Since 1977, there has been a project in the works to create a Community patent, i.e. a single patent title providing uniform protection throughout the EU. These plans have received substantial press coverage recently, especially further to the signature on 19 February 2013 by 24 Member States (all except Spain, Poland and Bulgaria) of the Unified Patent Court ("UPC") Agreement.
The UPC Agreement had been approved in December 2012 by the European institutions, along with a regulation creating unitary patent protection1 and one establishing language rules in this respect2. These three instruments are jointly referred to as the "European unitary patent package" or "EU patent package".
While these recent developments are undoubtedly important achievements since the project's inception, there is still a long way to go before the system becomes operational. Indeed, a number of questions remain unanswered and certain legal issues are still unresolved, not to mention the fact that a ratification threshold must be met in order to bring the package into effect.
This contribution briefly discusses the new system, the expected advantages and disadvantages, the main outstanding issues, and the likely consequences of the reform in Belgium.
What is the European patent with unitary effect or "unitary patent" ("UP")?
European patents, granted by the Munich-based European Patent Office ("EPO") through a centralised application procedure, are in essence a bundle of national patents granting national protection.
UPs will also be granted by the EPO but will constitute a single patent title conferring uniform protection and equal effect in all Contracting States. The patentability requirements and term of protection will be the same as for European patents.
Once the package enters into effect, an applicant will have the option of applying to the EPO for:
(i) a UP;
(ii) a regular European patent; or
(iii) a UP and a European patent for any country not covered by the UP.
To obtain a UP, recordation in the Register for Unitary Patent Protection must be requested from the EPO within one month from grant.
Of course, it will still be possible to apply for national patents with the national patent offices.
What is the EU Unified Patent Court ("UPC") system?
Decisions under the UPC system will be effective and binding in all participating Contracting States. In other words, the revocation of a patent or a finding of infringement and any related measures (e.g. an injunction) will have equal effect in all Contracting States.
* How is the UPC system structured?
The UPC will be composed of a Court of First Instance and a Court of Appeal.
So-called Local Divisions (for a single Contracting State) and Regional Divisions (for two or more Contracting States) will make up the Court of First Instance, together with a Central Division, based in Paris but with sections in London (for chemistry, including pharmaceuticals and human necessities) and Munich (for mechanical engineering).
The Contracting States must state, at the time of ratification, whether they intend to set up a Local and/or Regional Division.
The Court of Appeal will be based in Luxembourg.
* What is the scope of the UPC?
Once the UPC Agreement enters into effect, UPs will automatically be enforceable in all Contracting States that have ratified the agreement, under the exclusive jurisdiction of the UPC, i.e. Central, Local and Regional Divisions.
The UPC is not intended to hear cases pertaining only to UPs. European patents, including those granted previously, will also fall under the scope of the UPC, following a transition period of 7 years from the date of entry into force of the Agreement.3 During the transition period, owners of European patents may "opt out" of the UPC system. An opt-out means that a European patent will remain subject to the current country-by-country jurisdictional system. A patentee may, at any time during the aforementioned transition period, choose to opt in to the UPC system.
* What are the rules of jurisdiction under the UPC system?
The jurisdiction rules under the UPC system are fairly complex. The main rules can be summarized as follows:
Revocation proceedings must be brought before the Central Division.
Counterclaims for revocation in infringement proceedings must be brought before the Local or Regional Division before which the original infringement claim was brought. This division can either (i) hear the counterclaim, or (ii) refer the counterclaim to the Central Division and stay or proceed with the infringement proceedings, or (iii) refer the entire matter to the Central Division, with the parties' consent.
For infringement claims, the patentee can choose to bring an infringement action before the Local or Regional Division of the place of the (actual or threatened) infringement or of the infringer's (principal) place of business. If the infringer has no place of business within the EU, infringement proceedings can also be brought before the Central Division. When a revocation action is already pending before the Central Division, an infringement action can, at the patentee's discretion, be brought before the same court or before a Local or Regional Division.
Declarations of non-infringement must be sought before the Central Division. However, if infringement proceedings are initiated before a Local or Regional Division within 3 months' time, the action for a declaration of non-infringement will be stayed.
What are the advantages and opportunities of the new package?
The new package is intended to address the disadvantages of the current system, i.e.:
complex administration of various national rights, including multiple renewal fees;
the need to conduct parallel litigation on a country-by-country basis.
The European Parliament has stated4 that a UP application should cost EUR 6,500 during the transition period and approximately EUR 4,725 thereafter. In addition, the official renewal fee for a UP is expected to equal the current renewal costs in five EU Member States but has yet to be determined. This would be 80% less than a European patent valid in 25 Member States, which costs approximately EUR 36,000. The purpose is to improve the competitiveness of the EU compared to the US and Japan, in which countries patents are much cheaper.
The package should benefit companies that would like broad protection across the EU and currently only validate their inventions in a handful of Member States given the high cost of doing so. The EU patent package should reduce litigation costs and eliminate potentially inconsistent judgments in different Member States regarding the same patent. The new system will also allow patentees and potential defendants to adopt pan-European freedom-to-operate strategies.
What are the disadvantages/risks of the new package?
Placing all one's eggs in the same basket can be risky. Thus, an (un)favourable decision will have pan-European effect. Further, as the UP is a single title, it can be revoked in all EU Member States by means of a single court decision.
It is expected that companies active in contentious sectors and/or in which one or only a few patents are key will decide to opt out of the UPC system or will continue to apply for national patents.
In addition, the package will not cover the entire Internal Market. On the contrary, it is limited to participating Contracting States and will only become operational after being ratified by at least 13 Contracting States and only within the territory of those States. This will inevitably lead to a fragmentation of the Internal Market, at least for a certain - and unpredictable - transition period. The current disadvantages will in other words remain for an indefinite period of time, which runs counter to the objective of uniformity.
What are the outstanding questions and legal issues?
The new system was scheduled to enter into force on 14 January 2013 or upon the entry into force of the UPC Agreement, whichever is later. The UPC Agreement must be ratified by at least 13 Contracting States, including the UK, Germany and France, in order to enter into force.
In addition to the ratification requirements, the new system cannot become a reality until the current rules on jurisdiction and the enforcement of judgments in the EU are revised (i.e. Reg (EU) No 1215/2012, repealing Regulation (EC) No 44/2001, commonly referred to as the "Brussels I Regulation"). This is a serious obstacle, as such a revision will require an agreement between all 27 Member States, not all of which will participate in the new European patent package.5
Last but not least, there are legal objections to the way in which the UPC Agreement was achieved and is conceived. A first question concerns the so-called enhanced cooperation procedure. It is debatable whether the participating Contracting States were allowed to conclude the UPC Agreement amongst themselves, without involving the EU. Second, the UPC Agreement does not seem to adequately address the concerns raised by the Court of Justice of the European Union ("CJEU") in Opinion 1/09,6 in terms of the EU compatibility of the UPC structure. In this regard, the UPC will interpret and apply EU law, despite being outside the EU structure, which the CJEU views as a violation of the principles of the EU system of judicial review.
What are the likely consequences of the reform in Belgium?
Assuming the system will be put in place despite the outstanding issues and objections discussed above, it is important to anticipate the impact of the reform in Belgium.
Upon ratification, Belgium will need to indicate whether it wishes to host a Local Division. It is important to set up such a division as it will provide Belgian companies, SMEs and research institutes with local access to the UPC. In the absence of a Local Division, litigation will have to be initiated abroad, which will necessarily mean higher costs.
In addition, the establishment of a Local Division is necessary to maintain the benefit of existing tools under national rules of procedure for all patents, including UPs. For instance, Belgium has a very efficient procedure to gather evidence of inter alia patent infringement, the so-called saisie-description/beslag inzake namaak. This procedure allows patent holders to ask the competent court to (i) appoint an independent expert to inspect the alleged infringer's premises, unannounced, in order to describe the allegedly infringing goods and processes as well as the scope and origin of the alleged infringement (e.g. examine IT systems and accountancy books) and (ii) order attachment measures (which in practice can take the form of an injunction against the marketing and selling of the allegedly infringing goods). Without a Local Division, it will no longer be possible to apply for such relief for UPs and, after the transition period, for European patents.
As the capital of Europe, Belgium has a very central location and masters all official languages of the UPC system (French, German and English). In light of these circumstances, not establishing a Local Division would truly be a missed opportunity.
Footnotes1 Reg (EU) No 1257/2012.
2 Reg (EU) No 1260/2012.
3 This period may be extended for another 7 years.
5 Moreover, the EU jurisdictional rules were recently amended (Reg (EU) No 1215/2012, published on 20 December 2012) but not to take into account the UPC. In other words, the Commission will have to make a new proposal to amend the EU jurisdictional rules, which will then have to pass through all stages of the legislative process.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.