European Scrutiny Committee Contents

14 European unitary patent




+ ADDs 1-2

COM(11) 215




+ ADDs 1-2

COM(11) 216

Draft Regulation implementing enhanced cooperation in the area of the creation of unitary patent protection

Draft Regulation implementing enhanced cooperation in the area of the creation of unitary patent protection with regards to applicable translation arrangements

Legal base(a) Article 118(1) TFEU; co-decision; QMV

(b) Article 118(2) TFEU; consultation; unanimity

DepartmentBusiness, Innovation and Skills
Basis of considerationMinister's letter of 29 November 2012
Previous Committee Reports(a) HC 86-xxi (2012-13), chapter 3 (28 November 2012); HC 86-vii (2012-13), chapter 4 (4 July 2012); HC 428-xxvii (2010-12), chapter 2 (18 May 2011)

(b) HC 86-xxi (2012-13), chapter 3 (28 November 2012); HC 86-vii (2012-13), chapter 4 (4 July 2012); HC 428-xxvii (2010-12), chapter 3 (18 May 2011)

Discussion in CouncilDecember 2012
Committee's assessmentLegally important
Committee's decisionCleared; further information requested

Previous scrutiny

14.1 We reported on these two proposals last week, when we asked the Government to respond to concerns raised with us by stakeholders, after which we would decide whether to waive scrutiny so that the proposals could be adopted by the Council in December.

14.2 The IP Federation represents the views of a wide range of industries operating in the UK, Europe and internationally in intellectual property (IP) matters, both policy and practice, including patents. On 26 November Dr Bobby Mukherjee, President of the IP Federation, wrote to the Chairman of the Committee as follows:

"Owing to a lack of transparency in process, the IP Federation have only just seen the new Article 5a in connection with the most recent proposals to amend Article 5 of the "Proposal for a Regulation of the European Parliament and of the Council implementing enhanced cooperation in the area of the creation of unitary patent protection". In reaction, we now attach a paper prepared by the IP Federation. This is supported by its members, as well as by CIPA.

"The paper sets out concerns that the new Article 5a makes it more likely still that reference will have to be made to the CJEU with all the attendant delays and expense, and some of the points of doubt that we believe will have to be referred. These are preliminary concerns which we have shared and hope to discuss with the IPO, but feel should be shared with the Scrutiny Committee now, having regard to the Scrutiny Committee timetable.

"These comments are made solely in relation to new Article 5a and it should not be thought that the other problems that have been highlighted by many individuals and bodies in the past have been dealt with satisfactorily.

"Having regard to the foregoing, the IP Federation believes that it would be inappropriate for the Scrutiny Committee to release this from scrutiny, until there has been scrutiny of the new Article 5a language".

14.3 The IP Federation paper is set out in full in last week's Report.

14.4 The Committee also received a paper setting out similar concerns from Robin Nott and a letter from Andrew Waugh QC, both writing in their personal capacities.

The Minister's letter

14.5 The Parliamentary Under Secretary of State at the Department for Business, Innovation and Skills (Lord Marland) writes on 29 November to respond to the views of the IP Federation and Robin Nott.

14.6 The Minister says at the outset that the points made in the letters received by the Committee have already been subject to careful consideration by the Government, which fully supports the Article 5a proposal. He stresses that the Government successfully secured the removal of Articles 6 to 8 from the unitary patent Regulation, which was a key concern raised by the Committee earlier this year. In its Report, the Committee was not confident that this change would be possible, and he is very pleased that the Government has been able to deliver this important amendment to meet industry's concerns about potential references to the ECJ. The proposal as it stands fully achieves the Government's aims of removing the risk of multiple references to the ECJ on whether particular conduct amounts to infringement.

14.7 He sets out why he believes the concerns set out in our Report last week to be unfounded.


14.8 The central point, which has not been fully recognised by some stakeholders, is that national provisions on infringement and exceptions will mirror the UPC Agreement. The UPC Agreement will apply sources of law according to Article 14e, in the order: EU law; the UPC Agreement; the EPC; other international agreements (e.g. TRIPs); and national law.

14.9 This is an important subtlety in the new Article 5a. The reference to national law is an indirect reference to the provisions of the Agreement; it is indirect in order to avoid ECJ jurisdiction in matters of infringement, which sit in the UPC Agreement. The provisions of the Agreement will be transposed into the national law of participating States under the ratification process and interpreted by the UPC judges.

14.10 It will be for the panels of the UPC to apply the infringement and exception provisions in accordance with the UPC provisions and in such a way as to ensure uniformity. This is why the UPC has been set up — to ensure uniformity and consistency in the application of the infringement and exception provisions in the UPC Agreement.

14.11 Aspects not covered by the UPC Agreement are not necessarily uniform, but that has always been the case (they were not covered by the patent regulation either).


14.12 The Government has carefully considered the new wording of Article 5a and is satisfied that, compared to no Article at all, "it increases the risk of references to the ECJ on matters of substantive law of patent infringement by no more than a negligible amount (one so low that it can in practice be ignored)."

14.13 The ECJ does have jurisdiction to give preliminary rulings on the interpretation of the unitary patent Regulation in the same way as it does in relation to any other EU Regulation (under Article 267 TFEU). However, the removal of Articles 6 to 8 from the Regulation mean that issues on the substantive law of patent infringement may not be referred to the ECJ. This is because these matters are dealt with in the UPC, an international agreement to which the EU is not a party, and will be implemented by national law. These matters are not covered by Article 267 TFEU and so cannot generate a reference to the ECJ.

14.14 As regards the reference to Article 10 in Article 5a(3), Article 10 has always been in the Regulation. Article 10 mirrors provisions found in other EU instruments creating EU intellectual property rights. The cross-reference to Article 10 in Article 5a(3) does not create any new role for the ECJ as has been suggested. The only reference that might be available might be as to what Article 5a(3) meant but this is likely to be a one-off reference and any preliminary ruling could subsequently be applied by the panels of the UPC. National provisions would not be subject to reference to the ECJ under Article 5a(3).


14.15 The concept of a unitary patent in Europe has been an ambition for decades. It is acknowledged and accepted that this concept will help deliver innovation and growth for UK businesses and the associated legal services.

14.16 Fundamental to the concept of a unitary patent is the requirement that the applicable rules are uniform. The consequence of having an EU Regulation establishing unitary patent protection to ensure uniformity is that Member States may no longer legislate in relation to the unitary patent areas covered by the Regulation. This is a normal consequence of EU legislation.


14.17 Several individuals have claimed that the reference to national laws creates a lack of uniformity of protection as Article 5a(3) provides that the acts of infringement are defined by reference to the national law.

14.18 Article 5a actually makes an Article 118 TFEU legal base more sustainable as it builds on the uniform protection conferred by Article 3 by setting out the effects of a unitary patent. It sets out the rights and protection conferred, which will be uniform as they are found in the UPC agreement which must be implemented by all participating States.

14.19 Finally, the Minister says he hopes this further information will allow the Committee to clear this proposal and to enable the UK to support the proposal at the forthcoming Council.

Further letters from IP associations and industry

14.20 We have received further letters in response to the Minister's from the IP Federation and the Chartered Institute of Patent Attorneys (CIPA). In addition, Robin Nott wrote to say his concerns had not been allayed by the Minister's letter, and the UK Bioindustry Association wrote with concerns about Article 5a.


14.21 On 3 December the IP Federation wrote to say that, whilst the Minister's arguments speak to the intentions of the new language in Article 5a, they do not address the unintended consequences which are significant and potentially harmful for business, innovation and competition in the UK and EU, and risks putting the UK at a serious disadvantage compared with overseas economies. In short, there are serious concerns with the current proposals, and nothing in the Minister's letter provides reassurance enough to convince the Federation otherwise.

14.22 The Federation continues that, concerning lack of uniformity with reference to national law, the Minister observes that laws relating to infringement will mirror the UPC Agreement. He assumes that Divisions of the Court in different countries will all apply this uniformly. This seems unlikely, comments the Federation, but the concern is not so much the specific laws of infringement as such, but more the associated laws (statutory and/or jurisprudential), relating for example to limitations, exceptions and defences, which will remain diverse in different countries, as at present. But under the proposed system, those divergences will have pan-European effect, and will vary depending on the domicile of the patent owner. That is a significant increase in fragmentation, disharmony and legal uncertainty, resulting in an overall lack of uniform protection. For example, it would appear (though it is not clear) that the Crown user provisions which permit Government use of patented inventions would not be available under a unitary patent owned by a US, Chinese or indeed any non-EU company as German law would appear to apply. Not only is there a lack of clarity on the issue but it raises sovereignty concerns too.

14.23 The Federation adds that this resulting lack of uniform protection fails to establish a sound legal basis for the unitary patent Regulation under Article 118 TFEU.

14.24 The Minister's view on the question of transfer of sovereignty, comments the Federation, is premised on the unfounded notion that the proposals as they stand "will help deliver innovation and growth for UK businesses and associated legal services". The IP Federation is aware of no impact assessment to justify this statement. In fact, it believes the package as it stands will have the opposite effect. It will put UK and European businesses at a serious disadvantage compared with other nations and trading blocs, both established and emerging, around the world. In particular, the proposals as they stand allow, indeed encourage, forum shopping putting divisions of the UPC in different countries in direct competition with each other. To attract claimants, courts are likely to become more pro-claimant. Pro-claimant courts harm UK and European business, because they become more vulnerable to pan-European final injunctions by their competitors from outside the EU. But at the same time, the proposal does not support UK businesses to the same extent when they assert their patents against their competitors from outside the EU.

14.25 Furthermore the Federation adds, the proposals permit pan-European injunctions to be granted even on patents that later turn out to be invalid and unenforceable. The issues arising from bifurcation of which the Committee is well aware have not been addressed at all, far less alleviated. The harm to the UK economy will be substantial based upon the estimates of potential harm to the IP Federation's members.

14.26 If the proposal is passed in its current form, the Federation takes the view that it will encourage businesses to relocate major assets and infrastructure away from the UK, outside the jurisdiction of the UPC and into safer countries. It will discourage inward investment in the UK from companies domiciled outside the EU. Those businesses that remain within the UK will face considerable disadvantages relative to non-EU competitors.

14.27 In summary, the IP Federation still thinks it would be inappropriate for the Committee to remove its scrutiny reserve until the full implications of the newly introduced Article 5a language have been analysed and the effect on the economy has been estimated.


14.28 We received a letter on 3 December from Chris Mercer, President, CIPA. He says CIPA understands and supports the intention behind the new Article 5a. However, it is concerned that the wording may not achieve its objective without unintended consequences. These are complicated areas of law and stakeholders have not had sufficient time to consider the new arrangements, or any opportunity to comment constructively.

14.29 CIPA remains seriously concerned that the financial arrangements are still not clear and that no economic impact assessment has been carried out on the latest proposals. At the moment, based on comments from its members, CIPA fears that these proposals would be detrimental to the UK economy.

14.30 Finally, the issue of bifurcation remains. The proposals still enable a pan-European final injunction to be issued against a UK company even if the patent is valid.

14.31 If the Government decides to sign the agreement, despite the points made above, the Government should work with others for further improvements before ratification. CIPA offers to help with this in any way it can.


14.32 The Bioindustry Association (BIA) wrote on 27 November to ask for clarification of the intent of Article 5a. Its letter was also copied to the Minister and the Government's Intellectual Property Office (IPO). It says that

"whilst many of the concerns remain, we very much welcome the open and transparent dialogue with the IPO and appreciate the most recent negotiating efforts made in relation to one of the significant concerns, namely Articles 6-8 and the role of the CJEU [ECJ]. We understand that this is a complex piece of legislation and recognise the difficult negotiations that have been undertaken on this point."

14.33 On Article 5a, the BIA asks how it would be reviewed by the ECJ, what the effect of the reference to "national law" will be, and whether national laws would have to be harmonised.


14.34 We ask the Government to respond directly to the questions raised by the UK Bioindustry Association. The answers appear to be contained in large part in the Minister's most recent letter to us of 29 November.

14.35 We thank the Minister for his letter. We take particular note of the fact that:

  • the reference to national law in Article 5a is an indirect reference to the UPC Agreement in order to avoid ECJ jurisdiction over matters of infringement;
  • the UPC will apply a mixture of laws, including the national law of the State in which the patent proprietor has his residence or principal place of business;
  • the Government is sure that, compared to no Article at all, Article 5a "increases the risk of references to the ECJ on matters of substantive law of patent infringement by no more than a negligible amount (one so low that it can in practice be ignored)."

14.36 We recognise that certain intellectual property associations are still critical of the unitary patent and the UPC agreement, particularly of the fragmentary effect the application of national laws based on the domicile of the patent owner will have on unitary patent protection across Europe. That said, we note that CIPA supports the intention of Article 5a, although it is concerned by the risk of unintended consequences and would like more time to consider it, as would the IP Federation.

14.37 We are satisfied, however, that, whether one is in favour of a unitary patent or not, the current draft of the unitary patent Regulation is the best deal available as a consequence of negotiations with the European Parliament, which was set against the removal of Articles 6-8. We also acknowledge the significance of the removal of these Articles, and thereby the ECJ's jurisdiction over the infringement of unitary patents, which was a key recommendation of our Report The UPC: Help or Hindrance?[79]

14.38 We are also satisfied that the finite resources we have available, and the impending adoption by the Council, make it highly unlikely that further scrutiny by us of these two proposals will have an influence on their content.

14.39 We therefore clear them from scrutiny, but ask the Government to deposit the final versions adopted by the Council, together with a covering letter explaining any further changes.

79   Sixty-fifth Report of Session 2010-12, HC 1799. Back

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Prepared 13 December 2012