Making sense of Europe’s Unitary Patent

By Gwilym Roberts, Partner and Julia Venner, Associate, Kilburn & Strode, LLP, London, UK

As a concept, a unitary European patent has been under discussion, in one form or another, for over four decades. In the last couple of years, however, there have been significant developments in the implementation of the so-called “EU Patent Package” (the Unitary Patent Regulation (Regulation No. 1257/2012) which implements enhanced co-operation in this area, together with the applicable Translation Arrangements (Regulation No. 1260/2012), and the Agreement on the Unified Patent Court).

The aim of the EU Patent Package is to provide a single pan-European patent and a single court for litigation of European patents. While this package is being heralded by some as a means to make access to the patent system easier, less costly and more legally secure, by providing uniform patent protection in all participating member states, it remains to be seen whether the current proposals will actually deliver these benefits to patentees.

Unitary patent

The Unitary patent will sit alongside “standard” European patents granted by the European Patent Office (EPO), which are subject to a national validation procedure to take effect in the designated states.

The process of applying for a European patent, the examination of the patent application by the EPO, and the EPO grant formalities will remain unchanged under the new regime; the difference arises after grant. In order to obtain a unitary patent, the patent owner must file, within one month of grant, a “Request for Unitary Effect” and, during a transitional period, the applicable translation. European patents will continue to be granted in English, French or German. English-language patents will require translation into any other language of an EU member state. French or German language patents must be translated into English. Such translations will be required until suitably accurate machine translations are available (and for a maximum of 12 years after the Regulation enters into force).

Keeping the unitary patent in force will require the annual payment of progressive renewal fees to the EPO. Once granted, a unitary patent is intended to provide uniform protection having equal effect in all participating member states. A unitary patent can be enforced, assigned, revoked, limited and can lapse in all participating member states, and can be licensed in respect of the whole or part of the territories of the states. For example, it will only be possible to assign a unitary patent in respect of all of the participating member states. It will, however, be possible for the patent owner to grant a third party a license to use the patented invention in respect of only some of the participating member states, for example the UK, France and Germany.

Under the current system, a granted European patent can be validated in up to 38 European Patent Convention (EPC) states and 2 “extension states” (Bosnia & Herzegovina and Montenegro). Although the new system moves towards a single pan-European patent, the unitary patent will still have a somewhat “patchwork” nature. Only European Union (EU) states may be party to the Unitary Patent Regulation (“the Regulation”). Many EPC states are not EU states (for example, Switzerland and Norway) and will therefore not be covered by the unitary patent. Furthermore, two EU states, Spain and Italy, have opted out of the Regulation. As of the time of writing, Poland has declined to sign the Unified Patent Court Agreement, ratification of which is a pre-requisite for participation in the unitary patent, and is therefore also currently outside of the unitary patent system. To date, only 24 of the 40 states that may be designated by a European patent application will be covered by a unitary patent. For the remaining states, it will remain possible to proceed in the traditional manner, with national validations at grant.

Unified Patent Court

The Unified Patent Court Agreement (“the Agreement”) is an international agreement between contracting member states. The Unified Patent Court (UPC) will have mandatory jurisdiction over both unitary patents and, subject to transitional provisions, over standard European patents, insofar as they designate contracting member states. The UPC will also have jurisdiction over Supplementary Protection Certificates (SPCs), which are granted for inventions in certain technologies requiring lengthy regulatory approval processes). It will not have jurisdiction over national patents or national utility models.

During a transitional period of at least seven years after the date of entry into force of the Agreement, an action for infringement or revocation of a standard European patent or an action for infringement or for a declaration of invalidity of an SPC may still be initiated before the national courts. Furthermore, unless an action has already been brought before the UPC, holders of standard European patents or patent applications granted or applied for prior to the end of the transitional period and holders of SPCs can opt out of the exclusive competence of the UPC. The owner of a unitary patent, however, cannot avoid the jurisdiction of the UPC.

The territorial extent of the UPC will include all contracting member states to the Agreement (all of the EU States, with the exception of Spain and Poland). While Italy is not a participating member state of the Unitary Patent Regulation, it has signed up to the UPC. The UPC will therefore have jurisdiction over the national part of a standard European patent that has been validated in Italy, unless the patent holder has opted out of the exclusive competence of the UPC, as described above.

The UPC will comprise a Court of First Instance (CFI), including a Central Division and Local and Regional Divisions. After much political argument, it was decided that the seat of the Central Division will be in Paris, with separate specialist divisions in London (for cases relating to human necessities, chemistry and metallurgy) and Munich (for cases relating to mechanical engineering, lighting, heating, weapons and blasting). In addition to the CFI, there will be an Appeal Court, based in Luxembourg.

The UPC will have the power to decide questions of infringement and validity. Cases concerning the infringement of a patent can be brought before the Local/Regional Division where the alleged infringement occurred or where the defendant has their residence or principle place of business. In the event that there is no appropriate Local/Regional Division, cases can be brought before the Central Division. A counterclaim for revocation must be brought before the same Division as the infringement proceedings, although parties can alternatively agree on a Division of their choice, including the Central Division. However, all or part of the action can be referred thereafter from the Local/Regional Division to the Central Division. In this way, “bifurcation”, where actions for infringement and revocation are heard in different courts, is possible. For example, an action for infringement could be heard in a Local/Regional Division whilst a counterclaim for revocation may be handled, at a later date, by the Central Division. This is intended to make the UPC more patentee-friendly. However, there are concerns that, whilst this may be the case, it is to the detriment of third parties.

An action for revocation or declaration of non-infringement must be brought before the Central Division (or a Local/Regional Division, if the parties agree).

Will the EU Patent Package be fit for purpose?

As noted above, the EU Patent Package intends to make access to the patent system easier, less costly and more legally secure by providing uniform patent protection in all participating member states. Whether the package actually delivers these advantages remains to be seen.

A first issue of concern is the patchwork nature of the system. If you obtain a unitary patent, it will still be necessary to carry out national validations in any EPC states or extension states that are not covered by the unitary patent, if you wish to obtain patent protection in those states.

Secondly, although a “unified” court is provided, a certain amount of forum shopping will be possible within the UPC. For example, an action for patent infringement can be brought before the Local/Regional Division where the alleged infringement occurred or where the defendant has their residence or principle place of business.

Furthermore, some commentators, including Google, Apple and Samsung, are concerned about the issue of bifurcation, where actions for infringement and revocation are heard in different courts. In particular, they are alarmed by the potential for a court to order an injunction prohibiting the importation and sale of goods, even though the patent may ultimately be found invalid; provisions that patent assertion entities or “trolls” may be quick to exploit. Such bifurcation also opens up potential complications in relation to the language of proceedings.

Lastly, it is unclear whether the new system will actually save costs or whether it will in fact be more expensive than the current system. The level of renewal fees for unitary patents has yet to be set but they are expected to reflect the size of the EU market and to be equivalent to the level of the renewal fees paid for the average geographical coverage of current European patents. So, for owners only interested in validating their European patent in a small number of participating member states, the unitary patent may not be an attractive option. There are also concerns regarding the cost of creating and maintaining the UPC. As the EU is no longer a party to the Agreement on the UPC, the cost of setting up the court will be borne by contracting member states. Going forward, as the intention is that the running costs of the UPC will be covered by court fees, there are concerns that these will be correspondingly high.

There is also apprehension regarding the quality of decisions coming out of the court and the first few judgments will therefore be crucial in alleviating these concerns.

Who might use the system?

It is unclear what the uptake for the new system will be. Many patent owners, when considering whether to obtain a unitary patent or to proceed solely with national validations, are likely to consider only the cost at (or closely following) grant, and are unlikely to take into account the cost of future litigation. The reduced requirement for translation of the granted patent will therefore be an attractive feature of the new system. However, the level of the renewal fees set for unitary patents will also be a key consideration. If too high, this may limit the interest of parties such as small and medium-sized enterprises. However, for larger companies who routinely validate their European patents in numerous states, the unitary patent may provide annuity savings.

The fact that the unitary patent can be revoked in a single action in respect of all participating member states may reduce its appeal, particularly in respect of high-value patents. For such patents, owners may prefer to obtain a standard European patent and opt out of the exclusive competence of the UPC. Once the nine-month EPO opposition period has elapsed, such patents could only be revoked on a national basis, one state at a time.

As discussed above, patent assertion entities or “trolls” are expected to favor the new system, particularly while it remains unclear whether the UPC will take a patentee-friendly approach, for example via bifurcation. The possibility of obtaining an injunction against an alleged infringer before the validity of the patent has even been considered will be a potent weapon for such entities.

When will the EU Patent Package come into force?

The Agreement on a Unified Patent Court will enter into force once 13 contracting member states, including the UK, France and Germany, ratify it or after the “Brussels I” Regulation (No. 1215/2012) on the jurisdiction of the courts in civil matters in the EU is amended to clarify the jurisdiction of the UPC, whichever is the later. The Unitary Patent Regulation will apply from the date of entry into force of the Unified Patent Court Agreement.

At present, Austria, France and Sweden are the only countries to have ratified the Agreement, although it would appear that Belgium, Denmark and Malta will shortly join them. A date of entry into force of 2016, or even 2017, is seen as realistic. However, recent legal challenges by Spain still have the potential to derail the package.

Good intentions tinged with practical concerns

While there does appear to be a large degree of political goodwill behind the EU Patent Package, the likely impact of the new system, and when it will come into force, remain uncertain.

The theory and intent behind the new system may be good, but there are areas of concern. The potential appeal of the new system to “trolls” is alarming some and large numbers of patent owners may elect to opt out of the exclusive jurisdiction of the UPC, particularly in respect of high-value patents, to avoid the risk of simultaneous revocation in all of the participating member states. The cost of the new system, in particular the cost of renewal fees and litigation before the UPC, are also a significant concern. Finally, there is apprehension regarding the quality of the decisions that will come out of the UPC. However, given the close involvement of Europe’s top judges, and the long and distinguished history of European law, there is hope that the UPC will deliver on its promise to defend “against unfounded claims and patents”, “enhance legal certainty”, strike “a fair balance between the interests of right holders and other parties” and allow for “proportionality and flexibility”.