Draft Agreement on a Unified patent Court and Draft Statute

European Scrutiny Committee

Draft agreement on a Unified Patent Court and Draft Statute

Henry Carr QC, Chairman, Intellectual Property Bar Association

The Chartered Institute of Patent Attorneys

Baroness Wilcox, Department for Business, Innovation and Skills

Confederation of British Industry

Intellectual Property Lawyers’ Association

Written evidence from Henry Carr QC, Chairman, Intellectual Property Bar Association

Evidence in Writing for the European Scrutiny Committee: Draft Agreement and Regulation on a Unified Patents Court

Introduction

1. At present, European Patents are granted by the European Patent Office in Munich. The patentee is granted a basket of rights which can apply throughout Europe. However, in order to enforce those rights, the patentee has to sue in the national courts of different member states, which is costly and can lead to inconsistent results. For this reason, the theory of a Unified Patents Court has long been thought desirable.

2. However, the practical application, as expressed in the current draft Agreement and Regulation, has highly detrimental consequences. It is being rushed through, in spite of widespread opposition from the IP judges, the patent professions and industry.

3. The Council of Bars and Law Societies of Europe ("CCBE") is the representative organization of about one million lawyers. The Report of its Working Group on Patents dated 12th December 2011, in relation to the Unified Patents Court, states that:-

"It is apparent that the proposed Court system will not meet the goals of being accessible and affordable, especially for SMEs. The CCBE finds that the proposed system, as the proposal stands, will increase legal uncertainty and increase cost.

The CCBE is concerned that speed is now an overriding purpose carrying with it the risk that the result will be a system which users will refuse to accept. "

4. Similar concerns were expressed by the CBI, the IP Federation, the Bioindustry Association and others (including the Intellectual Property Bar Association) in a letter to Baroness Wilcox dated 16th December 2011. Whilst expressing the hope that it should be possible to finalise the project under the Danish Presidency "with calm and thoughtful discussion", the letter expresses great concern that "the pressure to reach an agreement quickly will result in a system which could undermine innovation and growth".

5. The main problems are as follows.

References to the Court of Justice of the EU ("the CJEU")

6. Articles 6-8 of the proposed Regulation contain provisions on direct and indirect infringement and limitations on such rights. This means that their interpretation will be subject to the preliminary ruling jurisdiction of the CJEU.

7. This is notoriously slow. It means that patent disputes will not be able to be resolved until the ruling has been obtained, which will add years to the proceedings, as well as additional costs. Further, the CJEU has no expertise in patent law and its procedures are not appropriate for cases involving complex technical subject matter.

8. At a general meeting of the Intellectual Property Judges Association on the 28th-29th October 2011, the Judges unanimously resolved that:

"they were against the proposed inclusion of Arts. 6-8 of the current draft Regulation into the final Regulation and that if they were included the new system would fail to achieve the object of a better system of patent litigation in Europe."

There were 27 Judges present, of whom 24 were from EU member states.

9. In a Report dated 1 September/18 October 2011, Professor Rudolf Krasser of the influential Max Planck Institute gave examples of numerous questions that might require a reference to the CJEU and stated that the inclusion of Arts. 6-8 would:

"…lead to delays in the proceedings as well as additional cost and effort for the parties involved, thereby seriously counteracting the objectives of the enhanced co-operation. Similarly, the effects on the field of patent law would run contrary to the objective…of the rapid and effective enforcement of intellectual property rights."

10. In an Opinion dated 2nd November 2011, Professor Sir Robin Jacob, who has unrivalled expertise in intellectual property, stated:-

"There is no time for anything other than plain speaking. I am fortunate enough to have had wide experience, as barrister, judge and now academic, with the patent system from all angles. I have many contacts amongst users and lawyers. I know of no one in favour of involvement of the CJEU in patent litigation. On the contrary, all users, lawyers and judges are unanimously against it."

In a further Opinion he explained that the inclusion of Arts. 6-8 was unnecessary.

11. However, the Commission is not listening, and is ploughing on regardless. Furthermore, the Legal Affairs Committee of the European Parliament is also pressing on with Arts. 6-8. These Articles are likely to be contained in the Regulation, given that the major political groups are backing it, without any regard to its implications.

Separation of Infringement and Validity

12. In an action for infringement, the validity of a patent may be challenged, for example on the basis that it lacks novelty or contains no inventive step. Invalidity is a defence to an action for infringement.

13. In the UK, validity and infringement are normally tried together. However, in Germany, they are separated, with the question of infringement being decided first. This is known as "bifurcation". Moreover in Germany an injunction may be granted after the question of infringement has been decided but before the issue of validity has been determined.

14. Because of the haste with which this proposal is being pushed through, the issue of bifurcation has been fudged by providing that the proposed Unified Patents Court has a discretion to bifurcate in any particular case, but with no guidance as to how that discretion should be exercised.

15. In cases where the court exercises its discretion in favour of bifurcation, this again will be a potential disaster for industry. An injunction may be granted after the question of infringement has been decided which applies to many countries in Europe. Years later, the Court may decide that the patent is invalid and that the injunction ought never to have been granted at all. This does not promote innovation. On the contrary, it restricts competition without any justification.

Effect on SMEs

16. The current proposal is to have a Central Division, the location of which is yet to be determined, as well as Local Divisions in different Member States. A Regional Division may also be set up for two or more States upon their request. Each panel of each Division will have three judges.

17. The relationship between Local and Regional Divisions and the Central Division is far from clear. It may be that cases where validity is challenged will have to be sent to the Central Division, which is likely to be almost all cases.

18. This complex structure is likely to be far more costly and burdensome for SMEs than the existing system in the UK. A UK SME engaged in cross-border trade may also be required to defend itself against a pan-European injunction for patent infringement in the language of the Court chosen by the patentee.

19. Furthermore, how the Court will be funded is highly speculative, and is likely to result in significant additional costs being passed on to the parties. The CCBE report concludes at paragraph 5 that:-

"The costs uncertainties are significant. …Figures that have been presented are on such levels that SMEs (and others) will likely end up with higher costs than in single national proceedings…The financial risk for SMEs to litigate in the proposed Court is therefore significant and probably in many cases not acceptable."

20. The Patents County Court ("PCC") has procedures and a costs regime specifically designed for SMEs and is currently working well. After a transitional period, the current proposal gives exclusive jurisdiction to the Unified Patents Court, even in respect of existing European Patents, and so will exclude the PCC.

The absence of suitable judges

21. Art. 10(1) of the draft agreement requires that the judges of the Unified Patents Court shall "ensure the highest standards of competence and proven experience in the field of patent litigation." Pursuant to Art. 6, each panel must have a multinational composition. The Commission estimates that by 2022, when the transitional period ends, 101 full time and 45 part time judges will be required.

22. Patent expertise varies greatly between member states. In some countries, such as the UK, Germany and the Netherlands, there are many patent cases. In others, such as the Eastern European countries, there are very few.

23. Therefore the requirement for multinational panels of judges possessing the highest standards of competence in patent litigation is a pipe-dream. The quality of justice administered by any court is dependent on the expertise of its judges. It will be impossible to train such a large number of judges, who do not have the relevant experience, to an acceptable standard.

Uncertainty as to the procedural rules

24. It is foreseeable that the agreement will be forced through before procedural rules have been agreed. A current (un-agreed) draft of the rules is immensely complex, containing over 200 provisions. Yet none of the existing documents even address fundamental questions, such as third party liability for patent infringement (accessory liability), legal professional privilege etc. Principles will have to be developed from scratch through case law of the new Court, a process which will be unpredictable and expensive.

Uncertainty as to location of the Central Division

25. There is disagreement as to where the Central Division should be located. Germany, France and the UK are all bidding for it. If the Central Division is located outside the UK, there will be far less requirement for the high level of patent expertise that currently exists in this country. The location of the Central Division is crucial, as it will inevitably have significant influence on the practice and procedures of the Court.

Conclusion

26. The purpose of this evidence is to highlight fundamental issues with the existing proposal. However, it appears that the train has left the station and is not stopping. If the UK opts out, then it may be marginalised, as once the Court has been established, industry will require that it works. Intellectual Property is crucial to the UK.

27. A Unified Patents Court, if properly thought out, would be of great benefit to industry. But it should not have ‘Divisions’, only a single Court with a central registry which sits wherever is best for the case, using the language(s) appropriate or convenient for the parties, and with experienced judges.

28. If this is not possible, then  we urge the Government to continue to press for the Central Division to be located in the UK, and to work with others to avoid the most serious consequences discussed above.

20 January 2012

Written evidence from the Chartered Institute of Patent Attorneys

The European Unitary Patent and the Unified Patents Court

Introduction

Summary

1. A 'Unitary Patent' system for the European Union (EU) is proposed. This is to be introduced using the 'Enhanced Cooperation' system by two European Regulations as well as a separate Court Agreement between the EU countries taking part (all except Italy and Spain). This paper sets out

I. The history and process (§§ 4-13)

II. Evidence basis for this legislation and alleged cost savings (§§ 14-24)

III. Constitutional points and Arts 6-8 of the Patent Regulation (§§ 25-31)

IV. 'Bifurcation' (§§ 32-34)

V. Exclusivity and Transitional Provisions (§§ 35-44)

VI. Supplementary Protection Certificates (§§ 45-48)

VII. Other matters (§§ 49-54)

VIII. Conclusions (§§ 55-59)

2. The economic evidence for adopting the system as currently proposed is at best unreliable. We expect the proposed system to be less convenient, less flexible and more expensive, particularly for smaller companies. The law will become uncertain because certain aspects may be referred to the European Court of Justice (CJEU) for interpretation. Important questions as to how the system would work remain to be answered. If there are problems, the proposed system will be difficult and may be impossible to amend.

The Institute

3. This evidence is given on behalf of the Chartered Institute of Patent Attorneys (CIPA). CIPA was founded in 1882 and was incorporated by Royal Charter in 1891. It represents virtually all the 1,900 or so registered patent attorneys in the UK, whether they practise in industry or in private practice. Total membership is over 3,200 and includes trainee patent attorneys and other professionals with an interest in intellectual property (patents, trade marks, designs and copyright). It became, by the Legal Services Act 2007, the official regulator of the patent attorney profession in UK, its regulatory functions being carried out completely independently of the membership.

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I. The history and process

4. Since October 1973, 38 states, including all Member States of the European Union ("EU"), have signed the European Patent Convention ("the EPC"). Importantly, the European Union was not a party to the EPC. The EPC provides for the current central procedure for granting European patents by the European Patents Office ("the EPO"). Although the granting procedure is centralised, the result is a bundle of national patents, each of which is subject to the law of the Member States in which the patentee claims protection. That is to say, a patentee might elect, when filing its patent application, for protection in the Netherlands, the UK and Germany. When the patent is granted, the patentee then has a bundle of national rights – a Dutch patent, a British patent and a German patent – each of which is subject to the national laws of the Member States for which it is granted, independently of the rights granted in respect of any other Member State. Where the same dispute is being fought in more than one country, then this country by country enforcement can be a costly, time-consuming exercise that can sometimes lead to conflicting decisions as between the courts of the Member States. (But this does not arise in all disputes.)

5. A proposed unified patent system has been in discussion for over 40 years – a system which would increase the cost-effectiveness, certainty and efficiency of enforcing patents in Europe. In 2000, the European Council officially reopened discussions on a proposed Community patent. That summer the Commission put forward a proposal for a Council Regulation on the Community patent which provided for the accession of the EU to the EPC and the creation of a unitary patent which would be granted by the EPO. In 2007 the Commission presented a document entitled "Enhancing the patent system in Europe" to the European Parliament. This proposed to create a unified system to enforce current European patents and the future Community patent. The Council also drafted an international agreement between the Member States, the EU and other states party to the EPC which would create a unified court that could hear actions in relation to European and the proposed Community patents. In 2009, this led to further proposals by the European Commission for what was known as the European and Community Patent Court (ECPC), which included a separate proposed Regulation for a Community patent.

6. Following concerns by some Member States, including Ireland, Greece, Spain, Luxembourg and Italy, the European Council requested the opinion of the Court of Justice of the European Union "CJEU" under Article 218(11) TFEU over concerns that the draft agreement was incompatible with the EU and EC Treaties. On 8 March 2011, the CJEU found that the draft agreement was incompatible because it would deprive national courts of the power or obligation to refer a question of EU law to the court for a preliminary ruling under Article 267 TFEU: and 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 of EU Member States.

7. It had become clear prior to the CJEU’s decision that a collective agreement between the EU and Member States in relation to the unitary patent and unified court would not be politically possible. Following the CJEU’s decision, on 10 March 2011 the Council authorized 'enhanced cooperation' for unitary patent protection. 'Enhanced cooperation' allows groups of Member States to integrate policies, even where other Member States do not agree. Italy and Spain brought actions against the Council arguing that the Council had misused its powers in instituting 'enhanced cooperation'. These cases are pending.

8. Following the CJEU’s decision, the momentum to establish a unified patent court and unitary patent system increased rapidly. From the summer of 2011 to December 2011, numerous draft texts of the proposed Regulation establishing unitary patent protection and the Draft Agreement on the unified patent court were circulated. Despite being informed of numerous vital concerns [1] with the various versions of the Regulation and Draft Agreement by judges, patent professionals and industry throughout this period, including a unanimous resolution by the Intellectual Property Judges Association, it came as a surprise to the profession when, on 2 December 2011 the European Parliament’s Legal Affairs Committee and the Polish Presidency declared that there was a "done deal on the EU patent". Later that day it was announced by the Council that the following week they would agree on the seat of the unified patent court, the Proposed Regulations and Draft Agreement. On 5 and 6 December 2011, it was clear through various Council press releases and conferences, that there was substantial political pressure to agree on all elements of the package and initial the agreement on 22 December 2011. [2]

9. Disagreement on the location of the Central Division of the proposed Unified Patent Court by Member States slowed this process down. However, on 20 December 2011 the Legal Affairs Committee of the European Parliament approved all elements of the package. None of the issues raised by the patent profession had been addressed in the latest version of the Regulation and the problems, as set out below and in the written submissions of EPLAW and the IP Bar Association, remain. The story on the Draft Agreement is less clear – the latest version has yet to be seen by the public. [3]

10. Although it was hoped that under the Danish Presidency the rush to agreement on the proposals would be driven, not by political urgency, but by the objective of achieving an efficient, workable and cost-effective patent system, these fears nevertheless remain. Last week, the President of the European Commission, President Barroso, told Parliament:

"I call on the three Member States, France, Germany and the United Kingdom, who are holding this up over a site issue of some offices, to swiftly find a compromise. Frankly, it is not acceptable! It is not acceptable that such a crucial initiative is blocked over such a trivial disagreement. Europe needs to innovate to grow. And innovation is severely hampered by the current complex and expensive rules that we have been trying to overcome for decades. It is time now to make history and to score a victory for ambition, for common sense and above all for Europe's innovators." [4]

11. However, the comment from President Barroso again confirms the patent profession’s and industry’s concerns that these proposals are being rushed through primarily to score a political victory, the objective of creating a cost-effective and user-friendly unified European patent system being put second.

12. We believe the process would have benefitted from more input from professionals such as CIPA. During the run up to the CJEU’s Opinion, we were informed that it was too early for us to provide detailed comments on the various draft documents. After Enhanced Co-operation was adopted, we were told that it was now too late.

13. Nevertheless, a group of professionals met in the UK and produced a detailed paper on key issues. Although this concentrated on the Court Agreement, comments were made on other issues too. Although some changes have been made to the Court Agreement, we have not seen a new text. Comments on the Draft Regulation seem to have had no impact at all.

II. Evidence basis for this legislation and alleged cost savings

Costs, Benefits and Risks

14. Part of the unseemly haste to implement the new European Patent reforms seems to be a belief that a unified system will help the Eurozone out of its current economic difficulties. That belief is difficult to credit. Changes to the patent system may indeed help: but they may significantly hinder the economy if the changes are poorly formulated. How the new system will work remains unclear and so does its economic impact. For example, the official fees for registering and maintaining a patent is still unknown.

15. If done right, the Unitary Patent could be a real boon to the economy. However, as CIPA has previously made clear, we do not consider the current proposals to be the correct basis for establishing a unitary system. We should not change the present system for something worse.

16. Unless amended, the current proposals would be worse than the current system in that it would be:

- less flexible

- more uncertain

- more expensive, both for obtaining protection and enforcing it.

17. Further, the potential economic benefits of the new system remain unclear.

18. We feel the impact assessments done by the Commission are of poor quality and based on information which is no longer current [5] [6] . Before the legislation is released from scrutiny the committee might require that a proper impact assessment be done of the effects of the new regime. This should consider the comparative:

(a) costs

(b) speed

(c) quality of decision-making, including the impact of the in clusion of Articles 6 to 8 (see paragraphs 25-31 below).

If legislation was contemplated in this country such an assessment would be done as a matter of course.

Costs

19. One can hardly doubt that, for those who protect their inventions in all countries of the EU, a unitary patent will cost less to register, less to maintain and less to transfer, than the twenty-five individual national patents it replaces. Such people will certainly save considerably. To date, they have been few and far between [7] ; (though there will certainly be more if the costs are sufficiently reduced).

20. We have seen no reliable estimates for renewal fees or of litigation. Nevertheless it is claimed that the new system will be considerably cheaper, to the particular advantage of smaller companies (SMEs) [8] . However, this claim is based on doubtful assumptions [9] . Comparisons are made between the cost of obtaining protection by twenty-five separate national patents via the EPO route with the cost of a unitary patent. This shows the unitary patent to considerable advantage – it could be much cheaper. But whether an SME necessarily needs protection in twenty-five EU countries is not considered. No inventions are ever protected in all countries where patents can be obtained. The cost of rights obtained is roughly proportional to the number of countries in which patents are sought. The additional value of extra rights falls rapidly. An SME with a significant invention will rarely be well advised to file in all countries of the European Union. It is often a better use of limited funds to file only in a few of the larger countries of the EU, those in which competition is likely to be most important. Under current law, for patent purposes, the EU is not a single market: goods produced legally in a patent-free EU country cannot be sold unlicensed into another EU country where they are patented. Such limited filings may be as cheap as, or cheaper than, obtaining a unitary patent.

21. Another disadvantage of the unitary patent may be maintenance fees. Again, these are likely to be significantly cheaper under the unitary patent system than for separate protection in each of the twenty-five countries. They are unlikely to be cheaper than total renewal fees year on year in a smaller selection of countries. And the unitary patent will be less flexible. If the patentee needs to economise, with a selection of countries he can abandon the less vital rights, and keep the others: with the unitary patent, the only choice is to pay in full or lose all rights.

22. Thus simply to show that complete coverage over the EU will be cheaper under the new system is inconclusive. It could assist large companies who routinely file in all EU countries (for example, drugs firms). It is much less clear that it will save money for SMEs. In any case, any savings on registrations or renewals could go by the board, should the cost of enforcing the patent be prohibitive, or the patents be rendered valueless by perverse decisions.

Litigation

23. The proposed Court system is intended to be practicable and affordable. But there are no reliable estimates of costs here either. Originally the European Union planned to contribute to the costs, but following the CJEU Opinion, the Commission is no longer a party to the Court Agreement and will not be contributing to the costs of setting up this system or training the judges. It therefore appears that much of the costs of setting up and running the courts, which will fall on national governments, will be passed on to litigants. Litigation before the new Courts will be heard by a panel of three or four judges, which (however desirable in a new multinational system) must be more expensive than a single judge. The benefit will be that one action and one decision will replace litigation in several countries. However, such multiple litigation is not at all common (no firm figures are available, although some estimates are no more than 5-10% of patent litigation is duplicated in other Member States), and normally undertaken only by large companies. Such companies have the necessary financial resources and (perhaps even more important) the available manpower. Patent litigation can take up much staff time, which smaller companies cannot spare. So any benefits here are at best unclear.

Economic benefits

24. The Hargreaves Report suggested that a Unitary Patent system would be worth £2.1 billion a year to the UK economy by 2020 ((Hargreaves Report, Supporting Document EE: Table, page 2 line 2; Discussion, pp. 7-8)). There is a strong argument to proceed, if that forecast is reliable. However, we doubt this. The benefits are said to arise by making life easier for small companies, a major source of economic growth. However, we do not see that the proposed changes will on balance make life easier for smaller companies. We think they may make things worse. We note that the Hargreaves Report was completed in the early months of 2011, before details of the current proposals were available. We do not know what assumptions were made about how the Unitary Patent would work, or how the changes would affect small companies. It would be understandable if in these circumstances projections were too optimistic.

III. Constitutional points and Arts 6-8 of the Patent Regulation

25. CIPA has had the benefit of seeing the written submissions of EPLAW and Mr. Henry Carr QC to the Committee. CIPA unreservedly agrees with their comments in relation the problems associated with Articles 6 to 8 of the Proposed Regulation.

26. The inclusion of Articles 6 to 8 in the proposed Regulation means that the interpretation of the meaning of what constitutes infringement of a unitary patent will be subject to the preliminary ruling jurisdiction of the CJEU. This will result in three considerable problems – increased delay, increased cost and increased uncertainty.

27. Preliminary ruling references to the CJEU have the effect of suspending the litigation between the parties. Once the CJEU has ruled, then the national litigation must restart, in order for the opinion of the CJEU on the points of law to be applied. Those preliminary ruling references are, as Mr. Carr says, "notoriously slow" and can delay proceedings for years leaving both parties in an ambiguous "no-man’s zone" in respect of their legal positions and in turn greatly impacts their, and third party, participation in the marketplace. This delay can have a significant impact on patent rights which, unlike trade mark rights that can last indefinitely, are of limited duration – 20 years. With delay can also come increased expense, as further legal fees are incurred and interest on damages or undertakings accrue.

28. In other areas of intellectual property, namely in trade mark law, opinions from the CJEU have created a body of law which is often unclear, unformulated and devoid of any basis in the provisions of Community legislation and the recitals which aid its interpretation. The very nature of a CJEU reference means that the Court is giving very broad guidance on the interpretation of EU law. It thus does not address, with the required specificity usually demanded by cases, the complicated issues of law and fact at issue. The problems which broad guidance on the interpretation of law can create is likely to be compounded by the fact that the judges of the CJEU, although skilled, will not be equipped with the necessary experience in the field of patent litigation that the referring judges are required to possess under Article 10(1) of the Draft Agreement.

29. Further, when the CJEU issues an opinion it is for the referring national courts to apply that opinion to the facts of the case under their national law. This application can vary as between Member State’s national courts, and indeed even as between judges within the same jurisdiction. This has already created substantial uncertainty in other areas of intellectual property law, notably trade mark law and the laws of copyright. Further, the application of a CJEU opinion by courts may never occur in instances where the parties settle a dispute following the opinion – again leaving the status of law unclear.

30. Such legal uncertainty can lead to more litigation between parties attempting to clarify their respective legal position. It can also prevent parties from entering a market in which they would be free otherwise to compete but for the uncertainty of the legal position and the threat of litigation. Both outcomes increase costs and can damage innovation and the functioning of the market, especially for SMEs.

31. The consequences of this system – increased delay, increased uncertainty, and increased costs - threaten to be replicated in the patent field if Articles 6 to 8 are not deleted from the Proposed Regulation.

IV. 'Bifurcation'

32. This is the system whereby validity of patents is judged separately from infringement – in separate trials, in different courts. It is an important feature of German (and Austrian) procedure, and quite foreign to other countries. In its favour is urged that it simplifies matters – and so it does, for the patentee. But, according to British ideas, it is quite unfair to the party accused of infringement. If the patent is invalid, it cannot be infringed. The infringement trial (in Germany) is faster than the validity trial. Infringement may be found (and the 'infringer' required to cease operations and pay damages) well before the patent is proved to be invalid in the validity trial. An even stronger objection is that the patentee can put a different case in the two trials – particularly about what the patent means. In the infringement trial he will seek to interpret the scope of protection as broadly as possible, so as to cover what the defendant does: in the validity trial he will argue for a narrow meaning, so not covering what has been done before (even if this is similar or even identical to what the defendant has done). Trying validity and infringement together is intrinsically fairer because the patentee must then argue only for one consistent meaning.

33. The availability of bifurcation in Germany will powerfully affect the way the new Court arrangements operate. Patentees will be advised to file their infringement suits in Germany wherever possible. This will be particularly inconvenient for small companies from other countries, which will have extra expense in dealing with overseas proceedings not in their own language. They may be able to get the suit transferred from the local German division of the European Patents Court to the Central Court, so that infringement and validity can be considered together – but arranging the transfer will itself cause added trouble and expense. A cheaper alternative may be to concede the case unargued. This is a discouraging outlook for small companies.

34. Larger companies are also worried. They fear that 'trolls' (companies who buy up patents from a variety of sources, not to develop new products, but in the hope of extracting licence fees from those who do) may be encouraged by 'bifurcation' to step up their activities in Europe. Just how troublesome this may be would depend on the rules of the new Courts (not yet available).

V. Exclusivity and Transitional Provisions

35. Patents can protect considerable income streams for 20 years into the future. However, patent attorneys have to advise clients at the outset what to file and where to file. Our members are trying to advise their clients now on what they should be doing in order to protect themselves for the next 20 years: should they file through national patent offices or the EPO?

36. To answer that, patent attorneys need to have an idea of both the application process and what happens post-grant – i.e. how enforcement is carried out. When the EPO started, many applicants (if they could afford to) hedged their bets and filed cases twice – once via the National route and once via the EPO. There was duplication, but it reduced risk – it meant that users could compare the systems and decide whether the EPO was working properly before they had to commit. As users got used to the EPO, this practice reduced. But with the new European Patent Court system as currently proposed, we may end up resurrecting this wasteful practice.

37. If it turns out that, for EPO-granted national patents, the new European Patents Court does not do as effective a job as the national courts it is seeking to replace, then users will want to fall back on the original system – national patents granted by the national patent offices and enforceable through national courts. This decision has to be made early in the life of each invention. It cannot be unmade later. Patent law prevents a later filing for the same invention.

38. So users seek the right to opt out of the European Patents Court system until it has developed a track record. If the track record is weak, then they want to be able to opt out for good.

39. However, this is hindered by two provisions – the exclusivity of the European Patents Court (for all infringement and validity litigation both on unitary patents and on national patents granted by the EPO) and the short transitional provisions. No doubt both of these provisions would help to ensure that the new European Patents Court has customers. But it should gain these on merit, by competing effectively with the national systems, and not by coercion. The EPO has been a remarkable success, without coercion. As an optional new system, competing with national patents, it has won the trust of users (who retain the opportunity to file for patents nationally). It is now a cornerstone of the European patent regime. But if the new Court system doesn't work, it could be severely damaged, because in order to avoid that system, inventors will have to bypass the EPO.

40. The uncertainties are numerous. No one knows yet how the European Patents Court will function or what it will cost. Whilst it is expected to be cheaper than litigating the same patent in three or four different EU member states, it is unlikely to be cheaper than litigation in one member state only. Will cases take longer than they do at present? We don’t yet know the Court rules, which will be a key determinant of quality. Such uncertainty as to the quality of the court and system may well mean that many companies will choose to pursue litigation through the national route for many patents in order to avoid the new court,.

41. Of critical importance is whether the enforcement regime will be good for SME’s or whether they will find themselves priced out of patent litigation. Can a three-judge, local, regional or central division really be as efficient, flexible and responsive as the Patents County Court? We doubt that this could ever be the case. So an assurance that the PCC will retain its jurisdiction for EPO-granted patent disputes during the transitional period is not enough.

42. These problems would be easily solved by making the European Patent Court’s jurisdiction non-exclusive.

43. If the intent ultimately to grant the European Patents Court exclusive jurisdiction over the patents granted by the EPO remains, then the transitional provisions and ability to opt out (or back in) during the transitional period should last much longer. We need to know the track record of the European Patents Court over at least a decade before any such exclusivity starts , and then the compulsion should only relate to applications filed after the end of that transitional period and not to all then pending applications and granted patents.

44. It may be objected that if serious difficulties arise, the system could be amended. We strongly doubt whether this would be easy or even possible. To amend the Court agreement would require unanimity of the parties.

VI. Supplementary Protection Certificates

45. Supplementary Protection Certificates (‘SPCs) are a form of patent term extension which can be obtained for certain pharmaceutical and agrochemical products. The extension compensates for the time taken to obtain by regulatory approval. These rights mean a great deal to drug developers.

46. Currently the EU SPC regime relies upon patent owners or their licensees seeking the patent term extension once they have been awarded a national or EU regulatory approval. SPCs are granted by national patent offices on national patents, whether granted by them or the EPO.

47. This regime will not extend to the new EU patent. A new regime is required. This is not simply a case of needing to adapt the current regulation to cover the EU patent as well as the national patents, an authority which will grant and administer the SPCs must also be established. Will this go to one national patent office? Delegating this to the EPO may not be acceptable as the EPO, which is not an organ of the EU, has no experience whatever of dealing with SPCs. Further, the decisions of national patent offices are then appealable to the national courts, with referrals available to the CJEU. What will be the appeal route for a refusal to grant an EU SPC? Should that go to the European Patents Court? Or direct to the CFI?

48. A further complication is that an SPC is based both on a patent and on a regulatory approval certificate. Many (not all) of such certificates are issued by national regulatory authorities. Will such national certificates serve to extend the unitary patent throughout the EU? – or only in the country issuing the certificate (in which case the patent would no longer be unitary)?

VII. Other matters

Interaction with the EPC and the EPO

49. In the leaked Opinion of the Advocates-General in August 2009, statements were made about the need for the powers delegated by the EU to the EPO to handle EU Patents to be overseen by an EU court. The CJEU did not address this point in their final opinion. The EPO is not an EU organisation and has 38 Member States, 11 of which do not currently belong to the EU. So it is by no means clear whether or how this system can operate in practice. In effect, the EU may be asking the EPO to run one system where the patents are to be unitary patents and a second system for all its other member states. We also believe there are other inconsistencies between the Regulation and the EPC, which need further review.

50. The new European Patents Court will be overseen by judges qualified in patent law. The experience of both the United Kingdom and numerous other EU Member States is that the appointment of specialist judges in this field generally results in quicker trials. The judges are already familiar with patents (their structure and language), the appropriate law and civil procedures. This results in high-quality decisions.

51. However, to get the most out of a specialist system, it is also important for the cases to be properly presented. Patent attorneys represent clients in patent matters in this country. The English judges have recognised that patent attorneys perform better than solicitors who are not familiar with patent law. The EPLAW proposal does not require lawyers to show any knowledge of patent law – and yet this highly specialised area is the key issue in any dispute before the European Patents Court.

52. At the moment, the draft court agreement grants patent attorneys the right to represent parties in disputes in the European Patents Court, albeit that they may need a further qualification – perhaps similar to that already obtained by patent attorneys in this country who wish to act in the High Court.

53. Even if other matters can arise, disputes before the European Patents Court will centre on patent infringement and invalidity, core areas for a patent attorney’s practice. Litigation is often conducted by teams, and if other topics arise the team can be augmented – but it should still be run by someone who has a detailed understanding of the key patent issues.

German Property Law to apply to patents from overseas

54. The default position for all non-EU businesses is that German property law will apply. The drafting in the regulation, and the effects this may have, are still not clear. The original provisions in the Community Patent Convention, where a non-EU party could select the relevant property law by selecting an attorney in the appropriate jurisdiction, would be clearer and fairer.

VIII. Conclusions

55. The current drafts of the Proposed Regulation and Draft Agreement, as currently drafted, will create a system which is the antithesis of the system that was intended to be created. The economic evidence for adopting the new system is doubtful at best. We expect it to be less convenient, less flexible and more expensive, particularly for smaller companies. The law will become uncertain because it is to be decided by the European Court of Justice (CJEU). Important questions as to how the system would work remain to be answered. The current proposals create a system that could be a playground for patent trolls, while legitimate investment in patent protection and enforcement in the EU could decline.

56. Europe’s judges, patent profession and industry have repeatedly informed national governments and European legislatures of the systemic problems with the current proposals and solutions to these problems. The current proposals require careful consideration by experts, instead of a rush to politically acceptable but economically damaging compromises.

57. CIPA again urges that the full package for this legislation is properly thought through, with all parts being prepared, so that the package can be looked at as a whole, before it is adopted.

Once that is done, we believe that an effective system would be achieved. In that context, it makes sense for international business that the Central Division of the European Patents Court be located in London.

58. For these reasons, we feel that this legislation is not yet fit for purpose and more work is required if we are to create a patent system which will enhance the creativity of European businesses.

23 January 2012

Written evidence from Baroness Wilcox, Parliamentary Under-Secretary of State at the Department for Business, Innovation and Skills

9224/11 & 9226/11 (32700 & 32701): REGULATIONS ESTABLISHING A UNITARY PATENT, AND THE APPLICABLE TRANSLATION REGIME, WITHIN THE FRAMEWORK OF ENHANCED COOPERATION

I am writing to update you on the progress of the patent Regulations following the adoption of a general approach at the Competitiveness Council of 27 June 2011, for which you kindly lifted the scrutiny reserve under paragraph 3(b) of the scrutiny reserve resolution as set out in your letter of 22 June.

The Regulation establishing a unitary patent, under the co-decision procedure, has been the subject of informal discussions between the Council Presidency, the Parliament and the Commission with a view to agreeing a deal at first reading. The Council’s position was based on the general approach.

The lead committee in the European Parliament is the Legal Affairs Committee, who voted on the Commission’s proposal on 19 December 2011. Although a consolidated text including the Committee’s amendments has not yet been finalised, the Council secretariat has published the four-column document 17578/11 setting out the compromise text to which the Legal Affairs Committee’s amendments correspond.

We expect the European Parliament to consider the Legal Affairs Committee’s report and any other amendments tabled at its plenary session in February, following which the file will return to the Council, possibly for adoption as an ‘A’ point.

I enclose the four-column document for your information, and I have set out below the main substantive changes in relation to the general approach, without addressing minor drafting changes or reorganisation of the text.

• New Recital 11a makes reference to provisions on damages in the enforcement Directive (2004/48/EC), not governed by the unitary patent Regulation.

• Recital 16 and corresponding Article 15(2) refer to taking account of the needs of small and medium sized enterprises in setting fees.

• New Recital 21b urges participating Member States to ratify the Agreement on the unified patent court in accordance with national constitutional and parliamentary procedures and take steps for the court to be operational as soon as possible.

• Articles 6 – 10 are clarified to refer only to territories where the patent has unitary effect (see Article 22)

• Article 12(2) is expanded to clarify that the Select Committee of the Administrative Council of the European Patent Organisation will consist of representatives of the participating EU Member States, together with an observer from the Commission, and will take decisions with due regard for the position of the Commission.

• Article 20 is changed so the Commission reports on the operation of the system after three years from the first unitary patent taking effect, and every five years thereafter (from six and six previously).

• Article 21 is amended to require participating Member States to notify the Commission of implementing measures, adopted by the date in Article 22, or the date from which the unified patent court has exclusive jurisdiction in that Member State.

• Article 22(2) sets out the application date of the Regulation as being 1 January 2014 or the date of entry into force of the Agreement on the unified patent court, whichever is later. European patents shall only have unitary effect for the participating Member States in which the unified patent court has exclusive jurisdiction at the date of registration (of the unitary effect). The consequence of this should be that the European patent has effect as a national patent in other States designated in the application, providing any national requirements are met.

• Article 22(4a) distinguishes between the date of 1 January 2014 for ensuring administrative arrangements are in place at the European Patent Office as required by Article 12, and the date for implementation of measures ensuring that unitary effect can be inscribed in the European Patent Register which must be by the time the unified patent court has exclusive jurisdiction for the state concerned.

These amendments bring into place the improvement noted in your letter of 22 June, that the Regulation does not come into effect unless there is agreement on a unified patent court that is compatible with EU law.

Also included in the document 17578/11 are two small changes to the Regulation on applicable translation arrangements (page 67). This Regulation is subject to unanimity in the Council and consultation of the European Parliament. We expect it to be considered at the same plenary session in February before coming back to the Council for possible adoption.

I appreciate that the waiver granted in June means these Regulations have not yet cleared Parliamentary scrutiny, and I would like to ensure that we provide the Committee with all the necessary information you need in this respect.

As these Regulations are within the framework of enhanced cooperation, I note that the draft Council Decision authorising enhanced cooperation on the unitary patent (11815/10) is retained under scrutiny, and would be pleased to supply any further information that is needed for it to be cleared. However the previous draft regulation on language arrangements (11805/10), which was being discussed before enhanced cooperation was authorised in March 2010, is effectively superseded by 9226/11.

19 January 2012

Written evidence from Baroness Wilcox, Parliamentary Under-Secretary of State at the Department for Business, Innovation and Skills

11533/11 (33058) DRAFT AGREEMENT ON A UNIFIED PATENT COURT AND DRAFT STATUTE

Thank you for the Committee’s consideration of the enforcement of patent rights at your meeting of 20 December. I am writing in response to the points raised and to provide further information before the Committee’s evidence sessions on 25 January and 1 February.

First I should confirm that after the Competitiveness Council of 5 December, and following a number of bilateral contacts between the Polish delegation and states participating in negotiations on the unified patent court, the Poles determined that there was no consensus on the compromise package they had proposed on 5 December. Consequently they decided to cancel the initialling ceremony they had scheduled for 22 December. Discussions on the unified patent court are continuing under the Danes, though there is no specific format or timetable. We understand that on the draft Agreement they hope to make early progress.

The Rules of Procedure, which set out how the Agreement will operate in practice, were previously taken forward by an expert group of stakeholders advising the Commission. Members of that group tell us they have been invited to a meeting on 3 February to continue their work.

Regarding the concerns of the Committee about having an up to date text of the Agreement, I fully understand your position. Unlike the situation which might apply in the case of legislative procedures in the Council, we do not have a single up to date text which sets out agreed positions and reservations by delegations. We might have expected a clean text if the Agreement had been ready for initialling on 22 December.

However in the light of the Committee’s request my officials have taken the opportunity to consolidate the main working documents which have been published since document 11533/11, and this unofficial text is enclosed. An analysis of the main changes is included in Annex 1, as well as an indication of the areas covered by the Polish compromise proposal, on which we expect discussion to continue. The compromise proposal has not been made publicly available, other than to the extent summarised in the Council press release after the 5 December Competitiveness Council, and is still under negotiation between the states concerned.

As regards the specific issue of Articles 6 – 8 of the patent regulation, and the body of expert opinion to which the Committee refers, perhaps it would be helpful to distinguish between the provisions of the Agreement establishing the unified patent court, and those of the patent regulation.

As members of the Committee will appreciate, the Court of Justice of the EU always has the power to interpret questions of EU law, for example when a court of the EU Member States refers such questions for a preliminary ruling. The provisions of the unitary patent regulation, including Articles 6-8, would be matters of EU law. Should an issue of interpretation arise in relation to such provisions, the courts of the Member States would need to comply with the provisions of the EU Treaties conferring jurisdiction on the Court of Justice of the EU to give preliminary rulings on any such referred questions.

The Agreement is intended to establish a unified patent court which is a court common to participating EU Member States, and will then be subject to the same relationship with the Court of Justice as current national courts. So the unified patent court will have the same powers, as national courts do, to refer questions of interpretation of EU law for a preliminary ruling.

In EU legislation which establishes any intellectual property right, it is usual to set out what the right actually consists of. For the unitary patent there must be legal provisions to say what acts the patent holder can prohibit, because these are what define infringement of the patent, which is the essence of the patent. In most national systems the patent holder can pursue action against someone who makes, sells, or imports products embodying the patented invention without the patent holder’s permission, so these would be infringing acts in relation to national patents. Articles 6 – 8 of the unitary patent regulation correspond at EU level to the provisions on infringement which are generally found in national laws. Equivalent provisions are found in the court Agreement as far as European non-unitary (bundle) patents are concerned. However stakeholders would like infringement provisions for the unitary patent in the Agreement, rather than having them set out in the patent regulation.

A party’s defence to allegations of infringement may be that the patent should be considered invalid, on the basis of specific reasons. However for patents granted by the European Patent Office, including the future unitary patent, the reasons for which a patent may be found invalid are already set out in the European Patent Convention, to which all EU Member States are party. There is therefore no need to include provisions on validity in the patent regulation.

It is undoubtedly the case that if a court dealing with a dispute decides it needs to ask a question of the Court of Justice about the interpretation of EU law, there will be a delay in giving a final ruling on the dispute. But it is for the original court to decide if any question needs to be referred, for example if clarity is needed on the interpretation of specific provisions, and equally the original court must decide how to apply the preliminary ruling of the Court of Justice once that is received. We already see this happen in the case of some aspects of EU law that relate to patents.

Nonetheless I do appreciate stakeholders’ concerns about the inclusion of Articles 6 – 8 in the regulation, rather than having infringement provisions for unitary patents in the court Agreement. We have raised this issue with successive Presidencies, the Commission, and others involved in the negotiations. We understand that among our negotiating partners and within the EU institutions there has been insufficient support to change the text by deleting these articles from the regulation, even if there is no written body of expert opinion to compare with the papers produced by Professor Sir Robin Jacob and others. Moreover, while we have taken opportunities to raise this issue with our counterparts, the general approach on the patent regulation agreed at the Competitiveness Council of 27 June 2011 did include these articles within the text of the regulation. I will cover the progress of the patent regulation more fully in a separate letter.

I hope the further information provided here will be of assistance to the Committee, and I look forward to having the opportunity to answer the Committee’s questions on 1 February.

19 January 2012

Written evidence from the Confederation of British Industry (CBI)

Proposals for Unitary Patent and Unified Patents Court

1. The CBI is the UK’s leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce. With offices across the UK as well as representation in Brussels, Washington, Beijing and Delhi the CBI communicates the British business voice around the world.

2. Our submission sets out our thoughts on proposals for the Unitary Patent and Patent Court. Our position has been established in consultation with a wide variety of CBI members. In summary:

· The CBI has supported, and continues to support, the development of a properly implemented Unitary Patent and Patent Court. However, proposals at the end of 2011 were of significant concern to IP-rich (and associated) industries in the UK.

· Concerns relate to legal certainty and quality; clarity over the transition process; the location of the proposed central court; and practical issues, principally around cost.

· We welcome the opportunity to appropriately address and resolve these concerns under the Danish Presidency during the first half of 2012.

3. The CBI has consistently expressed support for the development of a high-quality Unitary Patent and accompanying Patent Court, and continues to support the project in principle. In particular, Professor Hargreaves’ finding that the establishment of a Unitary Patent could increase UK national income by over £2 billion a year by 2020 is significant. In the final months of 2011 we voiced concern that the proposals on the table (under the Polish Presidency) were not ready to be progressed, and, if accepted, would create a patent system in Europe which is worse than the one we have at present.

4. We are keen to see momentum for the project continue, but it is important that this momentum is not at the expense of a high quality patent system. CBI members have expressed substantial concern at elements of the current proposals, and it is crucial that these issues are appropriately resolved if this project is to continue with the full support of UK industry behind it.

5. These concerns relate to legal certainty and quality; clarity over the transition process; the location of the proposed central court; and practical issues, principally around cost. In particular, we remain concerned about the following issues:

· It is crucial for the Patent to be credible and workable. Judicial quality and expertise must be ensured across the regional, local and central courts. In particular, to ensure this, we support the deletion of Articles 6–8 from the Patent Regulation. With the Articles included, there is a risk that a two-tier legal system could emerge, with the remit of ECJ Judges potentially expanded to interpret Patent Law, rather than the specialised courts as intended. Therefore, this has the potential to create significant legal uncertainty for IP-rich industries in the UK.

· It would increase business confidence to have an appropriate transition to the new system in place, with clear procedures established before the deal is finalised – particularly the right to bring infringement cases to the central court, which would be reassuring for UK industry.

· The location of the local and central courts is highly important, as the host nations will undoubtedly reflect local custom and practice in their domains. It is therefore crucial that courts are located in different countries, and that the chosen locations reflect the truly European nature of the project, rather than giving one country a competitive advantage.

· Practical issues remain, particularly relating to the cost of implementation and the choice of an appropriate financing model. It is particularly important that the fee regime adopted works for smaller firms, so that SMEs are not disadvantaged by the new system.

6. We believe that with considered discussion on the issues outlined above, it should be possible to reach a final agreement on the Unitary Patent under the Danish Presidency with the support of the UK business community. Regular stakeholder involvement in this process can contribute significantly to achieving this objective, and we will continue to work with the Government in any way we can to achieve that objective.

January 2012

Written evidence from the Intellectual Property Lawyers’ Association

Submission to European Scrutiny Committee on

proposed Unified Patent and Unified Patent Court

Introduction

The Intellectual Property Lawyers’ Association ("IPLA") represents solicitors’ firms in England & Wales which have specialist intellectual property practices. The vast majority of patent and other intellectual property cases in England & Wales are handled by IPLA Member firms. Member firms also have practical experience of how patent litigation works in other jurisdictions, both within Europe and elsewhere. This memorandum sets out a number of IPLA’s concerns about the proposed Unified Patent and Unified Patent Court. There are a number of unresolved issues and we support HM Government in its attempts to secure sufficient time for these issues to be properly resolved.

1. The Desirable Objective

Under the present system, European Patents (sometimes referred to as "bundle patents") are processed in a single application by the European Patent Office but, on grant, become a "bundle" of separate national patents. Accordingly, if a company distributes a product which infringes a "bundle patent" across Europe, a patentee faces having to take separate proceedings in each relevant country under the local "bundle patent". Since enforcing the patent in Europe accordingly involves several parallel infringement actions, the cost is greater than it should be and there is a risk that different courts will reach different and sometimes inconsistent decisions, in widely differing timescales. In many cases, it may not be commercially necessary to enforce the patent in every country, but this can lead to procedural games and forum-shopping as each side tries to secure a decision from a court which is thought to be favourable to its case. A supra-national system which allowed a single set of enforcement proceedings across the whole of Europe has obvious advantages.

A number of things characterise a desirable supra-national court: if these are not achieved, such a court will not be better than the current national system.

Speed

Most commercial litigation consists of arguments about liability and compensation for something which has happened in the past. Patent (and other IP) litigation is different; it is normally concerned with products which are still on the market, and which continue to damage the patentee’s business unless and until an injunction is granted, usually following the final decision. If an interim injunction is granted pending the final decision, the accused infringer is kept out of the market, when it may turn out at the final trial that it was not in fact infringing the patent. Either way, there is a pressing need, in the interests of commercial necessity and more generally in the interests of fairness, that the court should come to a final decision as rapidly as possible. Taking into account the work necessary to prepare the evidence for the court, the general consensus is that trial within six to twelve months is desirable, and achievable.

Judicial Expertise

Patent law comprises a series of concepts which are unfamiliar to most lawyers (and judges) who have not made a special study. Furthermore, decisions in patent cases require the application of the law to scientific facts in areas of technology with which the judges are unfamiliar. A good patent judge accordingly requires knowledge of patent law and experience of its application, together with a willingness to engage with and understand unfamiliar technologies. Judges who do not have these characteristics will find it difficult to give decisions which are fair and which will be respected by the litigants.

Procedural fairness

The procedural rules need to be even-handed so there is no significant advantage for plaintiff or defendant. For example, a patentee may need information from the defendant in order to establish the case on infringement, while a defendant may need information from the patentee in order to establish a case on invalidity of the patent. Rules which permitted the patentee to insist on the provision of information by the defendant, but which did not give a corresponding right to a defendant, would unfairly favour the patentee, and are undesirable.

Proportionality

Patent litigation can be huge – involving a patent on a product with a turnover of hundreds of millions of pounds across Europe - or may be small, between SMEs where the relevant turnover is less than £1 million. The system needs flexibility, so that SMEs can obtain a decision at low cost (probably at the expense of procedural sophistication), while litigants fighting over a very substantial market need to be able to bring before the court their full range of arguments and for the court to consider them in appropriate detail.

2. Areas of concern

CIPA and the IP Bar Association have identified a number of areas of concern and we are generally in agreement with their views. We also fully support them and HM Government in their advocacy of London as the seat of the Central Division of the proposed Unified Patents Court: if that could not be agreed, then it would be desirable that the hugely important post of President of the First Instance Court be first occupied by a British judge.

We take this opportunity to comment on some specific issues, bearing in mind the considerations outlined above.

References to Court of Justice of the EU ("CJEU") – Articles 6-8 of proposed Regulation on Unified Patent: Articles 6-8 put the law as to what acts infringe a patent into Community legislation, and accordingly disputes as to the correct application of these provisions must be referred to the CJEU for a ruling. The procedure before the CJEU typically lasts for two years or more, during which time the proceedings in the referring court must be suspended. Since the accused infringements are likely to be continuing during the period of such suspension, there is a risk that the patentee will suffer significant injustice.

Furthermore, we are not aware of any proposals to educate CJEU judges in EU patent law, and one of the objectives of the draft Court Agreement, to provide expert judges will be undermined.

As explained in the IP Bar’s submission, it is not necessary that the law on infringing acts be contained in the Unified Patent Regulation.

Bifurcation

In a significant proportion of patent cases, the defendant’s main defence is that the patent is invalid. Bifurcation means that the court which assesses whether the defendant infringes does not consider this defence. Furthermore, since validity cases tend to be more complex, the court hearing the infringement case is likely to make its decision before the court hearing the validity case. It is an enormous advantage for a patentee to have the issue of infringement decided without the defendant having an opportunity of putting forward its main defence. Bifurcation accordingly contravenes the principle of procedural fairness.

Rules of Procedure

The most recent publically available draft of the proposed Rules of Procedure for the Court is dated October 2009. A number of important issues were discussed between European patent judges and representatives of the Commission at the Venice Patent Judges Forum in October 2009, but the revisions to the draft which reflect the result of this discussion which we understand have been made by the Commission are not publically available. There is accordingly considerable uncertainty as to the current state of the draft.

To finalise the Rules will involve a substantial amount of work. We illustrate this by reference to a small number of representative issues which will need to be resolved.

1. "Front-loading": "Front-loading" is a requirement for the parties to prepare and submit all their arguments and evidence up front. It is designed to prevent parties from saving their best arguments to the last minute in order to take their opponent by surprise; but if taken to the extreme, it can require parties to expend time and effort on issues which turn out not to be in dispute. The degree of front loading to be required in the Unified Patent Court is understood to be a controversial issue.

2. Service of proceedings: It is important that legal proceedings can be started without delay, but there has to date been no detailed work on the rules for serving the originating documentation on the Defendant(s): this is likely to be a difficult issue, since there are currently wide variations in what is permitted, between for example the UK, where service is up to the parties, who can serve the proceedings by ordinary post, and for example Germany, where proceedings must be served by a court official: arranging service through official channels outside Germany can lead to delays of two months or more.

3. Legal privilege: The current rules provide for legal professional privilege only in outline. This is an area of some controversy where detailed rules will be necessary. Since privilege gives protection against compulsory disclosure of documents, there is no developed law of privilege in the many European jurisdictions where there is no such compulsory disclosure. Where privilege is recognised, there is disagreement between national rules, which recognise privilege for in-house legal advisors, and the law laid down by the CJEU for Community-level competition matters, which does not. Since most large companies rely heavily on advice from in-house patent lawyers, this will be an important issue.

The current draft rules give rise to a number of smaller issues, which although unlikely to prove controversial, will take time to resolve. Two examples are: (i) Rule 353, which limits the ability of a plaintiff to amend his case, but there is no corresponding limitation on a defendant; and (ii) Rule 209, which provides for compensation to a defendant for injury caused by interim measures which are revoked. Where a plaintiff lacks the resources to pay for such compensation, it can be ordered to provide security, but only on the application of the defendant. Thus, where measures are granted ex-parte there would be no protection for the defendant.

3. Further Negotiation

IPLA recognises that, where other Member States take a different view, it is not necessarily possible for the UK Government to resolve issues in the negotiations in a way which UK industry and other UK users of the system would wish. However, there are a number of issues where there is very substantial agreement among users of the system across Europe (for example, in relation to the involvement of the CJEU), where the opportunity for further debate has been effectively closed off by those responsible for the progress of the negotiations. Furthermore, a significant amount of work will be required to produce Rules of Procedure which meet the objectives of speed, procedural fairness and proportionality, and the three months which we understand is the period which is currently envisaged for finalising these Rules would be insufficient even if none of the issues were controversial.

The UK IPO, which is responsible for developing policy in this area, has worked hard, particularly in the past nine months or so, to understand the views of UK Industry and other users of the patent system. However, those in the Commission and the Polish Presidency who have been driving the negotiations have to a large extent closed down debate on the provisions in the draft which remain controversial, and have set a timetable which does not permit the outstanding issues to be properly resolved. IPLA supports HM Government in its attempt to gain more time to allow a system which meets with the requirements of users more closely to be negotiated.

24 January 2012


[1] These concerns are listed in this paper, as well in the submissions of EPLAW and Mr. Henry Carr QC.

[2] This never occurred.

[3] The lack of a current Draft Agreement highlights the lack of transparency which has beset the profession throughout the legislative process and negotiations.  This has made it very difficult for the profession and industry to comment usefully on the proposals.

[4] Press Release dated 18 January 2012, http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/12/13&format=HTML&aged=0&language=EN&guiLanguage=en

[5] We reference two papers from the Commission on the costs of the Unitary Patent. However, without knowledge of the fees, we may not know the real cost savings, if any. http://ec.europa.eu/internal_market/indprop/docs/patent/sec2011-482-final_en.pdf and http://ec.europa.eu/internal_market/indprop/docs/patent/studies/compact-cost%20-benefit-study-final_en.pdf

[5]

[6] This paper sets out a view of when the court would be economic - http://ec.europa.eu/internal_market/indprop/docs/patent/studies/litigation_system_en.pdf. This report assumed that the EU would subsidise the Court. It contends that the Court is useful only if it reduces duplicated litigation. It estimates that 60-70% of German litigation is duplicated, but this assumption is not supported by evidence.

[6]

[7] “...only around 1,000 patents out of approx. 50 000 annually validated patents (2%) are validated in all 27 Member States. Around 4,000 patents (8%) are validated in 13 Member States and 20,000 patents per year are validated in the largest 5 EU markets (40%). Approximately half of these patents are only validated in 3 Member States – an estimated 25,000 patents per year (50%).” EU Commission paper SEC(2011) 482 Final.

[7]

[8] “By adopting the European patent, we will make it easier, quicker and cheaper to protect intellectual property; we aim to award the first EU unitary patent in 2013, saving up to 80% on the current cost. This will be as attractive to American companies as European ones – particularly Small and Medium-sized Enterprises.” Máire Geoghegan-Quinn, European Commissioner for Research, Innovation and Science, "Europe: Your Destination for Research and Innovation"; Destination Europe Boston, 20 January 2012.

[8]

[9] Press releases (from the European Parliament and others), claiming that an EU patent will cost € 650, as compared with a US patent costing around € 1850, are based on a misunderstanding. They compare different items. The cost for the US patent is (apparently) an estimate of the total official fees from filing to grant. In comparison, the EU figure quoted is only the extra cost of translations (eventually to be) required to convert a granted EPO application into a unitary patent. A fair comparison would also have to include all the official costs of EPO prosecution, including at minimum a filing fee ( € 115), designation fee ( € 555) search fee ( €1165), fee for examination (€1555) and fee for grant ( € 875), as well as (typically) the first two annual maintenance fees of € 445 and € 555 respectively. In any event, it makes no sense to ignore the major costs incurred in a (prudent) patent filing - professional fees.

Prepared 31st January 2012