An Update On The Status Of EU Unitary Patents

This article was originally published on Law360.

By John B. Pegram, Fish & Richardson PC

In 2013, the European Union approved a package of proposals to create a EU Unified Patent Court (UPC) along with unitary patents. With implementation initially expected in 2015, it's a good time to look at how much progress has been made so far.

For background, 25 EU member states signed the Unified Patent Court Agreement (UPCA) in 2013, which requires ratification by at least 13 EU states (and must include France, Germany and the United Kingdom) before the UPC opens for business. The UPC, which should open about four months after this UPCA ratification, will have exclusive competence in the participating states for substantially all litigation involving the new unitary patents, and all existing and future conventional European patents whose owners do not opt out during an initial, transitional period.

The unitary patent is a single European patent granted by the EPO with unitary effect for all EU states participating at the time of grant. The unitary patent and a transitional requirement for full translation into a second working language of the EPO will be created by EU Regulation Nos. 1257/2012 and 1260/2012, respectively. These regulations are tied to the UPCA and will take effect when the UPC opens.

UPC Developments

There no longer appears to be much doubt that the UPCA will receive the minimum required ratification; however, the schedule is stretching out. The UPC Preparatory Committee posted an updated roadmap, including milestone dates, on its website on Sept. 16, 2014. It states that the court "will not be ready before the end of 2015." Therefore, the UPC and unitary patent now appear unlikely to be available before the spring 2016.

Five states, including France, which is a necessary state, have already deposited their instruments of ratification. There do not appear to be any significant obstacles to ratification by the other two required states, Germany and the United Kingdom, unless the latter country decides to withdraw from the EU. Indeed, the timing of ratification by one or both of those states apparently is being managed to assure that the UPC is fully prepared when it opens. More than the necessary six other states in various ways have indicated their strong interest in participating and are moving toward ratification.

The first instance level of the UPC will have local divisions and regional divisions, in addition to a central division, with seats at Paris, London and Munich. Germany expects to have local divisions in Dusseldorf, Hamburg, Mannheim and Munich. The United Kingdom appears likely to have two or three local divisions. Estonia, Latvia, Lithuania and Sweden have announced their plan to form a Baltic Regional Division, based in Stockholm.

The UPCA requires that language of proceedings at the Central Division ordinarily will be the language in which the patent concerned was granted. In most cases, that is English. Many of the local and regional divisions appear likely to permit use of English as a working language or require English, as will be the case in the Baltic Division.

The Preparatory Committee has a heavy burden in creating a multilingual, multi-location court. It has established working groups to address tasks in five areas: legal, financial, human resources, information technology and infrastructure. The two most notable achievements to date have been drafting rules of procedure and recruitment of judges.

Fortunately, an ad hoc group of judges and lawyers started drafting rules for the proposed court long before the UPCA was signed. The Preparatory Committee and its related committees obtained comments on the 15th draft rules, and produced a 16th draft in March 2014, along with an explanatory "digest" (longer than the rules themselves). Hearings on the proposed rules are promised later in 2014.

There can be little doubt that the UPC will have high quality judicial panels. Initially, many judges are likely to serve part-time, while continuing to serve as national judges or, in the case of technical judges, as attorneys. There was a very strong response from about 1,300 people to the call for expressions of interest in serving as a judge. The Preparatory Committee approved a list of suitable candidate judges at its July 2014 meeting and has notified the persons who expressed interest whether they satisfy the criteria to be a judge and whether they would require further training. Those who received a positive indication will still have to make a formal application in order to become a judge. A judicial training center opened in Budapest in March 2014 and training is expected to begin there in the autumn. It will receive support from the EPO training section.

The most recent UPC development is that the Preparatory Committee chairman appointed a new expert panel on Sept. 16, as part of the committee's outreach to practitioners and future users of the UPC. This 14 group of judges, lawyers, patent attorneys and business representatives, participating in their personal capacities on an informal basis, will advise the chairman and his working group coordinators. The expert panel is not intended affect formal consultations with practitioners and future users, or the decision-making function of the committee itself.

Many Questions on Opt-Out

Perhaps the most active topic of UPC discussions among European patent owners and professional representatives have been about whether to opt out from the exclusive competence of the court for conventional European patents and how the opt-out procedure will operate.

On the one hand, fear of central attack and preferences for familiar national courts have led some practitioners to strongly advise that European patent owners opt out of the UPC, at least initially. We saw the similar reactions when the European patent and trademark systems were created at the European Patent Office and the Office for Harmonization in the Internal Market, respectively. However, a European law firm's survey this summer and comments from patent owners indicate that owners probably will not opt out for most patents.

Procedurally, there are two principal opt-out questions. First, what will the opt-out fee be? At present, the draft UPC rules indicate there will be a fee, but not the amount. Second, how will owners be able to opt out from day one of the UPC, to avoid a preemptive action for revocation of a patent in all participating states? The UPCA provides that an opt-out shall take effect upon its entry into the court's register, but how can anything be entered in that register before the court exists? It is anticipated that the UPC will arrange with the EPO to manage the records for that part of the court's register and that the court would adopt those records before accepting case filings.

Finally, the planned integration of the UPC into the EU courts system is moving forward. In May 2014, the EU amended the so-called Brussels I Regulation, to include the UPC in that regulation, which governs the jurisdiction of courts and recognition of judgments within the EU. The amended regulation will take effect in January 2015.

Unitary Patent Developments

The implementation of the regulations creating the unitary patent and its transitional translation regime will be eased by the facts that the EPO is an existing organization and the unitary patent is simply a European patent that will have unitary effect for participating states, granted by the EPO after examination in the usual way.

A Select Committee of the EPO's Administrative Council, composed of representatives of the participating states, is making preparations for the launch of the unitary patent. Draft rules, which were leaked this summer, indicate that the EPO will establish a Unitary Patent Protection Division to handle matters specifically relating to the unitary patent. Official release of the draft rules for comments is expected this autumn.

The most significant question relating to the unitary patent is what will the costs be, especially the maintenance fees? The Select Committee is faced with a tension among the requirement that the unitary patent system be self-funded, the requirement that half of the maintenance fees be shared with the participating member states and the budgetary considerations of patent owners. The maintenance fee problem is exacerbated by the fact that unlike conventional European patents owners will not be able to discontinue unitary patent coverage in some states to control costs in later years. A unitary patent will be unitary; all or nothing. The Select Committee has indicated that subject of fees is to be discussed, again, at its October 2014 meeting.

Finally, it's important to note Spain's two pending cases in the Court of Justice of the European Union seeking total or partial nullification of the unitary patent regulations that would create unitary patent protection and its translation arrangements. Unlike the United States, CJEU briefs and responsive pleadings are not public records, so our sources of information about those cases are limited to the complaints and reports of the oral argument on July 1, 2014.

Spain's principal arguments appear to be that the regulations lack a proper legal basis in EU law and that the EPO which is not an EU entity cannot be delegated with powers to administer the unitary patent, especially because of the lack of adequate judicial control. The advocate general’s opinion had said he will deliver his advisory opinion on Spain’s submissions on Oct. 21, 2014; however, recent, unofficial reports indicate that opinion will be issued later. The CJEU decisions are expected in late 2014 or early 2015.

Interestingly, the decision in Spain's CJEU cases can directly affect only the establishment of the unitary patent. The current cases do not attack the UPCA and implementation of the unitary patent regulations is not a prerequisite to creation of the UPC. Therefore, if the France, Germany the U.K. and at least 10 other states ratify the UPCA, it would take effect even if part or all of the unitary patent regulations are nullified.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.