 Member States of the European Union ("EU") (currently including the UK) and thus be part of their judicial system.  The Court will have exclusive jurisdiction over traditional European patents (a bundle of national rights) to the extent patentees have not opted them out from the new system and so called "European patents with unitary effect," a new type of patent to be issued by the European Patent Office upon request of the applicant that will confer protection over the entire territory of the participating European nations (currently Spain and Poland refuse to sign up) as one single right (for more details on the new system click here).  The UPC has always been regarded as a truly pro-European initiative to enhance the EU's competitive advantage and designed to enable innovators to defend their rights across the EU in providing a less expensive and time-consuming way than current present procedure, in which patents have to be registered and enforced in individual EU countries.  On the other hand, the UPC raises the risk of centralised revocation of a patent, which could have serious implications on high value patents.

Now, on Thursday, April 26, 2018, with BREXIT being less than a year away, the UK's Intellectual Property Minister announced that the United Kingdom had ratified the UPC Agreement ("UPCA"), which is an important step towards the realisation of the new envisaged European patent system and paves the way for negotiations to ensure the UK's continued participation in the UPC following BREXIT.  The declaration stating that the UK agrees to be bound by the UPCA and the UPC's Protocol Privileges and Immunities ("PPI") has been signed by the UK's Foreign Minister and deposited with the EU Council's General Secretariat in accordance with Article 84 UPC and Article 17 PPC (press release of UK Government).  The ratification has meanwhile been confirmed on the EU's status webpages for the UPCA (here) and the PPI (here).  This step is paramount, as, for the UPC to take effect, 13 EU Member States (including France, UK, and Germany) must pass national legislation to ratify the UPCA.  As of now, the UK, France, and 14 other EU countries have done so (for a ratification update click here).  Germany, however, which is hosting one section of the central division of the UPC in Munich, has still to ratify and deposit its ratification instrument before the UPC can come into force. 

While some commentators struggle with how membership of the UPC is compatible with the stated BREXIT aim of "taking back control", when essentially signing up to a European patent litigation system does exactly the opposite, others emphasise that the UPC is nothing but a logical evolvement of the European Patent Convention, an international patent system that (despite its name) is not exclusive to EU Member States, and that the UPC may be open to non-EU countries, too. 

Anyhow, first there is a short-term obstacle for the UK to join the UPC to be overcome.  Ironically, the ratification of the UPCA by Germany, one of the most pro-EU countries and a key driver behind the UPC (at least as far as the German patent professionals community is concerned) is currently on hold due to a constitutional complaint (the "Complaint") filed at the German Federal Constitutional Court (Bundesverfassungsgericht) ("FCC").  The Complaint has been covered here and received extensive third-party assessments here.  In essence, what is being challenged by the Complaint is, inter alia, (1) a violation of Article 4 subsection 3 and Article 19 subsection 1 of the Treaty on European Union and Article 267 of the Treaty on the Functioning of the European Union, as regards to the creation of an international court within the legal system of the EU; (2) non-compliance with Article 38 subsection 1, sentence 1, Article 20 subsections 1 and 2 in conjunction with Article 79 subsection 3 of the German Constitution ("GC"), as regards the qualified majority requirement under German constitutional law to sign up to the UPC; and (3) non-compliance with the rule of law principle as regards to an insufficient legal status of the UPC judges and the UPC rules of procedure—again, the Complainant is referring to Article 38 subsection 1, sentence 1, Article 20 subsections 1 and 2 in conjunction with Article 79 subsection 3 of the GC.  Details on the Complaint and the complainant can be found here.

Time Is of the Essence

While the British government repeatedly expressed their intention to ratify the UPCA despite BREXIT, the UPCA itself stipulates (at least if read literally) that only EU Member States may participate in the UPC.  But it appears that some BREXITEERS believe that the UPC is an international rather than an EU project and that in the future there may be even (other) non-EU states that may be able to join too.  Given the codified jurisdiction of the European Court of Justice over the UPC (more info on that dimension can be found here), we can already see all International Law experts rubbing their hands on that one.

All sarcasm aside, the now effectuated ratification may be crucial for the UK's participation in the UPC system, but it may be worth nothing if the UPC fails to enter into force before the UK is expected to leave the EU—i.e., on March 29, 2019.  Even though the Complaint has been published in the list of cases to be heard by the FCC this year (here), timing could be an issue for the UK's participation in the UPC.  The UPCA will enter into force on the first day of the fourth month after receipt of the German ratification documents.  Therefore, in order to enter into force in good time (i.e., pre-BREXIT), the German approval must be obtained by the end of November of 2018 at the latest.  

It is, however, completely open as to when a decision of the FCC can be expected.  The Court sought the opinions of 27 institutions, including the constitutional bodies, which were received by the end of January (see here).  Some of them are rather extensive.  Furthermore, it is speculated as to whether the complainant has gotten another opportunity to respond, for which the Court would usually grant a three-month deadline.  

Only if the FCC will dismiss the Complaint as inadmissible, the German Federal President (Bundespräsident) will sign the UPCA and the PPI, and the UPC will come into force in time for the UK.  The earliest such a dismissal can be expected is mid-May of 2018.  If the Complaint is admitted, however, the case will be decided on its merits, which will be a longer process.  In this case, it cannot be ruled out that the Court will come to a decision as late as late autumn 2018 or impose conditions to remedy constitutional concerns on the German Federal Government (Bundesregierung), which could lead to further delays.

It remains to be seen whether timing will prevent the UK from participating in the UPC.   

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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