Your guide to Unitary Patent and UPC
Europe is about to embark on the most fundamental change to its patent system in 40 years. The AIPLA Daily Report presents a primer on what’s coming
paris-vue-densemble-tour-eiffel.jpg What are the Unitary Patent and Unified Patent Court?
The Unitary Patent and Unified Patent Court (UPC) are designed to provide a cheaper, simpler system for patent protection and enforcement in the European Union.
The Unitary Patent is formally known as “the European patent with unitary effect” and is created by two EU Regulations, both passed by so-called “enhanced cooperation” (which means not all of the 28 member states participated). Regulation 1257/2012 sets out what the Unitary Patent is, and Regulation 1260/2012 concerns the language and translation requirements.
The UPC is an agreement between member states, and must be ratified by each participating state. It provides for a single court structure for disputes over both Unitary Patents and European patents (subject to a transitional period) in all the participating countries. (This is why it is called the Unified Patent Court, rather than Unitary Patent Court.) The Rules of Procedure are now in their 16th draft and run to about 250 pages.
Though the new system does not cover all of the EU, if 25 countries ratify it will embrace an area with a population of some 400 million people.
Doesn’t the European Patent Convention already provide for a single patent system in Europe?
No. The European Patent Organisation, which came into effect in 1977, now has 38 member states, including all 28 EU member states, and provides a centralised system for examining and granting patent applications for those countries. However, upon grant, the patent must be validated in each designated country. This creates what is known as a bundle of national patents, subject to national laws and court decisions. In theory (and occasionally in practice) the same European patent can be subject to contrary decisions in different countries. For example, it could be held valid in Germany but invalid in the UK, or infringed in France but not infringed in the Netherlands.
When will the new system start?
The Agreement on the UPC must be ratified by 13 member states, including France, Germany and the UK, before it can come into effect. So far, five states including France, have ratified. Others are in the process of doing so.
Given the time required for further ratifications, and the practical steps necessary before the court can operate, the earliest start date is likely to be spring 2016, though some people believe it will be delayed until 2017.
However, since patent applicants only need to designate a Unitary Patent at the time of grant, if these timelines are met, then the first Unitary Patents may be already being examined at the EPO.
Which countries are involved?
The 28 EU member states are all eligible to join the system. However, just 25 countries participated in the enhanced cooperation that led to the Unitary Patent Regulations (the exceptions are Spain and Italy, which object on language grounds, and Croatia, which had not joined the EU at the time) and 25 countries have signed the UPC (Italy has, but Poland has not).
Spain has filed a challenge to the legality of the system before the Court of Justice of the EU. A decision is expected by early next year.
How much will it cost?
The cost of applying for a Unitary Patent will be the same as applying for a European patent today. The difference comes once the patent is granted. If you have a bundle of national patents, validation and translation fees have to be paid for each designated country. With the Unitary Patent, no such fees will be necessary (though some translation costs will still apply). If your patents are drafted in English, this should lead to substantial savings in the long term.
However, a number of costs are still not known. Notably, the annuity (renewal) fees are still to be set. For European patents, these are paid country-by-country. For Unitary Patents there is a single fee covering all participating countries. Renewal fees will be collected by the EPO and distributed to participating states. The Regulation sets out how the fee levels should be set, and how the money should be distributed, but the details are still being worked out. EPO President Benoît Battistelli the keynote speaker at today’s luncheon, says that the fees will be “higher than you hope for, but lower than you fear.”
The level of renewal fees is crucial to the popularity of the new system: if the fees are too high, patent applicants may opt to file national patents in a few key countries instead.
A number of other fees are also still to be set. These include a one-off fee for opting out of existing European patents from the UPC, and court fees.
What will happen at the EPO?
The EPO will examine applications for Unitary Patents alongside European patent applications. The processes and legal standards applied will be the same. The only difference will be at the point of grant, when the applicant can choose to designate a Unitary Patent. However, applicants who want protection in states that are not participating in the Unitary Patent will still have to designate those countries. For example, you may choose designate the Unitary Patent, Spain, Switzerland and Turkey. You would then have to pay the validation (and, if relevant, translation) costs for those three countries on top of the Unitary Patent fees. (note that the London Agreement has reduced the translation costs for a number of EPC member states).
Oppositions and appeals at the EPO will continue as normal.
Will the UPC end forum-shopping in Europe?
No, far from it. The court will consist of a web of divisions (known as local, regional and central divisions) in different cities around Europe. There are expected to be 15 to 20 divisions in total, and some of these may sit in different locations. The Central Division itself is divided between three cities: Paris (the headquarters), London (for pharmaceutical-related cases) and Munich (for mechanical-related cases).
Clearly there will be scope for plaintiffs to choose where to start litigation in certain cases, and some courts may become known as being plaintiff-friendly (commentators have talked about the “Eastern District of Europe!”). It is also likely, at least in the early stages, that there will be different views of procedural and substantive questions. The Court of Appeal (to be based in Luxembourg) is likely to have to adjudicate on these. Where there are questions about the interpretation of EU law, these may be referred to the Court of Justice of the EU.
A big concern, particularly for industries, is the possibility of bifurcation. This is where validity and infringement are heard separately (as happens now in Germany). It often results in a finding of infringement (leading to remedies such as an injunction being granted) before the validity of the patent has been tested. The UPC provides for the possibility of bifurcation between divisions in principle, though it remains to be seen whether it will happen in practice or whether infringement cases will be stayed pending the outcome of validity hearings.
What will hearings be like?
Judges at first instance will sit in panels of three, and have the opportunity to add a fourth technical judge in appropriate cases. There will be no juries. The Court of Appeal will have panels of five.
Hearings are designed to be short and paper-based. There will be limited scope for discovery or cross-examination of expert witnesses, though divisions and judges may interpret this in different ways.
The language regime is somewhat complicated, but in most cases will be determined by the division hearing the case in agreement with the parties. In practice, much of the litigation is expected to be in English.
What happens next?
The next (17th) version of the Rules of Procedure is expected to be published this month, followed by a public hearing in Trier, Germany in November. That should lead to a final version of the Rules being published early next year.
In the meantime, there is much work to do regarding the practicalities of the new court – including setting up an IT/docketing system, finding buildings and hiring staff. Most importantly, judges will have to be recruited and trained. Judges will likely have great influence on how the system develops, at least in the early stages, and there is much interest in who they will be. In particular, there are concerns about having too many judges from countries without a long tradition of IP litigation.
At the EPO, the Office says it is making the necessary preparations to grant Unitary Patents and host the central registry. However, there are intense discussions going on about the setting of renewal fees, which are unlikely to be completed until later next year.
What do we need to do now?
Based on the likelihood that the new system will come into effect within the next two years, if you file patent applications in Europe you will soon need to consider whether you want any of them to become Unitary Patents. You may need to factor that into budget planning from now on.
If you already have a European patent portfolio, you may also want to consider whether you want to opt your patents out of the new court. Given the uncertainties of the new system, you may prefer to enforce your patents using the existing national courts. On the other hand, you may choose to have your patents before the new court so you can help shape the jurisprudence.
You may also want to follow the debate as the remaining aspects of the system are finalised, including the UPC Rules of Procedure, the appointment of judges and the setting of fees. There are numerous websites where you can find out more about these, and also opportunities to make your views heard (though note that most of the relevant consultations have already taken place).