Documents considered by the Committee on 9 November - European Scrutiny Committee Contents


2 Enforcement of patent rights

(a)

(31127)

7928/09


(b)

(32604)


(c)

(33058)

11533/11


Draft Agreement on the European and Community Patents Court and draft Statute


Opinion 1/09 of the European Court of Justice on the Draft Agreement on the European and Community Patents Court and draft Statute

Draft Agreement on a Unified Patent Court and draft Statute

Legal base(a)Article 81 and 218(8) TFEU; co-decision; QMV

(b) Article 218(11) TFEU

(c) —

Document originated(c) —
Deposited in Parliament(c) 8 September 2011
DepartmentBusiness, Innovation and Skills
Basis of consideration(c) EM of 21 September 2011
Previous Committee Report(a) HC 5-iv (2009-10), chapter 4 (15 December 2009); HC 5-xi (2009-10), chapter 3 (24 February 2010)

(b) HC 428-xxiii (2010-11), chapter 2 (5 April 2011)

(c) None

Discussion in Council(a) and (b) Not applicable

(c) No date set

Committee's assessment(a) and (c) Legally and politically important

(b) Legally important

Committee's decision(a) and (b) Cleared

(c) Not cleared; further information requested

Background

2.1 In parallel with discussions to establish a single EU-wide patent, there have been separate discussions aimed at creating a single European patent court. In 2009 these discussions led to proposals for a European and Community Patent Court (ECPC). The proposed ECPC agreement, document (a), was considered by the Committee in December 2009 and February 2010, and held under scrutiny.[13]

2.2 Following concerns raised by some Member States, the Council requested the opinion of the Court of Justice, under Article 300(6) EC (now Article 218(11) TFEU), on the compatibility of the envisaged ECPC Agreement with the provisions of the EC Treaty. That Opinion (1/09), document (b), was issued on 8 March 2011. We reported on it in April 2011, and held it under scrutiny.[14]

2.3 The Court found that the draft agreement establishing the ECPC was incompatible with the EU Treaties for two reasons. Firstly, it would deprive national courts of the power or, as the case may be, obligation, to refer a question of EU law (including under the EU Patent Regulation) to the Court for a preliminary ruling under Article 267 TFEU — such preliminary rulings were "indispensable to the preservation of the very nature of [EU] law".[15] And secondly, if a decision of the unified patent court were to be in breach of EU law, it could not be subject to infringement proceedings by the Commission nor could it give rise to financial liability on behalf the EU Member States — two essential characteristics of EU law according to the Court.

Previous scrutiny

2.4 The Committee last wrote to the Parliamentary Under Secretary of State and Minister for Intellectual Property at the Department for Business, Innovation and Skills (Baroness Wilcox) on 22 June, when it noted that the Commission's non-paper on the unified patent court suggested that, in order to meet the requirements of the Court's Opinion of 8 March, the ECPC should have jurisdiction for EU Member States only, so excluding non-EU Member States which are party to the 1973 European Patent Convention, and which number 38 (including 27 EU Member States). Pending the deposit of the revised agreement, the Committee asked the Minister for a more in-depth analysis of how a unified patent court would affect the European patent, and how likely it was to meet the requirements of the Court of Justice's Opinion.

2.5 The Minister replied on 7 July in the following terms:

    "The Commission recommends that the unified patent court have exclusive jurisdiction over infringement and validity for both the unitary European Union patent and for (bundle) European patents granted under the EPC. Participation in the proposed agreement would only be open to Member States of the European Union.

    "EU Member States not taking part in the unitary patent would be free to participate in the court agreement but the court would only have jurisdiction over (bundle) European Patents in respect of those countries.

    "The operation of European bundle patents in respect of non-EU EPC Contracting States would be unaffected. Disputes relating to (bundle) European patents in such States would still be heard by the relevant national court as is current practice.

    "This system will still provide significant savings to UK businesses because they would not need to litigate their patents in as many different national courts as they do now.

    "You also asked how likely it is that the Commission's recommended approach will meet the concerns of the Court of Justice of the European Union (ECJ). In its opinion of 8 March the ECJ (the 'Court') objected to conferring jurisdiction on a court created by international agreement which would deprive Member States' courts of their task of implementing Union law or referring questions to the Court of Justice for a preliminary ruling. The Court distinguished this from the Benelux Court of Justice as "a court common to a number of Member States, situated, consequently, within the judicial system of the European Union, its decisions are subject to mechanisms capable of ensuring the full effectiveness of the rules of the European Union.

    "The Commission recommends addressing this point by limiting participation in the new patent court agreement to EU Member States. As you note in your letter, the Commission goes on to state that as consequence it would seem possible for infringement proceedings then to be initiated against all Member States jointly were the unified patent court to violate Union law and for any financial liability arising to be applicable to all Member States jointly.

    "By limiting participation in the proposed agreement to EU Member States we are satisfied that the Commission's recommended approach addresses the issues raised by ECJ Opinion 1/09. This approach received support from the vast majority of Member States when it was discussed at the Competitiveness Council on 30 May 2011, so I am confident it will be adopted.

    "The Presidency has produced a revised draft agreement for the Court system based on the Commission's recommendations. This draft has now been published and I will deposit the new draft agreement and submit an Explanatory Memorandum accordingly.

    "UK industry has not yet had an opportunity to comment on the detail of the new draft agreement. The Government regularly consults UK stakeholders on developments with both the unitary patent and unified patent court negotiations and we will continue to engage positively with industry."

The Unified Patent Court Agreement

2.6 This new draft international agreement on what is now called the Unified Patent Court (UPC), document (c), has been revised to take account of the opinion of the Court of Justice. It nonetheless preserves much of what was in the previous agreement establishing the ECPC. Similarities include the fact that the Unified Patent Court (UPC) would comprise a Court of First Instance and a Court of Appeal; the Court of First Instance would be composed of local, regional and central divisions; the local divisions would be hosted by the Contracting States; a regional division may be set up by two or more Contracting States (the seat of the central division has yet to be decided). The UPC would have exclusive jurisdiction concerning the infringement and validity of both European bundle patents (granted by the European Patent Office according to the European Patent Convention) and European patents with unitary effect, established under two Regulations implementing enhanced cooperation in the creation of unitary patent protection.[16]

2.7 There are two major differences between the UPC and the ECPC agreements, however. The UPC agreement is restricted to EU Member States only — non-EU Contracting States of the European Patent Convention are no longer parties to the agreement. And the EU, as a legal entity separate to its Member States, is no longer a party to the agreement. The new UPC agreement also introduces provisions on joint Member State liability for any failure of the proposed patent court to apply EU law, including that set out in the patent Regulations.

BASIC PROVISIONS OF THE AGREEMENT AND STATUTE TEXT

2.8 Article 1 establishes the creation of the UPC as a court common to the Contracting Member States with exclusive jurisdiction for European patents and European patents with unitary effect. Article 2 provides definitions for certain terms used in the agreement. Article 3 describes the scope of the UPC's jurisdiction. Articles 3a and 3b deal with legal status and liability of the UPC. Article 4 specifies that the UPC will be made up of a Court of First Instance, a Court of Appeal and a Registry. Articles 5-9 outline the functions of these parts of the Court.

2.9 Articles 10-14 outline the requirements for the judges of the UPC, including the eligibility criteria, how judges are appointed, and how they are trained.

2.10 Article 14a specifies that the UPC shall respect the primacy of EU law and apply the entire body of EU law. Article 14b makes provisions to ensure the proper application and uniform interpretation of EU law. Specifically, provisions are made to ensure the UPC refers questions on the interpretation of EU law to the Court of Justice of the European Union. Article 14c sets out joint liability of the Contracting Member States should the UPC fail to apply EU law. Article 14d requires that the Contracting Member States ensure the UPC complies with their obligations under EU law. Decisions of the UPC will be directly attributable to the Contracting Member States.

2.11 Articles 14e-14i set out the applicable law for the UPC, including listing allowable defences within the Court. Articles 15-16 describe the jurisdiction of the UPC. Article 17 allows for the creation of mediation and arbitration centres.

2.12 Articles 18-21 set out the financing requirements of the UPC. The court shall be self-financing with fees set and reviewed periodically by an Administrative Committee. Any shortfall in the budget of the court would be provided by the Contracting Member States.

2.13 Articles 21a-28 set out the organisational and procedural provisions relating to the UPC; this includes outlining who is responsible for representing parties in the UPC.

2.14 Articles 29-31 describe the language arrangements of the Court. Articles 32-34 set out the procedures before the UPC and the rules for evidence.

2.15 Articles 34a-44a deal with the powers of the UPC, including the provision of temporary and permanent injunctions. Articles 45-47 set out how appeals will be dealt with in the system.

2.16 Articles 49-56 describe the method that the UPC will use to reach decisions and to then to ensure that the decisions are enforced.

2.17 Articles 57-57b present the details of how the UPC will be implemented and operated following agreement.

2.18 Article 58 outlines the transitional arrangements for pre-existing European patents. In particular, it allows holders of European patents applied for or granted before the UPC is created to opt-out of the jurisdiction of the UPC.

2.19 Articles 58a-60 set out the requirements for the entry into force of the agreement.

DRAFT STATUTE

2.20 The draft statute is incomplete but currently outlines the institutional and financial arrangements for the UPC. Articles 2-9a set out the requirements for judges, including the eligibility criteria, their appointment and how they should serve in office. Articles 10-12a outline the arrangements for governing the new court system. Articles 13-15 set out how the Court of First Instance should function including the composition of panels. Article 16 sets out the requirements for the composition of panels of the Court of Appeal. Articles 17-20 define the functions of the Registrar. Articles 22-32 present the financial arrangements for the UPC. This includes the framework for adopting the budget each year. Articles 33-37 deal with the process of reaching decisions within the UPC and how dissenting opinions with be dealt with. Annex II to the Statute lists the topics to be included within the Rules of Procedure.

The Government's view

2.21 The Parliamentary Under-Secretary of State and Minister for Intellectual Property at the Department for Business, Innovation and Skills (Baroness Wilcox) deposited an Explanatory Memorandum on the draft agreement on 21 September.

2.22 In its introduction she says the UK sees an effective patent litigation system as a crucial part of the overall package to deliver a business-friendly unitary patent in Europe. She then sets out some of the Government's concerns.

2.23 On funding, the Minister explains that the fact that the EU is no longer a party to the agreement means that there will not be an EU contribution to the setting up costs of the UPC. The UK favours a system whereby the UPC will be self-funded primarily through court fees. Contracting Member States will be expected to subsidise the operating costs initially but the level of contributions may be expected to fall as the UPC begins to recoup costs through court fees.

2.24 On jurisdiction, she says that in the UK and most EU Member States related validity and infringement actions on a patent case are generally dealt with together. Current proposals allow for these actions to be dealt with separately, however. She explains that UK industry generally opposes hearing these actions being heard separately as it could mean that cases are more expensive and/or could reach inconsistent decisions.

2.25 Current proposals state that the new Court will have exclusive jurisdiction over actions involving European and unitary patents. There is a transitional period of five years during which time litigants will have the option of using national patent jurisdictions instead. The Minister reports that some industry stakeholders have commented that the transitional period is not long enough because it can take five years or longer to take an application from filing to grant at the European Patent Office (EPO).

2.26 There are a number of related issues which impact on the affordability of the UPC for users, the Minister says. These include the costs of accessing the UPC, who is allowed to represent parties in court and whether parties will be able to get legal aid. UK stakeholders have raised concerns that the costs of the UPC might be prohibitively high now that there will not be a contribution from the EU budget to the setting up costs of the court.

2.27 The first instance of the UPC will be regional, to allow local access, but European in character. Achieving this means local/regional court divisions (not national courts) at first instance which follow the same procedures and meet uniform standards of quality, consistency, efficiency. Large regional divisions and mixed judicial panels would encourage this. Local (national) divisions in each State could mean national practices would continue, which is likely to be inefficient.

2.28 There are a number of language issues to be resolved. These include the operational language of the division, the language of proceedings, the language of court documents and the language of judgments. Related is the issue of translation and interpretation. Different solutions could apply to each. Some Member States have concerns that their nationals may not be able to use their own language in the UPC, and judgments may not be available in their language. However, UK industry is concerned that complex language requirements will create cost and uncertainty.

2.29 Patents are highly technical documents and this can present difficulties for judges if they do not have the technical know-how to understand the invention. Some European States use technically-qualified (non legally-qualified) judges and others, such as the UK, use technical experts to provide the necessary technical knowledge. UK industry is concerned that there are currently not enough suitably qualified judges to populate all of the panels of the Court of First Instance and Court of Appeals in their local, regional and central divisions.

2.30 Current proposals for the Court do not state the location of the central division of the Court of First Instance, the Court of Appeal and the Mediation Centre.

Conclusion

2.31 We report earlier in this chapter previous and helpful correspondence with the Minister on how a unified patent court could be established whilst respecting the primacy of EU law, as set out in the Opinion of the Court of Justice, and on how it would have jurisdiction over European patents granted under the 1973 European Patent Convention as well as unitary EU patents. We note that negotiations on the draft agreement are at an early stage. So rather than asking further questions now, we would be grateful for an update on the negotiations when the details of how the UPC will operate in practice for EU and European patents become clearer, such update to cover whether the concerns raised by the Minister above have been allayed. We would also be grateful for a summary of the views of UK industry on the UPC. In the meantime, the draft agreement on the UPC, document (c), remains under scrutiny.

2.32 We now clear the previous agreement on the ECPC, document (a), and the Opinion (1/09) of the Court of Justice, document (b), from scrutiny.


13   See headnote. Back

14   See headnote. Back

15   Para 85. Back

16   The Committee maintained a scrutiny reserve on both of these proposals in its Report on 18 May 2011. See (32700) 9224/11 and (32701) 9226/11: chapters 2 and 3, (18 May 2011) HC 428-xxvii (2010-12). Back


 
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Prepared 18 November 2011