Kluwer Patent Blog

1 Introduction

Reports that say there’s — that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things that we know that we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns, the ones we don’t know we don’t know.

Donald Rumsfeld, United States Secretary of Defense, 1975-1977 and 2001-2006

According to Article 89 of the Agreement on a Unified Patent Court (UPCA), the Agreement is set up to enter into force on one of three dates, whichever is the latest. The first date provided in the Agreement was 1 January 2014. As we all know, it did not happen then. According to the above cited famous phrase from Mr. Rumsfeld, reports that something has not happened are particularly interesting. Thus we will look into what did not happen, what did happen, and what will likely happen in the future in more detail in the following. Note that this contribution is fairly long for a blog (my apology to you readers!), yet by no means meant to be comprehensive.

Given that virtually nothing was ready on 1 January 2014, it came as no real surprise that the UPCA did not enter into force and the Unified Patent Court (UPC) did not open its doors by then. We thus need to consider the second and third alternatives of Art. 89 UPCA in more detail.

Let us start with the third alternative date: This is “the first day of the fourth month after the date of entry into force of the amendments to Regulation (EU) No 1215/2012 concerning its relationship with this Agreement”. Amended EU Regulation No 1215/2012 will
enter into force on the twentieth day (or on the next day if the European Parliament’s alternative proposal is adopted) following its publication in the Official Journal of the European Union (OJEU), but it will only apply as of 10 January 2015. The final version of the amended EU Regulation No 1215/2012 has meanwhile (29.5.2014) been approved and published in the Official Journal.

The second alternative date provided in Art. 89 will therefore be decisive for the entry into force of the entire UPCA. According to this alternative, the Agreement will enter into force on the first day of the fourth month after the deposit of the thirteenth instrument of ratification or accession in accordance with Article 84 UPCA, including the three Member States in which the highest number of European patents had effect in the year preceding the year in which the signature of the Agreement takes place. What is behind this convoluted language?

The “year in which the signature of the Agreement takes place” was 2013. In the year preceding 2013, i.e. in 2012, the three “Member States” (a Member State is defined as a Member State of the European Union) in which the highest number of EPs had effect were Germany, France and Great Britain. So at first glance everything seems simple: Germany, France and the UK must ratify the UPCA, along with at least ten other Member States. We know that, and we also know that France has even already deposited its instrument of ratification. This is a known known, with which I will deal, among others, in Section 2 below. But the UK and Germany have not (yet) ratified the UPCA, so the question arises as to when these states will do that. This is a known unknown, and will be dealt with, among further unknowns that we are aware of, in Section 3 (and 4).

Finally, the UK government has announced that it intends to hold a referendum in 2017 on whether the UK wants to stay in or leave the EU. Whether there will actually be such a referendum is still unknown, although it appears quite likely. The outcome of such a possible referendum is even more unpredictable. So Section 4 will deal with this and other unknown unknowns. Each of the following knowns and unknowns can have an impact on whether and when the EU Patent Package will finally enter into force. Note, however, that in particular the list of unknowns is far from complete and there may be further factors not considered herein that may have an impact on whether and when the EU Patent Package enters into force.

As a small but not unimportant aside, this contribution also discusses the latest proposals of the Preparatory Committee on the Rules for Representation of European Patent Attorneys before the UPC, see section 3.2 below.

2 The Known Knowns

2.1 Status of Ratification

According to the official website of the European Commission, three states have to date ratified the UPCA, i.e. Austria (6 August 2013), France (14 March 2014) and Sweden (5.6.2014). Update (24.6.2014): The website of the European Council also states that Belgium (6.6.2014) and Denmark (20.6.2014) have notified their ratification, whereas the website of the Commission does not yet show this information. In the blogosphere, news was spread that Malta had also ratified the Agreement, but this has not yet been officially confirmed.

In Denmark, the ratification was preceded by a referendum that was held together with the elections for the European Parliament on 25 May 2014. The majority of the Danish people voted in favour of joining the UPC, even though the result was quite close: a majority of 33.7% voted yes, 20.2% no, while 1.9% were blank votes and 44.2% abstained.

In most other EU countries, the ratification process is still in progress. Spain and Poland, however, have indicated that they will not sign or ratify the UPCA. Croatia has not signed the UPCA to date and not much is known about the position of the Croatian government on the EU patent package.

2.2 Venues of the Court of First Instance

By now we know that the Court of First Instance of the Unified Patent Court (UPC) will be a multi-local entity of formidable complexity. The Court of First Instance will have a central division as well as local and regional divisions. The central division will be seated in Paris, with sections in London and Munich, so “central” in Europe does not mean in “one defined place”, but rather in “three places”, depending on the technical area (main IPC class, click here for more details) of the patent at stake. Every Contracting Member State may set up one or more local divisions or, together with one or more further Contracting Member States, a regional division of the court of first instance. The seat of such local and regional divisions shall be designated by the respective Contracting Member State(s). The German government has meanwhile decided that Germany will have four local divisions with seats in Düsseldorf, Mannheim, Munich and Hamburg. In the United Kingdom, discussions are ongoing as to whether Scotland should have its own local division, but it seems that a final result has not yet been reached. In making this decision, the UK government will surely bear in mind that Scotland will hold a referendum in September of 2014 about whether it wants to leave the United Kingdom.

There will be a local division for Denmark in Copenhagen, a local division for Belgium in Brussels and a regional division for Estonia, Latvia, Lithuania and Sweden in Stockholm. France currently intends to have just one local division in Paris. Italy may be expected to establish a local division in Milan, but this is still awaiting official confirmation.

It should be mentioned that it is not necessary for each Member State to have its own local division. Luxembourg, for instance, has declared that it does not intend to open a local division. If a Contracting Member State does not host a local division and does not participate in a regional division, actions shall be brought before the central division (Art. 33(1)(b) UPCA). The interesting effect of this clause is that whenever a patent infringement is asserted within the entire EU territory, including Luxembourg, the plaintiff always has the option of bringing its case before the central division, although it may likewise decide to take this case to a local division in one of the Contracting Member States. This will open up interesting options for forum shopping within Europe.

2.3 Rules of Procedure

The Rules of Procedure for the new UPC are already in a fairly advanced state. The Preparatory Committee has meanwhile published the 16th draft in response to a wide consultation with practitioners and industry on the earlier draft. The invaluable work of an expert group of experienced attorneys and judges from various countries has meanwhile been taken up by the Legal Group of the Preparatory Committee. This group will now examine the draft set of rules at the level of participating EU Member States. An oral hearing is planned to be held by the legal group in the course of 2014, which will seek further input from users on all suggested amendments to the text since the written consultation.

Perhaps the most remarkable feature about the Rules of Procedure is its ambitious time schedule. The Rules of Procedure aim to conclude first instance proceedings (including both validity and infringement aspects as well as possible amendments) within just one year. The options for a patent proprietor to amend/limit its patent before the UPC in litigation will accordingly be very limited as compared to the options that exist e.g. in Germany or Italy today. In view of the ambitious goal to conclude a first instance case within one year, the parties will be allowed only short time periods, typically in the order of 2 months, to file their submissions or replies. It can therefore be expected that patent litigation before the UPC will be very intense. Particularly if the defendant needs to conduct a search for prior art in order to develop or optimize its defense, or if the Proprietor needs to amend the patent in view of newly uncovered prior art, and the defendant is then facing a quite “different” patent (e.g. when a new feature has been introduced from the description for which no search had been conducted as of yet), the respective reply periods are very short. It remains to be hoped that the UPC will have an eye to the actual procedural situation and avoid undue hardships to one of the parties, rather than insisting on the one year time regime by all means.

3 The Known Unknowns

3.1 Timing of Further Preparatory Works

On 19 May 2014, the EU Commission published the “Second Progress Report for implementing the European Patent Package” . This report reveals, inter alia, that a “Select Committee” was set up according to Article 9(2) of Regulation 1257/2012 (establishing the basis for the Unitary Patent) in the framework of the European Patent Organisation (EPO). Within the Select Committee, the participating EU Member States shall ensure compliance with Regulation 1257/2012 in fulfilling their international obligations undertaken in the EPC and shall cooperate to that end. In their capacity as Contracting States to the EPC, the participating Member States shall within the Select Committee ensure, among other things, the setting of the level of renewal fees and the setting of the share of distribution of the renewal fees in accordance with Articles 12 and 13 respectively of that Regulation. The Select Committee foresees completion of its work “during the first semester 2015”.

As regards the UPC itself, the Report succinctly summarizes the challenges that Europe is currently facing: “There is a large variety of different legal, administrative, financial and logistical measures, which will have to be put into place before the UPC can become operational. The Court will need sufficient judges with the necessary experience in patent litigation, and judges who have received appropriate and intensive training. It will also require the appointment of non-judicial staff. The legal and financial framework will need to be in place including the UPC’s Rules of Procedure, the Rules of Procedure of the different Committees, the Financial Regulations and Rules on the Court fees, legal aid and the recuperation of costs from the losing party. The Court will need to have at its disposal adequate facilities and an electronic case management and filing system. The Registry will need to be able to register and manage cases. Patent holders wishing to opt-out their patent in accordance with Article 83(3) of the Agreement on a Unified Patent Court will need to be provided with the opportunity to register their opt-out in a way which will ensure the process is effective from the first day of the UPC being operational”.

These enormous tasks have been entrusted to a so-called Preparatory Committee that has formed five working groups, (i) a Legal Framework working group, (ii) a working group on Financial aspects, (iii) an IT working group, (iv) a Facilities working group and (v) an HR & Training working group. Each group has provided an estimate of when its work might be completed. The IT group, for example, estimates that the IT procurement process will be completed by the summer of 2015. A consultation on the first proposal for the Court fees is supposed to be launched by end of 2014.

Whether all of this is so realistic remains to be seen. As the report itself put it cautiously: “A revised roadmap for the Preparatory Committee is now available on the UPC website. The roadmap is still ambitious and the Committee stays completely committed to its challenging task. However, the Committee’s main objective is to ensure the quality and efficiency of the UPC, which has to gain the trust and confidence of the users of the patent system from the first day of its operations. Consequently, in view of the large variety of different measures which still have to be put into place, the Committee had to revise the target date for the completion of its tasks and has agreed a target date that is realistic and achievable. It is now deemed that the work will need to continue until the end of 2015. In close coordination with colleagues in the Select Committee in charge of the implementation of the Unitary Patent Protection, the Preparatory Committee will revise the roadmap and the target date in the early part of 2015 to ensure that the European Patent package is delivered in the most timely and efficient way, while ensuring a high quality of implementation of the entire package”.

Thus, the Preparatory Committee estimates that its work will need to continue until the end of 2015, and in the “early part of 2015” we will most likely see a new target date. All of this means that the UPC will most likely not come into existence before 2016.

3.2 Right of Representation Before UPC

Art. 48 UPCA stipulates that Parties may be represented by lawyers (attorneys) or alternatively by European Patent Attorneys “who have appropriate qualifications such as a European Patent Litigation Certificate”. A European Patent Litigation Certificate does not exist today, hence there is a lot of room for interpretation and debate of what “appropriate qualifications” are or should be.

Art. 48(3) therefore provides that the requirements for such qualifications shall be established by the Administrative Committee. However, an Administrative Committee has not (yet) been formed, and therefore the Legal Working Group of the Preparatory Committee has taken on this task and very recently (13.6.2014) published a proposal of Rules governing the European Patent Litigation Certificate and Other Appropriate Qualifications together with a Explanatory Memorandum for consultation up to 25 July 2014 on the UPC website. The purpose of this consultation is to allow users to engage on a subject that is fundamentally important to how they operate before the Court.

I sincerely hope that the presently proposed Rules for the European Patent Litigation Certificate will not become final in their present form. Particularly Section II defining “Other appropriate qualifications” has been worded in a way that is very tricky for European Patent Attorneys who have no law diploma (Rule 11), and have not been able to complete one of the courses listed in Rule 12a, e.g. because no such law course exists or existed in their country at the time when they underwent their legal education. Such European Patent Attorneys could only rely on Rule 12b, which stipulates that an appropriate qualification is deemed to be

(b) having represented a party on his own without the assistance of a lawyer admitted to the relevant court in at least three patent infringement actions, initiated before a national court of a Contracting Member State within the five years preceding the application for registration.

That seems to be, in my humble opinion, a requirement that practically no European Patent Attorney will be able to satisfy. In Germany, for example, it is impossible for a European Patent Attorney to represent a party on his own in an infringement action without the assistance of a lawyer, since only lawyers are allowed to file requests before an infringement court (Sec. 78 German Civil Procedural Code). The same will be true in most, if not all, other UPCA Member States. Practical experience in patent litigation matters as an appropriate qualification to represent parties before the UPC should therefore be defined differently and more accessibly by experienced patent practitioners, e.g. like this:

(b) having acted (in German: “mitgewirkt“) for a party, either with or without the assistance of a lawyer admitted to the relevant court, in at least three patent infringement actions, initiated before a national court of a Contracting Member State within the five years preceding the application for registration.

Evidence of such activity could then e.g. be furnished by submitting copies of submissions by the (European) Patent Attorney to the court, or by an official protocol showing that (European) Patent Attorney X was actually present at Court during the infringement trial. European Patent Attorneys who have an interest representing parties before the UPC should not miss the opportunity to express their views to the Preparatory Committee before the end of the consultation deadline (by midnight of 25 July 2014). EPLIT (the European Patent Litigators Association) would also appreciate your comments and your engagement.

3.3 Costs

As mentioned above, the costs of the European Patent with Unitary Effect (EP-UE) and the UPC are still almost completely unknown. Apollo could have spoken through his oracle in Delphi 2500 years ago the same words as uttered by the President of the EPO in December 2013: “The renewal fees will be higher than many would hope, but lower than some might fear.” And Ms. Fröhlinger, who could be Apollo’s assistant, remarked in April 2014: “The renewal fees are likely to be somewhat higher than the amount that is paid for four designations, but not significantly higher”. This still leaves open the question as to what “somewhat higher” means and what “four designations” are, since the renewal fees in Europe vary from country to country. Ms. Fröhlinger emphasized according to the same source that the (real) value for money that the unitary patent represents is in the simplified administration of the patent portfolio by virtue of the broad geographical coverage of protection and more seamless enforcement. This “simplified administration” comes, however, at a price. It will no longer be possible to abandon individual designations of an EP-UE; it’s all or nothing.

In any case, more precise information about the level of renewal fees and the court fees can be expected by end of this year. (Large) companies who used to validate their existing EP patents in all or almost all EPC member states will almost surely financially profit from the EP-UE, but whether the same applies to the large majority of (particularly smaller and medium size) applicants who have so far validated their patents only in 3-5 member states (often including Italy and Spain in the latter case), remains to be seen.

3.4 The CJEU Decisions

As is well known and was explained in detail by my friend Miquel Montaña on this blog very recently, Spain has challenged the legality of the unitary patent and language regulations (EU Regulations No 1257/2012 and 1260/2012) before the Court of Justice of the European Union (CJEU). Many scholars have weighed in these actions by publications in legal journals or via the internet since the CJEU unfortunately does not accept amicus curiae briefs. The hearing of Spain’s two challenges (Cases C-146/13 and C-147/13) is due to take place before the Grand Chamber of the CJEU on 1 July 2014. It is to be expected that the opinion of the CJEU’s Advocate General in both cases will be available by the end of this year, and that the Court will then hand down its decision in the first half of 2015.

A particularly interesting “unknown” is whether the CJEU will find the European Patent Package, which provides for no court remedy against decisions of the Boards of Appeal of the EPO, to be in conformity with EU law. For example, if the EPO decided to revoke a European Patent for which Unitary Effect was requested pursuant to Regulation 1257/2012, then the underlying patent proprietor might argue that it is not in line with EU law securing the primacy of the CJEU and the national courts as the judicial organs of the European Union, if the Boards of Appeal of a non-EU organisation (i.e. the EPO) have the unlimited power to revoke such an EP-UE in opposition appeal proceedings, with no EU court being able to review such a decision and with the EPO being unable to refer questions of law to the CJEU and accept binding answers from Luxembourg. The CJEU may therefore have to decide whether it agrees to being curtailed in its jurisdiction when it comes to the validity/correctness of decisions by the EPO, or whether it declares the existing EU-Patent Package incompatible with the EU Treaties. This is probably neither a very simple nor a very pleasant choice for the Court. And it is by far not the only difficult legal problem that needs to be resolved, as Miquel’s excellent contribution shows.

4 The Unknown Unknowns

Finally, the general political climate in Europe and in particular people’s opinion towards the EU and “Brussels” represents a big unknown unknown, also when it comes to the EU Patent Package. For example, on 25 May 2014, the United Kingdom Independence Party (UKIP) won the relative majority (27%) of UK votes in the elections for European Parliament. UKIP is a political party in the UK whose main policy is to leave the EU as fast as possible. UKIP has also opposed the EU Patent Package in the European Parliament. If UKIP also wins a substantial number of seats in the general elections in the UK early next year and becomes part of the government, this will most probably be the end of the EU Patent Package in its present form, as their project is “less Europe”, not more.

The “Eurosceptic Earthquake”, as it was termed by the BBC, has clearly shocked the established parties. Mr. Cameron, the current UK Prime Minister, has been reported as saying that the message had been “received and understood” and that the public was “disillusioned” with the EU. Whatever this exactly means and whether it will have any impact on the UK’s ratification of the UPCA remains to be seen. Currently, it seems that the UK government is still minded to ratify the UPCA before the next general elections in the UK. But then there is also the “giant tussle” on who shall become the next President of the European Commission, or, more broadly, the fight between integrationists and those like Mr. Cameron that believe that “Brussels has become too big, too bossy, too interfering”, so again some uncertainties do remain. The EU Patent Package is perhaps a pretty good example of a case where a (good or bad – may the CJEU decide) compromise between these centrifugal and integrationist forces was found, at least for the time being. The UK government did its best to keep “Brussels” (or, more precisely, Luxembourg) out of the game by excluding, or at least trying to exclude, provisions of substantive law from the EU Regulations governing the EP-UE. Whether this will work and, if so, whether it will receive “Luxembourg’s” blessing, remains to be seen.

In the same EP elections, the “Front National” (FN) also won a landslide victory in France, gaining 25% of the vote, with the UMP gaining 21% and the governing Socialists only 14%. The FN’s political program includes the re-negotiation of European treaties in order to break with the dogmatic European construction, which has “totally failed”, as they claim. They want French national sovereignty to be restored in all areas where it has gone and want France to restore the primacy of national law over EU law.

So at least part of the public opinion in Europe, it seems, has turned pretty much anti-EU. Even though the pro-European parties still hold a solid majority in most European countries and in the European Parliament, a worst-case scenario (from an EU perspective) where one or even two major states exit the EU no longer appears completely hypothetical – even though it would be a deplorable outcome for Europe! But looking a bit more into the crystal ball from a pessimist’s viewpoint, the interesting question is what would happen if the UPCA is ratified and the EU Patent Package enters into force by end of 2015 or early 2016, but then the UK (or France) decided to exit the EU a few years later?

In a worst-case scenario from an EU perspective, the majority of the UK voters might vote for an exit, in which case the UK would have to notify the European Council of its intention to withdraw pursuant to Art. 50 of the Treaty on European Union (TEU) and would have leave the EU within two years, i.e. by some time in 2019.

Art. 50 TEU further stipulates that the Union shall negotiate and conclude an agreement with the exiting State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. The EU Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification of withdrawal, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

In such a (hypothetical and worst-case) scenario, the future of the entire EU Patent Package would depend on the outcome of such negotiations, a big unknown unknown. The UK would fortunately still remain a member of the European Patent Organisation (EPO) and EP patents would still be granted with effect in Great Britain, but the UK would no longer be able to participate in the Unitary Patent and the UPCA, since this is reserved for EU Member States, according to the CJEU’s unequivocal opinion in C 1/09. Consequently, the local and central divisions of the UPC that have a seat in the UK would have to be dissolved or moved to another state, the UK judges would have to leave the UPC, UK lawyers would no longer be able to represent parties before the UPC, and the UPCA would need to be revised according to Art. 87 UPCA or even be completely re-negotiated, provided that the participating Member States are of the view that a Unitary Patent and a Unified Patent Court make sense even without the participation of the UK (and without Spain, Poland and Croatia).

In my personal opinion, it would probably be the worst possible start for the EU Patent Package if its legal foundations were to crumble and the UPC needed to be re-organized shortly after it has started taking on the first cases. Whether this consideration may prompt the UK (or the German) government to delay the ratification process until the announced referendum has brought clarity about the UK’s position remains to be seen. This is another unknown unknown of some imminent relevance, as the UK and German governments/parliaments will have to make the tough decision as to whether it is better for Europe to launch the EU Patent Package in 2015/2016, with the uncertainty of a UK exit in 2019 hanging over its head, or whether it is better to delay the entry into force until after a (hopefully EU-friendly) outcome of the referendum. In view of the fact that even in the best possible case, the UPC will anyway not be able to start operating before the beginning of 2016, waiting for the outcome of the UK referendum in 2017 would only cause about one more year of delay. If thoroughness of preparation and a solid foundation of the UPC are the guiding principles, it is probably worth waiting until then.

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