In Germany today, the Federal Constitutional Court (Bundesverfassungsgericht) has held that the statute by which the German Parliament (Bundestag) sought to ratify the UPC Agreement (the 'Act of Approval') is void. This means that Germany's ratification of the UPC Agreement, will be delayed, probably considerably, as will the introduction of the new UPC and unitary patent system itself.
(The UPC Agreement is an international treaty between participating EU Member States to establish a new court, the 'Unified Patent Court' (UPC)) for the settlement of disputes relating to European patents, including a new type of European patent with 'unitary effect').
What did the Federal Constitutional Court hold?
In short, the Bundesverfassungsgericht held that the Act of Approval would alter the democratic rights of individuals, which are safeguarded under German constitutional law (the 'Basic Law' (Grundgesetz)). This is because powers presently within the remit of the courts of Germany would be irrevocably transferred to a supranational body. Accordingly, in order to be validly adopted, the Act of Approval needed to be passed by a two thirds majority of all of the members of the Bundestag (in accordance with articles 23(1) read in conjunction with article 79(2) GG). But what the Bundestag did, in attempting to adopt the statute, was to pass it unanimously but with only thirty-five members present in the third reading.
The Act of Approval is therefore void. So the plantiff's complaint was successful, to the extent it challenged the Bundestag's compliance with German constitutional law in purporting to adopt the Act of Approval. We will call this the 'technical challenge'.
However the Bundesverfassungsgericht did not uphold the plaintiff's complaint to the extent it objected to the substance of the Act of Approval. Indeed, the Court noted that the UPC Agreement, which the Act of Approval sought to ratify, is supplementary to or otherwise closely tied to the EU's integration agenda, is open exclusively to EU Member States, is expressly legitimated by the concept of enhanced cooperation and is closely enmeshed with the institutional system of the EU.
Where does this mean for the UPC?
As the Court noted, the UPC Agreement was pushed by EU organs. The European Commission has insisted on the centralisation of judicial protection in the field of patent law and the European Parliament has strongly supported the "European Patent Package" of the UPC Agreement and supporting EU Regulations.
As the Bundesverfassungsgericht rejected the substantive constitutional challenge to the Act of Approval, it remains possible for the Bundestag to adopt the Act of Approval in accordance with the Basic Law.
However, the Bundesverfassungsgericht's judgment, coming as it does only a couple of weeks after the UK decided not to pursue its involvement in the project, is likely to cause, at the very least, significant delay.
The UK's withdrawal meant that there had to be a degree of renegotiation between the participating Member States, including as to which Member State would host the part of the Central Division of the UPC that was to be located in London. It is therefore almost inconceivable that the Act of Approval will go back before the Bundestag to have the technical error corrected until the renegotiation process between the participating Member States has been completed.
We all know from experience that it can take a long time for the Member States to agree that sort of thing. In successive iterations, attempts to centralise and unify patent litigation in Europe have failed for five decades. With the UK's withdrawal, the remaining Member States participating in the new system may welcome time to re-consider and evaluate the changes that it will bring. Nevertheless, the impetus for change from the EU's organs, combined with the confirmation from the Bundesverfassungsgericht that the proposed structure of the European Patent Package would not offend German constitutional law, may yet assist the participating Member States in pushing it into operation. So the UPC Agreement may survive and even thrive in the long term, but it is just as likely to fall at this hurdle.
And now? - Update from 27th March
The decision has immediately led to numerous discussions about how long the "UPC project" will now be delayed, or whether it has even failed completely.
Fortunately, the German Government has reacted quickly and taken a clear position. In an official press release on Thursday, 26th March, Christine Lambrecht, Federal Minister of Justice and for Consumer Protection, has announced: "I will continue standing up for the possibility of us providing the European innovative industry with a unified European patent along with a European Patent Court. The Federal Government will assess the decision of the Federal Constitutional Court with care and check for possibilities of remedying the found lack of form within the current legislative period."
The current legislative period lasts until October 2021.
The full press release is available in German under https://www.bmjv.de/SharedDocs/Pressemitteilungen/DE/2020/032620_Patentreform.html