17 May 2017
Gowling WLG's intellectual property experts explain the Unified Patent Court and Unitary Patent, as part of their series of articles titled 'The basics of patent law'.
The articles cover, respectively: Types of intellectual property protection for inventions and granting procedure; Initiating proceedings; Infringement and related actions; Revocation, non-infringement and clearing the way; Procedure, trial, appeal and settlement; Remedies and costs; Assignment and Licensing and the Unified Patent Court and Unitary Patent system.
The articles underpin Gowling WLG's contribution to Chambers' Global Practice Guide on Patent Litigation 2017, for which Gordon Harris and Ailsa Carter wrote the UK chapter.
The Unitary Patent
The system for grant of European patents (EPs) was established by the European Patent Convention, which provides for the centralised application, prosecution and grant of patents (as a bundle of national designations) in and by the European Patent Office (EPO). For more, please see our article titled 'Types of intellectual property protection for inventions and granting procedure'. Such EPs will continue to be available for all EPC signatory states, notwithstanding the introduction of the Unitary Patent (UP), discussed below.
Two new EU Regulations, 1257/2012 (on the creation of unitary patent protection) and 1260/2012 (on translation arrangements), will, when they come into force, effectively make available a new designation of European patent, called a 'Unitary Patent' or 'European patent with unitary effect'.
Once available, a UP may be requested by the applicant for a European patent within one month of grant of the EP bundle. Where a UP designation is requested, it will be granted instead of national designations for all states which have, at the time of grant of the patent, signed and ratified the Agreement on a Unified Patent Court (the "UPC Agreement").
In contrast to national designations of EPs, for which the relevant national law applies to each designation in certain contexts (such as licensing and assignment), a UP will be a unitary right governed by one law. Which law applies will be determined by the residence, principal place of business or place of business of the applicant(s); failing any of these in a participating state then German law will apply.
The UP will only be available in respect of those EPC countries which, at the time of grant of the relevant EP, have signed and ratified the UPC Agreement and are participating in the EU legislative regime creating the UP. At present, this is not expected to include Spain, Poland or Croatia, and participation in the system is restricted to EU member states.
The renewal fees for a UP are €35,555 over the 20-year life of the patent. This is significantly less than the cost of validating and renewing an EP in each of the participating countries. However it is quite rare for companies to validate an EP in all such states and, unlike an EP, a UP cannot be 'pruned' to reduce renewal fees over the life of the patent. Nor can a UP be 'opted out' of the new court system (discussed below). Whether the UP will be a popular option therefore remains to be seen, but the UP nevertheless introduces a fundamental change to European patent rights.
The Unified Patent Court
At present, aside from the EPO's remit to hear post-grant oppositions filed within the first nine months of grant of an EP, disputes in respect of patents are (basically) a matter for the courts of the country of each relevant national patent or EP national designation. With the introduction of the Unified Patent Court (UPC) and the Unitary Patent (UP), this will change.
The UPC is established by the Agreement on a Unified Patent Court (the "UPC Agreement"), which is an international treaty. It is a new pan-European court system which will have jurisdiction to adjudicate on both national designations of EPs and Unitary Patents. The court's decisions will cover the territory of those participating states for which the relevant EP has effect; in practice for most existing EU member states, including the UK, Germany and France.
The UPC introduces a paradox of sorts: while it offers pan-European enforcement it also renders patents vulnerable to pan-European revocation. Accordingly there has been much debate as to whether patent owners will seek to avoid the change for as long as possible by 'opting out' their EPs.
The UPC will not have jurisdiction in respect of national patents (i.e. those commencing, for example, GB, DE, FR, etc).
Court structure and location
The UPC will be comprised of:
- a registry based in Luxembourg;
- local and regional divisions hosted by participating member states of the EU;
- a central division hosted in London, Munich and Paris (divided by subject-matter); and
- an appeal court hosted in Luxembourg.
The central division, local divisions and regional division(s) will be first instance courts.
There will also be an associated mediation centre, arbitration facilities and a training centre.
The judiciary will be drawn from across the EU, and will include experienced patent judges from the UK, Germany and France. The local and regional courts will always have a bench of three judges drawn from more than one country. There will also be technical judges available, who will have expertise in sciences and some legal training, to assist with validity issues.
Many states participating in the UPC will have a local first instance division (and Germany may have four). Some of the states will combine to form a first instance regional division; for instance a 'Nordic-Baltic' regional division comprising Sweden, Estonia, Latvia and Lithuania. Local and regional divisions will generally operate in their local languages and most will also operate in English (although some will apply a limited English rule). In the central division the language to be used is the language of the patent, unless another language is agreed. It is to be expected that a high proportion of cases will be heard in English, alternatively German or French.
Information on first instance divisions for which the location has been confirmed is available on the UPC's website here.
Originating revocation actions, and infringement actions in which the defendant has no place of business in a participating state, will be started in the central division.
Most infringement actions will have to be started in a local or regional division (defendant's place of business or place where the harm occurred). Counterclaims for revocation will then be confined to the same court, but the court may refer the validity aspects to the central division if it wishes, so "bifurcating" the case. It is, however, considered unlikely that this will occur often, and provisions in the Rules guard against bifurcation providing any timing advantage to the claimant.
During at least the first seven years of operation of the new court (the 'transitional period') it will remain possible for litigants to commence proceedings in national courts instead of in the UPC. The jurisdictional interplay between proceedings in the national court(s) and the UPC in respect of the same EP will be determined by the Re-Cast Brussels Regulation no. 1215/2012 (as amended by Regulation 542/2014).
In addition, during the transitional period, it will be possible to opt EPs and EP applications out of the jurisdiction of the UPC, unless the EP bundle includes a UP. (At present all the signatory states of the UPC Agreement are within the UP regime, so unless this changes, a UP would cover all UPC states).
With a view to enabling a smooth transition to the new system, the Protocol on Provisional Application provides for a 'provisional application period', which will precede the full operation of the UPC. During the provisional application period it will be possible to register opt-outs of existing EPs before the UPC comes into operation, so avoiding a race to the Registry to opt out patents which may be at risk of an immediate revocation attack. The start date of the provisional application period awaits confirmation.
Rules of Procedure of the UPC
The Rules of Procedure of the UPC are in a near-final form, having been through many drafts. They have been negotiated between the participating member states and so combine provisions from different legal traditions. The procedural approach is similar to civil law systems in which the court takes an active investigatory role, but it also contains elements taken from the common law adversarial approach. The Rules are systematic. As a whole, they lack the detail and specificity of the UK Civil Procedure Rules (CPR), but many of the UPC's rules directed towards case management are copied from or very closely reproduce provisions of the CPR. Indeed, on case management, the Rules broadly reflect current UK practice, including in respect of disclosure (although it is not called 'disclosure') and privilege.
It is expected that many aspects of the court's practice and procedure will be decided by the judges as the court's caseload grows, and so the question of how to achieve consistency between the different locations of the court arises.
The court has a fee-shifting rule - generally, the loser pays the winner's legal costs. However the scope for costs recovery is capped with reference to the value of the action. Some court fees are also scaled by reference to the value of the action. For more, please see the Rules of Procedure and the Draft Guidelines for the determination of Court fees and the ceiling of recoverable costs of the successful party.
A key procedural principle is that the parties' cases are to be expounded in full at the earliest opportunity, including the evidence on which they rely, and the construction they place on the patent claims. The parties also have to say, at each stage of pleadings, what further evidence they intend to provide, and what they need to have from the other party. The written stage of the proceedings can therefore take up to eight months, although in most cases six months will be enough. One of the judges allocated to the case (called a "judge-rapporteur") will then take control of the case and its management, and has three months in which to prepare it for trial. The trial itself is intended to be only one day, but may take longer.
On completion of the written procedure all the parties' evidence and argument should be on the table. The judge-rapporteur has to consider whether further evidence is needed, and whether it will be necessary to hear oral witnesses in separate hearings to resolve particular issues ahead of the trial. The judge-rapporteur has very wide-ranging powers to order either party to provide disclosure and other evidence, and can control what evidence is to be considered at trial. It is possible for a party to put forward expert witness evidence. Alternatively the judge-rapporteur may decide that an expert witness should be engaged by the court.
The Rules also provide for a wide range of measures to preserve evidence, including seizure of infringing goods, and for provisional measures, including interim injunctions. Applications may be made without notice, but a system of protective letters is available (modelled on the German procedure) for potential defendants to ensure that they will be heard. Certain safeguards are written into the Rules, including equitable principles, but the court culture in respect of interim applications will, to a large extent, be determined by the judges. Judges are to be trained for the new court, which will help with ensuring consistent practice across the different court locations.
The UPC Agreement is an international treaty. Accordingly, its provisions must be incorporated in the national laws of the participating states and it must be ratified by the requisite number of countries in order for the agreement to come into force, and for the new system to become operational.
The provisions of the UPC Agreement setting out the law regarding validity and infringement reflect those of EPC and the Community Patent Convention (an earlier attempt at a unitary patent right, which led to the harmonisation of national legislation regarding infringement in many European countries). Accordingly, little change to substantive patent law is necessary for the participating countries.
The effects of any opt out, and of national proceedings in the transitional period, on the law to be applied by a national court are not yet clear.
The law applicable to a Unitary Patent as an item of property is national law. It is permanently determined by the place of residence of the applicant; the default provision for applicants outside participating states is for German property law.
National law applies to the implementation of a seizure order, to any question of perjury, and on questions such as breach of confidence and privilege from self-incrimination.
The UPC Agreement will enter into force on the first day of the fourth month after the deposit of the thirteenth instrument of ratification or accession, which must include the three EU Member States in which the highest number of EPs had effect. The three EU Member States in which the highest number of EPs have effect are, at present, the UK, Germany and France.
The following signatory states to the UPC Agreement have completed ratification by depositing their instrument with the Council of the European Union:
Austria, Belgium, Bulgaria, Denmark, Estonia, Finland, France, Italy, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Sweden
Several other signatory states are understood to be progressing national legislative steps with a view to ratification.
The UK Government has indicated intent to ratify the UPC Agreement. The remaining draft legislation (the draft Unified Patent Court (Immunities and Privileges) Order 2017) for the UK Parliament has been laid before Parliament and is expected to be passed. Equivalent legislation is required in the Scottish legislature also. The UK is expected to be in a position to ratify the UPC Agreement in the Autumn of 2017.
Germany has also been progressing its legislative steps necessary for ratification of the UPC Agreement. However, pending resolution of a challenge in the German Constitutional Court, the executive has put a brake on the ratification process. The challenge may be resolved in Autumn 2017, which would enable ratification by Germany shortly afterwards.
In the meantime, the provisional application period can be triggered by the requisite signatory states of the UPC Agreement ratifying the UPC Agreement or informing the European Council that they have received parliamentary approval to ratify the UPC Agreement. The term of the provisional application period will then run until the UPC Agreement enters into force, at which point the UPC will open and UPs will become available.
If the UK and Germany ratify the UPC Agreement according to the timetable suggested above, the period of provisional application could commence in late 2017, the 'sunrise' period for filing opt outs could commence in Q1 2017 and the UPC could become operational in Q2 2018.
The question naturally arises whether the UK will be able to remain within the UPC system when it ceases to be a member state of the EU in March 2019. The approach taken by the UKIPO and the UK Government has been to proceed with ratification and implementation.
Academic and industry commentators are divided, but there are highly respected jurists who maintain that the UPC Agreement can be lawfully amended in such a way as to accommodate the UK post-Brexit. Agreement with the EU may also be needed; a consequence of the framing of the UPC Agreement within the structure of EU constitutional law.
It is fair to say that the other participating states are keen that the UK should participate, and continue to do so post-Brexit.
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