The Unitary Patent and the Unified Patent Court are likely to boost trade and foreign direct investment (FDI) in the European Single Market for technology. This is one of the conclusions in an EPO report which was published on 14 November 2017.

The study ‘Patents, trade and foreign direct investment in the European Union’, carried out by researchers of the EPO, the London School of Economics and the University of Colorado Boulder, assesses the impact of the European patent system on the circulation of technologies through trade and foreign direct investment in the EU.

According to the report’s conclusion, the ‘results confirm that incoming trade and FDI flows in high-tech manufacturing industries are sensitive to the different levels of patent protection in EU countries. (…) Simulations suggest that an alignment of EU countries on the best existing standard of patent protection could generate a EUR 14.6 billion increase in annual high-IP trade inflows and a EUR 1.8 billion increase in annual FDI inflows in the EU. (…) Addressing the fragmentation of the European patent system represents a major challenge for the European Union in the perspective of its transition towards a knowledge and innovation-driven economy. The forthcoming implementation of the Unitary Patent and Unitary Patent Court will be an important step forward in this direction.’

The researchers stress that ‘the main contribution of the study is to produce empirical evidence of the sensitivity to patent protection of trade and FDI flows in different industries, and of the relative magnitude of the resulting gap in incoming trade and FDI in different EU countries’,

The full impact of the Unitary Patent system has nót been investigated. ‘It should also be noted that the study focuses on the functioning and limitations of the European patent system as it currently stands. It thereby provides relevant insights into the expected benefits of the Unitary Patent and the Unified Patent Court, but does not constitute a full impact assessment of these reforms. Indeed, the empirical part of the study focuses on a scenario of harmonisation of national patent laws, setting aside limitations relating to the cost of patent application and litigation in Europe. It therefore accounts for only part of the expected benefits of the reforms, as the Unitary Patent is also designed to mitigate these costs.’

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18 comments

  1. The methodology of the report appears to involve assuming that the UPs will bring “stronger” patent protection that is easier to enforce. Upon the basis of earlier studies, this “improved” patent protection is then assumed to foster faster growth in “patent-intensive” industries.

    There are some notable exclusions, too. Because they already have “maximum strength” patent protection, BE, DK, FI, FR, DE, IT, IE and NL are excluded (as are EE, HR, LV, LU and SI, for which there is no literature measure of relative strength of patent protection).

    On the other hand, there are some curious inclusions in the study. For example, in addition to making the unjustifiable assumption that all EU member states will ratify the UPCA, both ES and PL are included in the study. This is despite the fact that ES cannot and PL will not ratify the UPCA.

    So, in summary, this is a study based upon a huge pile of over-simplified assumptions combined with the exclusion of almost all of the “big” economies of the EU. And after all that, the study predicts big gains for very small economies such as CY, LT and MT, but no gain (or only marginal gains) for the “big” economies of the EU.

    Also, it seems inevitable that the conclusions of the study would be highly sensitive to changes in factors that have been over-simplified (e.g. the impact upon “harmonisation”), or to inclusion of factors that have been outright ignored (e.g. impact upon the ex-EU trade of EU-based competitors of non-EU patent holders).

    Indeed, some of the conclusions of the study appear to fly in the face of common sense. Two particular examples stand out.

    Firstly, one would have thought that, as a HIGHLY patent-intensive industry, the pharma industry ought to be one that would “benefit” from UPs, and that would therefore contribute to the gains that the study predicts. However, I have yet to meet anyone from pharma who would be willing to request unitary effect for a key European patent, thereby risking (even after the end of the opposition period) losing that patent in 14+ EU territories in a single stroke.

    Secondly, the study concludes PL is one of the countries that would stand to gain the most. However, PL has indicated that it will NOT be ratifying the UPCA… which is presumably on the grounds that it has reached the opposite conclusion to the study.

    To be clear, I am not saying that it is impossible that the UPCA coming into force will bring economic benefits… just that the present study really does not provide anything in the way of reliable “evidence” on this point.

  2. Bearing in mind that EPO et al. will soon have to submit their comments in the German constitutional complaint proceedings, the timing and purpose of this “study” is all too obvious. Expect more along these lines in the coming weeks.

  3. What else could one expect from the EPO? As the studies relating to SMEs published by the EPO, the result had to be positive. At least it is admitted that the study is empirical, so in other words done with a wet finger, telling where the wind comes from.

    One aspect which has not be envisaged in the study: what if the patents granted by the EPO are of suboptimal quality? That risk is not to be belittled as the complaints about quality are growing. Claiming 40% more grants with the same, or even higher quality is not credible. Introducing 5 years contracts for examiners will also not help improving quality, as it is from 5 years onwards that the costs of training a new examiner will begin to be recouped. If an examiner leaves for whatever reason after 5 years, the investment will never be recouped. One has seen what a high turnover of examiners has done to the USPTO.

    By the way, the EPO should publish a long term statistic about the survival rate of granted European Patents in nullity proceedings before national courts. The data is there, so why not publish it?

    For the rest, one cannot but agree with the comments of Concerned Observer. Including PL in the study, whilst the previous Polish government has decided not to pursue ratification, and this for exactly the opposite reason as the one given in the report, is simply laughable. The present Polish government is certainly not more pro-European integration. One might regret it, but is a fact which should not be blatantly ignored. So what is to be demonstrated here, other than a plain denial of reality?

    The fear of putting all the eggs in the same basket was already present when the EPO opened its door. But the high quality of the work done at the time, and until recently, showed that this fears were not justified.

    As far as the UPC is concerned, the way it has been pushed through, as well as the way its rules of procedure have been concocted behind closed doors, is rather increasing the fears than lowering them.

    With the Brexit problem, which is far from being resolved, not to speak about the complaint before the German Constitutional Court, the situation is even more unclear.

    Presently the UPC suffers from one important problem: is it in accordance with EU law? The opinions diverge on this point, but it would have been more positive for the fate of the UPC if this question would have been answered upfront. Why has this not been done? Which investor is accepting to play such a risky game?

    The UPC is not a magical want by which everything in the European patent world becomes hunky dory as the report would like us to believe. Saying this does not mean that harmonisation in IP matters in Europe in general, and in the EU in particular, is not an aim which has to be pursued. The UPC is however not the only means to this effect.

    EPC has some member states which have been and will remain key players in the IP world, and which cannot join the UPC. In view of opinion C 1/09, it is clear that those countries will never be allowed to join the UPC.

    Tom Taylor’s comment is highly pertinent as well.

    Techrights: fingers off!!

  4. Once I’ve been to a party of the Portuguese community in Belgium. I’ve asked a couple sitting next to me what was their way to Belgium. They told me they are pharmacists/biologists and used to work in Portugal for a branch of the big Pharma company. The branch was located in Portugal because of the absence of patent protection in Portugal for the drag.

    When the patent expired, the company has relocated the business to Belgium and closed the site in Portugal. Some employees could move to Belgium, like the couple I met.

    The uniform big bulks of exclusivity hinder a competition, which otherwise would look for its ways everywhere. The further located EU Member States, with their own languages and small population, risk to become a periphery, faster than investments cover them with the abundance.

  5. When it comes to the UPC, the level of pleading from vested interests, parties with “an Agenda” is enough to make one puke.

    I started in the patent profession before the EPO, in the days prior to the Protocol on Art 69 EPC, when Germany decided scope of protection one way, and England in a very different way.

    Since then, there has been ever greater harmonisation throughout EPC-land, and a huge gain in legal certainty. Not because of any pan-European court but because of enlightened performance at the EPO (until recently), and comradely behaviour from the patent judges in the leading EU jurisdictions. Judges are only human. They want their clear and logical thinking to be adopted by their brother and sister judges in the other jurisdictions. Bear in mind that these other jurisdictions have very different procedural law. But they come together regularly, to debate and minimise their differences, which are steadily diminishing (see the latest Decision by the UK Supreme Court, to aligh itself with mainland Europe).

    This rivalry between different procedures and different legal interpretations is what improves the clarity of the law of infringement in the whole of Europe. If you doubt me, observe how rivalry between the various Technical Boards in EPO DG3 has produced a body of caselaw, in the White Book of Established Caselaw, that is unassailable in its logic and so has swept the world. For the most recent example, see the current IPKat interview with the Head of the Patent Office in Australia.

    The proponents of the UPC should be ashamed of themselves, sacrificing all this legal certainty and harmonisation at the behest of the multi-national corporate interests, the bulk users of the EPO patent grant service, to rid themselves of the attentions of troublesome SME patent owners. And we were doing quite well enough recently, with engineering disputes litigated in Germany and pharma litigation concentrated in London, and no need to litigate everywhere in order to resolve the dispute.

    As Robin Jacob has said “We can learn from the Americans. Watch what they do, and don’t then make the same mistakes”. Introducing this UPC is to make the same mistake as the Americans. And note, for the same reason.

    Germany, the home of the SME engineering manufacturer is, with its Constitutional doubts, is belatedly seeing the light. Better late than never.

  6. Follow-up on the post of NOVEMBER 16, 2017 AT 2:02 PM:

    Another time, I went to the Intellectual Property conference in Europe.

    The IP Law professor presented a very interesting research on ‘pay-for-delay’ agreements in the Pharma industry.

    Showing the statistic for 5-6 EU Member States, the professor said that, in Portugal, the amount of ‘pay-for-delay’ agreements is much smaller than in other EU Member States studied.

    At the conference, this phenomenon did not find the explanation.

    I a bit regret that the research presented did not show the amount of Pharma patents in Portugal in comparison with the other studied EU Member States. The competition between the EU markets might become more obvious.

  7. I cannot but agree with Max Drei. In spite of different procedural rules, the legal basis of patent law in all member states of the EPC, and hence in the EU, is the EPC. And the regular meetings of judges have, and will continue improving the harmonisation amongst them.

    When looking at what has been published on IPKat under http://ipkitten.blogspot.de/2017/11/speech-from-european-judges-forum-but.html, one wonders is the UPC is really needed: in Europe 2 out of 1000 patents are litigated.

    Do we really need such a machinery as the UPC? This is the more so as we still do not know whether is it conforms to EU law. To all the proponents of the UPC: do first your homework before bothering us with such a complicated thing as the UPC.

    Such a revealing figure shows that there is a lot of hot air blown around by those who want the UPC. The more “noble reasons” put forward like a monstrance by absolute supporters of the UPC is the necessity to have a “single legal market” when it comes to infringement or nullity. For them it is clear that the UPC is an absolute necessity.

    This plea suffers some heavy drawbacks:
    – That the common market cannot be fractioned with the help of patents is a reality for many years: exhaustion of patent rights as decided by the CJEU. As far as exhaustion of rights is concerned, we have a single market, and for all member states of the EU!
    – Not all member states of the EU will participate. For the time being Poland has said no after a Deloitte study, not a study done by the EPO. I take bets that the Czech Republic and Slovakia will follow. That other small countries have ratified like Slovenia and Portugal is, in my opinion, due to the mere fact that they have been promised an arbitration centre. That helps..
    – The fallacy that not introducing the UPC will be at the expense of the SMEs (cf. the link in Pink Panthers comment) is no more than a fig leaf behind which the major industry is hiding, and which has apparently helped to convince politicians. At an entry cost between 11 000 and 20 000 €, claiming that this is good for a SME is a joke. By the way, what is the state of discussions in matters of litigation insurance for SMEs?

    Even if the odd decision in one country is contrary to the one in another country, does it really harm? But if you can ask for a fee not just for litigating in one state, but in a plurality of states, your purse pushes you to come up with a different story. I see the prime motivation of pushing the UPC through at any cost at this level. Sorry to be blunt, but people like Pors and consorts are as blunt.

    As far as harmonisation of validity is concerned, there would be a very simple solution: extend the opposition period before the EPO over 9 months, so that it can be started as long as a granted European Patent is in force in one of the member states of the EPC. After all the proprietor may limit his European Patent as long as it produces its effects in one member state. Why then limit the right of third parties to act centrally against a patent to 9 months?

    In case of limitation or nullity, the consequences would be valid ex tunc for all member states of the EPC, not just for member states of the EU. This would however mean that lawyers would not have the monopoly in nullity proceedings, and this is a thought which hurts their pride and purse. Sorry to be blunt again.

    It would mean a kind of bifurcation at EPC level, but experience has shown that it works in Germany. The question of a revision procedure at the level of the EPC member states would however have to be resolved.

    One possibility comes immediately to mind: extend the possibility of revision before the Enlarged Board of Appeal of the EPO to matters of substance, and not limit it to mere aspects of procedure. It would avoid some R decisions which actually try to remain at a procedural level, whereas the problem is actually at substantial level. This could avoid some problems which are to be discussed at the German Constitutional Court.

    Such a solution would however mean that the staffing level of the Boards of Appeal and their independence should be at a different level than now. A though which does not come to mind to the actual president of the EPO. After all Art 11(5) EPC allows national judges to sit at the Enlarged Board of Appeal. Highly qualified national judges already play an important role within the Enlarged Board of Appeal.

    This solution would have a big advantage: as far as validity is concerned, there would be no diverging case law between the EPO Boards of Appeal and any other jurisdiction, be it national or supranational.

    By the way a kind of Enlarged Board of Appeal with dual function is also envisaged at the UPC level. It can act as an instance for rehearing=review, cf. R 245UPC vs. Art 112aEPC, or in the framework of a decision to refer, cf. R 238aUPC vs. Art 112EPC.

    There are thus other solutions than the UPC if it is felt absolutely necessary to “harmonise” the EU patent market. And for the 2 out of 1000, litigated infringement cases, we can leave with some diverging decisions. Another form of subsidiarity. That such a proposal might go against vested interests, which have been quite vehement recently, is not to be denied.

    When shall the Conference foreseen under Art 4aEPC be summoned?

    Techrights: no reference to this comment, be it directly or indirectly!

  8. Please read :
    A “thought which”, and not “A though which”

    “we can live with some” and not “we can leave with some”.

    The error is obvious as is the correction. it should thus be allowable.
    Nevertheless I apologise for a suboptimal proof reading!

  9. I should perhaps write a little more about how the debate between the patent infringement judges in different EPC jurisdictions benefits the clarity of patent law in Europe, analogously to how the debate on the substantive law of patentability has been clarified at the EPO.

    Those who draft FTO (freedom to operate) opinions are very well aware that, once the facts are fixed, it is hardly ever difficult to reach a view on “Is the asserted claim invalid: Y/N?”. Nearly always, it is uncertainty as to the facts which frustrates progress to a firm opinion.

    But now think what happens if it comes to litigation. A court in England finds the facts in its own way, by discovery, and days of expert cross-examination of witnesses in open court. This is not how the courts of mainland Europe go about finding the facts. This is nearly always the reason for contradictory decisions. It might be the reason why pharma litigation under the UPC is slated for London.

    Politicians might have been led to believe that these contradictory outcomes constitute a black mark on the face of patent litigation in EPC-land. But it isn’t is it? Each contradiction sets off an inquest. Each inquest reveals how the contradiction arose. Each such inquest reduces the likelihood of such a contradiction happening again.

    In this way, litigation in Germany gets more precise and forensic, and litigation in England gets more efficient and focussed. Both jurisdictions improve.

    This is a win-win which goes out of the window with the arrival of the UPC.

  10. Mr Tilmann has recently entertained his followers with a long presentation on his views re the constitutional complaint. Read a detailed (German) summary here:

    http://bit.ly/2zcP38P

    Reading this raises one question: If the complaint is so evidently inadmissible as Mr Tilmann seemingly claims, why did the court not instantly reject it? We shall find out soon.

  11. One could be inclined to believe what Mr Tilmann is saying. But one ought to be careful.

    For instance, after Opinion C 1/09Mr Tilmann was of the firm opinion, that the participation of non-EU member states in a pan-European litigation agreement comprising EU member states would not be allowable. Hence EPLA was dead.

    After the Brexit, his opinion changed and he advocated the participation of non-EU member states. If the ratification by the UK was before Brexit, UK could stay, but even other non-EU member states could join later, In other words EPLA was revived.

    I fail to understand how it is possible to come to two such diametrically opposite conclusions, and I am probably not the only one.

    On the other hand, why on Earth would the Constitutional court bother requesting amicus curiae briefs, and even extending the time limit for filing those, if it was so convincing as Mr Tilmann portraits it, that the request should be dismissed at once?

    A further point worth noting: in his speech, Mr Tilmann countered the concerns about the inadequate basis for the Rules of Procedure by pointing out that national parliaments were aware of the main features of the procedure and that it was laid down in the UPCA and was thus the subject of their deliberations. In this respect, he claims that there is no blanket authorization, as the complainant argues, with regard to the proceedings and hence no violation of Art. 79 Abs. 3. I am of the opposite opinion.

    The Rules of Procedureare however one of the major drawbacks of the UPCA. The rules of procedure have been concocted behind closed doors by a group of self-co-opted people, mainly litigation lawyers and some judges. No control of the legality of the rules of procedure has been carried out. Some of the RoP are quite strange.

    Did the parliaments know for instance that any person allegedly concerned by the outcome of the dispute, could be invited to intervene, and may even be forced to intervene in the proceedings? See R 316UPC as well as
    R 316aUPC, especially R316A(2)UPC. That an intervention is possible, is certainly welcome, but that there is no appeal against an order refusing an Application to intervene, cf. R 317UPC, is at least odd. An intervention can be refused, and there is no appeal against an order refusing an intervention, but a third party can be forced to intervene, and will be bound by the judgement. How come?

    Another point is worth mentioning. According to Art 48(4) UPCA, “Representatives of the parties may be assisted by patent attorneys, who shall be allowed to speak at hearings of the Court in accordance with the Rules of Procedure”. In R 292(2) it is then specified that “Such patent attorneys shall be allowed to speak at hearings of the Court at the discretion of the Court and subject to the representative’s responsibility to coordinate the presentation of a party’s case.” At the court’s discretion means probably never, and if so, only with a status comparable to that of an accompanying person before a body of the EPO (cf. G 4/95).

    Those points taken on their own might look anecdotic, but they are nevertheless revealing for the spirit which has been brought in the Rules of Procedure. Lots of different ways of dealing with infringement have been merged into the Rules of Procedure, but their conformity with any constitution of any of the member states of the UPCA has never been checked. A blanket authorisation is there.

    Contrary to what Mr Tilmann claims, the CJEU should have a look before the UPC enters into force and leads to irreparable damages.

    Techrights: fingers off!!

  12. One modest remark on Mr Tilmann (T) as reported in said summary:

    He seems to create out of thin air two sorts of violations of the Grundgesetz, with its Art. 79(3), the so-called “Ewigkeitsgarantie” (“eternal guarantee”), forming a threshold and only those violations also infringing on Art. 79(3) – designated “qualified violations” by T – being an actionable infringement of the constitution.

    If he has truly said so – and I would be careful as the linked report seems more like hearsay -, reading Art. 79 (and asking every second year law student) will immediately reveal that this is gross nonsense. The latter, by the way, applies to the whole line of argumentation (again, if legit as described). If this is all that even UPC figureheads have to defend their project, its future may indeed look grim.

  13. Dear UPC newsblogger, how about asking Prof. Tilmann for an interview on his mentioned presentation? It would appear that his views might be worth being put up for discussion amongst a broader audience.

  14. In my view, Prof Tilmann’s comments are so unbelievable that they reek of desperation.

    I have two particular favourites from his reported assertions.

    The first is that certain (constitutionally) important principles – legal certainty, the protection of legitimate expectations, the right to a legal judge and the prohibition against retroactivity – are “not inviolable”, and that the BVerfG need only concern itself with “SERIOUS encroachments”. This raises many questions: Which encroachments would count as “serious” in Prof Tilmann’s eyes? Who gets to assess whether an encroachment is “serious” or not? On which grounds would they make that assessment? If only “serious” encroachments are banned, is there case law of the BVerG that confirms this (that is, a case where the BVerfG has accepted a law that clearly violates the constitution, but only in a “non-serious” manner)?

    The second is his unqualified assertion that the Court of Justice of the EU does not have a monopoly in the area of IP disputes – which assertion would appear to cover even those disputes that turn on a matter of EU law. On this point Prof Tilmann seems to have (conveniently) forgotten the principle of supremacy of EU law. I find it particularly strange that his memory fails him on this point, given how central that principle was to the reasoning of Opinion 1/09.

    In any event, I note that Prof Tilmann did not address the issue of Brexit. As he seems to have answers to so many of the complaints against the UPC Agreement, perhaps he would care to additionally answer the questions that I posed on an earlier thread (http://bit.ly/2iqbHzf)? The key question there was: is the UPCA “a court common to the (EU) Member States”?

    Finally, I note that Prof Tilmann’s views on (in)admissibility must be wrong. According to his logic, complaints relating to the EPC would also be inadmissible. However, the BVerfG has admitted at least 4 complaints that allege incompatibility of the EPC with the Basic Law.

    This all brings me back to a view that I previously expressed in connection with statements made by Mr Pors (who, coincidentally, is also employed by a company that stands to be one of the main financial beneficiaries of the UPC Agreement coming into force). That is, with matters relating to the UPC, I shall only take seriously the views of others that are based upon genuine conviction (and sound, legal reasoning) as opposed to mere convenience.

  15. Those having read the complaint can only be stunned by Mr Tillmann’s positions. His explanations are widely limited to simply negating the complainant’s arguments without, however, providing anything of substance, but repeatedly invoking interpretations of the German constitution that, while serving his needs, can only be described as hair-raising. If a person like prof Tillmann, who used to have a good reputation as a lawyer, argues that only certain types of violations of the constitution should be unlawful (!), this, apart from having no support whatsoever in the Grundgesetz or in the case law of the BVerfG (so far), tells everything about his almost fanatic dedication to the UPC project.

  16. It has been almost 3 weeks since I posed the simplest of questions regarding the status of the UPC: is it an EU (Member State) court or an international court (http://bit.ly/2iqbHzf)?

    In seeking a well-reasoned response from a supporter of the UPC, it is true that I was relying upon a triumph of hope over experience. However, even wearing my more cynical hat, I expected at least one UPC supporter to at least try to engage with the issue.

    If those supporting the UPC do not have a robust answer to even this simplest of questions, then the prognosis for the UPCA is looking very grim indeed. That is, if it is not even clear whether the UPC will have the ability to make preliminary references to the Court of Justice of the EU, then there will be no point contesting the grounds of the constitutional complaint in Germany… as it will then only be a matter of time before the CJEU finds the whole system to be incompatible with EU law.

    I must say that am increasingly disturbed by the refusal of UPC supporters to engage with irrefutable facts. Indeed, in discussions with UPC supporters, I find myself taking the role of John Cleese’s character in the famous Monty Python sketch about a parrot (http://bit.ly/1b9g2R6). That is, whilst I contend that the UPCA ought to be pushing up the dasies by now, the responses that I get are much like the diversionary tactics (in effect, drawing attention to the “beautiful plumage” of the UPC) or pathetic excuses proffered by Michael Palin’s character. Perhaps we can now expect UPC supporters to assert that the delay in ratification is due to the UPCA “pining for the fjords”?

  17. I am also interested whether two different kinds of violations (qualified and “simple”) of the basic law are a generally accepted concept among experts or whether Prof. Tilmann has invented the concept. As a layman, I am wondering why the basic law has so many articles if they are -according to Prof. Tilman- more or less superfluous anyway.

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