IP lawyer: The unitary patent and Unified Patent Court – the latest developments

Decisions around the renewal fee structure for the new unitary patent are crucial: their outcome will define whether industry embraces this new right. With pre-grant costs for a unitary patent the same as those for any other patent application filed at the European Patent Office (EPO), the decision on post-grant renewal (annuity) fees is central to whether businesses will consider the unitary patent a cost-effective alternative to the current European patent system.

In late June the Select Committee of the Administrative Council of the EPO endorsed a proposal for unitary patent annuity fees. Under the proposal (the ‘true TOP4’ proposal), the single annual payment for a unitary patent after grant will be equal to the sum of the annuities payable for patents in the four EU member states most commonly designated for European patents: the United Kingdom, France, Germany and the Netherlands.

Earlier fee proposals (suggested by the EPO in March 2015) received significant criticism. Under those proposals (‘TOP4’ and ‘TOP5’), the annuities payable mirrored the sum of the annuities payable in the (four or five) most validated in countries in Europe, similar in concept to the true TOP4 system, but only for the period after 10 years from grant. Up to year 10, the fees payable mirrored those payable pre-grant at the EPO (or provided for a transition regime). Those earlier proposals were roundly rejected by industry because, for a unitary patent granted quickly, the annuities payable in the first 10 years would have been exceptionally high (50% higher than under the true TOP4 proposal).

Many stakeholders welcomed the true TOP4 proposal. Up to year 10, its annuity level is lower than the EPO pre-grant annuity level, so early grant by the EPO is desirable from a cost perspective. Applicants will need to consider the various routes to accelerated examination at the EPO.

UPC costs – one size doesn’t fit all

The Preparatory Committee of the UPC launched a public consultation on UPC court fees and recoverable costs in early May 2015 which sets out the committee’s proposals. First, court fees for bringing an action will be based on:

• a fixed fee for all actions brought at the UPC; plus
• a value-based fee for infringement actions valued at above €500,000.

The proposals included two options for discounting for small and medium-sized enterprises (SMEs), based on:

• a reimbursement system for settlement or withdrawal; and
• an exemption from the value-based fee for some SMEs or non-profit organisations.

There will be a significant disparity in fee level for different-sized actions: fees can range from €11,000 to €231,000. There is no doubt that the fees for high-value actions will subsidise those for the smaller actions.

Recoverable costs (the level of legal costs reimbursement required from a losing party to a winning party) will also depend greatly on the value of the case. They will range from €50,000 for the lowest-value cases to €3 million for the highest. Careful and proportionate allocation of legal resources will be needed at planning and other key stages of an action.

The Preparatory Committee is awaiting the results of the consultation.

UK ratification in 2016?

Following the election in the United Kingdom of the Conservative Party to government in May, a referendum on EU membership will take place before the end of 2017. Although the United Kingdom is one of the three essential signatories that are required to ratify the UPC Agreement before the new court can exist (the others being France and Germany), another country can step in to be the third essential signatory if the United Kingdom ever leaves Europe. For this reason, notwithstanding how unlikely the UK electorate is to vote to leave the European Union, it appears that the referendum will not hold up the seemingly inexorable progress towards a future with the unitary patent and UPC.

To demonstrate the government’s confidence that the United Kingdom will continue to be a part of Europe and play an active role in the UPC, the UK Intellectual Property Office (UKIPO) made an announcement on June 23 2015 to state that the UKIPO and the government are pressing ahead with ratification of the agreement, and intend to have completed all “domestic preparations” by Spring 2016. This probably does not include ratification (it seems likely that this will be coordinated with other preparations for the new regime), but it does give comfort to anyone doubting the United Kingdom’s intentions.

Italian enthusiasm

Italy announced in late May 2015 (in the wake of the failed challenges by Spain to the legality of the unitary patent and UPC) a change to its position on the unitary patent, announcing that it will fully embrace the unitary patent and the UPC, and indeed will pursue this as one of its top priorities. Spain is left out in the cold at present.

Full steam ahead

Preparations for the new patent and the new court continue at pace. The Preparatory Committee of the UPC held a successful and forward-looking 10th meeting in mid-July, publishing the 18th draft of the Rules of Procedure. The rules are now near final and the committee expects to agree the final formal version in October. The committee also announced that contracts for all IT work have been put in place. It appears that the UPC is moving towards opening its doors (at least electronically) from late 2016 or 2017.