While the patent world is waiting with anxiety what the German Federal Constitutional Court will do with the challenge of the legal basis of the Unified Patent Court Agreement, the man behind this complaint, Düsseldorf patent attorney Dr. Ingve Björn Stjerna has attacked the economic foundation of the UP system in a recent article on his website.
In his analysis ‘The European Patent Reform – The prearranged affair’, Stjerna writes: ‘before starting to legislate in a highly complex legal field like patent law, one would usually expect the legislator to have the impact of planned legislative changes profoundly and comprehensively assessed by respective scientific opinions and analyses’. However, this was not the case with the Unitary Patent system, Stjerna points out; the UP system was justified on the basis of ‘one single investigation on the patent judiciary, ordered by the European Commission: The report “Economic Cost-Benefit Analysis of a Unified and Integrated European Patent Litigation System”, presented on 26/02/2009, by Prof. Dietmar Harhoff.’
According to Stjerna, a lot is wrong with the two central hypotheses of the report: 1) the supposed duplication rate of court cases and 2) the argument that the UPC would set the level of the costs of proceedings ‘at a level equivalent to the cheaper continental systems like the German one’.
Stjerna: ‘A duplication rate of 16 to 31 percent as assumed in the Harhoff report is obviously too high. It was abandoned even by the Commission in an own study while the EU legislative proceedings were still ongoing. After its completion, a further study was published, amongst others authored by Prof. Harhoff, which found a duplication rate of only around 8 percent.’
And although the court costs are ‘more or less equivalent to or cheaper than those in the German system’, there is a big problem here as well, as the ‘maximum reimbursable representation costs at the UPC vs statutory German cost reimbursement’ are much higher: ‘In summary, it can be said that in proceedings with a lower value in dispute of up to EUR 500,000 the maximum reimbursable representation costs at the UPC exceed the statutory German RVG* reimbursement claim more than three-fold. (…) At a value in dispute of up to EUR 1m, the UPC limit exceeds RVG by roughly the factor 4.75, at EUR 2m approximately five-fold. The maximum is reached at a value in dispute from EUR 4m with almost six times RVG, before the spread is again decreasing.’
According to Stjerna, the enacted UP ‘legislative package (…) does not only contradict the initially communicated political motivation and promises, but (….) is also lacking the envisaged advantages. (…) the European patent reform has been adopted at EU level without defining the costs of unitary patent protection and of the proceedings at the UPC, both happened only well after the end of the legislative procedure.’
Only at the very end of his analysis, Stjerna says something about the legal challenge of the Unitary Patent and the Unified Patent Court Agreement before the German constitutional court, without admitting however he is the complainant.
‘A similar approach has been used for legal problems possibly endangering the enactment of the patent reform. These were and still are ignored or discussed away or, if this is not possible, a solution is postponed until some time in the indefinite future. (…) The present situation is special insofar as now a court is in a position to assess in detail the UPCA’s doubtful legal viability. By doing so, it can make up for what has been repeatedly and perhaps deliberately omitted in the European as well as in the national German legislative procedure, thus finally providing the badly needed legal certainty to the users.’
Later today, the German Parliament will discuss a motion of the right-wing Alternative für Deutschland (AfD), which is based on two of the arguments of the constitutional challenge. The AfD motion argues that the UPCA ratification bill did not have the requisite majority of two thirds of the members of the Bundestag and that UPC judges will not be independent since they are appointed by a panel which also includes attorneys at law and only for six years, and calls for the repeal of two acts concerning the Unified Patent Court and the Unitary Patent. The motion is not expected to get wide, if any support.
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* Rechtsanwaltsvergütungsgesetz, the German Lawyer’s Compensation Act
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Whether or not you share Dr. Stjerna’s point of view, it is undeniable that his comments are both rational and thought-provoking.
For a starter, here are a few thoughts from me.
If the UPC Agreement takes effect in the UK, then SMEs will be unable to select the Intellectual Property Enterprise Court (IPEC) as a litigation forum for European (UK) Patents … except for those EP(UK)s that are opted out, and remain opted out, of the exclusive competence of the UPC.
IPEC has, because of its affordability, been remarkably popular with SMEs. So why would the UK profession be in favour of ratifying an agreement that would prevent many (and, in the end, all) EP(UK) patents from being litigated there?
The UPC might be wonderfully cost-effective for those that need patent litigation covering multiple jurisdictions. However, it looks very much like it could wipe away all of the advances made by IPEC (and its predecessor, the PCC) in helping SMEs to engage with patent litigation in the UK.
Thus, given that the promised (vibrant) market in litigation insurance has predictably failed to materialise, what message (other than a raised middle digit) would ratification of the UPC Agreement send to SMEs in the UK?
There is another aspect which has been completely forgotten. Who will be the beneficiaries of the UPC?
Certainly not the EU industry, as barely a third of all applications entering the EPO come from applicants in member states of the EU.
On top of this, the number filings from SMEs from EU member states must be minute, although all the UPC proponents claim loudly that the UPC should be highly beneficial for them!
It would be easy for the EPO to give the filing figures from SMEs as they benefit a fee reduction! Why are they not published?
To sum it up: non-EU member states would primarily benefit from the UPC, and not to forget all lawyers firms having contributed to the setting up of the RoP in the manner regularly disputed by Mr Stjerna. They want to see a return on investment. The sooner the better. But this is the last reason why the UPC should come!
Enough is enough, and it is to be hoped that the Brexit and the GFCC will put an end to this stupidity.
Nothing against harmonisation of IP decisions in Europe, but not with the UPC.
Tecchrights: FINGERS OFF!!!
The UPC will not harmonise IP decisions in Europe!
Harmonisation by definition requires more than one view. Yet, the very essence of the UPC is to eliminate all but one view.
It is true that litigation on a national level may on occasion lead to diverging decisions. But that is a strength rather than a weakness of the current system. If the same case is decided differently by two courts, one may conclude that one of the two courts is incompetent. More realistically, however, diverging decisions indicate that the case is borderline and either decision is justified. Such a situation calls for a settlement as both views have equal merits.
Under the UPC the assessment of such cases will not be improved. The UPC will only have the effect thatthere will only be one judgement in such cases and that a diverging, but equally justified view will be excluded. Rather than looking a both sides of the coin, the UPC will flip the coin.
Dr Stjerna’s Paper reinforces some suspicions I always had.
Remember the Boer War that the English lost, and the Times journalist covering the action in South Africa? The one who truthfully send back one negative report after another. The one who then got a telex from his Editor back in London, with the order to “Never mind all that stuff Cedric. Send news of victories!”
It’s been a bit like that for The EU Commission and the Euro-politicians sponsoring the Unitary Court, throughout the court’s gestation period.
And the trans-national litigation law firms are only too happy to oblige.
What I don’t know yet is to what extent Big Pharma will “opt out” of participation in the UPC. What strikes me is that if the UPC is good for anybody, then it is trans-national Big Pharma. But if that part of the economy is not convinced, and declines to play ball, then who is, for Fxxx’s sake?
Consider the locations of the UPC central division. Pharma in England, Engineering subject matter in Germany. But who needs the Central Division so to concentrate patent litigation? It’s already like that, isn’t it, even without the UPC? Is there not already competition enough, between the litigation community in Germany and that in London, for the patent business? And is that competition good for the clarification of patent law in Europe? I think it is. And what about The Netherlands? Yeah, what about them? They are adept at taking the best from each of their two big neighbours, and doing patent litigation even better than either of them. Good so!
As IPO of a (larger) SME with more than 25 years of experience in the IP field, I would like to congratulate Mr. Stjerna to his new article regarding the European Patent Reform. We are a company with more than 3000 employees; our patent portfolio shows more than 2000 patents. In the past 20 years, we were involved in 10 – 15 patent litigation cases before German Courts.
In view of all my experiences, I have to agree 100% with Mr. Stjerna´s two key messages.
We never saw in our patent litigation cases as plaintiff the necessity to conduct court proceedings in more than one country. From the practical point of view it was always sufficient to litigate an infringement suit successfully in Germany, no duplication of proceedings was ever necessary.
A further advantage in connection with litigation in Germany were the very reasonable reimbursable representation costs. As shown by the figures in Mr. Stjerna´s article we have to expect significantly higher costs (and related risks) in the UPC system. I expect that such risks will not encourage SMEs to enforce their patents if they are infringed.
Accordingly, I have serious doubts whether the UPC system will really be an advantage for companies like us. I am aware that the situation might be different for bigger companies and/or other technical fields like biotech/pharma. Nevertheless, it is questionable from my point of view to “tailor” under wrong prerequisites a new European patent litigation framework which serves primarily only a fraction of the users of the IP system.
Tecchrights: FINGERS OFF!
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