Fate of Unified Patent Court after UK referendum

Now that the votes have been counted, it is clear that the UK electorate has voted to leave the European Union. The referendum result is not legally binding, but there is no serious doubt that the UK government will follow the result and within some months start the procedure to leave the European Union, or that the UK Parliament will not block an EU exit.

No matter how the exit procedure goes, the situation will have a major negative impact on the realisation of the European patent package. First, once the United Kingdom is no longer an EU member state, it cannot take part in the unitary patent and Unified Patent Court (UPC). Second, the start of the patent package may be delayed.

Unitary effect

The unitary patent package consists of a new type of European patent and a Unified Patent Court. The new patent will (if it comes into existence) have unitary effect throughout participating EU member states and the UPC will eventually replace the national courts when it comes to litigation of all European patents, with or without unitary effect.

The unitary patent package is in the process of being ratified by the individual EU member states and as soon as 13 member states (including the three economies with the highest number of patents in the European Union) have ratified, the package will come into effect. Since the patent package will have a dramatic effect on the patent landscape, professionals with an interest in intellectual property are cautiously following its progress. The UPC Agreement has already been ratified by 10 states and sufficient states were expected to ratify in the second half of 2016 to enable the European patent package to become operational in the first half of 2017.

Now, in the harsh light of a ‘Brexit’, the situation is completely different. Since the United Kingdom is one of the three largest economies of the European Union, the UPC cannot become operational before the United Kingdom either ratifies the UPC Agreement or leaves the European Union.

Ratification – or not

Theoretically, the UPC could still commence operations in 2017 if the United Kingdom ratifies – and the UK Parliament has already agreed to ratification of the UPC Agreement. The UPC Agreement is strictly limited to EU member states. If the United Kingdom were to ratify the UPC Agreement and then leave the European Union, it would be a participant of the UPC Agreement for only a short time, which could lead to many complications and additional transition costs for the United Kingdom.

If the United Kingdom does not ratify the UPC Agreement, the situation becomes uncertain. Since the UPC cannot start without the United Kingdom as long as it is an EU member state, there would not be a UPC or unitary patent any time soon. Only after the United Kingdom has formally left the European Union would Italy replace it in the top three EU economies, therefore requiring Italy to ratify the UPC Agreement. In this scenario, it could take years for the UPC and unitary patent regime to become operational.

Also, a new location may have to be agreed to replace London as a seat of the central division of the UPC. This could give an opportunity for other countries (eg, the Netherlands and Italy) to claim this seat.

In the coming months, the United Kingdom and the European Union will have to deal with many issues, of which the UPC is only one. At present, the future of the unitary patent regime and the UPC is highly unclear.

Other EU countries

Meanwhile, the ratification process is proceeding smoothly in other EU member states – 10 member states have ratified, the latest instrument having been deposited by Bulgaria on June 3 2016. While Belgium ratified two years ago, progress was recently made in the Netherlands too, as the House of Representatives passed the law authorising ratification on June 16 2016. The law now lies before the Senate, which has scheduled to pass it on June 28 2016. No further hurdles are expected to prevent ratification in the Netherlands.

In Germany, the first hearing on the UPC Agreement was held on June 23 2016 in the House of Representatives – at the exact moment that the UK referendum was being held. This first hearing will be followed by second and third hearings, in which the matter will be debated in substance. The Senate will thereafter vote on the matter. In theory, the matter could pass both the House of Representatives and the Senate before the summer recess.

Next steps

Considerable efforts and investment have already been made to set up the UPC and unitary patent system. To make a success of the unitary patent, it may be necessary to lower renewal fees, taking into account the reduced territory in which the unitary patent has effect. Nevertheless, stakeholders of the patent system (ie, patent owners, licensees, third parties, small and medium-sized enterprises and large corporations) will still benefit significantly from a unitary patent and a UPC that can decide patent disputes for a large number of continental EU member states. This will still mean reduced litigation costs and more harmonised decisions throughout the remaining part of the internal EU market.