In December 2012, the European Parliament voted on the adoption of the Unitary Patent Regulation and the Translation Arrangements Regulation. Two months later, in February 2013, 25 of the 28 EU Member States signed the Unified Patent Court Agreement (“the UPCA”) after about 40 years of discussions. At present, Spain, Poland and Croatia have not decided whether to participate in the system.
Now, the UPCA has been ratified by 12 countries: Austria, France, Belgium, Denmark, Sweden, Malta, Luxembourg, Portugal, Italy, the Netherlands, Bulgaria and Finland. The United Kingdom has stated that it will ratify the UPCA, irrespective of the UK leaving the EU. Time will tell whether the UK remains a party to the UPCA. The German Bundestag has unanimously voted for the UPCA, and when ratifications by the UK and Germany have taken place, the UPCA will come into force on the first day of the fourth month thereafter, presumably early 2018. The UK ratification has been delayed by and will not take place before the general election on 8 June 2017.
But what are the consequences of this new system to patent proprietors? And what new opportunities and risks does it present? To clarify this, we will focus on the Unitary Patent and the Unified Patent Court individually and further explain how decisions in relation to the Unitary Patent and conventional European patents will impact the enforcement and challenging of patent rights.
The Unitary Patent
The Unitary Patent will serve as a complement to the existing European patent system. In particular, the new patent system aims to reduce administrative and translation costs by offering proprietors a single patent with validity in all of the EU Member States that are participating in the unitary patent system.
There are currently two alternative options for those wishing to protect their inventions in Europe. The first alternative is to file national applications for patent protection in individual European countries either as direct applications or via the PCT route. The second alternative is to apply for a European patent through the European Patent Office (EPO) in Munich either as a direct application or via the PCT route. The European patent, once granted, allows patent proprietors to choose which of the 38 national countries within the system that will be covered by the patent protection, and requires all or part of the patent (the claims) to be translated into the national language of each respective selected country (validation).
The unitary patent can be seen as an extension of the current European patent system. In contrast to the current European patent, which is essentially a bundle of identical national patents in the selected EPO member states, the new unitary patent provides a simplified option for obtaining one single patent that is valid in most European countries. To obtain a unitary patent, patent proprietors must submit a request for “unitary effect” to the EPO once the European patent has been granted. This request applies to all EU Member States participating in the new patent system at the time of grant. When granted in English, it requires only that the patent is translated into one further language of any of the EU Member States. If the patent is granted in French or German, an English translation must be filed along with the request for unitary effect.
The new unitary system is intended to offer time and cost savings for companies interested in patent protection in the participating EU Member States. The reduction in the costs of translation and renewal fees obviously depends on the countries where patent protection is wanted and wanted to be maintained. The renewal fees of the unitary patent will correspond roughly to the sum of the national renewal fees in the four major validation countries: Germany, the United Kingdom, France and the Netherlands.
The Unified Patent Court
The establishment of the Unitary Patent will be accompanied by a new Unified Patent Court headquartered in Paris, with two additional specialised subunits: in Munich (mechanics) and in London (chemical sciences and pharmaceuticals). Participating Member States may establish local or regional divisions of the Unified Patent Court. A regional division of the court established by Sweden and the Baltic countries will be seated in Stockholm with proceedings in English while Denmark will establish a national division with proceedings either in English or Danish.
This significant change of judicial procedures will allow a patent to be enforced or challenged in one single action covering all participating states, as opposed to the present situation where patents granted by the EPO must be enforced or challenged in national courts in the validation countries. The new court system is intended to streamline an expensive process while eliminating the confusion and uncertainty caused when/if different national courts reach different decisions.
However, the new Unified Patent Court will also have jurisdiction regarding conventional European patents in the participating EU Member States. During a transitional period of seven years (which period may be prolonged by up to seven more years), disputes regarding conventional European patents may be brought before either the Unified Patent Court or national courts. During the transitional period, the true proprietor of a conventional European patent may opt out of the jurisdiction of the Unified Patent court leaving the national courts as venues for disputes regarding the opted-out patent.
After the transitional period, the Unified Patent Court will have exclusive jurisdiction regarding conventional European patents in the participating EU Member States unless they have opted out during the transitional period. The long-term result of this could be that a company unwilling to take the risk of having its patent rights invalidated in all of the participating EU Member States simply chooses to revert to national patents in those countries.
Litigations in relation to conventional European patents in European Convention States outside the unitary patent system will be handled by national courts like today.
To some companies the benefits of the UP option are clear: simplified application, obviation validation and translation requirements and thus reduced administrative costs. To others the UP option represents, at worst, a risky option that exposes patent proprietors to the threat of litigation and revocation of patent rights across a major part of Europe (i.e. in the EU member states participating in the UPCA) in one single court procedure.
In the light of this, companies should carefully consider the implications of the new patent court regime when developing their patent strategies. In fact, the effect can be devastating to the proprietor of a particular patent, since that patent will be invalidated in all of the participating EU Member States if successfully challenged before the new court. This “all-or-nothing” approach also applies to infringements: A judgment regarding a specific patent infringement will apply in all of the participating EU Member States. This creates a situation where, in some cases, an applicant may select the new system which provides a patent that can be enforced against infringers in all participating states at once. In other cases, it may be preferable to have national patents including validated European patents where the validity can be challenged only on a country-by-country basis. This is possible through the opt-out option available to conventional European patents during the transitional period where the central handling can be deselected.
Bearing this in mind, it is important to emphasise that the unitary patent should be seen as a complement to the existing systems and that it will function in parallel with them. As such, it adds further layers of strategic considerations for patent proprietors when they are to choose the best way to make use of their options and assets. To certain companies, it may open up opportunities to expand their business into new markets at a reasonable cost. To others, it may represent an increased risk that is simply not worth taking.
The fact that patent coverage can apply to a broader geographical area by requesting unitary effect and the fact that the decisions of the Unified Patent Court will have effect in all participating member states will increase the potential risk of being involved in infringement proceedings for companies that produce and sell goods and services. This will increase the need for patent monitoring and freedom to operate analysis before new products are released in the participating EU Member States. Further, since proceedings before the Unified Patent Court will be a “frontloaded” system with short notice to establish a comprehensive defence, companies should be prepared, at all times, both internally and with immediate access to external advice, to defend themselves in such matters.
The road ahead
To many patent proprietors, this new alternative will be very welcome indeed. To others, however, the implications are less clear. One likely consequence will be that a greater number of patents will become valid in the majority of smaller markets in Europe, since those countries can be included in the same patent at the same cost. This increased patent coverage is likely to result in an increased need for market adaptations and strategic considerations to companies of all kinds, making a comprehensive patent strategy all the more valuable – and needed - in the long term.
Significant differences between European patents with unitary effect and conventional European patents include:
Cost: It will be less costly to obtain and maintain broad geographical patent protection under the unitary patent system than conventional European patents due to reduced translation and renewal costs. However, a conventional European patent can be maintained for a limited number of countries which is not possible for a unitary patent.
Validity: A unitary patent is valid in all participating EU Member States, while a conventional European patent is valid in the Member States in which it is validated.
Patent litigation: A unitary patent will be handled in the new Unified Patent Court system. A revocation applies to a unitary patent in its entirety. The Unified Patent Court’s decision regarding infringement applies to all participating EU Member States for which the unitary patent has effect.
During the transitional period, a conventional European patent may be handled either by the Unified Patent Court with regard to the participating EU Member States or by the national courts in those countries. The Unified Patent Court decision applies to the territory of those participating EU Member States for which the European patent has taken effect. A national court decision will apply to that country only. A conventional European patent in countries that are not EU Member States participating in the UPCA will continue to be litigated before the national courts.
During a transitional period of seven years (which period may be prolonged by up to seven more years), a conventional European patent can be opted out of the unitary patent system by the actual proprietor(s) of the patent. This opt-out will apply after the transitional period, too, but may be withdrawn at the request of the true proprietor. However, as soon as proceedings regarding a conventional European patent have been initiated before the Unified Patent Court, opt-out is no longer possible for that patent. This requires immediate and active assessment of options by the proprietors of conventional European patents. A sunrise period for opt-out of European patents will probably start three months before the coming into force of the Unified Patent Court Agreement.