It is about to start – the European Union’s unitary patent system. Possibly as early as 2016. Without doubt, this is a historic achievement and a great opportunity – for companies holding patents, for companies using patents, for patent prosecution and for patent litigation.
However, will there actually be unitary patent protection within the territory of the 25 Member States participating in “enhanced cooperation”? For the foreseeable future it should not be expected that the unitary patent will cover all 25 Member States. Since the application of the EU regulations on the unitary patent is bound to the date of entry into force of the Agreement on a Unified Patent Court (UPCA) and this agreement, different from EU regulations, needs ratification further progress depends on the speed of ratification in the Member States. Predictably, the forecast of the EU Commission that the necessary ratifications might be available in November 2013 turned out to be over-optimistic.
In order to make entry into force of UPCA easy, the legislator has set the minimum number of ratifications at 13. Currently, only Austria, Belgium, Denmark, France, Malta and Sweden have deposited their instruments of ratification. One player in the enhanced cooperation has left the game: Poland has not signed the UPCA since it no longer believes that the new unitary patent serves the economic interests of the country. Among the 13 ratifications must be the three countries with the largest number of European patents, i.e., France, Germany and the United Kingdom. France is already on-board, and Germany will follow. However, a question mark may be made behind the United Kingdom where a general election for the House of Commons will be held on May 7, 2015. Resentments against the EU might become an obstacle to further progress although such fears have so far not materialized in the discussion of the pending Bill. As an incentive for voters and the Parliament to be elected in the United Kingdom, the UK Intellectual Property Office promises a benefit of around £200 million per annum to the UK economy through hosting parts of the Unified Patent Court in London.
Once the 13th instrument of ratification has been deposited and the system has become applicable for 13 Member States, the success of the unitary patent will depend on the patentees’ willingness to use it. As regards unitary patents, they will fall within the jurisdiction of the Unified Patent Court (UPC) from day one. We will come back to the choice between unitary patents and the current “bundle patent” later. As regards the jurisdiction of the UPC over the bundle patent, the UPCA provides for a flexible system for patentees by giving them a period of familiarization and allowing the proprietor of a European bundle patent to opt out from the jurisdiction of the UPC during a transitional period. Nevertheless, the current draft of the Rules of Procedure for the UPC provide for a fee for submitting a declaration of opt out. This may result in considerable revenues for the unitary patent system because opting out is not only a question for patents to be granted after entry into force of the UPCA but also for the whole portfolio of valid European bundle patents. Regardless of all heartfelt support for the unitary patent system, it is at least questionable how such fee can be justified. Usually, administrative fees have to be paid for a service rendered to the debtor of the fee. One might ask why those not willing to use the services of the UPC should be obliged to pay a fee which may actually be used for the financing of the court system.
But is there a reason to opt out? Is the inherent advantage of the UPC, its power to enforce the patent for the whole territorial scope of the patent, not reason enough to choose the UPC instead of the national courts? The answer depends on the question whether the users will expect that they obtain decisions of a standard of quality which can be compared with the high standard they have been experienced so far at the national level. In this respect, one has to be aware of the fact that so far more than 90 % of the patent cases within the EU have been litigated in only four countries: Germany, France, the United Kingdom and the Netherlands. The vast majority of experienced patent judges come from these countries. The question therefore is whether the judges of the future UPC and in all of its local or regional divisions will have the required skill and competence, comparable to the current situation in the countries just mentioned.
According to Article 15 of the UPCA, future judges of the UPC shall ensure the highest standards of competence and shall have proven experience in the field of patent litigation. However, the Statute of the UPC stipulates that the UPC shall have a balanced composition on an as broad as possible geographical basis and that experience in patent litigation may be acquired by training in the UPC’s training center in Budapest. In any case, the UPCA provides for the Local Divisions in countries with more than 50 patent cases per year that two of the three legally qualified judges are nationals of the respective state. Most likely, the actually experienced candidates from these countries will be appointed to the Local Divisions of these countries. Thus, there will be a number of Local Divisions which are likely to achieve the desired high standard of competence. A further incentive for patent litigation before the UPC might be that a number of Local Divisions are expected to offer English as an additional language of procedure.
The patentees’ choice between the European bundle patent and the unitary patent is very likely to depend on financial considerations as well. We may have serious doubts whether the promotion of the unitary patent by its proponents with the claim that patent protection in Europe will become up to 80 % cheaper, will actually be realized. But the unitary patent will certainly be less expensive than a bundle patent for the majority of the participating countries. Apart from savings on the enforcement side though the UPC, on the prosecution side, there are two possible sources of savings for the users: renewal fees and translations. In both cases the possible savings are dependent from the status of ratification of the UPC. A unitary patent for 13 states is less attractive than one for 25 or even for all EU Member States.
In respect of the renewal fees, the participating Member States, when agreeing on the unitary patent package, also reached a political consensus on the aim of allowing all states to keep their current renewal fee income while at the same time ensuring that those states having at present a low fee income will increase this income. Trying to maintain the share of the states and even increase it for some, as well as, at the same time, financing the additional costs for the administration of the unitary patent and achieving savings for the patentee sounds like squaring the circle. However, the actual level of renewal fees is not known, yet, and it is to be hoped that it is lower than some might fear. [Update: See our article European Patent Organisation: The first concept for assessing the amounts of renewal fees for the unitary patent, reported by Dr. Rudolf Teschemacher]
As far as the translation costs are concerned, the compromise in the package to require a translation in one language during a transitional period excludes savings for the majority of patentees. At present more than 50 % of granted European bundle patents are validated in up to three Member States. That means that the proprietors of these European bundle patents do not save anything with the unitary patent because under the London Protocol no translation is required in particular in France, Germany and the United Kingdom. Rather, these patentees will incur additional costs for the obligatory translation of the full specification. Only a minority of patentees validating the patent in from six to eight Member States, as the case may be, will be able to make savings.
The agreements reached in 2013 at the political level on the unitary patent package, 55 years after the year of birth of the European Economic Community (EEC) in 1958, have finally brought to their conclusion the efforts to create unitary intellectual property rights in the European Union not only for trademarks and designs but also for patents. Whereas the unitary patent is not quite the “single patent for the European Union”, it is, nonetheless, a huge step forward, although many political compromises have prevented a better solution from becoming reality. Prominent examples for these compromises are the splitting of the location of the Central Division between Paris, London, and Munich, or the lack of clear rules on bifurcation. Such compromises were due to a European spirit which is far from being as enthusiastic as it was in 1958 or in 1973, the year of the signing of the European Patent Convention (EPC). However, the institutions competent for implementing the unitary patent, i.e., the Preparatory Committee of the UPC and the Select Committee of the Administrative Council of the EPO will recognize their responsibility of making the unitary patent a success. This requires, at least from time to time, to put national interests aside and to revive some of the European spirit which was the starting point of patent harmonization and unification. We are looking forward to using the new unitary patent system.