2 Enforcement of patent rights
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11533/11
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| Draft Agreement on a Unified Patent Court and draft Statute
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| Legal base | —
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| Department | Business, Innovation and Skills
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| Basis of consideration | Minister's letter of 2 December 2011
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| Previous Committee Report | HC 428-xliii (2010-12), chapter 5 (7 December 2011); HC 428-xli (2010-12), chapter 2 (9 November 2011)
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| Discussion in Council | No date set
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| Committee's assessment | Legally and politically important
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| Committee's decision | Not cleared; further information requested
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Background and previous scrutiny
2.1 The background to this proposal is set out in our earlier
Reports.[5] On 7th December
we concluded as follows:
"We note that the Minister's letter was dated 2nd December
and so could only be considered by the Committee on 7th December,
two days after agreement was expected in the Competitiveness Council.
The Minister does not explain her own time constraints in producing
the letter, and so her approach to Parliamentary scrutiny continues
to leave us very concerned. Additionally, having submitted the
draft agreement as a European document for scrutiny, together
with an Explanatory Memorandum, the Minister is silent on whether
she wants us to release it from scrutiny, which displays a further
lack of understanding of the scrutiny procedures.
"We also note that the Minister has not answered
a key question we raised in our previous report, namely whether
the concerns raised in the Explanatory Memorandum had been allayed.
These concerns included:
- "Separate jurisdictions
for related validity and infringements actions on a patent case:
the Minister explained that UK industry generally opposes these
actions being heard separately as it could mean that cases are
more expensive and/or could reach inconsistent decisions.
- "UK stakeholders had 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.
- "There were 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 had 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 was concerned
that complex language requirements will create cost and uncertainty.
- "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 was concerned that
there were 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.
"The Minister's letter fails to address whether
these concerns have been met. They appear to us to relate to central
issues in the agreement which we would have expected the UK to
wish to resolve in its favour before giving political agreement.
We would be grateful if the Minister could address these at the
earliest opportunity.
"Additionally, the Chartered Institute of Patent
Attorneys letter to us demonstrates real concern that draft agreement
will be disastrous for UK companies. It comments that 'inappropriate
pressure' is being placed on governments to sign the agreement.
The attached 'CIPA view' begins as follows:
'we support the idea of a Unitary European Patent.
But only if it is an improvement on the present system. What is
currently being discussed is not. It would be worse, not better'.
"This is followed by seven proposed amendments
it thinks necessary before the agreement will be beneficial for
UK companies.
"Again, we would be surprised if the UK were
willing to give its agreement to an agreement in the face of such
opposition from a key stakeholder organisation, so we ask the
Minister to address each of the points raised by the Chartered
Institute of Patent Attorneys and say why the agreement as it
stands will benefit UK industry.
"Finally, we note the Minister says that the
Presidency has been 'less inclined to take on board amendments
of a technical nature, given that the substance of the Agreement
was discussed in Council working groups before the Council conclusions
of December 2009'. We ask the Minister to explain in more detail
what this means; it sounds to us as if the Presidency has not
permitted any substantive negotiations on the detailed provisions
of the text.
"Pending the Minister's replies to the above,
the draft international agreement remains under scrutiny."
The Minister's letter of 9 December 2011
2.2 The Parliamentary Secretary for Business, Innovation
and Skills at the Department for Business, Innovation and Skills
(Baroness Wilcox) replies to our conclusions by letter dated 9
December.
2.3 On the scrutiny process, she says it would not
be usual practice for the Government to submit a document like
that in 11533/11 because it concerns a draft international agreement
between States acting in an inter-governmental capacity and is
not based on any provision of the EU Treaties. However, she appreciated
that it was of interest to the Committee in relation to its scrutiny
of the patent Regulations and the Council decision on enhanced
cooperation, and it was for that reason that she arranged for
the deposit of the document and an Explanatory Memorandum.
2.4 The negotiations between States on this Agreement
are not open to the public, so the Minister says she cannot give
full details of the package currently on the table. As she indicated
in her letter of 2 December, the Polish Presidency is seeking
consensus on political aspects of a compromise package relating
to the draft Court agreement. There was no question of signing
of the Agreement itself by Ministers at the Competitiveness Council
of 5 December. But it was only at a very late stage that it became
clear what the Presidency was expecting on 5 December, and there
were further changes on the day of the meeting itself.
2.5 After a series of bilateral meetings on 5 December
throughout the day, the Presidency presented a compromise package
which in certain key aspects, including the location of the seat
of the central division, was not satisfactory to the UK and at
least one other Member State. The Government is continuing in
bilateral discussions with the Presidency. They may convene another
meeting of Ministers, if necessary, before the proposed initialling
ceremony planned for 22 December. It is not yet clear how this
relates to the diplomatic conference and signing planned by the
Danish presidency for June 2012.
2.6 Details of the compromise package are not publicly
available, but they do reflect some progress made in relation
to the concerns raised by stakeholders. If remaining aspects can
be resolved satisfactorily either through bilateral discussions
or in a Ministerial meeting, then the UK would want to be in a
position to join the initialling ceremony on 22 December without
any breach of the Parliamentary scrutiny reserve resolution.
2.7 She then turns to the specific concerns of the
Committee:
- separation of jurisdiction
on validity and infringement:
the possibility of separation (bifurcation) continues to be an
essential element for some of the States involved in negotiations
on the Agreement, but this is mitigated by a number of options
which allow the regional or local division to hear such actions
together, or remit both to the central division. Further instances
have been proposed for starting infringement actions at the central
division;
- costs of the unified patent court:
ensuring that arrangements are cost-effective will help reduce
the level of user fees necessary, and current drafts require hosting
States to pay facilities costs. Other costs will be shared by
States according to a scale to be determined, at least until such
time as the unified patent court is self-financing;
- language of proceedings:
while some simplification is possible, it is also necessary to
ensure that defendants, in particular, are able to use an EU language
with which they are familiar. Where parties agree, the language
of proceedings may be changed; alternatively there is a possibility
for either party to petition the President to change the language
of proceedings to the language of grant. Some aspects of the linguistic
regime, for example publication of judgments, could be dealt with
in the Rules of Procedure;
- quality of judges:
there is a very clear understanding among negotiating parties
that training will need to be provided to ensure there are enough
experienced judges once the unified patent court starts up, and
one state has already bid to host a training centre for judges.
2.8 She then addresses the concerns of the Chartered
Institute of Patent Agents, which, she explains, is one of the
bodies represented on the European patent reform consultation
group:
- deletion of Articles 6 —
8 from the patent Regulation:
there is little support within the Council or among the EU institutions,
but the Government has continued to raise the issue;
- non-exclusive jurisdiction:
while some States argue this would delay consistency of the system
by limiting the number of cases reaching the unified patent court,
there is currently an opt-out from the unified patent court for
patentees and applicants until the end of an extended transition
period;
- German property law:
the Government understands that the key concern is German employee
inventions law, but thinks this is more a question of entitlement,
which is addressed by the European Patent Convention. Otherwise
German property law applies in the case of proprietors having
no domicile or place of business in the EU — this is already
the situation for other intellectual property rights;
- transitional provisions:
these have been extended in the latest drafts, including the opt-out;
- supplementary protection certificates:
the Government sought assurances from the European Commission
that any necessary legislation will be brought forward in good
time;
- rights for European Patent Attorneys before
the unified patent court: this is already
in the agreement;
- legal professional privilege:
this will be further clarified in the Rules of Procedure to be
developed under the Danish Presidency.
2.9 The Minister asks us to understand that she cannot
be more specific about the Government's position on these issues
while it is still engaged in negotiations with other States on
the overall compromise package. However she hopes that the information
provided is sufficient to allow the Committee to complete its
scrutiny of the draft agreement.
2.10 Finally, she says that the Agreement will only
enter into force upon ratification by a minimum number of States
— to be decided, possibly 13 — and she understands
that the procedures set out in section 20 of the Constitutional
Reform and Governance Act 2010 will apply after signature and
before ratification.
Letter from Andrew Waugh QC
2.11 Mr Waugh is a Silk in Three New Square chambers,
which specialises in intellectual property law. He writes to the
Committee in response to the Minister's letter above. He says
that he read "with a sense of disbelief" that she hopes
that the information she provided to the Committee is sufficient
to allow it to complete scrutiny on the draft agreement. In his
opinion, it does not, not least because details of the compromise
package are not publicly available. He continues that the "the
complexity of the proposed court structure, lack of clarity on
financing, the expertise of the appointed judges, the dubious
assertions that the court will be cost effective and many further
problems plague the draft agreement and proposals". The Minister
provides no assurance that these will be addressed in the compromise
package. Of most universal concern within the patent profession
is that the:
"[i]nclusion of Articles 6 to 8 in the Proposed
Regulation, and not just in the draft Agreement, will 'make substantive
patent law part of EU legal order.' Patent cases involving a 'new'
unitary patent would be susceptible to the preliminary ruling
jurisdiction of the Court of Justice of the European Union (CJEU/ECJ),
while 'old' European patents would not. Cue the ensuing costs,
years of delays, uncertainty and substantive patent law being
interpreted by a panel of judges who do not possess the skills
and level of expertise that the judges referring the questions
in the first place are required to address under Article 10 of
the Draft Agreement.
[...]
"The entire 'package' as currently proposed
appears to be the antithesis of what a European unitary patent
was meant to achieve in the first place — being a cost-effective,
efficient, certain and user-friendly system."
2.12 Mr Waugh says that the European Patent Lawyers
Association has been campaigning for a long time to secure a unified
patent system which is cheaper, more efficient and serves the
needs of its users. At its recent Congress on 5 December, its
past president, Dr Jochen Pagenberg, summed up the proposal as
follows:
"If one wants a really unattractive, inefficient,
unpredictable and probably extremely expensive patent court system,
then we will get it; one must only give the ECJ a chance to receive
as many referrals in patent law as possible.
"If one wants to see substantive patent law
in Europe to be decided by judges without any solid knowledge
and experience in this field, then one must involve the ECJ whenever
possible.
"And if somebody intended to lay a solid ground
for failure of this — at some time very promising —
project, then he will probably succeed."[6]
Letter from the Chartered Institute of Patent
Attorneys of 16 December
2.13 We asked the Chartered Institute of Patent Attorneys
(CIPA) to comment on the Minister's letter of 9 December. It responds
as follows.
2.14 Deletion of Articles 6-8 (relating to infringement)
from the Regulation: the presence of these Articles gives
jurisdiction to the Court of Justice to decide the law of infringement
under the unitary patent. This is bad for three reasons:
- the Court of Justice lacks
experience and expertise in patent law;
- the likelihood that EU and national law would
diverge, as the Court of Justice does not have the same oversight
over the law of infringement of national patents and may therefore
set a different standard for infringement of the Unitary Patent;
- the delay in proceedings caused by references
of points of infringement law to the Court of Justice.
2.15 Non-exclusive jurisdiction. The proposed
agreement covers not only unitary patents. It would also (after
a transitional period) be the only forum in which to try cases
on national patents granted by the European Patent Office (EPO).
The normal jurisdiction of the UK courts over such patents would
be removed. This is of particular concern to small companies.
UK High Court actions are expensive (possibly more expensive than
the unified patent courts will be, though this is not clear yet).
To meet the needs of smaller litigants in intellectual property,
the Patents County Court (PCC) has recently been modernised. It
has a new highly-respected and energetic reforming judge: it has
a streamlined procedure, capped recoverable costs and set a limit
(£500,000) on damages recoverable. It has just begun to attract
patent cases again. Under the current unitary patent proposals,
it will lose all rights to hear patent cases (except for patents
granted by the UK Patent Office rather than the EPO) five years
after the system comes into force. It is difficult to believe
that the Unified Patent Court (with at least three judges hearing
each case) can be competitive with the service now offered by
the PCC.
2.16 Notably, some businesses are considering avoiding
the EPO altogether in order to avoid this problem. That is a step
backwards: making separate national applications before national
patent offices is more expensive and may result in SMEs obtaining
protection in fewer countries in future.
2.17 German property law not to apply automatically
to non-EU patentees. The existing proposal fails on two grounds:
uncertainty and unfairness:
"Uncertainty is of various kinds. What are the
consequences of German law applying? German law gives exceptional
rights to inventors, such that many research organisations avoid
building labs in Germany. Maybe this law would not affect inventions
made outside Germany, even if patents resulting were subject to
German property law, but we are not certain about this, and the
possible impact is so important that even a small risk could be
unacceptable to business. Another type of uncertainty is what
is to count as 'a place of business' in a European country, effective
to subject the patent to local law.
"Unfairness is to patent attorneys in countries
other than Germany. The application of German property law to
patents on inventions arising overseas will give German patent
attorneys a competitive advantage over those of other EU nations.
'File through us' they will say 'and if any problem arises about
ownership, we can advise you about it'. In such cases, attorneys
from other countries will incur extra costs through having to
take German advice. It is true (as the Minister says) that some
other community IP rights (Community Designs, for example) may
take their nationality from that of the Office where they are
filed. But (we believe) disputes about ownership of these are
less common (and less important) than with patents. For example,
there have been several significant patent ownership disputes
in the UK in recent years. The case between Yeda and Rhône
Poulenc went all the way to the House of Lords, yet neither company
was based in the EU. The proposal should revert to what it was
in earlier drafts of the Community Patent — that the applicable
law for patents of non-EU patentees should be that of the patentee's
local attorney. An American company may prefer to conduct ownership
disputes in English. A Brazilian company may prefer Portuguese."
2.18 Transitional provisions. This difficulty
is linked with non-exclusive jurisdiction. Currently there are
transitional provisions which allow local courts jurisdiction,
as well as the unified patent courts. But these expire after five
years. There is talk that this period might be extended to seven
years. In CIPA's view, this is nothing like long enough. The life
of a patent (typically) is up to 20 years. For pharmaceutical
and agrochemical products a further extension of up to five years
is possible. At the end of their lives is when these patents are
most valuable. The limited transition period asks companies who
own these patents to gamble now on how well this system will operate
in the future. It is no wonder, CIPA says, that some are considering
returning to the pre-EPO days of filing national patents rather
than risk being caught up in this untried and still insufficiently
considered system.
2.19 CIPA would prefer the transition period to continue
indefinitely. And it remains concerned about amendments to the
system. Only experience will tell how it will work in practice.
It has proved possible to amend the European Patent Convention
(once). It may well be necessary (but much more difficult) to
amend this one. The proposal for a review falls well short of
promising that amendment will follow. CIPA thinks there should
be formal provision, if a country so decides, for it to withdraw
from the system.
2.20 Sensible provision for SPCs (supplementary
protection certificates for partial extensions of drug and pesticide
patents). CIPA notes that there are promises that this point
will be dealt with. It would prefer to see the proposals and have
the opportunity to assess them — not least because the current
system for SPCs is giving rise to numerous referrals to the Court
of Justice because of the way it was drafted.
2.21 Besides these points, CIPA asked for confirmation
and clarification of two others: rights of representation for
European Patent Attorneys, and privilege. The former rights are
(CIPA believes) now likely to form part of any final agreement.
The latter are vitally important. If proper privilege for representatives
is not clearly established, international companies with important
interests in common-law jurisdictions (in particular the USA)
will be unable to use the unified patent courts for fear of documents
being disclosed in the unitary patent court which would not normally
be available in US proceedings (or even current UK proceedings).
CIPA is unhappy to accept reassurances that the necessary rules
will be put in place without the opportunity to examine them before
the agreement is signed.
2.22 CIPA's letter finishes with an "endnote":
"Why does the Government support the new system?
Legislation should be evidence-based. The Hargreaves Report strongly
supported the concept of a Unitary Patent. This was based on economic
evidence that an improved system would be worth £2.1 billion
a year to Britain in 2020 (Reference: Hargreaves Report, Supporting
Document EE: Table, page 2 line 2; Discussion, pp. 7-8). If this
is real, the project has much to commend it. However (as we understand
it) this estimate is based on the judgement that the new system
benefits innovative small and medium-sized firms. Such firms are
seen as a major source of growth and employment. If they can protect
their inventions and enforce their patents more easily and cheaply,
they will add more value to the UK economy. If however (as CIPA
believes) such firms could be worse off under the proposed new
system, the economic gains are illusory, or negative. The UK would
do better to stick with the existing system."
Conclusion
2.23 We are struck, again, by the strength of
opposition to this proposal and the linked Patent Regulation from
organisations representing the patent profession — both
nationally in the form of the views expressed by the Chartered
Institute of Patent Attorneys, and within the EU of the European
Patent Lawyers Association (EPLAW). We note that, besides the
recent remarks of the President EPLAW cited earlier in this Report,[7]
EPLAW issued a resolution on 29 October 2011 on the Patent Regulation
and the unified patent court concluding that:
- the inclusion of Articles
6-8 in the Patent Regulation was a serious error; and
- extending the jurisdiction of the Court of
Justice to consider substantive patent law should be avoided:
patent litigants need an efficient and predictable procedure before
highly experienced judges which they would not get in proceedings
which would include referrals on substantive law to the Court
of Justice.
2.24 We are grateful to the Minister for her early
response to the questions raised in our last Report. Her answers
do not, however, allay our concerns about the international agreement,
and so we do not propose to release the document from scrutiny.
Principal among those concerns are the effect of the non-exclusive
jurisdiction of the unified patent court on small businesses seeking
to enforce EPO patents through national courts and the jurisdiction
of the Court of Justice being extended to cover the infringement
of patents. From the submissions we have received, there appears
to be a substantial body of expert opinion which thinks the Court
of Justice would be wholly unsuited to this task, with profoundly
negative consequences for the enforcement of intellectual property
rights across the EU. If, however, the Minister can point us to
a body of countervailing expert opinion which welcomes the advent
of the Court of Justice's involvement, we would be grateful to
review it.
2.25 We have heard informally from the Minister's
officials that the signing ceremony planned in Warsaw for 22 December
is now unlikely to take place. Although unaware of the reasons
for this, obviously we welcome this news. And we urge the Government
to seek to persuade the current and next Presidencies to allow
for significantly more time for effective national scrutiny of
the draft agreement.
2.26 Our task in scrutinising the agreement is
made considerably harder by not having sight of a more recent
version. Given the importance of the topic, and the considerable
interest in it outside Parliament, we ask the Minister to deposit
a redacted version of the agreement, as a way of avoiding the
constraints of a limité Council document, which
conceals negotiating positions but sets out the contents of the
draft Articles to date. Or, alternatively, to provide a full explanation
of the agreement in a Ministerial letter. We also ask that the
Minister provide an explanation of each Article in an accompanying
letter or Explanatory Memorandum.
2.27 Given the legal impact of the Patent regulation
and the unified patent court domestically, we will be inviting
representative organisations from the patent profession to give
evidence to us in the New Year. We would also be grateful to the
Minister if, on the same occasion, she would attend to give evidence
too. Our officials will be in touch to arrange this.
2.28 Finally, we note the Minister says in her
letter of 9 December that "it would not be usual practice
for the Government to submit a document like that in 11533/11
because it concerns a draft international agreement between states
acting in an inter-governmental capacity and is not based on any
provision of the EU Treaties". Our view differs: this agreement
directly affects the competence of EU institutions — it
is therefore of utmost importance that the Committee is
able to scrutinise it. It should therefore be usual practice for
all Departments to submit such international agreements for scrutiny.
(Such agreements come within the category of document defined
in paragraph 143 (1)(vi) of the Committee's Standing Order.)
5 See headnote. Back
6
See EPLAW President's Report 2011, p. 3 (http://www.eplaw.org/Downloads/President's%20Report.pdf). Back
7
Para 2.12. Back
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