Europe a step closer to becoming the centre of global patent market after court rejects Spanish UPC challenge

Spain has failed in its challenges to the legality of the EU patent and the Unified Patent Court. In a judgment issued today, the Court of Justice of the European Union (CJEU) found that both are consistent with EU law and, as a result, can proceed to implementation. Given there is no higher court to which the Spanish can appeal it would seem that they have reached the end of a road that began for them back in 2011 – although they had signalled their objections to the plans long before that.

So, a major potential banana skin in the creation of a single European patent system has been avoided. But anyone thinking that we are just a hop, skip and a jump away from everything getting up and running might want to recondsider. We are not. There is still plenty of time to wait before the first cases are heard by the Unified Patent Court (UPC) and the first EU patents are issued by the EPO. That’s because the second cannot enter into force until the first is ratified by 13 EU member states – three of which have to be France, the UK and Germany. The French have done their bit, but the Germans and the British have not – while just six other countries (Austria, Belgium, Denmark, Malta, Sweden and Luxembourg) have been through the ratification process (and there is now a constitutional challenge in Belgium to its agreement). On top of all this, the fees relating to the single patent have yet to be finalised amid concern that the first amounts suggested by the EPO may be too high.

All in all, when it comes to Europe and patents it is usually best to assume that everything will take longer than is originally anticipated; and so it will be with the new system which, let’s not forget, was supposed to be up and running last year. In fact, depending on the result of the UK election this Thursday at some time in 2017 the British could vote to leave the European Union, which would throw a great big spanner in the works – especially if, for whatever reason, there has bene no UK ratification before then.

But putting all the negativity to one side and assuming that some time within the next two or three years everything will be sorted out, what we are likely to see is a relatively swift move towards Europe becoming the main venue for the resolution of global patent disputes. There are a few good reasons for this and, in no particular order, they include: it will be less expensive than litigating in the US; it will be quicker than litigating in the US; the market will be bigger than the US in terms of both population and, very slightly, GDP; and, crucially, it looks like injunctions will be available much more readily than they are in the US, while there will be no equivalent of the PTAB. In short, if you are the owner of high-quality European patents and you are finding it tricky to conclude a global licensing deal with an infringer, the quickest way to get something sorted out is likely to be taking a case to the UPC and winning it.  Indeed, just bringing such an action could very rapidly concentrate the infringer’s mind.

The consequences of that are also important. Primarily, European patents are likely to become more valuable. What has to be remembered here is that it will not just be new EU unitary rights that can be litigated at the UPC, but all those that have been granted by the EPO and remain in force, unless they have been opted out by their owners.  And this applies to current EPO-granted patents – ie, ones that are currently enforceable at the national level – as well as any future ones the office awards. In other words, there are plenty of entities out there now that own patents that can be successfully enforced via the future UPC. And because of that, the day that the court gets up and running those patents will suddenly become worth a great deal more than they are now. Of course, whether the current owners know that is another matter altogether; my guess is that some do, but plenty more don’t – and that means for prospective buyers that care to look there are probably a fair number of bargains out there, many of which will be owned by non-European organisations.  Over a longer period an eastward shift in big ticket patent litigation will mean more entities will want European patents; that will mean more applications at the EPO (good news for European patent attorneys) and more purchasers - for both offensive and defensive reasons.

Of course, what this is also likely to mean is the appearance of more intermediaries, aggregators and other service providers in Europe. At first, these will mainly be existing American operations opening branch offices, but over time distinct European outfits will also emerge to join the very limited number that are already out there. It certainly looks like being a great time to be a top flight European patent litigator; but for American litigators – already finding conditions tough in the US – it could get even more challenging if a lot of big ticket works migrates to the other side of the Atlantic. Certainly, serious patent law firms in the US are going to have to have serious European operations or, at the very least, very strong referral networks.

What we are unlikely to see, though, are common or garden patent trolls making their way over here. The costs associated with European litigation do not support troll-like business models, while the EPO is generally felt to issue much higher quality patents than the USPTO does currently, so there will be less junk available for chancers to play with. However, that is not going to stop a lot of big corporations talking about trolls and the dangers they pose; mirroring PR efforts in the US, they will try to use them as a hook for demands that significant restrictions be placed on UPC judges’ discretion to issue injunctions – in fact, arguably the process has already started. Whether they will be as successful in Europe, though, is open to question: German SMEs, for one, are very fond of their ability to get injunctions.