Documents considered by the Committee on 20 December 2011 - European Scrutiny Committee Contents

2 Enforcement of patent rights



Draft Agreement on a Unified Patent Court and draft Statute

Legal base
DepartmentBusiness, Innovation and Skills
Basis of considerationMinister's letter of 2 December 2011
Previous Committee ReportHC 428-xliii (2010-12), chapter 5 (7 December 2011); HC 428-xli (2010-12), chapter 2 (9 November 2011)
Discussion in CouncilNo date set
Committee's assessmentLegally and politically important
Committee's decisionNot cleared; further information requested

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."


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 ('s%20Report.pdf). Back

7   Para 2.12. Back

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