Is The European Unitary Patent System On Its Way To A Tepid Start?

For nearly two decades, the European Union has pondered the completion of a unitary patent system (UP) and a Unified Patent Court (UPC). But even after the European Court of Justice has ruled the UP/UPC agreement to be constitutional, users, including some big ones, remain cautious.

A number of experts at a Premier Cercle conference at the European Patent Office in Munich this week said they expect a slow start. Questions of the fairness of the future patent systems were also raised.

Margot Fröhlinger, from the EPO office, politely thanked the Spanish government for triggering the ECJ judgment which, she said, settled the issue of the constitutionality of the new Unified Patent system once and for all. “Luxembourg has spoken, now the debate is over,” Fröhlinger said.

As one of the driving forces for the UP at the European Commission for years, Fröhlinger was most enthusiastic that all systems are on “go” now. Last month, the Select Committee of the Administrative Council of the EP finally agreed on the fee structure for the unitary patents, after lengthy discussions. For a so-called “true top 4” fee – the combined fee of the patent offices of Germany, United Kingdom, France and the Netherlands – the future unitary patents will be valid in 25 EU member countries.

Money Issues and Political Arm-Twisting

 

The fee level for which models from top one to top six were discussed according to the EPO officials, now is “higher than expected by many, yet also lower than many feared,” EPO President Benoit Batistelli told the event. The unified patents will offer protection in 25 of the 28 EU member states, the signatories of the agreement on the UPC.

Batistelli underlined that patentees would benefit from a “reduction of the fees by 70 percent,” plus savings from not having to manage patents in all those countries.

That calculation has been challenged somewhat, based on the fact that patentees mostly chose not to apply for patents in all states potentially making the new UP at times more expensive compared to a classical European patent validated in only the biggest markets or even a combination of chosen national patents.

Patent holders will be given the option to opt out of a UP for European patents they currently hold and also for new patent applications for a transitional period of at least seven years.

“We hope that at end of the day there will not be so many opt-outs,” said Fröhlinger. Another round of difficult discussions are expected for how the UP renewal fees will be shared between the 25 UP signatory states, she said.

More work also lies ahead for the Preparatory Committee of the signatory states in preparing the rules of procedure, and the fee structure for the Unified Patent Court. With regard to the rules of procedures, the Preparatory Committee is now on version number 18, reported Fröhlinger, adding “it may not be the last one.” A public consultation on the court fees will be closing on 30 July.

The UPC for a start will have 30 to 40 patent judges nominated by the signatory states, according to the Chair of the Preparatory Committee, Paul van Beukering, manager, Intellectual Property Unit atMinistry of Economic Affairs. How much politics is involved in the whole business of setting up the new structures was illustrated by van Beukering’s acknowledgement to the expert audience in Munich that: “The judges will elect their own president, but they must look at his or her passport.”

The reason for this is that signatory countries have compromised that the first president of the UPC must come from France. Salaries, another money issues, have still to be settled.

“Unless we aim high in having a salary which is competitive enough to attract high class people, we will lose quality,” said Oliver Varhelyi, deputy permanent representative of the Hungarian mission to the EU.

The salary issue could be a “bottleneck”, he explained, as the UPC appointment proceedings could be hardly launched without telling potential candidates what they would earn. For the judges, according to a panel of patent judges from the UK, France, Germany and Switzerland there will also be an issue with different patent law traditions. “German judges have no discretion with regard to injunctions“, said Ulrike Voss, presiding judge at the Patent Senate of the Higher Court of Dusseldorf. Yet according to the EU law effective for the UP there is no automatism, judges may or may not grant the injunction relief.

Concerns of the Industry

IP lawyers from several industry sectors expressed concerns about the new system, with uncertainty over how the newly set-up court – which will also have several local and regional branches – will work.

One issue of concern with the UP is that prior art searches across the 25 member states risk more hits or objections. A patent application failing due to that would result in losing patent protection for the complete market, while a patent in the main market of the patentee still could have worked out.

“We will not generally use it for everything, but it will be another part of our strategy,” said Karl Georg Aspacher, division IP counsel at Siemens. Criteria for the decision are the importance of the patent and considerations about its market. Cost issues also have to be factored in, he said, adding, “It is a case-by-case decision-making.”

For pharmaceutical patents, “the tendency will be to opt out,” said Catriona Hammer, senior IP counsel at GE HealthCare.

Hammer criticised the op-out fee which has been set at 80 euros per patent. “Why should those not using the system subsidize it?” she asked. Personally, she told Intellectual Property Watch, she would have prepared the European legislators ‘to focus on cost reduction in the first place.” The European patent system is still the most expensive patent system, she said.

With regard to uncertainties about the UPC with its multi-language benches and calls to lend some trust to the new system, she dryly noted that patent divisions of companies would not “sit there and think how can we do best for the future, but we think, how can we win.”

Shawn Ambwani, chief operating officer of United Patents, warned that the strengthening of patents by allowing for unified patents might attract more non-practicing entities (NPEs), or patent trolls, to eye litigation before national or regional branches of the UPC.

Concerns about Fairness

The question could be raised, said Lubos Knoth, vice chair of the EPO Select Committee and President of the Slovak Industrial Property Office, if in the end one would get too many patents, and “is it a good thing for innovation or is it a good thing for those who hold the patents.”

When asked about what was top on his wish list for the patent system, Knoth said: “Make it a bit more fair, you see it is pro patentee. That is the question that needs to be resolved.”

Knoth’s statement was supported by Josef Drexl, director at the Munich Max Planck Institute for Innovation and Competition. “For smaller countries, smaller companies and all those who will be more on the defendant side, benefits are questionable,” Drexl said.

At the same time, the constitutional questions while declared academic by Fröhlinger, are far from fully answered after the ECJ judgment against Spain’s complaint, because the Court in Luxembourg declared the future UPC to be outside of EU law. Transferring judicial competency to such an institution which by the way had failed to list the European Declaration on Human Rights in the basic agreement, could still be challenged before national Constitutional Courts. The ECJ also remained silent on whether there is an obligation for signatories to finally ratify the UPC agreement.

Drexl also pointed out that the German government might in the end not as expected by the European Patent Office be on the fast side with ratification of the UPC agreement resulting in another delay of the start of the system. Not only is there a need for 12 countries to ratify the agreement to become effective, the three biggest patent markets must be included in the group. The potential referendum in the UK and a potential “Brexit” further complicates the picture.

Therefore, while Fröhlinger envisaged a start of the system next year or early 2017 at the latest, other guesses are more conservative, picturing the start not before 2018. Plus, given the caution expressed by parts of the industry, it could be up to a slow start, Jorma Hanski, director of Patents and Innovation Line at the Finnish Patent Office, said in his summary.