It is totally unacceptable to strip the competencies of the third seat of the central division of the Unified Patent Court now that it will not go to London but most likely to Milan. Lorenzo Montanari, executive director of the Property Rights Alliance (PRA), has said this in an interview with Kluwer IP Law. Last week, during the meetings of the IMF and the World Bank in Washington DC, Montanari delivered an open letter signed by Italian academics and lawyers to the Italian minister of economy and finance, underlining the importance of a UPC central division seat in Milan.
A few weeks ago, it became clear that Milan is now the only remaining candidate to host the seat originally designated for London. But apparently France and Germany want to withhold part of the London competencies. For Munich the chemistry and metallurgy cases have been claimed reportedly, and Paris apparently wants jurisdiction over pharmaceutical patents with SPCs. Is this also what you’ve heard?
‘Yes, unfortunately, this is true. Paris is demanding to restrict the original court jurisdiction guaranteed to London, and is claiming jurisdiction concerning pharmaceutical SPC patents. If this is to happen, it will be impossible for Milan to fulfill its duty as the third UPC seat.’
Is it acceptable, in your view, to transfer part of the competencies to Paris and Munich? For instance in view of the fact that the UK/London has traditionally had a more central role than Italy and Milan in the creation of the UPC or/and in life sciences activities?
‘No, it is not, as transferring the responsibilities assigned to London to Paris or Munich is backtracking and undermining Milan’s competency as a part of the Unified Patent Court. Even if Italy did not play a central role in the creation of the UPC, as you describe. A void has been created since the UK left the European Union. The first step in filling this void is to grant privileges to other states and EU member states, and Italy is the only country vocally advocating to fill the void.
Italy, as a nation, also makes sense, as it is currently ranked 2nd in Europe for brand protection and 9th for intellectual patent protection, which is essential in creating the appropriate environment for SPC pharmaceutical patents.’
Last month, a high-level conference was held in Milan completely focused on securing the seat of the central division. What was the outcome of the conference?
‘Together with Prof. Pietro Paganini, founder and president of the free market think tank Competere and our longtime partner in Italy, we felt the need to organize a policy event with high-end academics, lawyers, and representatives of the trade association such as Farmindustria and Federmeccanica to highlight the importance a UPC headquarter in Milan will have for innovation in Italy. Moreover, we had the pleasure to host, as a special guest, the undersecretary of economy and finance MP Lucia Albano. She confirmed how strongly the Italian government is negotiating with France and Germany to secure the seat for Milan, including all the competencies that were assigned to the London seat.
Once in Milan, the UPC’s headquarters will transform Italy into a vital innovation hub in Europe and the whole Mediterranean region, with a direct consequence of increasing foreign direct investment in Italy. During the conference, we discussed intellectual property rights and how anti-innovation proposals such as the ‘TRIPS waiver’ on Covid 19 vaccines have negative repercussions for protecting intellectual property rights and innovation, which has adverse consequences on health.
During the conference, we discussed the idea of sending an Open Letter – organized by Competere and the Property Rights Alliance, and writing the Italian government about the important role of the UPC in strengthening intellectual property rights and innovation in Italy.’
A month ago, a spokeswoman of the Germany ministry of justice said a decision about Milan and a possible redistribution of competencies was expected ‘shortly’. Do you know whether the negotiations are still going on?
‘I am currently unaware of the progress of ongoing negotiations, but hopefully the decision will come out soon. And that decision will hopefully result in Milan hosting the headquarters for the UPC. Italy is the only public candidate and granting this seat to another country unwilling to advocate for itself publicly will be a disservice to the European Union as a project.’
In a Managing IP article, the Milan issue was described as ‘the elephant in the room’ of the UPC. Among others, because an amendment to the UPCA is necessary, which would require approval from all contracting member states and could be legally challenged. What is your view on this?
For every member state, the ultimate goal is to finally establish the Unified Patent Court, which has been in discussion for the past two decades. There is a procedure for changing the location of a UPC seat. Under Article 87 of the treaty which established the UPC, the Agreement can be modified without requiring a new ratification process to address a change in the EU Treaties. Instead, changing the matters to be dealt with in the former London seat by dividing them among Paris, Munich, and Milan is illegal and dangerous to the stability of the UPC. It risks multiplying the proceedings connected to chemical and pharma patents, increasing costs, uncertainty, and bureaucratic bloat.’
The Managing IP article also describes the political sensitivity of the negotiations: ‘Would Italy formally challenge a decision to move more responsibilities to Paris? Could Milan pull out, or be shunted out, from hosting a central division? (…) the relationship between the three main seats – if indeed there are to be three – is a major question that all interested parties will want answers to before they start bringing their disputes to the court.’ Do you expect an acceptable outcome for all parties is possible?
‘We should challenge this arbitrary proposal to elevate Paris’s role over other members. And the data don’t support France as an alternative. As I mentioned above, according to the International Property Rights Index released last year, Italy ranked 9th globally for intellectual patent protection, 4th in brand protection, and 2nd in Europe amongst these categories. Italy, from an objective view, is the perfect nation to host the third seat of the Unified Patent Court.
The European Union and its member states have a great history of collaboration on complex issues, settling these through debate. An acceptable outcome can be achieved. However, not through a French-German partnership for dominance of European institutions, but ensuring that each participant in this European project can advocate for itself within the system. In case Milan being set aside of hosting the central division of the UPC will be a breakdown of trust between EU members.’
How important is the seat of the UPC central division for Milan and Italy?
‘On April 13, I had the pleasure of delivering, during the spring meetings of the International Monetary Fund and the World Bank in Washington DC, our open letter to MP Giancarlo Giorgetti, the current Italian minister of economy and finance, on the importance of having the third UPC’s headquarter in Milan.
With this open letter, which was signed by important academics and lawyers as well as a think tank, we want to reemphasize we support the Italian government and why a third UPC headquarter in Milan will be of paramount importance and transform Italy into an important international hub for innovation and intellectual property rights.
“The candidacy of Milan”, the open letter says, “for one of the three central seats of the Unified Patent Court, is an excellent opportunity for Italy to acquire not only a central role in the European patent protection system, but also to create greater awareness of the central role of intellectual property in the country’s economic and productive system. (…) Milan is the manufacturing capital of Italy, an international pole of fashion and design, and home to ten universities. This is why the city has all the right cards to become one of the three headquarters of the Unified Patent Court, especially of the life sciences cluster. A survey by Assolombarda shows that 30% of the 250-billion-euro turnover is achieved in Lombardy. The innovation sector is already a European benchmark in terms of production and the quality of services, and would become an even more important driving force for the entire economy of the city and the country with a legal seat such as that of the unified court”.’
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If this was true, Italy should withdraw its ratification before the 1st of June, so that the UPC would not start at all.
Insistent rumours say that already on 25 April next the Administrative Committee of the UPC will address the issue of the fate of the London branch of the Central European Patent Court, which has become unavailable due to Brexit, and that on that occasion the Italian representatives – diplomats with no competence in IP matters – will formulate a proposal agreed with their counterparts from France and Germany that would provide for the reassignment of this seat to Milan, but with much reduced competences compared to those that were allocated to London (which included chemical-pharmaceutical patents, while electronic patents are the responsibility of the Paris office and mechanical patents of the Munich office). In practice, Milan would ‘cede’ to Paris the chemical and pharmaceutical patents for which a Supplementary Protection Certificate was issued (today granted for the majority of those that led to a drug being sold on the market) and all the rest of the chemicals to Munich.
The reallocation to Milan of the seat already assigned to London is in accordance with Article 87.2 of the UPC Agreement, which provides that it is within the competence of the Administrative Committee to amend the Agreement in order to bring it into line with an international patent treaty or a change in Union law: and Brexit is precisely the latter hypothesis.
Not so the partitioning of the competences already assigned to the London seat, because this partitioning does not fall within the scope of the amendments that the Administrative Committee of the UPC can adopt pursuant to the aforementioned Art. 87.2 of the Agreement and therefore in order to be legitimately implemented would (it does!) require the execution and ratification by all the States of an amending agreement.
It would therefore be enormously detrimental not only to Italy, but to the entire system. First of all, precisely because a partition of competences deliberated by the Administrative Committee, even unanimously, would be illegitimate, it would give rise to (well-founded) disputes in chemical and pharmaceutical cases that would be brought before the headquarters in Paris and Munich, which would slow down or block (if the intervention of the Court of Justice of the European Union were needed to settle the matter, as is likely) important cases in this decisive sector.
Secondly – and this is even more serious – this fragmentation of competences will make the system unmanageable, because in many cases it will lead to a multiplication of chemical and pharmaceutical lawsuits, since it will not be possible to request in a single lawsuit the revocation or declaration of non-infringement of two or more patents relevant to the same product, when the classification of them is not homogeneous, because only some have resulted in the grant of a SPC (and for them the case would have to be filed in Paris) or because of the remaining some are classified as chemical (and therefore destined for Munich) and others as pharmaceutical (and therefore for Milan). The same problems would also arise in the case of a simple split of the competences of London between Paris and Munich.
This would prevent a joint handling, which is instead very desirable, both to reduce the costs of litigation and (and above all) to prevent inconsistent outcomes, and would also make coordination with infringement cases much more difficult in case of bifurcation. The decision to allocate chemical and pharmaceutical cases to a single seat was not arbitrary, but reflected both a legal and an economic logic: this is all the more important, since the reluctance of companies in this sector to submit their patents to the UPC is well known, so that this dismemberment of competences could induce many of these companies to patent state by state, making the entire Unitary Patent and UPC system much less appealing, and therefore also Europe much less attractive for foreign investments in the chemical-pharmaceutical field.
It is not true, moreover, that Milan is less suitable than London to host this location: Milan is one of the most modern cities in Europe, with perfect logistics, as demonstrated by the management of Expo 2015 and the assignment of the 2026 Winter Olympic Games, at the centre of one of Europe’s leading economic areas, both for manufacturing industries of excellence and for important research centres, especially in the pharmaceutical and life science sectors. Italy, incidentally, produces 52% of the drugs that are sold in the European Union.
So anyone who cares about the success of the Unitary Patent and SPC system must take action to avert this outcome and insist that the European governments agree in the simplest way, i.e., that the London branch of the Central European Patent Court be reallocated to Milan, without changing its competences under the Agreement, and that the three central seats all become operational at the same time on 1 June forthcoming.
“The reallocation to Milan of the seat already assigned to London is in accordance with Article 87.2 of the UPC Agreement, which provides that it is within the competence of the Administrative Committee to amend the Agreement in order to bring it into line with an international patent treaty or a change in Union law: and Brexit is precisely the latter hypothesis.”
This assertion needs some elaboration. What exactly is the legal basis, either in an international treaty, or in Union law, which could justify the use of Article 87(2) to amend the UPCA in this precise manner?
The Intellectual Property chapter of the UK Withdrawal Agreement does not mention patents or the UPC whatsoever. In fact, the UK Withdrawal Agreement mentions patents precisely once: namely in Annex 2 to the Northern Ireland Protocol, paragraph 7, which refers only to Regulation 816/2006 on “compulsory licensing of patents relating to the manufacture of pharmaceutical products” as one of the legal provisions applicable in Northern Ireland.
This seems to fall a long way short of providing any legal basis for amending the UPCA, still less any legal basis for substituting “London” with “Milan” in the establishment of the central division.
So, for Article 87(2) to apply, there must be some other concrete legal act which can provide legal basis. And yet nobody ever seems to be able to identify what that is.
From a professor in IP law, I would expect a bit more legal basis and a bit less biased promotion of the national economic interests of his own country. I can agree on the bit where the argument is made that the redistribution of competences is a serious breach of the UPC agreement and international law in general. But why the same can’t be said about the relocation to Milan remains totally unclear.
We need a proper redraft of the Agreement and re-ratification by the Member States willing to participate in the amended system.
The problem is: if Italy accepted this sub-optimal proposal from France and Germany, which Member State would dispute the fait accompli?
It is most urgent that Italy does not accept the proposals and strongly opposes any “temporary” relocation of the London section to Paris and Munich, which relocation also does not have any legal support in the Agreement and is used by France and Germany to put pressure on Italy.
The best thing for Italy would thus be to withdraw its ratification today, so as to put the UPC/UP on hold, thanks to Art. 89.
“From a professor in IP law, I would expect a bit more legal basis and a bit less biased promotion of the national economic interests of his own country”
His CV looks more like he is a litigator than a law professor:
https://www.iplawgalli.it/en/avv-prof-cesare-galli/
“His professional experience includes important litigation, both in Italy and abroad, relating to all aspects of Intellectual Property Law, in particular trademarks, domain names, patents, designs, PDOs and PGIs. He has often handled international and cross-border matters.”
Follow the money. The patent litigation industry wants the UPC at all costs, even if the new system is unaffordable for small companies.
The UPC was ratified by Italy after big companies (Confindustria) lobbied, small companies were mostly against this golden patent court.
The situation is similar in other smaller countries like Portugal and Slovenia.
The local industries and patent representatives where not in favour or participating in the UP/UPC system, but those two countries were lured in the UPCA with the promise of an “Arbitration Chamber”. Do we really need two arbitration chambers in the UPC contracting states? I do not think so!
As forum shopping is not excluded at the UPC, it is doubtful that the legal profession in those two countries will ever benefit from the UP/UPC system.
I too would have expected a little more in the way of substantive legal basis.
Article 87(2) UPCA provides the AC with the power to amend the UPCA to bring it into line with “an international treaty relating to patents or Union law”. This revision power is therefore limited to aligning the UPCA with EITHER:
(a) an international treaty relating to patents; OR
(b) Union law.
The UK’s Withdrawal Agreement is an international treaty. Whilst it contains provisions that (dis)apply Union law to the UK, it does not modify Union law itself. Thus, whilst it is ARGUABLY an “international treaty relating to Union law”, this is not certain.
In any event, an “international treaty relating to Union law” is NEITHER (a) NOR (b) above. The UK’s Withdrawal Agreement is therefore NOT RELEVANT to Article 87(2) UPCA.
I should also point out that the UK’s Withdrawal Agreement does not in any way create or modify international law relating to patents. It also makes no mention whatsoever of the UPC Agreement or any element of the Unitary Patent Package. This means that there is nothing in the UK’s Withdrawal Agreement with which the UPCA can be “aligned”.
This is the elephant in the room that supporters of the UPC have studiously avoided tackling. The proposed redistribution of competences is just the cherry on top of a mound of rule of law violations that have simply been swept under the carpet.
“Under Article 87 of the treaty which established the UPC, the Agreement can be modified without requiring a new ratification process to address a change in the EU Treaties.”
You need a positive source of EU law for that, I don’t see any EU law that says “Milan”. Saying the UK Withdrawal agreement is enough as a source of law to do that is yet another abuse of law.
While it is doubtful that the UK Withdrawal agreement applies to Art. 87, certainly it does not support an amendment of the competences reserved to the three sections of the UPC central division.
Italy should withdraw now its ratification, so that the UPC can be properly amended. This would also help to solve the current issues of the UPC (e.g. CMS and opt-out).
It would be shame for Italy (and also a risk for the whole UPC/UP system) to accept the current proposals of France and Germany.
Robot, what makes you think that withdrawal of Italy’s ratification would represent a roadblock to the UPC? Do you not think that it would simply result in yet another serving of legal fudge aimed at keeping the show on the road?
Without Italy, I really cannot see how the UPC Party could “interpret” Art. 89(1) UPCA: “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”
Already interpreting the 3 states as DE, FR and IT (instead of UK) is borderline, since UK was certainly a EU member state in 2012. DE, FR and NL seems impossible to me.
However, nothing is impossible for the UPC Party, considering the entry into force of the PPA in 2022.
Robot, I think that your last sentence above explains the point that I was trying to make.
I would suggest to take one step after the other.
First, would the UPC Administrative Commitee – or maybe some of their friends from the UPC Advisory Committee? – mind letting the potential UPC users know,
a) on which legal basis the UK is supposed to have “withdrawn” from the UPCA and its protocols,
and
b) on which date this is supposed to have taken effect?
https://www.stjerna.de/upca-uk-withdrawal/?lang=en
I bet that the UPC Administrative Commitee will never answer these questions, at any rate not before the UPC has started.
UPC Administrative committee cannot be sued for maladministration in front of a court, so it’s pretty much “we do whatever we want”.
Too true. The same is also true for the complete mess over opt-outs. If technical problems with the CMS that keep “unexpectedly” occurring end up making it literally impossible for an opt-out to be filed in the sunrise period, who can an aggrieved party sue (or even complain to)?
When comparing the original opt-out rules with the present ones, it is manifest that the change has been carried out in order to artificially increase the number of granted patents trapped at the UPC. This aspect is reinforced by the difficulties using the CMS system.
When the Registrar is not able or not wanting to help users, it makes the situation even worse. What good is a Registrar which does not know how to best use the CMS system and advise potential users?
The fear has been from the beginning that there will not be enough cases for the UPC to be viable from economic point of view, so that any measure helping to artificially increase its workload is welcome.
It would be interesting to make public the provisional budgets for, let’s say, the first three years of the UPC. I doubt that those figures will ever be made public as it would be too easy to catch the actors of the UPC with their fingers in the jam pot.
At what point does the “we do what we want” principle run into the buffers? Perhaps not until an infringer loses before the UPC and some court or other is asked to issue an injunction, or find the loser to be in contempt of court for failure to deliver the relief ordered by the court?
But if big business in general is content for its disputes to be adjudicated outside the courts, will it acquiesce in the decisions of the UPC, so that they are never challenged? Consider that other supra-national patent entity, the EPO. Increasingly, the attitude there seems to be “we do what we want” and most everybody, in particular most of the EPC Member States, is happy to turn a blind eye to erosion of the Rule of Law.
Dear Max Drei,
You have a good point.
Any decision of the UPC will at some point have to be enforced. Especially if the UPC intends to have a long arm for its jurisdiction.
There are mechanisms by which court orders can be enforced, even outside the territory of its direct competence. However this is only valid for court orders from an independent and impartial tribunal established by law, cf. Art 6(1) ECHR.
Serious doubts can be expressed for the UPC when one sees how the UPCA should be fiddled by its proponents/supporters. This is especially the case when the amendment is meant to be carried out by using a mechanism of amendment which has never been foreseen for this purpose, cf. Art 87(2) UPCA.
The UPCA is a treaty subject to the VCLT. One can turn around and look at the UPCA and the VCLT under whatever angle, the crystal clear provisions of the UPCA are not open to much interpretation. Even a first year law student would realise this.
What is actually flabbergasting is that learned legally qualified people are in for such a dodgy interpretation of the UPCA. One wonders why? It is just enough to hear some potential members of the UPC complaining that its belated opening deprives them from some income.
The situation at the EPO is slightly different, but the rule of money seems to have replaced the rule of law. At the EPO, the tail is wagging the dog. The AC rubbers stamps the desiderata of the upper management. This is only possible with the help of the so-called “cooperation” budget which is used and abused by the present and the former tenant of the 10th floor.
For the UPC and the EPO, just follow the money. It is a sad reality.
If Italy ever thought that France and Germany would give up the domains allocated to London after very harsh negotiations and a compromise like the EU knows many, it was at least naïve.
It was more than evident, that without the London section, the domains allocated to it and specified in Annex II of the UPCA would not simply be shifted “en bloc” to another place, whatever this place might be.
Once the UK has gone, it does not come as a surprise that the two leading nations in patent matters within the EU do not want to see very important technical areas like pharmaceuticals and chemistry going to another place. It was actually foreseeable.
The withdrawal of the UK from a treaty not having a withdrawal or exit clause is by no means certain.
That Art 87(2) UPCA is envisaged by the proponents of the UPC in order to overcome the UK/London problem is nothing new.
However, it has been made clear at many occasions and by many commenters that Art 87(2) UPCA has a very specific purpose. It is to avoid a new ratification once all contracting states have adopted in their national legislation some EU regulation or some international treaty on patents. It has never been envisaged in order to correct the UPCA after Brexit. There is no interpretation under the VCLT allowing such a sleight of hand.
There is also Art 87(3) UPCA which would allow Italy to contest a decision taken by the Administrative Committee under Art 87(2) UPCA. Italy might however fear that it could lose the third seat if it would do so.
Claiming that it will be impossible for Milan to fulfil its duty as the “third UPC seat” if IPC classes A and C are not dealt with in Milan is a gross exaggeration. There are actually only three different locations for the central division which has its seat in Paris. The UPCA has never had “three seats”!
What brand protection has to do with SPC pharmaceutical patents needs an explanation and not a mere allegation.
It is hard to believe that the “third seat of the UPC” will transform Italy into a vital innovation hub in Europe and the whole Mediterranean region, with a direct consequence of increasing foreign direct investment in Italy.
I cannot see, for obvious reasons, any investment from foreign companies going to the South of Italy. Tradition and legal certainty seem to have a different meaning there. Rather throw the money out of the window. One could also say that Milan has already such a degree of pollution that it does not need more investment in industry.
The impact of foreign investment in the UPCA contracting states has never been properly assessed either. It has been a postulate of the proponents of the UPC. No hard figures have ever been shown.
The impact on SMEs in the UPCA contracting states, and hence for Italy which has lots of them, has never been assessed either. Why do Poland and the Czech Republic refuse to join the UP/UPC system? Exactly for the reason that it could harm its industry.
It is certainly a matter of prestige for Italy for Milan to become the third location of the central division. However, all the reasons given in the blog and the plea of Prof. Galli for the technical areas originally foreseen for London to go to Milan, have to be taken, not with a pinch of salt, but a vat of it!
While we are discussing here, the UPC will soon become fait accompli…
FAIT ACCOMPLI
noun [ C ] UK /ˌfet ə.kɒmˈpliː/ US /ˌfeɪt ə.kɑːmˈpliː/ plural faits accomplis UK/ˌfet ə.kɒmˈpliː/ US/ˌfeɪt ə.kɑːmˈpliː/
something that has already happened or been done and cannot be changed:
The policy change was presented to us as a fait accompli, without consultation or discussion.