14 European unitary patent |
+ ADDs 1-2
+ ADDs 1-2
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
|Department||Business, Innovation and Skills
|Basis of consideration||Minister'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 Council||December 2012
|Committee's assessment||Legally important
|Committee's decision||Cleared; further information requested
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
"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.
LACK OF UNIFORMITY FROM THE REFERENCE TO NATIONAL
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
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).
TRANSFER OF SOVEREIGNTY
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.
THE LEGAL BASE AND ARTICLE 118
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
THE IP FEDERATION
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
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
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
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.
UK BIOINDUSTRY ASSOCIATION
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
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
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
79 Sixty-fifth Report of Session 2010-12, HC 1799. Back