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) for harmonized enforcement of unitary EU patents.  Although a specific date for implementation of the proposed system has not yet been established, it is presently hoped that it will take effect in early 2017.  Thus, the upcoming implementation 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 at the EPO; this application can be a so-called “direct” European application – being a first application for an invention, or claiming priority to a prior application filed in any other country – or it may be filed as a European regional phase application stemming from an application filed under the Patent Cooperation Treaty (PCT).  The EPO provides a centralized search and examination of the application, and if allowed, grants a European patent nominally covering all European states for which the application was designated, extended or validated.  So, a granted European patent can be considered to be a “bundle” of national patents.  The patentee must then choose which countries he wishes his European patent to cover and must follow the specific steps required by each country of interest.  Only in those countries where this has been done will the European patent be enforceable.

Unfortunately, there are a number of disadvantages to this approach, most of them related to the fragmented nature of the grant and enforcement process.  For example, each country has its own rules regarding translation, with several requiring the patentee to translate the whole patent into an official language of that country.  Also, each country will typically demand a separate annual renewal fee that must be paid to maintain the enforceability of the patent in that country.  Moreover, post-grant procedures vary between different countries, and need to be conducted in each country, sometimes requiring the input of a local attorney.  Similarly, enforcement proceedings against infringers must be conducted separately in each individual country, as well as revocation proceedings for invalidating a patent once the 9-month period for centrally opposing a European patent has expired.  Still further, in addition to the potential uncertainty caused by different results in each country’s judicial system, the potential for different results typically leads to “forum shopping.”

In an effort to combat these deficiencies, the EPO has proposed the new unitary EU patent and accompanying UPC system.  Specifically, the goals of the newly proposed system seek to create a more cost-effective patent process and a single enforcement forum across EU member states.  In addition, the combined system is 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 26 of the 28 EU countries (with Spain and Croatia not yet joining), and goes into effect for the participating countries on the date the Agreement on a Unified Patent Court is put into force.  The Agreement on the UPC system has been signed by 25 of the 28 EU countries (with Spain, Poland and Croatia not yet participating), and will enter into force on the first day of the fourth month after the 13th participating country has officially ratified the Agreement (these 13 countries must include France, Germany and the United Kingdom) or  on the first day of the 4th month after the date of entry into force of the amendments to Regulation (EC) 1215/2012 concerning the Agreement, whichever is later.  At present, 8 of the 25 agreeing countries have officially ratified the Agreement, including France.  Currently, the UPC Preparatory Committee is reviewing the 18th draft Rules of Procedure, and they are predicting that the UPC system will commence in early 2017.

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 European patent application is filed and examined by the EPO.  The difference would be at grant: once a unitary patent is granted, it would automatically be valid in each of the participating EU countries.  It should be noted that a unitary patent would not be recognized by non-EU countries, such as Turkey, Switzerland, Norway and Hungary, even though those countries are currently party to the European Patent Convention.  European patent validation in those non-participating or ineligible countries would remain under the current rules by individually translating and maintaining the granted European patent in each individual country as now.

Once the unitary patent process is in place, to obtain a unitary patent an applicant simply files and prosecutes a single application at the EPO, as with the current process.  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 European patent as under the current rules.  In situations where patentees wish to validate their patent in countries participating in the unitary patent scheme as well as non-participating countries, they will have both a unitary patent and traditionally-obtained national patents.  Also, there are simplified translation requirements for unitary patents.  Specifically, if prosecution of the patent at the EPO was conducted in French or German, then a translation of the patent into English must be provided, and if prosecution at the EPO was in English, a translation into any other official language of the EU must be provided.  However, it is hoped that these translation requirements will expire after 12 years following the unitary patent scheme taking effect, by which time the EPO hopes machine translations will be of sufficient quality.  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 a Court 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 invalidity and infringement actions.  The Court of Appeals, which will be located in Luxemburg, will serve as the forum for appeals from a Court 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 a Central Division (itself split into three) and several Regional and Local Divisions to be spread across Member States.  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 will hear cases according to technical discipline, broadly as follows: the court in Paris hearing physics and electrical cases, the court in London hearing life sciences, chemistry and pharmaceutical cases, and the court in Munich hearing mechanical and engineering cases.  The Local Division courts will be specific to certain individual member countries; however, exactly which countries will have a Local Division court has not yet been finalized.  Regional Division courts will be multi-jurisdictional for groups of countries that will not each have their own Local Division court, although which countries 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, countries employing Regional Divisional courts may eventually create Local Divisional courts, as needed.

Jurisdiction for unitary patent actions will fall to the Local or Regional Division courts where an act of infringement occurred, or where any defendant resides or has its principal place of business, or if no residence or principal place of business is present in a member country, then any place of business of any defendant in a member country.  If no infringement occurred in, and a defendant has no place of business or residence in, a country 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 jurisdiction over 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 of 3 or 5) selected from the country(s) local to the court, as well as European countries 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 country.  The applicable language for a given patent action will be an official 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 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, unitary and otherwise), 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, though it may be extended to 14 years after a review.  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.  A Provisional Application Protocol to the UPC Agreement was signed by member states on 1 October 2015.  This allows early implementation of certain aspects of the Agreement, including practical aspects relating to IT systems and recruitment of judges.  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 country 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 to be set at the cost of renewing a European patent in the UK, France, Germany and the Netherlands (which are the 4 most frequently validated countries).

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 country, which should significantly reduce such costs in those cases where a large number of countries is implicated.  Likewise, a single injunction for all 25 member countries will also be available to applicants, again without the need and associated costs of pursuing an injunction in each country.  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 only be interested in a few countries or who typically choose only the UK, France or Germany where there are no further translation requirements.  Proprietors may be wary of choosing to expose their patent to central attack beyond the EPO’s opposition period.

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 result, 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 country.  The unitary patent will allow simultaneous validation in all member countries with the payment of a single validation fee (and single annual 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 countries 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 4 or 5 member countries, the unitary patent process is likely unnecessary and too expensive.

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