(UPDATED) The German draft ratification bill of the Unified Patent Court Agreement will be discussed in the crucial legal committee of the Bundestag next Wednesday.
It is one of the issues that on the agenda of the legal committee for 25 November 2020, which was published today. According to this report of Bristows, the draft bill will also be considered in the Committee for Affairs of the EU and the Budget Committee, after which the (leading) legal committee will submit a report and recommendation to the Bundestag.
It will be interesting to see what position the liberal FDP takes in the discussion in the legal committee. As the draft ratification bill needs to be approved with a two-third majority, the votes of this liberal opposition party (which occupies 80 of the 709 seats in the Bundestag) are important. Last month the FDP filed parliamentary questions about the UPCA ratification bill (see this post), focussing mainly on the position of SMEs and the compatibility of the UPCA with the German constitution.
The German government answered the questions last week, stressing the advantages of the Unitary Patent system for European industry and the benefits for SMEs and arguing it has no doubt about the compatibility of the UPCA with German Basic Law or EU legislation: “Die Vereinbarkeit des EPGÜ mit dem Grundgesetz, insbesondere den Grundrechten, sowie mit dem Unionsrecht wurde umfassend geprüft.”
The ratification process is the second attempt to complete the formalities leading to full membership of the Unitary Patent system. Earlier this year the German Federal Constitutional Court declared invalid the parliamentary procedure which took place in 2017, because the UPCA ratification bill had been approved in the presence of no more than 35 members of the Bundestag.
The developments in Germany are being followed with great interest, as German support for the UPCA and the Protocol for Provisional Application (under which practical preparations for the new Unified Patent Court can start in full) will trigger the start of the UP system, although two more member states will have to be found to approve the PPA. The case before the Constitutional Court and the Brexit have caused enormous delays, but the German government has always supported the UP system and is keen on completing the ratification procedure as soon as possible.
However, it seems likely that – after the constitutional complaint that was filed in 2017 by patent lawyer Ingve Stjerna – a new constitutional complaint will be filed as soon as the parliamentary procedure is completed, this time by the FFII. Dr. Stjerna has also left open the possibility of filing a new complaint. This could further delay the entry into force of the system, or mean the end of it.
Position paper European academics
Last month, a group of over 30 European practitioners and academics published a position paper and stated “the Unified Patent Court system is not the best solution for Europe and for innovation”. They “urge all the decision-makers and persons involved in the process of adjusting the UPCA, following the withdrawal of the United Kingdom, to pause and to consider alternatives solutions”.
They “recall that the Unified Patent Court Agreement (UPCA) suffers some substantial deficiencies and constitutes a significant precedent that challenges the democratic and institutional processes in the EU. There is still time to reflect on the implications of these changes and to review the options for a EU patent system that could provide effective support for European innovation.”
It was somewhat surprising that, despite the uncertainties concerning the UPC, a report appeared this week that Ireland planned to organize a referendum about the membership of the UPCA next year (the report was later adapted). Yesterday a spokesman for the Irish Department of Enterprise, Trade and Employment denied such referendum (required in the case of a transfer of jurisdiction for patent litigation from the Irish courts to a new international court) is imminent. In the Irish Times he said: “When there is greater clarity on the timeframe for the UPCA coming into effect, Ireland will move forward with its own ratification process (…).”
Voices within the Irish business and IP community have argued that Ireland should campaign to host the central pharma division of the UPC, which had been planned in London but which will have to find a new place due to the Brexit. Ireland would be the fourth candidate. Milan has officially announced its ambition to house the London central division, it is rumored that the Netherlands and France are interested in welcoming the division as well.
UPDATE: This article was updated on 21 November 2020 to include the position paper of European academics and practitioners
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: “Die Vereinbarkeit des EPGÜ mit dem Grundgesetz, insbesondere den Grundrechten, sowie mit dem Unionsrecht wurde umfassend geprüft.”
Could they publish the result of this examination?
Just because the legality has been thoroughly examined does not say anything about the result of this examination.
UPCA ratification is also on the Bundestag agenda for the second and third deliberations on Thursday next week (item #15, https://www.bundestag.de/resource/blob/473450/ad9836b2695cf011e527e52a1feffe76/Tagesordnung-komplett-kommende-Woche-data.pdf), so no doubt that said Committees’ support of the project is guaranteed.
Well, I think that we can conclude that my powers of prediction are very strong indeed. On 2 November 2020, I stated that:
“we can already predict with 100% confidence what the responses will be, namely “Everything is in order. Nothing to see here”. We can also be certain that the responses will amount to nothing more than hand-waving, smoke and mirrors and half truths”.
Well, the answers provided by the German government match this prediction PRECISELY. My personal favourite is the answer provided in connection with questions regarding the absence of a cost-benefit analysis for the UPC and the possible impact upon SMEs. This is because the government’s “excuse” for not conducting any analysis is that they were happy to rely upon two prior “studies” that were conducted … in 2009!
The trouble with this is that, back in 2009, the legislation relating to unitary patents was COMPLETELY different. This is because the flavour of the day back then was the ECPC. That proposed system was struck down by the CJEU as being incompatible with EU law. Thus, unsurprisingly, the provisions of the UPC Agreement look rather different. There is also the matter that neither of the 2009 studies includes anything close to a comprehensive cost-benefit analysis.
Thus, the German government’s “excuse” for not conducting a full cost-benefit analysis is effectively that other people did some “back of a fag packet” calculations more than a decade ago in connection with a proposed legal system that was really quite different to what we have now.
Well, in the face of such compelling reasoning, I am sure that no one will doubt any of the government’s other assertions, such as:
“The compatibility of the UPCA with the Basic Law, in particular the fundamental rights, as well as with Union law was comprehensively examined”; and
“The federal government does not see any further constitutional deficits”.
I mean, there is no way on earth that these statements could be viewed as being deliberately misleading, right?
On the lack of UPC impact study, you have to “choose your supermarket carefully” (read the entire paragrah 4):
“The European Scrutiny Committee of the UK Parliament (House of Commons) found that that report was outdated and contained errors.”
“Ironically, although the Scrutiny Committee criticised the EU Commission for not offering an updated impact assessment study, the UK Parliament has yet to provide its own impact assessment (i.e. similar to one commissioned by the Polish government). The advice that the patent agents gave before the Scrutiny Committee concerned some practical points which revolve around litigation practices. However, an economic evaluation has not been undertaken thus far as to the exact impact on the national economy and the business of various sectors, despite repetitive requests. 
 See, e.g., IP Federation, Newsletter: Latest Activities: “Unitary Patent and Unified Patent Court”, 13 February 2013: “We are urging the Government to conduct a robust economic impact analysis based on the effect on the UK economy and publish the results for scrutiny before ratifying the Unified Patent Court Agreement”, available at http://www.ipfederation.com/activities.php?news_id=67.”
May be advisable to await the decision of the Federal Constitutional Court (“Bundesverfassungsgericht”) regarding the pending constitutional complaints (“Verfassungsbeschwerden”) asserting “insufficient judicial relief against a decision of the Boards of Appeal (“unzureichenden Rechtsschutzes beim Europäischen Patentamt gegen Entscheidungen der Beschwerdekammern”).
Widening the competency of the UPC to include in its competency any decision of the European Patent Office (now limited in Art.32(i) UPCA to “decisions of the European Patent Office in carrying out the tasks referred to in Article 9 of Regulation (EU) No 1257/2012”) would be one approach to resolve any such constitutional issues.
However, the UPCA itself might be deemed to be deficient regarding safeguarding constitutional rights.
“German support for the UPCA and the Protocol for Provisional Application … will trigger the start of the UP system, although two more member states will have to be found to approve the PPA. ”
Can anyone explain how the UPC can proceed without the ratification of the UK (which is mandatory under the UPC Agreement)?
From patent professionals in the USA, it is a constant criticism of governments in Europe, that they are in the pocket of Big Industry, ignoring the interests of every other user of the patent system. The proof of their assertions is right here, is it not, folks? The Bundestag has been “nobbled”, right.
And then there’s another point which no doubt carries weight in Berlin, namely, now that the Brits have left the UPC, the German national interest demands that we cannot leave the way clear for the French to take over dominance of patent litigation in Europe.
Oh the irony though. The better way to obstruct a French take-over, while continuing to pander to Big Industry is to prevaricate on the UPC, not hurry it into force.
“The federal government does not see any further constitutional deficits”.
This is a misleading statement, the EPO cannot be sued for maladministration nor refusal to grant.
The Government does not want to see it, nor wait for the pending decision from Karlsruhe on the 3 other complaints, which should be published soon (early 2021) because they fundamentally know that it will delay/destroy the project.
Not to mention the lack of a proper impact analysis.
This is bad law making.
The answers to the questions from the liberal party by the German government warrants some comments.
The UPC is good for SMEs
It is interesting to see how now the UPC should be good for UPC whereas everybody knows that SMEs are only the fig leaf behind which the big industry and big internationally active lawyers firms are hiding.
When one knows that just 10% of the applications filed at the EPO stem from SMEs (official figures from the EPO), and that the average number of validations is around 5, all the talk about SMEs profiting from IPR is nice to hear, but far from reality. One just has to read the last paragraph of the study “SME Patenting – An Empirical Analysis in Nine Countries, to see that there is a lot of hot air.
I rather trust the conclusion in Mr Xenos’ publication as the figures used there are very recent. “The Impact of the European Patent System on SMEs and National States and the Advent of Unitary Patent”, published in Prometheus, Vol. 36, No. 1 (March 2020).
The famous study of the EPO about SMEs is actually based on 12, in words twelve, examples. It is hard to believe that those are exemplary for European SMEs in general. Associating the use of patents and trademarks form SMEs, as in the joint study of the EPO and the EUIPO make the figures relating to their IPR use much larger as it actually looks.
When the German government alleges that the legal fees incurred by German SMEs when using the UPC are a much lower than fees in the own country, one wonders why the government did not start to make justice more affordable on its own territory. Why is there the need to resort to a supranational jurisdiction? This defies any logic.
Why has the German government not explained why Poland and the Czech Republic have signed but will not ratify the UPCA? Simply because it will have deleterious effects on their industry.
The compatibility with the Basic Law and Point 106 in the decision of the GFCC
It is meaningless to claim on the one hand that the compatibility of the UPCA with the Basic Law, in particular the fundamental rights, as well as with Union law has been comprehensively examined, and on the other hand that the government does not see any further constitutional deficits, in the total absence of any explanations on the topic. The question raised by the GFCC in point 106 has not been discussed whatsoever. What was then examination about?
The absence of translations
It is also incorrect to say that no translations are required in case of a UP. At least during the provisional period a patent which has been granted in French or German will have to be translated into English. In this respect, it should be checked that the UPCA is not in contradiction with the London Protocol which has been ratified by both Germany and France. It is also clear that the language in the proceedings is not necessarily the language in which the patent has been granted, see Art 49UPCA. Under some conditions it is the claimant who can chose the language of the proceedings, cf. R14UPCA.
R 14(2,c)UPCA allows for litigation in an EPO language, especially English, while at the same time allowing for holding the oral hearing in the national language of the local division as well as issuing the judgment in said national language. In that situation amendments to the patent have to be filed not only in the language in which the patent has been granted, but also in the language order by the local division.
The possibility or not to use the language in which the patent has been granted is defined in R 231-323UPCA. It means a contrario that it is not necessarily the case. Where is then the simplification?
Last but not least, whilst at the EPO simultaneous translation is for free when requested one month before the scheduled date, translation costs will be cost of the procedure which will be charged to the succumbing party, cf. R109UPCA.
The London Section of the Central Division
There is another problem which has not been resolved in the draft ratification bill: the status of the London Section. Claiming that a fundamental amendment of an international treaty by a mere administrative instance does not offend the basic law is simply defying any common sense. Simply alleging that some articles of the VCLT can be misused to this effect is not convincing.
Not only has Italy shown interest in the duties of the London Section, but also the Netherlands and now Ireland. Should the UPCA ever enter into force, the battle for the duties of the London Section will is as heavy as it was when before the UPCA was signed.
Art 87(2) is there to amend the UPC to bring it into line with an international treaty relating to patents or Union law. Changing the devolution of the duties of the London Section cannot figure under any of those hearings. It presupposes that all the contracting member states have previously adopted separately some amendments. Only then a mere decision of the administrative committee of the UPCA can be envisaged.
Art 87(3) UPCA foresees that a contracting state which does not want to be bound by an amendment of the UPCA under Art 87(1 or 2) can request a review conference. We will then be in the same situation before Art 7(2) UPCA was introduced. What happens if no unanimity can be reached at the revision conference?
Which proprietor not having lost its marbles will want any of its patents in such a system? This has by no means be made clear by the German government in its replies to the legitimate questions raised by the liberal party. The whole paper is full of vague statements with the aim of obfuscating the real issues
I would also like to draw the attention to the document: “The Unified Patent Court system is not the best solution for Europe and for innovation, and there are alternative systems to consider after Brexit”, originating from the UC Louvain, and having received support from numerous law professors all over Europe. One of them is even a former Vice-President of the EPO!
Looking at the various notes at the end of the paper is also very instructive.
It can be debated whether what has been done for trademarks within the EU needs to be done for patents, as the number of true supranational litigations is very low in view of the facts that the average number of validations in EU member states is around 5. The few companies really having to litigate in a large number of contracting states of the UPC can easily afford it. This is not the case for SMEs, whatever the German government might presently claim.
Trademarks are somehow different as they have an immediate impact on the customer. Patents are not something the general public is confronted with. The necessity of harmonising in patent matters is not as stringent as for trademarks.
In the case of patents, subsidiarity could be the best for all. What appears more important is to increase the cooperation between patent judges in all contracting states of the EPO, and not merely in EU contracting states.
This aim can be reached easily at the fraction of the costs brought by the UPC or any other supranational system. But this would mean less revenue for internationally active patent firms in patent litigation. Hence the UPC is a must for those people.
It simply confirms that the hand of the German bill drafter is held by lobbyists who want the UPCA to come into force at any cost and with only their interests in mind.
The UPC cannot be competent to decide for all EP patents as it is a closed convention only applicable for EU contracting states. EPLA would have solved the problem, but the EU did not want it!
The UPC suffers the same drawbacks as the EPC. No proper revision instance, and not even in the UPCA but in its implementing regulations which can bee amended by the administrative committee. If the latter decide to scrap the rule, national parliaments have no say in it.
There is so much in the implementing regulations that any control by a national legislator is impossible. This also has not been explained in the new draft of the ratification bill.
Art 31(1) Vienna Convention on the Law of Treaties (VCLT) states “A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose”.
Art 32 VCLT states “Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:
(a) leaves the meaning ambiguous or obscure; or
(b) leads to a result which is manifestly absurd or unreasonable.”
Art 7(2) UPCA states “The central division shall have its seat in Paris, with sections in London and Munich. The cases before the central division shall be distributed in accordance with Annex II, which shall form an integral part of this Agreement.”
The meaning of Art 7(2) is far from being ambiguous or obscure and does not lead to a result which is manifestly absurd or unreasonable. It is rather the interpretation of Art 7(2) in the draft bill suggesting that the duties of the London Section of the Central Division be shared by the Paris and Munich section which is manifestly absurd and unreasonable.
Art 31(1) VCLT states that “The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:
(a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty;
(b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.”
There is no agreement at this stage of all the contracting states about the transfer of duties of the London Section to the Paris and Munich Sections of the Central Division.
In view of the claims from no less 3 contracting states to obtain the transfer of the London Section onto their territory, such an agreement is far away and might never be reached.
Attempting the execution of a decision of the Paris and Munich sections taking over the duties of the London Section might therefore not be possible as all contracting states of the UPCA are contracting states of the VCLT. I cannot see any national judge accepting to execute a decision in violation of an international treaty.
FFII has written to the Bundestag and to the EU institutions:
“The possibility to sue an administrative body, such as the EPO, for maladministration before the courts is one of the fundamental pillars of our western democracies, also called the “Rule of Law” (TFEU art2) and is a categorical constitutional guarantee (i.e judicial review of administrative acts). This applies also to the institutional possibility, under the requisite constitutional system of separation of powers, to appeal acts and decisions of administrative bodies (e.g. the EPO), as it can be observed in all national systems and also at the EU level, as with the other intellectual property rights of trademarks and designs, where the decisions of the EUIPO are frequently appealed before the CJEU. In this respect, the constitutional mechanism that sustains the absolutely necessary separation of powers exists for intellectual property rights in the EU (trademarks and designs) but is spectacularly absent from the Unified Patent Court and Unitary Patent institutional arrangement.”
“To MN,The UPC cannot be competent to decide for all EP patents as it is a closed convention only applicable for EU contracting states.”
Yes, I agree. I stand corrected.
When looking at the problems of the UPC is experiencing with respect of EU Law, it could be useful to remember the way which led to the EPC.
It should be remembered that the negotiations for a “Community Patent” started in the sixties, but ended after four drafts due to the lack of unanimity of the then contracting states of the European Community. It is only the threat of the PCT which brought the Europeans back to the negotiation table.
In order to overcome the locked situation it was then decided to separate the grant procedure from the enforcement procedure. We ended then with the Munich Convention of 1973 as an open convention and the Luxembourg Convention of 1975 as a closed convention.
We all know what happened with the Luxembourg Conference. The UPCA is no more than a revival, for whatever reason, of the Luxembourg Conference. But the UPCA has the same problem as the Luxembourg conference: it is not a system valid for all EU member states, but merely the result of an “enhanced cooperation”. This is a first birth defect of the UPCA.
In 1973, by separating grant and use of the title, the EPC could be opened to non-EU member states at the time, e.g. Austria and Sweden. Being an open convention, trying to link it with the EU end up with the problems we presently experience with the relation between EPC and UP within the EU. As soon as a patent becomes an asset within the EU, EU law plays a role.
As the EPO is totally independent from the EU it is not bound to respect the EU law. As long as there is an opt-out, the problem is not so stringent. It becomes much more stringent after the end of the opt-out period as all EP granted and validated in the EU become UP will end up before the UPC, so that the problems cannot be swept under the table.
In this respect the FFII has a point. The problem is not the grant of software patents or of patents relating to CII but a real constitutional problem. Trying to bring both system in coherence with each other leads necessarily to quasi insurmountable problems. With EPLA, the opinion of the CJEU has been required with the result we all know.
It is interesting to note that the promotors of the UPCA have never wanted the CJEU to have a look on the UPCA. Trying to get a connection between the EPC and the UPCA by merely allowing prejudicial questions to be brought to the CJEU might not be enough. This can be considered as a second birth defect of the UPC.
In this respect, the papers published by the UCL and signed by many IP law professors put the finger on the right spot. If there is an absolute necessity for an EU wide patent, then it cannot be the UP as envisaged in relation with the UPCA.
On the other hand, as the European Patent system under the EPC has been working quite correctly and after the decision of the CJEU on the “exhaustion of patent rights”, problems linked with exercise of the rights of granted EP in the EU were quasi absent. The low number of validations also contributed to the peaceful relation between the EU and the EPO.
The problems of coexistence between the EPC and the legal rules of the EU can apparently not be overcome in the present situation. Overthrowing the whole EPO system, which was a real success story would be a waste of efforts and setting up a purely EU patent office would not bring much and bring us all 50 years back.
The only conclusion should be to bring the UPC to a rest in the same way as the Luxembourg convention was brought to a rest.
In parallel real efforts should be made in order to make the Boards of Appeal of the EPO truly independent of the President of the EPO. May be the complaints before the GFCC will have this effect.
The UPCA is actually the expression of vested interests seeing the big buck ahead. Those interests have taken the EU and its politician as hostages. It is therefore time to stop this non-sense.
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