37 Offices in 18 Countries

The Unitary Patent & TheUnified Patent Court

Andrew ClayPartnerIntellectual Property & TechnologyPractice

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Major Changes Ahead For The European Patent System

• The way the Europeans do patents is very likely to changesignificantly within the next couple of years.

• This will have major implications for businesses based on theexploitation of new technology.

• I am going to explain the basics of the current system and thechanges which are likely to be implemented.

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Where we are now (1)

• The European Union has 27 member countries with a totalpopulation of just over 500m.

• There are two basic routes used to obtain patent protection inEurope.

• The first route is simply to make a number of separateapplications in different countries (possibly as a result of filing aPCT application). The end result is a bundle of national patents.Where coverage in a large number of countries is required thiswill be a very expensive route.

• The second route is to file (directly or via a PCT application) asingle application at the European Patent Office in Munich underthe European Patent Convention (1973). The European PatentConvention provides a framework for the granting of patents. Anapplication under the EPC can lead to a patent being granted inup to 40 countries – the EU member states plus 13 othercountries.

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Where we are now (2)

The EPC application procedure has the following main steps:-

- Formalities examination

- Search report and preliminary opinion on validity

- Early publication (with search report) at 18 months after filing ofthe application/or the priority filing if priority was claimed.

- Substantive examination

- Grant

- Possibility of post grant central opposition (9 months)

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Where we are now (3)

What happens post grant is where the problems begin.

The EPC application becomes, on grant, potentially a bundle ofnational patents in the countries designated in the EPC application.

To be granted in each such country the patent must be validated inthat country, which involves translation in some countries (seefollowing slides), paying publication fees and complying withvarious formal filing requirements.

The overall cost of validation of an average patent for 13 member

states is estimated to be about €12,500 and more than €32,000 if

validated across all EU member states.

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Where we are now (4)

The London Agreement (Agreement on the Application of Article

65 EPC, OJ, EPO 2001,55) has improved the situation in relation

to translation costs.

The London Agreement provides that:-

1. Countries with English, French or German as their official

language no longer require translation of the patent into their

official language: the claims will be in all three languages –

(Article 14(6) EPC).

2. Member states which do not have English, French or German

as their official language must designate one of those three

languages as their official language for the purpose of the

London Agreement. They may then only require the claims of

a European patent to be translated into their actual official

language, provided that that European patent is in the official

language (English, French or German) that the member state

has designated under the agreement.

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Where we are now (5)

All the countries not having English, French or German as theirofficial language have designated English as their preferredlanguage for the purposes of the London Agreement.

18 Countries have now ratified the London Agreement.

The net effect is that translation costs for European patents havecome down significantly, especially in cases where the Europeanpatent is in English.

However Spain and Italy have indicated that they won’t ratify theLondon Agreement so that full translation in these countries is stillrequired. A real shame as they are the fourth and fifth most popularcountries after the UK, Germany and France.

Full translation is also required in Bulgaria, Cyprus, the CzechRepublic, Estonia, Greece, Montenegro, Norway, Poland, Portugal,Romania, San Marino, Serbia, Slovakia and Turkey.

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Where we are now (6)

Renewal Fees – Another Major Problem

Once a patent has been validated in a particular country then tokeep it in force national renewal fees are payable annually. If theseare not paid then the patent lapses.

The level of fees varies considerably across the EU.

The deadlines for payment differ between different countries.

In some countries payment of the fees by bank transfer is still notpossible.

Some countries mandate the appointment of a patent attorney andrequire communications to be in the local language.

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Where we are now (7)

The Net Effect

The net effect of these costs is that the average European patent ison average now validated in only 5 countries – Study on the Costsof Patenting by Roland Berger Market Research.

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Where we are now (8)

Enforcement – A Further Major Problem Area

There is no central litigation system in Europe for patents.

A patentee generally has to start separate national infringementactions in each country where there is an infringement problem.This is very expensive and is simply beyond the pockets of mostSME’s.

Litigation procedures and practices vary considerably acrossEurope and even across a single country.

Inconsistent decisions across different countries for the samepatent and the same infringing device occur (e.g. the Improverlitigation).

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Where we are now (9)

Overall Picture

A fragmented, cumbersome post grant system where obtaining,maintaining and enforcing patents is expensive and time-consuming.

In the US a single patent covers a market of 312m people.

In China a single patent covers a market of 1.34bn people.

In India a single patent covers a market of 1.2bn people.

European business is therefore perceived as being at adisadvantage in its key home market. Although…

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The Solution (1)

These problems have long been understood.

As long ago as 1959 a working party was set up to come up with asolution: its solution was a unitary European patent (see theHaertel draft of the community patent,1962).

By 1975 a community patents convention (CPC) was signed by allthe then 9 member states but it was not ratified by enough of themto bring it into force.

In 1989 a further attempt to revive the CPC was made but again itfailed.

Little progress was then made between 1989 and 2009.

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The Solution (2)

In December 2009 the EU Competitiveness Council agreed a setof principles to implement a more integrated patent system forEurope. At its core were two fundamental elements:-

1. The creation of a unitary EU patent

2. The creation of a common patent litigation system withexclusive jurisdiction relating to both EU patents and EPCpatents.

The competitiveness Council envisaged unanimity amongst all 27member states. Spain and Italy were never going to agree to anyproposals they saw as promoting English, French and German.

In any event the Court of Justice of the European Union ruled(Opinion 1/09) that the then proposed Europe wide arrangementswere unlawful as they proposed to create a court system outsidethe EU legal framework.

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The Solution (3)

By December 2010 a number of member states asked theEuropean Commission to work with them to implement a unitarypatent limited to only those countries that were prepared to worktogether.

Such a coalition of the willing is possible under what is known asthe Enhanced Co-operation Procedure – see Articles 326 – 334 ofthe Treaty on the Functioning of the European Union.

The Council of The European Union then authorised the use of theenhanced cooperation procedure on 10 March 2011 –(2011/167/EU). This had previously been approved by theEuropean parliament.

Spain and Italy have started a court action (CJEU) to block the useof the Enhanced Cooperation procedure, on the basis of anobjection to the proposed language arrangements. That case is stillpending.

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The Solution (4)

Since the use of the enhanced cooperation procedure has beensanctioned progress has been rapid.

There are now two draft regulations and a draft internationalagreement.

One of the regulations deals with the Unitary Patent and one withtranslation issues.

The international agreement deals with the setting up of the UnifiedPatents Court.

The rest of this talk will focus on the key aspects of these tworegulations and the draft Unified Patents Court agreement andtheir implementation.

I am not dealing with the proposed Court procedures.

A word of caution is that, somewhat bizarrely, the current draft ofthe Unified Patents Court agreement, which was agreed by theCompetitiveness Council on 5 December 2011 has never beenpublished so there is some uncertainty about what the final draftwill look like.

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Draft Regulation On Creation Of A Unitary Patent (1)

Current draft is Com(2011) 216 final, subject to councilamendments.

• Unitary patents will start life as applications made to the EPO.The application and examination procedure for Unitary and EPCpatents will be identical up to grant.

• The difference will kick in post grant. After grant a patentproprietor can opt for:-

1. A bundle of national patents in the usual way OR

2. A unitary patent with unitary effect in all 25 EnhancedCooperation States OR

3. National patents in Non Enhanced Cooperation States plus aUnitary patent in the Enhanced Cooperation States.

• The EPO will keep a register of cases where patentees haveopted for unitary patent protection.

• Enhanced Protection States must cancel local equivalents whena notice of grant of a unitary patent is published.

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Draft Regulation On Creation Of A Unitary Patent (2)

• For patents granted after the date the regulation comes intoforce then requesting Unitary Patent effect will be an option,(Article 79(1) EPC).

• It is unclear to me whether it will also be an option in relation toexisting patents but even if it is then unlikely to have muchimpact as only a very small percentage of existing patents willhave been validated in all 25 Enhanced Cooperation States –2% of all patents is a number that is banded about.

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Draft Regulation On Creation Of A Unitary Patent (3)

Where a Unitary patent has been granted:-

(1) There will only be one annual renewal fee.

(2) The patent will have to be enforced via the new Unified PatentCourt.

(3) The patent will have to be dealt with as a whole.

(4) The patent as an object of property will be dealt with accordingto laws of the MS where the owner has residence or principle placeof business or (if neither in an MS) a place of business. Co-owners– position is determined by first named in the register. If applyingthe above still leads to no MS being caught then German lawapplies.

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Draft Regulation On Creation Of A Unitary Patent (4)

Controversially the draft regulation also:-

(i) Defines what infringing acts are (article 6) – equivalent tosection 60(1) of the Patents Act 1977.

(ii) Defines what amounts to indirect infringement (article 7) –equivalent to section 60(2) of the Patents Act 1977.

(iii) Defines what does not amount to infringement (article 8) –equivalent to section 60(5) of the Patents Act 1977.

The inclusion and exclusion of these articles is the main currentsticking point to the implementation of the whole package, (seefollowing slides).

Why is this so controversial?

There is also provision for an opt in to a licence of right procedure,(article 11).

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Draft Regulation On Translation Arrangements (1)

Current draft is COM(2011) 215 final.

On the vexed question of languages and translations the currentproposals envisage for a transitional period the following position:-

(i) Where the language of the EPO proceedings is French orGerman, on grant as a Unified Patent, at least until goodquality machine translations are available, a full Englishtranslation of the whole specification will be required.

(ii) Where the language of the EPO proceedings is English then atranslation into either German or French will be required.

(iii) Where there is a dispute, the patentee will, at his ownexpense, have to translate the patent specification into thelanguage of any legal proceedings in which the patent is beinglitigated.

(iv) The EPO is to make available high quality machinetranslations of Unified Patents into all official languages of thecontracting states.

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Draft Regulation On Translation Arrangements (2)

(iv) Certain categories of applicants for patents (SME’s,individuals and not for profit bodies) will be able to file patentapplications in their own language, even if it is not English,German or French and the costs of the translation into anEPO official language are to be subject to a cappedreimbursement from official filing fees.

As noted above, Italy and Spain lodged a complaint with the Courtof Justice of the European Union on 7 June 2011 seeking adeclaration that the proposed language/translation agreementsunfairly prejudice them. That challenge has yet to be heard by theCourt of Justice.

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The Unified Court – Main Features (1)

• Last published draft of the agreement was Council publication16741/11 of 11 November 2011. However that is not the draftwhich was agreed in principle (apart from location of the CentralDivision of the Court) by the Competiveness Council inDecember 2011. That agreed draft was based on a compromisedraft prepared by the Presidency of the European Council and isCouncil document No. 18239/11.

• Council document No. 18239/11 has never been published,despite requests by several member states (see Councildocument 6051/12). Apparently even the IPO had not seen acopy of it as late as June 2012…

• Thus all we have to go on is 16741/11 plus the Councilconclusions document of the meeting that took place on 28/29June 2012.

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The Unified Court – Main Features (2)

• There is a court of first instance and a court of appeal.

• The court of first instance has a central division (which hasspecial powers and thus the location of which has been greatlydebated) and also local and regional divisions.

• A local division can be set up in a contracting state. States whichare busy (more than 100 cases a year, three year average) canhave more than one local division.

• Two or more member states can set up a regional division.

• The central division will be located in Paris but additional“sections” of the central division will be located in London(chemistry including pharmaceuticals, classification C, humannecessities, classification A) and Munich (mechanicalengineering, classification F).

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The Unified Court – Main Features (3)

• All court of first instance (local, regional or central) shall have 3judges and be of a multinational composition.

• For a local division in a member state where there are less than50 cases a year (3 year average) there shall be one legallyqualified local judge and two legally qualified foreign judges.

• For a local division in a member state where there are more than50 cases a year (3 year average), there shall be two legallyqualified local judges and one legally qualified foreign judge.

• For a regional division, there shall be two legally qualified judgesfrom the region and one foreign legally qualified judge.

• There is provision for a fourth technically qualified andexperienced judge if a litigant requests it.

• The central division will generally have two legally qualifiedjudges from different countries and one technically qualifiedjudge.

• Actions dealing with the actions of the EPO in relation to theunitary patent will have three legally qualified judges from 3 MS.

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The Unified Court – Main Features (4)

Court of Appeal

• The Court of Appeal has five judges, three legally qualified andfrom different MS and two technically qualified.

• The chair (as with courts of first instance) shall be a legallyqualified judge.

Registry

• There will also be a registry for both the courts of first instanceand the court of appeal to keep track of cases.

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The Unified Court – Main Features (5)

Which Courts Can Hear What

• Infringement actions shall be brought in the court of the MSwhere the actual or threatened infringement has or may occur orthe regional division in which that MS participates.

• Actions for infringement and for provisional measures(injunctions etc), for damages and seeking remedies as a prioruser and relating to the compensation for licences of right shallbe brought in the court of the MS where the defendant (or atleast one of them) is resident or has its principal place ofbusiness and if none of the above then the MS where the D (orat least one of them) has a place of business or the regionalcourt in which that MS participates.

• If the above rules would lead to the choice of an MS where thereis no local or regional division then the case has to be brought inthe central division.

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The Unified Court – Main Features (6)

Which Courts Can Hear What

• If an action for infringement and for provisional measures(injunctions etc), for damages and seeking remedies as a prioruser and relating to the compensation for licences of right ispending before a division of the court of first instance, no furtheraction of that type between the same parties on the same patentcan be started in any other court of first instance.

• Where a counterclaim is made in an infringement action then thecourt of first instance can either (i) deal with both with theassistance of a fourth technically qualified judge or (ii) bifurcateand refer the counterclaim to the central division and suspend orproceed with the infringement proceedings or (iii) if the partiesagree refer the whole case to the central division.

• Actions for a declaration of non-infringement and for revocationhave to be brought in the central division unless there is aninfringement claim pending between the same parties in whichcase such claims have to be brought in the court of first instancewhere that action is proceeding.

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The Unified Court – Main Features (7)

Language

The language of the proceedings of the Court of First Instance willbe the official language or one of the official languages of themember state hosting the relevant local or regional division butthere is scope for the contracting member states to designate oneor more of the official languages of the European Patent Office asthe language of their proceedings. The parties may also agree onthe use of the language in which the patent was granted as thelanguage to be used by the Court, subject to the approval of thepanel of judges hearing the case.

Territorial Effect

The territorial effect of decisions of the Court is extensive: forUnified Patents it will cover all contracting states and for EPCpatents it will cover the all the countries in which such a patent hastaken effect.

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The Unified Court – Main Features (8)

CJEU Supervision

The draft agreement also provides for the introduction of the sameprovisions relating to infringement (article 14f), indirectinfringement (article 14g) and limitations (article 14h) as does thedraft regulation and again all of these will be subject to review bythe CJEU, (article 14b and article 267 of the TFEU). But seebelow…

Law

The court shall apply the law:-

- Of the agreement

- EU law including the two implementing regulations

- The EPC

- Other international agreements applicable to patents and bindingall member states (e.g. the Paris Convention)

- National law.

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The Unified Court – Main Features (9)

Other Main Points

• There is going to be a mediation and arbitration centre butmediation or arbitration cannot lead to a patent being declaredinvalid.

• Appeals will not have suspensive effect unless they are appealsin relation to a decision relating to the revocation of a patent.

• Appeal decisions as in UK will generally overturn the decision atfirst instance but there is procedure for a referral back inexceptional cases.

• The winner’s reasonable and proportionate legal costs and otherexpenses will be recoverable from the loser unless that would beinequitable.

• For financial compensation there is a five year limitation periodfrom date claiming party became or had grounds to becomeaware of the facts justifying the proceedings.

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The Unified Court – Main Features (10)

Which Patents Will Be Affected?

• Unitary patents – obviously.

• Existing European patents but proceedings for the infringementand revocation of such patents can still be initiated in nationalcourts for up to seven years after the Unified Patents Agreementcomes into force and will continue in such courts notwithstandingthe expiry of the seven years. That jurisdiction is non-exclusive –the Unified Patents Court can still be used for infringement andrevocation actions.

• For existing European patents a declaration for proceedings ofnon-infringement will have to be brought in the Unified Court.

The Opt Out (Council document 17317/11)

• Unless proceedings have already been begun in the UnifiedCourt, holders of existing European patents can opt out from theexclusive jurisdiction of the Unified Court for seven years.

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The Unified Court – Main Features (11)

The Opt Out (Council document 17317/11)

• The opt out period may be prolonged for a further 7 yearsfollowing a consultation exercise undertaken 5 years after entryinto force of the Agreement.

• The opt out is not much use if you are a defendant…

The possibilities for forum and court shopping seem extensive.

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The Unified Court – Current State Of Play

The Council decision of 28/29 June concerning the location of thecourt was meant to lead to the adoption in 2012 of the tworegulations and the signing of the court agreement.

BUT the Council also suggested that articles 6 to 8 of theregulation implementing the Unitary Patent be deleted.

That latter move did not go down well with the Europeanparliament. Its rapporteur (the person charged with overseeing theUnitary Patents initiative) said the proposed deletion was unlawful.The European parliament therefore decided, in early July, not tovote on the package of measures to implement the new regime.

The issue is now due to be discussed again between the EP’sLegal Affairs Committee and the Parliament’s legal service inSeptember 2012.

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The Unified Court – What I think will happen next

• The point of no return has likely been reached. Articles 6 - 8 willstay in the regulation.

• The package, with articles 6 – 8 in, will be approved by the EP inlate autumn 2012/spring 2013, possibly with enhanced opt outprovisions to meet the concerns of those who oppose theinclusion of articles 6 – 8 into the regulation.

• The council of ministers will then formally adopt the tworegulations in late 2012/early 2013 and they will come into forceat a date to be specified (likely a date in 2015/2016).

• A diplomatic conference will then take place to sign the UnifiedPatent Court Agreement possibly in the summer of 2013. Thiswill then be ratified by national parliaments in the remainder of2013/early 2014.Once 9 MS (including the 3 with the most EUpatents in force) have ratified the court agreement then it willcome into effect after a yet to be defined period, which isexpected to be 2 years.

• Therefore at some point in 2015/2016 the two regulations andthe agreement will likely come into effect.

• The first unitary patent is likely to come into force in 2016.

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The new Regime – Some Thoughts

• Patentees will need to monitor the opt out provisions carefully.

• There is the possibility that the endless delays that have plaguedtrade mark litigation may plague patent litigation if articles 6,7and 8 are included in the Unitary Patent Regulation.

• Bifurcation could be a nightmare for both patentees anddefendants.

• There is a serious question mark as to where all the new patentjudges are going to come from.

• Will the costs really be less for SME’s?

• Exclusivity for Unitary patents ?

• Non-exclusivity for EPC patents?

The patent litigation framework for Europe for perhaps decades tocome is now being determined. Only time will tell if the currentlyproposed framework is a step in the right direction or not.