Twenty Fourth Report Contents

Appendix 1: Draft Patents (European Patent with Unitary Effect and Unified Patent Court) Order 2016

Letter from Baroness Neville-Rolfe, Parliamentary Under Secretary of State for the Department for Business, Innovation and Skills to Lord Trefgarne, Chairman of the Secondary Legislation Scrutiny Committee.

I understand that the Secondary Legislation Select Committee will be considering the above draft Order at your meeting on 2 February. I wished to write to you with some further information which I hope will be helpful, particularly in light of a number of technical issues which I believe Baroness Bowles of Berkhamsted has brought to your attention. I regret that a full explanation of these issues was not laid out in the accompanying documents to the draft Order. As I hope the committee will appreciate, the issues are highly complex and very technical. Therefore, I am pleased to have the opportunity to provide this further information and to explain the Government’s decisions.

I should first like to address the issues around the implementation of the software exception. This is a particularly complex legal point and I have provided a fuller explanation of the legal arguments as an annex to this letter. I am pleased to note that Lady Bowles agrees that our chosen approach to implementation of this exception is compliant with the European Patent Convention.

The Government considered a range of options for implementing the infringement provisions of the Unified Patent Court (UPC) Agreement into UK law as discussed in detail in Impact Assessment number BISIPO003 which I laid before Parliament with the draft Order on 19 January.

At consultation stage, the Government proposed to apply the software exception to all patents valid in the UK. This approach was taken because the exception was considered to be narrow in scope and applying the exception to all patents valid in the UK would provide greater legal certainty for all users of the patent system.

The responses to the consultation highlighted serious concerns about the scope of the software exception which, in the respondents’ view, might be interpreted broadly allowing widespread use of patented inventions in this field thus devaluing any software-implemented patent. Many, including the Chartered Institute of Patent Attorneys (CIPA) and the IP Federation, advocated the creation of a “safe haven” whereby the exception would not be applied to national patents.

IPO officials engaged closely with concerned stakeholders, including CIPA, the IP Federation and TechUK, throughout last year to better understand their concerns and to explore the potential impacts of the various options. These further discussions were very beneficial in providing further evidence with which I reassessed the options. In doing so I took account of the concerns of industry, the need to provide legal certainty for all users of the patent system, and the legal consequences of each option.

On balance I considered that it would be best to adopt a two stage approach providing the “safe haven” advocated by stakeholders at first with a commitment to review the implementation within 5 years of entry into force. This approach ensures compliance with the UPC Agreement while also addressing the real concerns of industry regarding the uncertain scope of the exception. Further discussion of this issue is covered in paragraphs 49 to 55 of the Government Response and in the Impact Assessment (BISIPO003).

Lady Bowles has also raised some concerns related to how the changes proposed to the Patents Act on contributory infringement will work. Contributory infringement is where a person knowingly provides another with the means to infringe a patent. For example, supplying someone with a part that is essential to the patented device without permission of the patent owner could be contributory infringement.

The changes proposed in the draft Order implement Article 26 of the UPC Agreement. This Article requires that an act of contributory infringement must occur within the territory of the Member State in which the patent has effect. Article 26 applies to a European bundle patent (each patent in the bundle being valid in the territory of one Member State only) and to unitary patents (valid in the territory of all the participating Member States of the unitary patent).

Contributory infringement is provided for in UK law under Section 60(2) of the Patent Act 1977. That provision already applies to European bundle patents valid in the UK in compliance with Article 26 of the UPC Agreement; further amendment is not considered necessary. The aim of the proposed amendment in this draft Order is to account for the wider territory of unitary patents and thus the wider territorial context within which contributory infringement can occur for such patents. I do not believe that the amendment pre-empts judges’ interpretation of Article 26 of the Agreement.

Finally, I understand that the Committee may wish to know further details of the review of the legislation which the Government proposes to carry out. As highlighted in paragraph 12.1 of the Explanatory Memorandum and Impact Assessment BISIPO003 (in particular pages 1 and 19), the UK legislation will be reviewed within 5 years of the UPC entering into force which is expected in early 2017. That review will look closely at the impact of applying the software exception only to European bundle patents and unitary patents in particular but it will also consider other provisions in the legislation.

The review will consider patenting behaviour in the field of software-implemented inventions to determine whether companies take advantage of the “safe-haven” and file more national patent applications. The review will also investigate how the UPC or national Courts (in the UK or elsewhere in Europe) have interpreted the exception if cases have been brought before the courts. The Government will also consult users to discover the effect the software exception has had on their businesses.

My officials in the IPO are already considering the evidence that will be required for the review to ensure they are able to collect the right data to measure the impact of the legislation from now onwards.

Annex

1.Some commentators have argued that the UK implementation of the UPC exception to infringement for software decompilation is incompatible with our obligations under the European Patent Convention (EPC). These arguments are based on Articles 2 and 64 of the EPC.

2.Article 2 EPC requires that a European patent shall be subject to the same conditions as a national patent, i.e. a GB patent granted by the IPO. Article 64 requires that a European patent shall confer the same rights as a national patent. The rights conferred by a patent are the activities which constitute an infringement of the patent, for example making a patented device without the permission of the patent owner. On this basis, some commentators have argued that it is not possible to have different infringement provisions in UK law for European patents and national patents

3.In order to comply with Article 27(k) of the UPC Agreement it is necessary to introduce the exception into UK law for European patents and European patents with unitary effect. The UPC Agreement does not make provision for national patents and does not oblige the Member States to align their substantive law for national patents with the UPC provisions. The Signatory of the UPCA have confirmed this interpretation in their note published on 29 January 201412 where they state:

“The legislator has clearly not chosen to achieve a uniform application of substantive patent law through obligatory harmonisation of national patent law. There is no provision in the Agreement that obliges the contracting states to do so.”

4.Article 2 of the European Patent Convention (EPC) provides for a European patent to have the same effect as a national patent unless the Convention provides otherwise. Article 64 of the EPC requires that a European patent shall confer the same rights as a national patent. However, Article 64 also states that infringement of a European patent shall be dealt with by national law.

5.Furthermore, Article 149a of the EPC states that nothing in the EPC shall limit the right of some or all of the Contracting Member States of the EPC to conclude special agreements on any matter concerning European patents which are subject to or governed by national law. Article 27 of the UPC Agreement is one such arrangement that the Member States have concluded. In doing so, the Member States of the UPC have decided to set out the rights conferred on a patent owner by a European patent and unitary patents. However, the Member States have deliberately chosen not to do the same for national patents which remain subject to national law.

6.Therefore, for the Signatory States of the UPC Agreement, national law on infringement for European bundle patents and unitary patents will be subject to the provisions of the UPC Agreement but the law for national patents will not. This means it is possible for a national patent to have different infringement provisions to those of a European patent or unitary patent.

27 January 2016





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