Documents cleared
8 Unified Patent Court
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11533/11
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| Draft Agreement on a Unified Patent Court and draft Statute
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| Legal base | —
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| Department | Department for Business, Innovation and Skills
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| Basis of consideration | Minister's letter of 14 January 2013
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| Previous Committee Reports | HC 428-xli (2010-12), chapter 2 (9 November 2011); HC 428-xliii (2010-12), chapter 5 (7 December 2011); HC 428-xlv (2010-12), chapter 2 (20 December 2011); HC 1799 The Unified Patent Court: help or hindrance?
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| Discussion in Council | February 2013
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| Committee's assessment | Legally and politically important
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| Committee's decision | Cleared; further information requested
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Unitary patents and the Unified Patent Court
8.1 The Unified Patent Court (UPC) is part of a package of
measures designed to establish and enforce a unitary patent. It
will offer the opportunity to obtain patent protection for new
inventions across participating States from a single application,
administered by one organisation. EU Regulations (implemented
under enhanced co-operation) covering languages and establishing
the concept of a unitary patent are also part of the package.
These were cleared by the Committee in December[42]
before being adopted by the Council in the same month.
8.2 The UPC Agreement sets up a court common
to the participating States as part of their judicial system and
will eventually have exclusive jurisdiction concerning the infringement
and validity of both European bundle patents (currently granted
by the European Patent Office (EPO) according to the European
Patent Convention (EPC)) and European patents with unitary effect.
8.3 Currently a company or individual seeking
patent protection across Europe must register their patent in
each individual state where it is to take effect (if granted centrally
by the European Patent Office (EPO), these are known as "bundle
patents"). They are also required to pursue any legal action
to enforce the rights provided by the patent in the national courts
of each State where the alleged infringement took place. A unitary
patent (or "European patent with unitary effect") by
contrast will need to be registered just once (with the EPO) and
is intended to confer simultaneous and homogeneous legal protection
in all States who have signed up to the agreement.
8.4 The UPC will be comprised of a Court of
First Instance, consisting of a central division and local or
regional divisions, hosted by member states or groups of member
states, and a Court of Appeal to be sited in Luxembourg.
Previous scrutiny
8.5 We conducted an inquiry into the draft Agreement
establishing the UPC when it became clear from correspondence
with the intellectual property professions that there was strong
opposition to the proposals. In our Report[43]
we drew the following conclusions from the evidence we received:
- we agreed with those who so
strongly opposed the inclusion of Articles six to eight in the
unified patent Regulation, giving the ECJ jurisdiction over the
infringement of unitary patents;
- we recognised that a patent court which represents
the traditions of 25 EU Member States, including Germany and Austria,
would have to allow for bifurcation, but the probable consequences
of this appeared to us to be so grave, for the UK in particular,
as to question the validity of a unified patent court in the EU
in the first place;
- the requirement for multinational panels of judges
possessing the highest standards of competence in patent litigation
was unrealistic. Several of the witnesses concluded that it would
be impossible to train such a large number of judges, who do not
have the relevant experience, to an acceptable standard. We had
little reason to prefer the assurances of the Government to the
contrary over the experienced views of patent lawyers;
- despite the Government's insistence that "there
is a very strong commitment from all those involved in negotiations
that the patent and court system should be affordable for SMEs"
and "you can be sure that the one thing the Department for
Business is not going to be doing is wanting to make small and
medium-sized businesses disadvantaged", the patent professions
remained unconvinced. We shared the concerns expressed by the
professions that the UPC would be prohibitively expensive, and
also took the view that the EU impact assessment needed to be
urgently revisited;
- with regard to exclusivity and transitional provisions,
we concluded that the UPC should not be given a monopoly over
both unitary and European patents until its capabilities had been
proved;
- the location of the Central Division would be
crucial, as it would inevitably have significant influence on
the practice and procedures of the Court, as well as bring significant
economic advantages to the host city. Bringing the Central Division
to London (already a centre of international arbitration) would
both build the credibility of the Court and bring economic benefits
to London. If the Central Division was located outside the UK,
there would be far less requirement for the high level of patent
expertise that currently existed in this country; and
- on supplementary protection certificates, both
the patent professions and the Government seemed to agree that
certain provisions were urgently required.
8.6 Our overall conclusions were as follows:
"Although the theory of a unitary patent and
unitary patent court in Europe has long been thought desirable,
the practice has long been elusive. The latest attempt appears,
regrettably, to be a further example of this. Moreover, some of
the criticisms raised by witnesses result from traits that are
so ingrained in the operation of the EU that a legitimate question
arises whether an effective unitary patent can ever be achieved
within the confines of the EU's internal legal order.
"We conclude overall that the draft agreement
on the Unified Patent Court is likely to hinder, rather than help,
the enforcement of patents within the European Union. This will
particularly be so for SMEs, the main intended beneficiaries.
Given our concerns, it is vital that the UK Government adopts
a strong position reflecting the concerns of practitioners in
final negotiations, as well as calling for the Central Division
to be in London in order to mitigate the most damaging effects
of a unitary EU-wide patent."
8.7 Following the publication of the Report,
we were gratified to be informed that the Prime Minister had secured
a deal at the European Council in June last year to remove the
UPC's jurisdiction over the infringement of unitary patents, this
having been one of the most vehemently expressed concerns of witnesses
who provided evidence to our inquiry, and a central conclusion
of our Report.
8.8 The Prime Minister also secured a deal at
the European Council for an important part of the central division
to be located in London. The seat of the central division will
be in Paris, with specialist technology sections set up in London
and Munich according to subject matter. The London section will
deal with invalidity actions in the chemical and pharmaceutical
fields. It will also deal with infringement actions in these fields,
transferred from local or regional divisions. The local or regional
divisions will handle infringement actions and will be set up
at the request of participating States.
The Minister's letter of 14 January 2013
8.9 In his letter, sent at our request, the Parliamentary
Under-Secretary of State for Business Innovation and Skills (Lord
Younger) explains the latest substantive changes to the text of
the Agreement:
- Article 5(1a) now states that
the seat of the central division will be Paris with specialised
sections set up in London and Munich. The Agreement has also
been amended to include infringement provisions for unitary patents
(principally in articles 14f, 14g and 14h) — previously
the Agreement only included infringement provisions for European
(bundle) patents. These changes implement the June European Council
agreement;
- Another proposal under the Polish Presidency
in December 2011 was the extension of the transition period during
which patent owners may continue to use national courts for European
bundle patents. This has been implemented in Article 58. The transition
period has been extended from five to seven years with the possibility
of the period being extended by another seven years;
- Also, the revision clause (Article 58d), has
been changed to broaden the scope of the review;
- In addition, the Presidency has further clarified
the position regarding Supplementary Protection Certificates (SPCs).
In particular, Article 15 has been amended to make it clear that
the UPC will have competence to hear disputes relating to infringement
and revocation of SPCs. The transitional arrangements have also
been amended to make it clear that applicants may opt out of SPCs
granted on a European bundle patent; and
- The suggestion from the June European Council
regarding the changes to the provisions around a defendant's right
to request a transfer of an infringement case from a local division
to the central division (if the defendant is domiciled within
the European Union) are not included in the final text.
8.10 In all, the Government sees an effective
patent litigation system as a crucial part of the overall package
to deliver a business-friendly unitary patent. The UPC is required
for the overall functioning of the unitary patent and is an important
step in removing trade barriers between EU Member States and delivering
growth for Europe. The Agreement has been revised to address a
number of concerns from UK stakeholders and the current proposal
is the best deal available, the Minister says.
IMPACT ON UK LAW
8.11 The UPC aims to create a single legal system
for patent protection in Europe. The Agreement sets out (at Articles
25-28) the provisions for the actions that constitute infringement.
Decisions of the court will be based on: EU Law, the UPC Agreement,
the EPC, other international agreements on patents and national
law.
8.12 In order to make patent protection uniform
across the participating States, each State signing the agreement
will need to ensure that its laws are in compliance with the obligations
under the Agreement and the Regulations.
8.13 The first instance Court will mostly be
either a local or regional division. It will be possible to apply
to set up local and or regional court divisions (not national
courts). The Government's Intellectual Property Office (IPO) is
considering different options regarding local and regional divisions.
8.14 The Ratification process will require amendments
to national legislation to recognise the rights afforded to the
owner of a unitary patent and the jurisdiction of the UPC. This
will primarily affect the Patents Act 1977 (as amended). The IPO
is exploring implementation options with officials in other Departments
and with Devolved Administrations (on matters of justice).
LANGUAGES
8.15 There are a number of language provisions
with the Court and its divisions. These include the operational
language of the division, the language of proceedings, the language
of court documents and the language of judgements. The provisions
are set out in the related regulation and in the Court Agreement.
ENTRY INTO EFFECT
8.16 The whole system (unitary patent and court)
comes into force three months after the UK, France and Germany
and ten other states have ratified the Agreement, but not before
1 January 2014. At that point, applicants for patents through
the EPO will be able to ask for unitary coverage in all participating
States (or as many as have ratified the agreement) at the grant
stage.
8.17 It is unlikely that a sufficient number
of States will have ratified the agreement by January 2014 to
enable it to enter into force on that date. The Agreement is not
yet signed and some States will have referenda before they can
complete the process.
8.18 There will be a transitional period of seven
years (from the entry of the agreement into force) during which
individuals and companies with or seeking patent protection from
the EPO using the "bundle" patent system, may opt out
of the jurisdiction of the UPC and continue to use national courts
for litigation instead. After five years, the Administrative Council
will perform a consultation with users, on the basis of which
the transitional period may be extended by a further seven years.
8.19 Further negotiations among the signatories
will also be necessary to finalise the rules of procedure for
the court, to set the level of patent and court fees and establish
the governance mechanisms for the court. The Government will ensure
that it continues to influence the operational details related
to the Agreement and that the views of UK stakeholders are considered
in the wider discussions. Separately, signatories will need to
consider whether to establish local or regional divisions of the
court.
FUNDING
8.20 The EU is not a party to the court agreement
which means that there will not be an EU contribution to the set-up
costs of the court. The Agreement provides that in the transitional
period the Court will be supported by contributions from the Contracting
Member States. Long term the Court is expected to be financed
by its own financial revenues. The UK supports a system whereby
the court will eventually be self-funded primarily through court
fees.
8.21 Contracting Member States will be expected
to subsidise the operating costs initially and at least in the
transitional period, but the level of contributions is expected
to fall as the court begins to recoup costs through court fees.
The Government agrees that this model of funding is the correct
method. The UK will also need to incur the additional costs of
hosting part of the central division.
8.22 Exact details of the fee structures for
the court are yet to be decided, so detailed information on potential
funding or support during the transition phase is not available,
however the costs for maintaining facilities for a local court
and central division are not expected to exceed £1 million
per court per annum.
8.23 Court fees will be fixed by an Administrative
Committee composed of one representative from each member state,
each with one vote. There are a number of related issues which
impact on the affordability of the Court for users, for example,
the costs to access the court. The UK will be actively involved
in negotiations to finalise the remaining details over the coming
months.
COST BENEFIT
8.24 Creating a unified patents regime for Europe
is an important element of the Government's growth strategy and
a key recommendation from the 2011 Hargreaves review of Intellectual
Property and Growth. The Court Agreement is one part of the package
of measures necessary to establish this.
8.25 The European Commission's Impact Assessment
of April 2011 considered key aspects of the unitary patent. The
Government's own initial analysis of the unitary patent suggests
that the option to obtain protection for new inventions across
25 Member States (through the unitary patent) would offer businesses
savings in translation and validation costs (against the current
system for protection in the same States) of up to £20,000
per patent.
8.26 A unified Court system will save businesses
the expense of having to enforce patents in more than one State.
Discussions on detailed arrangements, for example on funding and
user charges, are continuing, so at this time it is not possible
to provide an estimate for the savings to business from the court
element of the package.
Conclusion
8.27 We thank the Minister for his helpful
letter. We note the changes to the UPC Agreement since we published
our Report, The Unified Patent Court: help or hindrance?,
on 3 May last year. The most significant change is the removal
of the ECJ's jurisdiction over the infringement of unitary patents,
which was a principal recommendation of our Report. We are also
pleased to note that at least part of the Central Division will
be located in London; that there is scope for extending the transitional
provisions by a further seven years; and that Supplementary Protection
Certificates will fall within the UPC's jurisdiction.
8.28 However, many of the concerns with the
UPC still remain, in particular the effect of bifurcation on forum
shopping, the training and quality of UPC judges, the prohibitive
expense of using the unitary patent and UPC, particularly for
SMEs, and the lack of an up-to-date Commission impact assessment
(we remain doubtful at this stage of the benefits to business
suggested by the Minister in paragraph 8.24 above).
8.29 Given that the negotiations on the UPC
Agreement have now concluded, we are content to clear it from
scrutiny. The Minister says, however, that:
"Further negotiations among the signatories
will also be necessary to finalise the rules of procedure for
the court, to set the level of patent and court fees and establish
the governance mechanisms for the court. The Government will ensure
that it continues to influence the operational details related
to the Agreement and that the views of UK stakeholders are considered
in the wider discussions. Separately, signatories will need to
consider whether to establish local or regional divisions of the
court."[44]
8.30 In the light of this, we would be grateful
if the Minister would write to us at the conclusion of the negotiations
on the rules of procedure summarising their content and explain
to what extent they mitigate the outstanding concerns we list
above, and to what extent they reflect the views of the stakeholders
which the Government will be consulting.
42 HC 86-xxii (2012-13), chapter 14 (5 December 2012). Back
43
HC 1799 (2010-12), The Unified Patent Court: Help or Hindrance?
(25 April 2012). Back
44
See paragraph 8.19. Back
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