The unitary European patent and its court regime
Europe is a continent of contrasts: its citizens are proud of their national traditions, but tenacious in striving towards unity. The history of European integration in the patent field is no exception. Despite member states having long-established national patent systems, in 1978 Europe produced the most advanced example of procedural unification worldwide in the patent field: the European patent.
This instrument allows inventors to file and prosecute a single patent application with effect in 38 countries, including a number of neighbouring non-EU states, and has achieved significant procedural simplification and substantial cost savings for patent applicants seeking protection in Europe. The success of the European patent has grown steadily and continues to do so, with more than 260,000 filings a year.
Yet the European patent is not a truly supranational patent: after its centralised grant by the European Patent Office, it must be validated by the national patent offices of the countries in which protection is sought. This involves translating the specification into a number of languages, with the attendant cost implications. After validation, the European patent becomes a ‘bundle’ of national patents, each living its own life in respect of renewal fees (to be paid nationally) and validity (which, in case of litigation, is decided independently by the national court).
This has consequences. First, the combined national costs, temporarily frozen by the centralised European patent granting procedure, become fully apparent after grant during validation and renewal. Second, in case of cross-border litigation, multiple national suits must be filed, involving the risk of conflicting national decisions in respect of validity and infringement. This complicates things for the patentee and gives rise to legal uncertainty. Therefore, the possibility of enforcing a traditional European patent throughout the whole of Europe remains a dream; realistically, patentees are happy enough if they manage to protect their patents before the national courts of key countries.
Faced with this situation, Europe has long been trying to introduce a truly supranational European patent – that is, one which:
- on grant, is immediately enforceable across Europe, with no need for validation or translation;
- is subject to a single renewal fee; and
- in case of litigation, is decided on by a single European court whose decision is automatically applicable across Europe.
The Community Patent Convention, establishing such a patent, was signed in Luxembourg in 1975, but was not ratified by member states and so never came into force. From 2000 to 2004 a renewed Community Patent Regulation was launched by the European Commission, relying on the European Court of Justice as a unified forum for patent litigation; however, this proposal was also not approved. A further proposal, the European Patent Litigation Agreement (EPLA), gave the existing national courts jurisdiction over granted European patents, but under a harmonised patent litigation procedure. This proposal was also abandoned due to a lack of agreement.
One of the problems preventing the success of these proposals was the inability to reach unanimous agreement among member states. In order to overcome this obstacle, in December 2010 12 member states agreed to work together under the ‘enhanced cooperation’ procedure, which allows member states that wish to introduce a common project to work together and agree it without needing the agreement of non-participating member states. During two years of negotiations further member states joined, and a comprehensive agreement on the unitary patent was finally reached by 25 member states and approved by the European Parliament on December 11 2012.
The agreement is not yet in force, as it needs ratification by least 13 signatory states (including Germany, France and the United Kingdom). Based on current progress, it is estimated that the new system could take effect in 2016. Therefore, although the unitary patent is not yet a reality, it is increasingly important that companies become familiar with it.
Figure 1. States involved in the unitary patent system (Italy has signed only the UPC Agreement and Poland has not signed the UPC Agreement)
Unitary patent system
The unitary patent is regulated by a package of three interrelated agreements:
- the enhanced cooperation agreement establishing the unitary patent and its effects;
- the associated agreements regarding translations; and
- the establishment of the Unified Patent Court (UPC).
Figure 1 shows the member states currently involved in the system.
Unitary patent and its effect
The unitary patent is obtained via a legal extension of the traditional European patent, called ‘unitary effect’. This is applied to the traditional European patent just after grant at the patent owner’s request. Therefore, one cannot file a unitary patent. This means that a company need not decide from the outset whether it wants a traditional or unitary European patent. It simply files a standard European patent, which will be examined by the European Patent Office (EPO) as usual; then within one month of grant, it can apply for unitary effect, if desired. In the absence of such request, the European patent will be treated as usual and maintain its current legal profile.
The chosen unitary effect automatically extends to all countries participating in the unitary patent agreement. In these countries, the granted European patent ceases to be a bundle of national patents and becomes a single legal entity, with no national validation requirements and a single renewal fee to pay. These countries are protected en bloc, with no possibility of selective designations; if the European patent additionally designates countries that are not participating in the unitary patent (eg, Switzerland, Spain or Italy), the designations will remain subject to the existing bundle regime (ie, with the related obligations to proceed nationally with validations and renewals).
In case of infringement, the unitary patent can be litigated only at a centralised level before the UPC. The competence of the UPC is not restricted to the unitary patent, but extends to traditional European patents; as a consequence, the UPC agreement removes the entire European patent system from the competence of national courts (irrespective of whether a unitary effect is applied): this should resolve the risk of different national courts issuing conflicting decisions in respect of the same European patent. Nevertheless, following the entry into force of the unitary patent agreement, there will be a seven-year transitional period (extendable by up to seven years), during which the owners of non-unitary European patents may still opt out of the UPC’s competence and litigate in the national courts. This transitional provision does not apply to unitary European patents, which can be litigated only before the UPC.
Finally, the unitary effect does not extend to licensing: the owner of a unitary patent can still license it in selected unitary patent countries and/or to different licensees.
If a patent owner chooses unitary effect, no translation or validation requirements apply to its patent (at present, these account for a large part of the European patent prosecution budget). As an exception, during the seven-year transitional period (extendable by up to seven years), the patentee will be required to provide a translation into a second official language of the EPO, different from the language of the granted patent; if the patent was granted in French or German, the second language must be English. This requirement is intended to give third parties sufficient information about the patent and will be abolished as soon as reliable electronic translations become available.
The elimination of translation and validation costs will have a variable impact on companies, depending on their current European protection policy. Companies with many European patents, used to validating them in many member states with different languages, will enjoy large-scale savings, compared to those with fewer European patents that validate them in fewer countries. Therefore, from a strictly economic viewpoint, the system is structurally more attractive for larger companies. However, small companies should also consider the benefits of EU-wide protection, not just because of the larger potential market, but also to extend protection to the borders of the European Union, where customs protection is in place and incoming goods can be thoroughly checked. This makes it easier for patent owners to intercept and halt the movement of infringing goods. Additionally, a small or medium-sized enterprise located in a European country with a different official language from those of the EPO which has filed a European patent application in that language will receive a reimbursement for its translation costs.
Further savings will be realised in renewal costs. The unitary patent will be subject to a single renewal fee, payable to the EPO, as opposed to the country-by-country payment system required by the existing European bundle patent. The unitary patent renewal fee has not yet been fixed, but is expected to be around three times the average national fee. Therefore, companies that maintain European patents in a large geographical area (eg, 28 countries) will enjoy large savings in renewal costs. Companies with patents in seven to eight countries will enjoy a smaller reduction, but with the advantage of covering an extended geographical area; while those with patents in two to three countries will pay approximately the same amount, but benefit from coverage across a much broader geographical area.
Unified Patent Court
If a patent is infringed or challenged, the unitary patent must be litigated centrally. This marks a major difference from the existing European patent which, after the expiry of the nine-month opposition term before the EPO, must be litigated country by country before the relevant national courts. The UPC, which will handle all unitary patent litigation, is a completely new court set up for this purpose. Although physically located in specific member states, it works at a supranational level, with its own judges and support staff working under a European regulation, fully separated and independent from the national courts. The UPC comprises the Court of First Instance, the Court of Appeal and the Registry. The Court of First Instance comprises the Central Division, as well as national and regional divisions.
The Central Division is located in Paris, with sections in London and Munich. The competence of these sections depends on the technical classification unit to which the litigated patent belongs. London will handle patents in the field of human necessities, chemistry and metallurgy; Munich will deal with mechanical engineering, lighting, heating, weapons and blasting; and patents in the remaining classes will be heard in Paris.
In addition to the Central Division, local (or regional) divisions may be set up on the initiative of specific (groups of) countries. These may elect their national languages(s) as the working language(s) of the court. An agreement for a regional division has already been signed by Sweden, Latvia, Lithuania and Estonia, while local divisions are being planned in several contracting states.
National and regional divisions are competent to hear infringement cases taking place within the corresponding country or region, or against infringers located therein. The local and regional divisions will also be competent for counterclaims for revocation, but with discretion to refer the case (either alone or together with the main claim for infringement) to the Central Division. If the national or regional division decides to keep the main claim and refer the counterclaim to the Central Division, a bifurcation of proceedings will ensue, similar to that under the existing German system. In such cases the infringement proceedings can be stayed until a decision is issued on validity. The Central Division will also be competent for direct nullity or non-infringement actions.
Court fees for proceedings before the UPC will be based on standard amounts, supplemented with a surplus if the value of the case (ie, the requested damages award) exceeds a given threshold.
The money-saving aspect here is not as evident as for translations and renewals. The centralised litigation fees are expected to be higher than those payable for single-country litigation. Therefore, for suits affecting only one country (which still represent a significant percentage of all European patent litigation cases), the UPC system will be more expensive. Multi-country litigations will not necessarily be cheaper. In fact, a suit before the UPC is critical, as a patent declared invalid by the UPC is lost in all unitary patent member states. Accordingly, patentees will tend to invest more money in defending their case, bearing in mind the high technical and legal level required for pleadings before the UPC.
One piece of good news for UPC users is the option to be represented in court by a specially qualified European patent attorney, as an alternative to a lawyer. European patent attorneys are expert in both technical matters and European patent law, are experienced to plead in oral proceedings and will be further qualified via a specific litigation diploma strongly focused on the UPC. A patentee could, for example, be represented by his or her European patent attorney of reference (ie, the person who drafts and prosecutes his or her patent cases and who is familiar with the technical field, the company and its goals).
The decision of whether to choose the unitary patent might rest on the strength of the patent at issue; a stronger patent may be a better candidate for the unitary patent, whereas a weaker one might be better protected under the European patent bundle system, possibly opting out of the UPC’s competence (in such cases invalidation of the patent in one country does not affect validity in the other designated countries).
In contrast to the required elements of prosecution, granting and renewal, litigation is just a possibility in the life of a patent. Therefore, a company might choose the unitary patent and accept the possibility of spending or risking more in case of litigation, given the significant savings in terms of translation and renewal.
The convenience of the new system remains to be seen in real life: it will depend, in particular, on the reliability of the UPC – that is, whether it will deliver the promised efficiencies in terms of the quality and smoothness of proceedings, at an affordable cost.
Once ratified and in force, the unitary patent will be an innovative legal tool for obtaining large-scale protection for inventions in Europe, simplifying the post-grant management of the European patent. For large companies, it will generally be cheaper than the existing European patent system; for smaller companies, it will make it easier to invest in broader and more uniform patent protection in Europe. The unified litigation procedure will increase the effectiveness of patent enforcement, but possibly with higher risks for weak cases, compared to the existing country-by-country litigation.
Botti & Ferrari Srl
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Paolo Gerli is a European patent attorney working at Botti & Ferrari Srl in Milan, Italy. In 1986 he graduated in pharmaceutical technology from the University of Turin. In 1987 he joined the European Patent Office in The Hague as a patent examiner, where he became familiar with the European approach to patent granting, in particular in the pharmaceutical field. Since 1999 he has been a qualified European patent attorney.
Mr Gerli has considerable experience in patent litigation, working as a court expert for the specialist Italian IP courts for more than 10 years. He is currently the elected representative for the Italian private practice constituency of the European Patent Institute.