The Proposed Unified European Union Patent System

The European Patent Organization has been developing a unified European Union (EU) patent system, which will include both a unitary EU patent, issued from the European Patent Office (EPO), as well as a Unified Patent Court (UPC) system for harmonized enforcement of unitary EU patents.  Although a specific date for implementation of the proposed UPC system has not yet been established, the unitary patent process will go into effect January 14, 2014, with the UPC system likely following sometime in later 2014 or 2015.  Thus, despite the complaints regarding both of the new systems, the upcoming implementation of at least the unitary EU patent system requires patent practitioners involved in European patent practice to become familiar with the system in order to properly advise their clients.

Under the current European patent system, an applicant files a patent application in the EPO, which can be originally filed in the EPO or it may claim priority to a prior application filed in any other nation, and may even be a nationalization of an application under the Patent Cooperation Treaty (PCT).  The EPO provides a centralized search and examination of the application, and if allowed, grants a unitary EU patent.  However, for enforceability of the EU patent, the patentee must validate the EU patent in each nation in which he seeks enforcement.  Only in those nations where the EU patent has been validated and maintained will the patent be enforceable.

Unfortunately, there are a number of disadvantages to the current EU patent approach, most of them related to the fragmented nature of the enforcement process.  For example, for validation of an EU patent in each nation, a separate fee per location is required, as well as a translation of the EU patent into the official language of the validating nation.  Also, each validation nation will typically have a separate renewal fee that must be paid to maintain the enforceability of the patent in that nation.  Moreover, any post-grant procedures after validation will likely differ in each validating nation, and would need to be conducted in each nation.  Similarly, enforcement proceedings against infringers, as well as, revocation proceedings implemented for invalidating a patent, must be conducted separately in each validating nation.  Still further, in addition to the potential uncertainty caused by different results in each validating nation’s judicial system, the potential for different results typically leads to forum shopping by parties.

In an effort to combat these deficiencies of a fragmented European patent system, the EPO has proposed the new unitary EU patent and accompanying UPC system.  Specifically, the goals of the newly proposed systems seek to create a more cost-effective patent process, for example, providing a single filing fee, a single patent prosecution process, a single renewal fee, and a single enforcement forum.  In addition, the combined system are intended to provide symmetry in patentability standards, as well as symmetry in enforcement and interpretation of prior and future EPO and judicial decisions.  The proposed unitary patent system has been accepted by 25 of the 27 EU nations (with Spain and Italy not accepting the system), and goes into effect for the participating nations on January 1, 2014, or on the date the Agreement on a Unified Patent Court is put into force, whichever occurs first.  The Agreement on the UPC system has been signed by 25 of the 27 EU nations (with Spain and Poland not yet agreeing to the system), and will enter into force on January 1, 2014, or on the first day of the fourth month after the 13th participating nation has officially ratified the Agreement (which must include France, Germany and the United Kingdom), whichever is later.  At present, none of the 25 agreeing nations has yet officially ratified the Agreement, and thus it seems likely that the unitary EU patent scheme will take effect before the UPC system is put into force.  However, the nations that have signed the Agreement on the UPC are expected to ratify the Agreement in due course, and thus the UPC system is expected to be put into force in later 2014 or 2015.

THE UNITARY EU PATENT

To achieve the aforementioned goals, the EPO has proposed the unitary EU patent procedure.  As with the current EPO system, a single EPO patent application is filed and examined by the EPO, again as under the current system.  Once a unitary patent is granted, it would be valid in the participating EU nations without the need to validate the patent in each of those nations.  It should be noted that a unitary patent would not be recognized by non-EU nations, such as Turkey, Switzerland, Norway and Hungary, even though those nations are currently members of the European Patent Organization.  EPO patent validation in non-participating or ineligible nations would remain under the current rules by individually translating and validating the granted EPO patent in each individual nation.  For the new unitary patent scheme to be implemented, the agreement on the UPC system must first be ratified, as discussed above.  According to the president of the European Patent Organization, that process should be completed and the first unitary patents issued some time in 2014.  Whether Spain and/or Italy will ratify the new process by then still remains uncertain.

Once the process is in place, to obtain a unitary patent an Applicant simply files a single application in the EPO, as with the current process.  Thus, there would be no change to the process of filing an application in the EPO, and Applicants are not required to choose a unitary patent at the time of filing.  Instead, once the patent is allowed, the Applicant then elects whether to receive a unitary patent, or whether the Applicant will receive a traditional EU patent as under the current rules.  In situations where patentees wish to validate their patent in nations participating in the unitary patent scheme as well as non-participating nations, they will a combination of a unitary patent and traditionally validated local patents.  In addition, there are translation requirements for elected unitary patents.  Specifically, if prosecution of the patent in the EPO was conducted in French or German, then a translation of the patent into English must be provided, and if the prosecution in the EPO was in English, a translation into any official language of the EU must be provided.  However, these translation requirements expire after 12 years, once the unitary patent scheme is put into effect.  For complete reference, practitioners may find the final full EU Regulation providing unitary patent protection at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:361:0001:0008:EN:PDF and the final full EU Regulation providing for the translation arrangements at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:361:0089:0092:EN:PDF

THE UNIFIED PATENT COURT SYSTEM

Enforcement of a unitary patent would also follow a proposed unified judicial enforcement system.  The organizational structure of the proposed UPC system would include the Courts of First Instance, a Court of Appeals, a Patent Arbitration and Mediation Center, and a Registry.  The Courts of First Instance would serve as the forums for initial patent actions, both invalidity and infringement.  The Court of Appeals, which will be located in Luxemburg, will serve as the forum for appeals from a Courts of First Instance, and the Patent Arbitration and Mediation Center, with seats in Lisbon and Ljubljana, would provide alternative dispute resolution services for parties.  The Courts of First Instance will include Central Division courts, Local Division courts, and Regional Division courts.  The Registry will provide a central repository for registration of unitary patents and UPC decisions, and will be based with the Court of Appeals, with sub-registries at each location of the Local and Regional Division courts.

The Central Division court will be based in Paris, with specializing branches located in London for life sciences, metallurgy, and chemistry technologies, and in Munich for mechanical, lighting, heating, weapons, and blasting technologies.  The court in Paris will have jurisdiction over the remaining technologies.  The Local Division courts will be specific to certain individual member nations; however, exactly which nations will have a Local Division court has not yet been finalized.  Regional Division courts will be multi-jurisdictional for groups of nations that will not each have their own Local Division court, although which nations will use Regional Division courts, rather than Local Division courts, has also not yet been finalized.  Moreover, as the UPC systems continues to be used, nations employing Regional Divisional courts may eventually create Local Divisional courts, as needed.

Jurisdiction for original patent actions will fall to the Local or Regional Division courts where an act of infringement occurred, or where any defendant resides or maintains its principle place of business, or if no residence or principle place of business is present in a member nation, then any place of business of any defendant in a member nation.  If no infringement occurred in, and a defendant has no place of business or residence in, a nation having a Local or Regional Division court, plaintiffs may file in a Central Division court.  The exception to these forum provisions is that the Central Division courts will have exclusive jurisdiction over original validity  challenges (i.e., a revocation action) that are not counterclaims in an infringement action, although counterclaims of infringement may also be filed by a defendant in such a revocation action at the Central Division, or as a separate action in a Local or Regional Division court.  Additionally, when a revocation claim is made as a counterclaim to an infringement action brought in Local or Regional Division court, the Local or Regional Division court has discretion to hear the revocation counterclaim as well, or to refer the revocation claim to the Central Division.

For the make-up of the new courts, each court, no matter if it is a Local, Regional, or Central Division court, will include a mix of judges (typically sitting in panels) selected from the nation(s) local to a court, as well as European nations not local to that court, in an effort to fairly balance the unified courts.  Applicable law will be determined by a patentee’s residence or place(s) of business; however, German Law will be applied if the patentee does not have a place of business in a member EU nation.  The applicable language for a given patent action will be the local language of the Local or Regional Division court, or a language specified by the Local or Regional Division court if a party requests a different language (for example, the language in which the patent at issue was prosecuted or perhaps a language common to both parties to the suit).  In the Central Division courts, the applicable language will be the language in which the patent at issue was prosecuted in the EPO.

Under the currently proposed rules for the new UPC system, patentees will have the option to opt-out of UPC jurisdiction and seek enforcement of their patents, whether validated nationally or with unitary effect, under the current EPO system (i.e., in a national court of a court of validation of the patent).  However, it is intended that the UPC system will eventually have exclusive jurisdiction of EU patents of all types, but it is unclear exactly when that exclusivity would come into effect.  The period during which patentees may opt-out of UPC jurisdiction will be seven years from the date the UPC system is put into effect.  Whether that period may or will be extended is currently unclear.  When patentees opt-out of the UPC system, they may opt-out for the entire term of the patent, and not simply the term during the seven year opt-out period.  Although patentees may opt-out of UPC jurisdiction for both their nationally validated and unitary patents, and may do so on a patent-by-patent basis, they may do so only if no proceeding before a UPC has begun.  Moreover, patentees will be permitted to opt-out/in multiple times, if desired, unless such a proceeding has already begun in a UPC forum.  For complete reference, practitioners may find the complete Agreement on a Unified Patent Court at: http://documents.epo.org/projects/babylon/eponet.nsf/0/A1080B83447CB9DDC1257B36005AAAB8/$File/upc_agreement_en.pdf

ADVANTAGES AND DISADVANTAGES

The proposed advantages of receiving a unitary patent are in line with the stated goals of the new system mentioned above.  Specifically, a unitary patent would eliminate the need for translating a granted patent into the language of each nation where it will be validated, and thus translation costs can be significantly reduced.  Also, a single renewal fee is all that must be paid to maintain the unitary patent, and the fee is currently estimated to be around the cost of renewing an EU patent in 5/6 nations (which is said to be the average number of nations in which Applicants have historically validated their EU patents).  A central forum for enforcement or attacking a unitary patent will also relieve Applicants from having to assert or defend their patent(s) in each nation, which should significantly reduce such costs in those cases where a large number of member nations is implicated.  Likewise, a single injunction for all 25 member nations will also be available to Applicants, again without the need and associated costs of pursuing an injunction in each nation.  Finally, and perhaps most importantly, a centralized judicial enforcement system would theoretically provide symmetry in the case law, including standards for patentability, infringement, invalidity, and claim construction.

Despite the numerous advantages proffered for the new unitary system, skeptics and opponents point to a number of potential disadvantages of the new rules.  For example, a single renewal fee could prove to be cost-prohibitive for those patentees who, at the time of grant, may not be conducting business in enough jurisdictions to justify a single, large fee.  Another significant concern is a potentially confusing enforcement process.  For example, significant language concerns based on the language selection rules for enforcing or challenging a patent discussed above have been raised.  These language concerns include the potential for conducting proceedings in a language different than the language used to prosecute the patent, which can implicate significant claim and specification translation issues.  In addition, conducting proceedings in a language foreign to a patentee and/or inventor(s) of a patent can alienate persons that may be material witnesses in the proceeding.  Another concern is the potential for bifurcated validity & infringement cases when validity is initially challenged in the Central Division courts.  Additional confusion, or even inconsistent results, can occur when the applicable law for a particular matter are applied in a court or by judges that are unfamiliar with those particular laws.  The potential for increased cost of enforcement is also a concern to many.  For example, translation costs in validity challenges or enforcement proceedings may be required when they would not have been under the traditional EPO system.  Similarly, obtaining counsel or legal experts in applicable laws and/or counsel or technical experts fluent in particular languages may also increase expense in proceedings under the UPC system.

CONCLUSION

The proposed unitary patent and UPC systems offer an interesting, if not necessary, solution to an often expensive and tedious current system requiring the translation, validation, fee payment (validation and renewal), and enforcement in each individual nation.  The unitary patent will allow simultaneous validation in all member nations with the payment of a single validation fee (and single renewal fee), along with limited translation requirements and associated costs.  While the disadvantages of the size of the single fees and the lack of unitary validation in all EU countries (at least for now) has created some opponents to the unitary patent, there appears to be more opposition to the proposed UPC system.  Although a unified judicial system promises symmetry in both legal standards and judicial decisions, the applicable law and applicable language provisions of the UPC system seem cumbersome, uncertain and expensive, which many patentees may ultimately find unworkable or simply undesirable.  So just which patentees should consider employing these new systems will likely be a case-by-case determination.  Because an opt-out provision is provided, patentees who conduct all or a majority of their business in a number of the member nations may still find the unitary patent process an easy and cost-effective solution to the current EPO validation process.  In those situations, the typical advice being given to such patentees is to take advantage of the unitary patent process, while deferring use of the UPC system until there has been some time to work out potential problems.  However, for those patentees who would not typically validate a patent in more than 5 or 6 member nations, the unitary patent process is likely unnecessary and too expensive.

James Ortega is a partner at Carstens & Cahoon, LLP. His practice of intellectual property includes the preparation and prosecution of patent and trademark applications and the litigation of intellectual property rights. 

This blog is maintained by Carstens & Cahoon, LLP to inform readers of recent developments in intellectual property. Solely informational in nature, this blog is not intended to create an attorney-client relationship or to be used as a substitute for legal advice or opinions. For more information, please visit www.cclaw.com

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