UPC Draft Rules of Procedure - are we nearly there?

13 November 2014

The Legal Group of the Preparatory Committee has completed its examination of the 16th draft of the Unified Patent Court (UPC) Rules of Procedure, which was handed over by the Expert Group nine months ago. The resulting 17th draft is newly published and contains some important changes to address the concerns expressed by industry and professional bodies.

Once finalised, the Rules will govern conduct of litigation in the new Unified Patent Court and will be central to strategy regarding patent filing and litigation in Europe.

Key developments

Following lobbying by industry and professional bodies, there have been several key developments to the draft Rules of Procedure. These address, in particular, concerns about the risk of an "injunction gap" in bifurcated proceedings, as well as choice of language if the local or regional division allows for litigation in different languages, and the route for appeal of procedural points.

The key changes are considered below, but the full text of the 17th draft of the Rules of Procedure is available here. Amendments by the Expert Group following the written consultation are in red (16th draft) and further amendments by the Legal Group are in blue. There is also a table showing the Legal Group amendments compared to the 16th draft, together with explanatory notes, available here.

Bifurcation and fear of an "injunction gap"

One of the key concerns following earlier drafts of the Rules of Procedure was the risk of an "injunction gap". Bifurcation of proceedings, such that validity and infringement of the patent are decided separately, can result in the validity decision coming many months after infringement is decided.

If there is a finding of infringement, an injunction may be granted to keep the defendant off the market. But if the patent is later held to be invalid, such that there cannot have been any infringement and the injunction was wrongly granted, the patentee may have suffered irrecoverable loss as a result, especially in fast-moving markets. Given the force of a pan-European injunction, this has been a major concern to many.

Under the previous two drafts of the Rules of Procedure, it would have been possible for local or regional divisions to send validity issues to be determined in the central division several months after the start of existing infringement proceedings, and after a date had been set for the hearing to determine infringement. If such bifurcated validity proceedings were to run their normal course, there would be a gap of several months after the infringement hearing before validity was determined.

Rule 40(b) in the 17th draft Rules goes some way to addressing these concerns. Under this rule, a counterclaim for revocation that has been referred to the central division in circumstances where the infringement action has not been stayed will be accelerated. The judge rapporteur of the panel of the central division "shall endeavour to set a date for the oral hearing on the revocation action prior to the date of the oral hearing of the infringement action" in the local or regional division.

However, while this goes further than a direction to accelerate proceedings, it is not an absolute command, and a very busy central division diary may thwart the best intentions and/or discharge the obligation to endeavour.

This provision already existed in the 14th draft of the Rules, but had been deleted in the 15th draft. While its re-introduction will not be popular with some patentees, for whom the threat of the injunction gap gave a tactical advantage, it will be welcomed widely by potential defendants (including proprietors) and industry groups which have lobbied against the injunction gap.

Opt out

The 17th draft of the Rules makes clear that where there are pending proceedings, or proceedings have concluded before the UPC or national courts, there is an absolute bar to opting out and opting back in to the UPC. However, there is still no clarity on the effect of the opt out provision at Article 83 of the UPC Agreement.

The revised Rule 5.7 clarifies that the option to opt out is blocked not only by an action pending before the UPC, but also by an action that "has been concluded". An action before the UPC is an absolute bar to an application to opt out, for the life of the patent, to reduce the risk of conflicting decisions in the UPC and national courts.

Similarly, Rule 5.9 clarifies that an application to withdraw an opt out (in other words to 'opt in') is not possible once an action has been commenced in a national court, whether that action is pending or has been concluded.

Language of proceedings

The latest draft of the Rules of Procedure also clears up an uncertainty about the language of the proceedings if the local or regional division in which the proceedings are to be heard offers a choice of languages. In the 16th draft of the Rules, the drafting committee had offered two alternative formulations of a draft rule to deal with this.

Where the court offers a choice of languages, the new rule 14.2 allows the claimant to choose the language of the proceedings. However, this privilege is limited by a series of exceptions to the general rule.

The "small local operator" clause protects locally operating defendants. If the infringement is only in the Member State in which the defendant is domiciled, so that the case could only be brought there, the defendant's national language must be used. (Litigation in the Nordic Division, however, will always be in English, so it will not be possible to sue a defendant in his national language in that division.)

Another exception to the claimant's right to choose the language is the possibility (under Rule 14.2(c)) for a division to adopt the "English limited clause" (Article 49(2)) of the UPC Agreement, which allows Member States to include the option to use English as an additional language. However, judgment will still have to be given in the official language of the division, even where the litigation has been conducted in English.

Appeal from procedural decisions

In the 16th draft of the Rules of Procedure, there was a lack of consensus from the Drafting Committee as to whether, under the UPC Agreement, the Court of Appeal would be able to grant permission to appeal from procedural decisions.

This raised concern that if the decision as to whether a point merited appeal was left to the first instance court, fewer points would reach appeal, and the necessary harmonisation of procedural inconsistencies by the Court of Appeal would occur much more slowly. In the meantime, differences in the interpretation of the procedural rules - for example the use of disclosure or party experts - by different local and regional divisions would result inevitably in 'forum shopping'.  

The new Rule 220.2 introduces a mechanism designed to give the Court of Appeal means to effectively control procedural orders of the Court of First Instance, while limiting the Court of Appeal's intervention to cases of particular importance to avoid systematic appeals which would risk paralysing proceedings. Where the Court of First Instance has not given leave to appeal, a party may request a discretionary review by the Court of Appeal.

While there will still be differences in how local and regional divisions interpret the rules, the capacity for intervention by the Court of Appeal should speed up the harmonisation of local practices.

Hearing in Trier

An oral hearing will be held on the 17th draft of the Rules of Procedure on 26 November 2014 at the Academy of European Law in Trier, and will concentrate exclusively on the changes since the 15th draft.

More than 70 firms and organisations have been invited to attend, along with a group of experienced patent judges, with the aim of ensuring that observations made represent a broad range of users. There are plans for a webcast to be accessible via the website of the European Law Academy.

According to the Roadmap that was published on the UPC website in September, the Preparatory Committee should agree on a final version of the Rules of Procedure in May 2015. This oral hearing is likely to be the last, and so the Rules appear to be near completion, which is helpful in our preparations for the UPC.


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