Agreement reached on European patent court

At the Brussels summit on 29 June 2012, the national leaders of the EU countries reached a compromise deal regarding the location of the central division of the European patent court. This paves the way for the adoption of the European unitary patent, which will allow a patent granted by the European Patent Office to be validated in 25 countries via a single step, and for this unitary patent right to be retained in force by a single annual renewal fee.

A major driving force behind the proposed unitary system is the reduction of costs. Although the EPO is perceived to grant high quality patents, patentees are faced with a high cost burden once the EPO patent is granted, when they must bring that patent into force in the required European countries to give it the effect of a national patent right in each selected country.  The local validation requirements can involve translations, official fees and formal filing requirements. If the validation requirements set out in the national law of a given country are not met, the EPO patent is deemed to have never taken effect in that country.

In addition, there is both a high cost and administrative burden on the patentee in relation to the payment of the required annual renewal fees to each local patent office post grant. The absolute deadline for payment of the renewal fee is not even the same in all countries, and the options available for payment of the fee to the national offices also vary.

Furthermore, although only low percentages of EPO patents are litigated, when there is a dispute over validity this is dealt with before each national court and there have been instances where the same EPO patent has been found valid in one European country and invalid in another.  Each national country also has its own rules regarding how infringement proceedings are brought.

Therefore there has been a strong political push to create a patent court that could deal with all cases of infringement and validity relating to the proposed unitary patent rights and, as such, when Hungary had the EU Presidency in 2011 it included a provision requiring that a treaty establishing a European patent litigation system must be in force before legislation on the unitary patent could take effect.

From there an initial consensus was reached that a European unified patent court should be set up, which would be able to consider infringement and validity for EPO patents brought into effect in EU countries on an individual, country-by-country, validation basis as well as EPO patents brought into effect as an 25-country unitary patent right. The court would be set up via an intergovernmental agreement between EU countries, such that it could fall under the judicial system of the EU and its decisions could be subject to the mechanisms capable of ensuring the full effectiveness of the rules of the EU.

The court would include both a central division and several local divisions. The central division would have exclusive jurisdiction over declarations of non-infringement and revocation actions, other than as counterclaims to infringement actions. Local divisions would have jurisdiction over infringement actions (and, where appropriate, counterclaims for revocation) when the infringement takes place in that local country or where a defendant has its residence or principal place of business in that local country.

The issue as to the location of the central division of the court of first instance of this patent court has, however, caused much political debate and disagreement.  Nonetheless, after much political wrangling, at the Brussels summit a compromise was reached, with the EU Council agreeing that the central division should be based in Paris, but with specialist sections of the central division being located in London and Munich.

London will handle cases relating to chemistry and human necessities, whilst Munich will handle mechanical engineering matters. All other subject matter will be handled by Paris.

It is therefore clear that London would become a hub for pharmaceutical patent litigation, and with an estimated 30% of the litigation workload. Although the finalised text of the intergovernmental agreement has not been settled, it was understood that there was an intention to allow European patent attorneys to act before the unified patent court. At Barker Brettell we have a specialist pharmaceutical patent team in our London office, providing expertise gained from working in-house in the pharmaceutical industry, and we also have a strong network of litigator contacts to assist where required. Therefore we stand ready to get involved with the new court system when it takes effect.

A key matter to note at this stage is the fact that the text of the agreement has not been formally finalised and published. Although it had been indicated by EU officials for several months that the only issue to be resolved was that of the location of the court, the draft agreement on the creation of this patent court (Document 18239/11) has only been made publicly available in heavily redacted form, so there remains doubt as to the exact mechanics of the court system. Hopefully further details will be released in the near future, following the EU Council’s agreement.

The EU Council did, however, indicate a change to some of the expected details in terms of a party’s ability to choose the division of the patents court.  In this regard, the Council has now stated that parties will have the choice to bring an infringement action before the central division if the defendant is domiciled outside the EU and that if a revocation action is already pending before the central division the patentee should have the possibility to bring a corresponding infringement action to the central division. There will be no possibility, however, for the defendant to request a transfer of an infringement case from a local division to the central division if the defendant is domiciled within the EU.

Michel Barnier, the Internal Market and Services Commissioner, issued a statement in which he welcomed the agreement, noting that “The reform will create a simpler application process and considerably reduce the costs for obtaining patent protection. All future unitary patents will eventually be available in all official EU languages, thus ensuring the dissemination of knowledge and benefiting inventors. I hope that Spain and Italy will also join the new regime soon.”

This final comment reflects the continuing rejection of the unitary patent proposals by Italy and Spain, which have suggested the use of English, French and German as the official languages of the system would give unfair advantage to companies based in France, Germany and theUnited Kingdom. Both countries have filed cases with the EU Court of Justice (CJEU) that seek annulment of the EU Council decision which authorised the “enhanced cooperation” of the 25 EU countries in relation to the proposed unitary patent. 

As part of the agreement on the location of the central court, the European Council made a suggestion that Articles 6 to 8 of the EU Regulation implementing enhanced cooperation in the area of the creation of unitary patent protection should be deleted. Those articles had looked to define patent infringement in the Regulation that established the European unitary patent. However, concerns had been raised that by including such definitions in an EU Regulation, those aspects were subject to EU law and so questions on the correct interpretation of these provisions would referred to the CJEU.  Not only does the CJEU have no specialist IP judges, let alone in the area of patents, it also has a reputation for being slow to progress matters. Therefore there were concerns expressed that these articles would add significant cost and delay to the proposed system and therefore make it less appealing to users, especially SMEs.

Although those who had expressed concern about these articles will be pleased with the EU Council’s suggestion, it is only a suggestion. The next stage in the procedure is that the proposals in their current form go back to the European Parliament, which will then vote on the proposals. Given that the European Parliament’s legal committee, JURI, approved the draft Regulation in December 2011 in a form that included Articles 6 to 8, despite considering a request to delete those articles, it would not be surprising if JURI’s recommendation to the European Parliament was to vote to retain these articles now.

Indeed, the European Parliament was due to vote on the matter on 4 July 2012 but that has now been postponed.  This follows a request by rapporteurs Bernhard Rapkay and Klaus-Heiner Lehne in response to the proposed deletion of the articles, with the rapporteurs arguing that this would “emasculate” the proposal.  Mr Rapkay noted that the EU Council had pledged in December 2011 to approve the law as it then stood, provided the European Parliament did likewise.

It is believed that a discussion by JURI of the proposed deletion of the articles will now be scheduled during July 2012.

Therefore the planned timetable for progress on the three sets of draft legislation for the unitary patent proposals (EU legislation for the set up of the unitary patent, EU legislation covering the translation arrangements, and the intergovernmental agreement covering the unified patent court) has already been delayed.  It had been intended that following the European Parliamentary deliberations and vote, the EU legislation could have been adopted by the EU Council by the end of July 2012.  In addition, it had been planned that a diplomatic conference would be held by the end of October 2012, for the intergovernmental agreement covering the unified patent court to be signed, so that the national ratification processes could then begin. This would then lead to an expected ratification by at least 13 countries by November 2013, such that the intergovernmental agreement could come into effect on 1 February 2014, together with the EU legislation.

The aim remains that by 1 April 2014 the system should be ready for the first registration of a European unitary patent. However, whether we do still get there, how bumpy the ride is along the way, and how user-friendly the end system will be remains to be seen.