Last week's most read article: UPC – businesses apathetic to 2019 complaint listing
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Last week's most read article: UPC – businesses apathetic to 2019 complaint listing

In-house counsel explain what they’ve done so far to prepare for the Unified Patent Court, but say they’re unlikely to increase preparations despite the complaint holding up the system’s creation being moved to this year’s agenda

Despite the announcement from the German Constitutional Court that it will hear the complaint against the UPCA’s ratification in 2019, businesses say that they are not ramping up their preparations for the Unified Patent Court (UPC).

In-house sources tell Patent Strategy that they are apathetic about the constitutional complaint’s new listing partly because the matter was on the court’s agenda for 2018 and was never heard, and because the harmonised patent project could still be derailed by Brexit.

They add that following a long period of stagnation, businesses started to prepare for the UPC after the UK ratified the Unified Patent Court Agreement (UPCA) in April 2018. But momentum for the project has long since lost steam, and companies are unwilling to get going again until there are greater assurances that the court’s establishment is inevitable.

“Companies have heard little news about the unitary patent or UPC system and have thus been keeping busy with other things,” says Peter Thomsen, global IP litigation and transactions manager at Novartis in Switzerland. “Once the constitutional court has issued its decision and the effect of Brexit on the project is better understood, there will still be enough time to prepare for the system’s establishment before it becomes operational.”

He adds that, given the uncertainty on when or if the UPC will enter into force, it does not make sense for companies to spend resources to prepare further beyond what they had done at the beginning of last year.

The associate patent counsel at a global life sciences company in the US, agrees with this point, adding that his company is planning for the UPC with the level of attention it deserves right now.

“We have got our folks educated, we know what it says and we know it could come in. But in 2016 it was promised in 2017 and now again for 2019 – and people are saying may come at the end of the year, depending on Brexit and the German Constitutional Court, of course.”

He adds that he believes that the project will come into being and that the business is well prepared for when that happens.

The head of IP at a chemicals company adds that the German Constitutional Court may well stall its decision on the UPC complaint until it knows what will come of Brexit.

She points out that when in-house counsel were asked at the 2019 Managing IP International Patent Forum how long it might take the for UPC system to come into force, they suggested that the minimum time might be three years. The longest guess was five years.

“Establishment is not on the cards any time soon. If it was going to happen next year, it might be worth looking at spinning out prosecution now, but since it could be five years away, it is just not worth it.”

The constitutional complaint has held up ratification in Germany since 2017, which is needed for the UPC system to come into effect. There has also been speculation that the Unified Patent Court Agreement (UPCA) could be frustrated by the UK’s departure from the EU because UK ratification is also a mandatory requirement for the UPC’s establishment.   A paper from the Max Planck Institute published last year also suggested that should the UPC come into effect, the UK could not remain part of the system because such a situation would be incompatible with EU principles.

Plans so far

Sources at Novartis, UCB, Nokia, Integrated Device Technologies (IDT), DS Smith and Cell and Gene Therapy Catapult and two car manufacturers say they already considered how to approach the UPC based on the benefits, downsides and potential risks of the system to their businesses.

The trick, they say, is balancing the cost-saving benefits of having unitary patents with the risks of operating in an unknown court and the possibility of central revocation.

Maximin Gourcy, IP manager at plastics manufacturer DS Smith in France, points out that many businesses are waiting to see what decisions come out of the unitary patent jurisdiction before they commit to it.

However, getting a ‘bad’ judgment and having a patent invalidated across the EU in one fell swoop is more of a risk for some industries than others. Telephone and telephone part manufacturers that own tens-of-thousands of patents on small components, for example, will not suffer enormously if any one patent is invalidated. And, because they have so many patents, their bottom lines would benefit greatly from reduced renewal fees, which makes them likely to opt in most of their patents into the new system.

The risk of central revocation is much greater for pharmaceutical or biotech companies with $1 billion blockbuster drugs. Thomsen at Novartis points out that these companies rely on Europe’s jurisdictional system to limit the damage of invalidation to these inventions. If a patent is knocked out in Bulgaria, for example, the company can learn from its mistakes, buttress its litigation and so increase the chances of a favourable outcome in more lucrative markets.

The life sciences associate general counsel says this is likely to be the route his company will take, but admits that there may be matters in this untried system that will take it by surprise when it comes to choosing which patents to leave in and which to take out of the new system.

“We do not know what those are. We will probably keep most patents out but I would not be surprised if, when the UPC happens, that assumption turns out not to be true.”

Businesses that don’t benefit financially from the UPC system will likely not opt-in their patents. Automotive sources point out that they only need to register most of their patents in industrial areas, which in Europe are the UK, Germany and France.

The UPC fee structure, however, is based on registration in four countries. A bundle of three patents, as such, would likely be cheaper to file and maintain than a single unitary patent.

Businesses already have a good idea of how they are going to use the UPC system and are not planning to ramp up their preparations any time soon. The German Constitutional Court’s 2019 complaint listing has not been big enough news to drive renewed enthusiasm for the project. Only once Brexit has been sorted and the complaint dismissed, will that happen.

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