The start of the Unitary Patent system ‘is a big event with big economic consequence. Europe could reconstitute their economic relevance’ around it, says John White, Special Counsel of law firm Harness IP in the US. In an interview he told Kluwer IP Law not everybody seems aware yet about the upcoming game changer, but his view is clear: ‘Everyone who files a US application should now also file an EPO application.’
Generally speaking, what do bigger businesses in the US know about the Unitary Patent system?
‘Bigger businesses in the US who already file regularly in the EPO have been informed about the existence of UP and the UPC to some degree. In instances where their business in Europe is particularly patent leveraged or dependent, i.e., pharma and biotech and chemical, they doubtless have been thinking about both UP and UPC since it became certain that the each would occur. We have, after-all, been awaiting the actual “event” for some time…..To determine who likely has this knowledge just see which companies are among the top 50 US filers at the EPO. This list will have some sophistication and knowledge, those not listed will not.
For small and medium sized businesses in the US that are infrequent or irregular EPO filers, they will learn about the UP and UPC with their next “grant decision” reporting letter! Surprise! A boiler plate paragraph or two describing both will be sent and a rapid “decision” will be required. I expect many telephones calls will be generated about the implications of this development! US centric companies rarely have a solid grasp of IP events beyond our borders. (Not even in Canada or Mexico…..).’
In a recent article, you wrote that once the Unitary Patent system has been introduced, ‘not filing in Europe amounts to patent malpractice’. Can you explain?
‘A considerable impediment to expansive patent coverage across Europe has always been expense. The initial costs for some countries are and were simply too much for the likely economic or business leverage that would be had, and then the annuities and attorney fees for such added up far too quickly. As a result, most patent coverage, even if obtained, was not renewed except in a few major countries. But, more likely, owing to steep initial expense, broad registration/validation was not even seriously considered. This is especially the case for early-stage companies. Money is tight, and even if strategically it made sense to obtain/maintain coverage, owing to future prospects, it was lost owing to other priorities. For existing companies, familiar with Europe, they just obtained coverage in a few key countries and hoped that was enough for their purse and purpose.
But now, especially in the early years, i.e., up to 7 years from grant, a UP is only about 1/3 of the cost of a single US patent to renew. It is also a tiny fraction of what it would have cost previously to have obtained and maintained patent coverage in all these UP countries. Plus, it will only have one reminder, and one annuity payment! Hence, for small and medium and new EPO filers, if you have success at the EPO through grant it makes absolutely no sense not to proceed to a UP. It is cheap, coverage is expansive, and it will only get better as more countries join.’
Patenting is about “possibilities” being maintained for future use, i.e., a “hedge” against future events and outcomes. If there is no “right” there is no “hedge”. The UP simply makes keeping that possibility of “rights” across Europe far more obtainable than in the past. In addition given the economic activity covered by the UP and the low cost, it makes as much or even more sense to obtain this patent when compared to a US patent. That is, if a decision maker can justify and budget for a US patent, it makes even more sense to also obtain a UP. It is that simple.’
If Europe is to become more popular for filing patents, will this be to the detriment of other international markets, in your expectation?
‘No. Here’s why. From a US perspective, post-WW II, worldwide economic activity has slowly but surely ramped up. As a result, the proportion of US economic activity vis-à-vis the world has slowly shrunk. At some point in time, different for each company, their business interests outside the US began to equal and sometimes outweigh their interests inside the US. While the US grew, business prospects outside the US grew even faster and in more places. Hence, cross border collaborations underpinned by IP rights proliferated. The business world steadily “globalized”. So, it has never been a question of reducing filings in one place in favour of filings elsewhere. Rather it has been a question of added filings to cover new collaborations and ventures. In the modern moment, supply chains have more day-to-day influence on where to increase or decrease filings. On the consumer side, as a world-wide middle class expands and becomes more affluent, more filings in more countries is the only strategy.
Europe has always been difficult for business with different currencies and languages and laws and cultures and borders. In recent decades, these barriers have been steadily reduced. The advent of the UP and UPC is, for us, another barrier to pan-Europe business being reduced or eliminated. UP filings should be “full speed” ahead!’
Applying for unitary effect for patents means these will be exposed to the jurisdiction of the brand new and untested Unified Patent Court. Isn’t that an important disadvantage of the system, at least in the upcoming years?
‘No. At least not for newcomers or infrequent filers. For those with a well-established strategy for filing in Europe: they are likely committed to the status-quo. They have organized aspects of their business and collaborations around their existing filing and enforcement strategy. For them it is probably best to use a “wait-and-see” strategy. Perhaps put a few properties into the UPC system and see what can happen, but otherwise maintain the status quo for the rest.
As for newcomers and infrequent filers: the system as it existed before is irrelevant. It was a part of the problem. Too expensive, too piece meal, too many different laws and standards and courts, and too slow. The UPC should address all these deficiencies!’
The UK is no longer part of the UP system. Is this a big difference for US companies?
‘Let’s face it: the UK is “special”. It has its own everything; and, Brexit was just the icing on the cake. If you had or expected significant business interests touching the UK, it always required a unique solution undertaken with UK counsel. Always. So, for us in the US nothing has changed. The UK is and remains a “special” case and requires very expensive lawyers to provide advice. If the UK makes a difference to what it is you are pursuing, nothing has changed.’
Earlier this month, the European Patent Office published its Patent Index 2022, showing that patent applications grew 2,5% compared to 2021. Do you expect this growth to increase due to the introduction of the Unitary Patent system as, among others, US companies will start to massively file patent applications in Europe now?
‘Once I get the message out there, yes! (Kidding). Surely, once this blog post is read, the die will be cast and waves of filings will follow! As for the US particularly: As Churchill said “you can always count on Americans to do the right thing – after they have tried everything else.” In my view, everyone who files a US application should now also file an EPO application, either directly or through PCT. There should be a massive increase in EP filings from everyone, and the US. The low barrier to entry to pan-Europe rights is simply too sensible to pass up. It preserves vast economic “possibilities” in ways that were simply not possible before. It is a “game changer”.’
The Czech Republic and Poland decided to stay out of the Unitary Patent system, among others out of concern their country would otherwise be flooded by patents from businesses outside Europe. Is their concern justified?
‘In my opinion, no. Where there are rights, there is economic activity, there is something to fight over. Good. The quickest way to economic prosperity is to create rights that can be defended and enforced. I’d much rather have economic activity to dispute and spar over than nothing and no one providing the service or product. Interest and investment is what you want. Not stagnation. Companies are naturally reluctant to commit resources to markets that they cannot defend. Bad and risky investment. The money and energy will instead flow to where protection and rights and predictability exist. Thus, I would expect their decision to be short lived. The UK, as well, will likely realize their folly and jump aboard the UP/UPC train.’
The start of the UP system has been delayed for many years, due to the Brexit and constitutional complaints in Germany, among others. Currently the lawfulness of the planned relocation of the London seat of the UPC central division to Milan is questioned – especially the fact that some competencies of the London seat will now go to Munich and Paris. Have the delays and legal debates changed your opinion about the system?
‘Do birth pangs change the opinion of the mother as to the worth or desirability of the child? No. They are forgotten, and we get used to whatever is the new system. Politicians like to agonize for years over issues to collect influence and favour. The delays have little to do with merit, but rather are anchored in issues related to preserving the status quo. In this situation, for the UP/UPC, in the short term anyway, the status quo is unchanged, i.e., you can still proceed as you did before and, in the longer term, a new product and set of benefits is offered. In the end, all patents derived from EPO grants will eventually find their way to the UPC. So, we’ll get to the same end one way or another.’
Is there anything else you’d like to mention?
‘The EPO should promote the foregoing message around the globe. This is a big event with big economic consequence. Europe could reconstitute their economic relevance around this event! It is that big!’
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“they will learn about the UP and UPC with their next “grant decision” reporting letter!”
Well, I am astonished to read this. The moment you the communication under Rule 71(3) [=intention to grant] is issued is the moment to explain the new option, as it was the moment to think about where to validate. And that is also when the applicant should think about whether the proposed claims fit their business goals.
“The UK, as well, will likely realize their folly and jump aboard the UP/UPC train.”
The UK may one day realise that they should have stayed in the EU, but I would have been interested to read how Mr White thinks the UK could jump aboard the UP/UPC train.
2/3 of patents in the EU are granted to non-EU companies, so money is flowing outside of Europe.
The UPC will only make the matter worse.
Where are the real macro economists?
“The UK, as well, will likely realize their folly and jump aboard the UP/UPC train”.
So speaks a person who clearly does not have a strong grasp of either the legal or the political barriers to the UK’s participation in a system whose strongest proponents (now) agree is open only to EU Member States.
Whilst it is nice to see the views of patent professionals from outside of Europe, it would help to make those views more relevant if they paid attention to key details. Of course, if the commentator is suggesting that the lure of the UPC will provide a strong enough incentive for the UK’s electorate to vote to rejoin the UK, then I would be VERY interested to hear his thinking.
Everything is not lost for the UK, at last as far as the legal profession is concerned. UK lawyers will be able to represent parties before the UPC as long as they have a European litigation certificate.
Where do you take it that British lawyers can get a European litigation certificate? British lawyers can only represent parties before the UPC if they have next to their British passport a passport from a EU member state, for instance an Irish one. They could also have a permanent residence in a EU member state and be able to represent parties before a court in a EU member state. “Normal” British lawyers are thus excluded from representation before the UPC!
A lawyer can only represent parties before the UPC if it can represent parties before courts in an EU member state.
British qualified representatives under Art 134 EPC can obtain a litigator certificate, but only for a transition period of one year when delivered by certain British institutions. The same applies for all other institutions presently delivering litigators certificates, like CEIPI or Fernuniversität Hagen.
In the future the training center in Budapest should be the main center authorised to deliver the litigators certificate allowing a representative under Art 134 EPC to represent parties before the UPC. After the transition period of one year, accreditation of other institutions will be possible after a positive decision of the Administrative Commitee of the UPC.
The devions whether a lawyer or a qualified representative under Art 134 EPC, is figuring on the list of representatives before the UPC, is taken by the Registrar.
I invite you to look at the Rules on representation in force since 16.06.2022.
Dear “Do we need…”
The transitional period of one year under Rule 12(1) of the Rules on the European Patent Litigation Certificate does indeed include a number of qualifications offered by UK institutions. However, this does not preclude UK-based or UK-national EPAs from obtaining an approved EPLC elsewhere after this period expires, for example if they do not benefit from the “grandfathering” provisions of Rule 12(1).
I am not sure from where you are drawing your assertion that the training centre in Budapest will in future be the “main centre”. As far as I know, many of the other EU-based institutions currently on the “grandfathering” list are also applying for suitable accreditation. CEIPI, for example, does not place restrictions on nationality for participation in its current litigation diploma and I have heard no indications that it will place such restrictions on future versions of the course which are likely to be accredited as complying with the EPLC.
Article 48(2) UPCA does not contain any restrictions on nationality for representatives under Article 134 EPC.
Unless institutions offering the EPLC decide to impose nationality/residency restrictions, I cannot see why British European Patent Attorneys would then find themselves locked out of obtaining an EPLC in accordance with Article 48(2) UPCA.
As far as “normal” lawyers are concerned, Article 48(1) UPCA does not directly impose any nationality restrictions. It requires that the lawyers be authorised to practise before a court of a Contracting Member State. Do all of the Contracting Member States place nationality and/or residency restrictions on such rights? I genuinely do not know, and would be interested in being informed. I suspect that there may be at least some current or future Contracting Member States whose laws permit non-nationals/non-residents to act before their courts, but would welcome confirmation or disconfirmation of this.
In any case, while the number of British lawyers with appropriate qualifications might be relatively low, it will be non-zero. It might be expected that those who do meet the necessary requirements find themselves greatly in demand.
The whole article/interview illustrates best how the wolf is brought into the fold.
I can fully agree with the commenter who reminded that presently 2/3 of patents in the EU are granted to non-EU companies. I also agree that the UP/UPC system will only make the matter worse.
If US applicants follow the advice given in the article/interview, the number of applications from outside the EU will increase and the balance in favour of EU patent holders will be even more negative.
There is another aspect which is often forgotten: the UP/UPC system opens a single door for litigants from outside the EU. Presently they have to file court cases in different countries if they want to attack EU patent holders. With the UPC, litigating will be made easier for EU patent holders, but more for non-EU patent holders in view of their global size.
The creation of the EU trademarks has already shown how it is beneficial to non-EU countries to have a single entry door for filing, but also for challenging trademarks. the same will happen with patents, with the big difference that there is no ECJ at the end.
It is naïve to think that US investments will increase in Europe due to the UP/UPC system. The opposite will rather be the case when one looks at the recent legislation enacted by the Biden administration.
Politicians have always been led to believe by the proponents of the UP/UPC system that the advent of the UPC would have a positive effect on the European economy. Nothing is sure in this respect as reliable figures have never been produced. The impact on European SMEs has never been seriously evaluated.
The UP/UPC is not made for SMEs whether they sit in the EU or outside. Poland and the Czech Republic have weighed the pro and cons of participating in the UP/UPC system and it is not for an American patent specialist to tell them that they are wrong.
Big US pharma, biotech and chemical companies will indeed profit from the UP/UPC system as it makes it easier for them to enforce their patents against their EU competitors. As they hold more EPC patents than their European competitors they will be in the advantage. In this endeavour they will be helped by internationally active lawyer firms active in litigation.
Big industries, especially from outside the EU and internationally active lawyer firms, whereby lots of those firms are of Anglo-Saxon, not to say from US origin, will be the big beneficiaries of the UP/UPC system.
Stating that the UK will realise its “folly and jump aboard the UP/UPC train” shows a deep misunderstanding about the Brexit and its consequences.
It should not be forgotten that when Brexit became reality, the US government urged the UK government to stay in the UP/UPC system in spite of the Brexit. This would have been ideal for US companies as they would not have had to change their habits. This was also the big hope of UK legal practitioners which had a strong influence in the setting up of the rules of procedure of the UPC.
To conclude, it is far from certain that “Europe could reconstitute their economic relevance around this event” It might rather bitterly regret it.
Whenever a research study is conducted, and the results publicised, it is prudent to check out who paid for the study because, as ever, he who pays the piper calls the tune. There have been, and will be, studies of the impact of the UPC on Europe, but I am not expecting any of them to deliver reliable conclusions. Recall all those pronouncements issuing out of the USA about 20 years ago, when it thought the world henceforth would be unipolar. Something along the lines of “These days, we make our own truths”. It could be that the creation and emergence of the UPC is a fine example of the power of money to create its own truth.
Dear Max Drei,
You are, alas, absolutely right. Who pays the piper calls the tune.
For instance, a lot publications from universities can be trusted, but here again not all of them.
Any sponsor for a study carried out by a university does certainly not want to see something negative to be said about its interests. Some scientists are even been directly “bought” by companies or lobbies. This has happened with the tobacco and oil industries, even those industries where well aware of the danger of their products.
The creation and emergence of the UPC is a fine example of what lobbies can achieve.
In a recent article in the German press it was made clear that lobbyists are directly helping the Commission in drafting EU regulations. This is also the case in some German ministries.
And you would like to see the rule of law prevail….
“lobbyists are directly helping the Commission in drafting EU regulations”
Nothing New here, the software patent directive was shadow written by large americain companies members of the BSA, with the name of Francisco Mingorance present in the word document distributeur by the Commission to the Council members.
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