The creation of the Unitary Patent and the Unified Patent Court in Europe and the implications for international business

January 2016  |  SPECIAL REPORT: INTELLECTUAL PROPERTY

Financier Worldwide Magazine

January 2016 Issue

January 2016 Issue


The forthcoming creation of a new European Unified Patent Court (UPC) and a new European patent with unitary effect (Unitary Patent), in which almost all member states of the European Union will participate, is the most important change in the European patent system since the European Patent Convention came into effect in October 1977. It paves the way for a unified approach to patents in Europe and will fundamentally change the international patent litigation landscape. The new system is expected to come into force in 2017.

Given the sheer scale and ambition of the project, it is still uncertain how the new system will directly affect particular businesses. Nevertheless, it is expected that the new regime will have two overarching influences on the international patent landscape. Firstly, by providing a unified patent litigation system for the world’s largest single economic market, it will make patent litigation in Europe much more attractive to international businesses. In time, this will likely make European patent litigation of equivalent importance as US patent litigation. Secondly, the new system is likely to lead to greater integration and harmonisation in patent law and policy within Europe. This will be a boon for businesses with product and service offerings that transcend local or regional boundaries in Europe.

Individually, each of these influences are significant. Together, these could dramatically reshape the drivers and approaches to international patent litigation in the coming decade. It is therefore essential that companies properly plan for the upcoming changes and develop strategies to take advantage of the new system.

The largest patent court in the world

The UPC will be, by GDP of its jurisdiction, the largest patent litigation forum in the world, dealing with patent disputes across Europe. It will provide a unified system for the enforcement of patent rights across Europe by replacing the existing patchwork of different national patent litigation regimes, which often results in two or more parallel actions in different countries and occasionally inconsistent decisions. The UPC will eventually have exclusive jurisdiction not only over the new Unitary Patents but also over standard European patents which have not been ‘opted-out’ of the system. This means any business operating in Europe could be subject to proceedings before the UPC.

The procedural rules for the UPC (which are now in near final form) borrow from the various different legal traditions of the participating member states. The result is a mixed procedural framework that includes elements from the different legal systems. In the short to medium term, this hybrid system is likely to be more attractive to consumer technology businesses which sell products that are protected by hundreds (if not thousands) of patents or which incorporate standardised technologies. This is because any downside risk arising from the uncertainties of the new system is likely to be offset by the advantage of Europe-wide enforcement. On the other hand, industries that are reliant on long term R&D and that rely heavily on individual patents, notably pharmaceuticals and biotechnology, may take a more cautious approach until the procedures and jurisprudence become more settled and predictable. Some will opt out all their current European patents and adopt a wait and see approach before, if comfortable with how the new system operates in practice, opting back into the system. Others will likely adopt a more nuanced strategy by testing the system with selected parts of their patent portfolio.

The administrative set up of the UPC will also affect the operation and development of the new regime. Following intense negotiations, it was eventually agreed that the UPC’s Court of First Instance will have a central division with the seat in Paris and sections in London (focusing on chemistry cases, including pharmaceuticals) and in Munich (focusing on mechanical engineering cases). In time, this will lead to specialisation in particular technology areas in these locations, albeit within the same procedural framework. Further, the judicial panel responsible for hearing cases (both at first instance and on appeal) will be comprised of a multinational team from different member states. This is designed to help with harmonisation and will speed up the development of expertise in the EU member states that do not presently have strong patent regimes.

In time, the combination of a unified procedure across Europe and the shared technical expertise of the court could make this a forum to rival the US in importance for patent litigation. How businesses will combine the use of the two systems will be interesting to watch develop.

A single patent for Europe

The standard European patent does not provide pan European protection but is in effect a collection of national rights; whilst these patents are prosecuted centrally at the European Patent Office (EPO), they only become effective once they are validated by the designated national patent offices. The Unitary Patent in contrast will provide uniform protection with effect in all of the participating member states. It will be a third route to patent protection in Europe, alongside national patents and the standard European patents with national designations.

Crucially, the Unitary Patent will not replace the existing European patent system but rather will exist alongside it. It will be possible for applicants to choose between combinations of national patents, European Patents and Unitary Patents. This allows applicants to choose the option best suited to their protection needs. Unitary Patents will, however, need to be litigated exclusively before the UPC (i.e., it will not be possible to ‘opt out’ these patents from the new regime).

The advantages of the Unitary Patent are essentially twofold. First, these new patents will be subject to the payment of a single set of renewal fees which will correspond to the sum total of the renewal fees paid for the four countries in which standard European patents are most frequently validated (namely, the UK, Germany, France and the Netherlands). This will be a significant cost saving for patents widely validated across Europe. Second, patentees will be able to enforce the Unitary Patent across all participating member states centrally, rather than having to pursue infringers under the different national designations of a standard European patent. This, however, also means that Unitary Patents can be attacked and revoked centrally.

Patent applicants will therefore likely adopt differing strategies depending on the technological field, the breadth of desired territorial protection and the underlying value of the invention itself. For example, some pharmaceutical companies may initially only rely on Unitary Patent protection for truly groundbreaking inventions (e.g., compound patents, which are typically much harder to invalidate) whilst relying on standard European patents for second generation protection (e.g., for dosage regime or secondary indication inventions, which are more vulnerable to an invalidity challenge). Also, where protection is only required in a small number of countries, filing national patent applications might be a valid option that would allow patentees to avoid excessive maintenance costs, as well as the uncertainty associated with the new system.

In the long term, the Unitary Patent is also likely to lead to greater harmonisation of substantive patent law and policy across Europe. This should naturally result from having a single patent that is effective (and can be enforced) across all the participating member states. The biggest beneficiaries are likely to be businesses with large Europe-wide operations that will benefit from a more streamlined and a more cost effective system.

Next steps and outlook

To oversee the establishment of the UPC, the signatory states have set up a Preparatory Committee. The Committee has been tasked with setting up the necessary legal framework for the UPC including the procedural rules, the financial aspects of the court, IT facilities and HR infrastructure. It is also overseeing the training of judges. It is currently expected that the UPC and the Unitary Patent will be operational in mid-2017.

Depending on your perspective, the new system will bring both risk and opportunity. In any event, this dramatic change in the patent landscape is happening and cannot be ignored. It is likely that those who will benefit most are those who are prepared and who develop their strategies early.

 

Alastair McCulloch is a partner and Indradeep Bhattacharya is an associate at Jones Day. Mr McCulloch can be contacted on +44 (0)20 7039 5219 or by email: amcculloch@jonesday.com. Mr Bhattacharya can be contacted on +44 (0)20 7039 5277 or by email: ibhattacharya@jonesday.com.

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