Implementation of UPC: So What
January 27, 2022
A French government press release dated January 20, 2022, announces the creation of a harmonized intellectual property framework with the entry into force of the Unified Patent Court following the ratification of the international agreement concerning it. But what does it means exactly for us?
Regular readers of this blog are aware of my passion for music and, in this instance, will note that the issue being raised today by the UPC is also one that has given rise to arguably one of the most majestic recordings in music history (So What). In any case, let's get down to our business: how will the JUB be set up? What are the consequences for practitioners?
The setting up of the UPC: the Provisional Application Period
This protocol automatically entered into force on Wedsnesday, January 19, that is, when thirteen states signed it. Now, as soon as the said protocol enters into force, preparations for the implementation of the UPC will begin. These include the appointment of Judges, the establishment of the registry, the development of the computer system and the finalization of the rules of procedure. The schedule of fees and recoverable costs will also have to be determined.
In any case, the protocol provides that certain provisions of the UPCA will only enter into force provisionally. This is for example the case for article 7, which defines the organization of the first instance phase of the court with its local and regional divisions and its central division in Paris (with the Munich and London sections), but also for articles 10 to 19, which concern the registry, the various administrative, budgetary and advisory committees as well as the judges and their training. The same applies to Article 35 on the Mediation Centre and Article 41, which provide that the Rules of Procedure will only be finally adopted by the Administrative Committee after the European Commission has given its opinion. Finally, the same applies to the provisions relating to the statutes of the court, and in particular those relating to the elections of the presidents of the first instance and of the Court of Appeal.
Consequences of the Establishment of the UPC
We can congratulate ourselves on the establishment of such a system which should facilitate harmonization on a European scale and limit forum shopping. From a French point fo view, it will notably allow French Judges to work together with their European counterparts and highlight the value of French Judges specialized in industrial property litigation (and of the jurisdictions from which they will come). Indeed, French decisions are still too little noticed at the international level, whereas many patent litigations are transnational. This is to be deplored in view of the quality of these decisions: a simple comparison with those of their European counterparts is enough to convince oneself of this. Moreover, we can expect a movement of harmonization of European Patent Law.
However, some reservations and questions remain. It is a complex system, in particular because of the distinction between European patents and European patents with unitary effect. This unitary effect will moreover have a cost, since it will imply the implementation of many important expenses to defend European patents with unitary effect before the Court: we can wonder here more particularly about the capacity of SMEs and other start-ups to become actors of this system, but also about their possible vulnerability facing such “European” actions of significant international actors.
This overall complexity as well as the cost of litigation before the UPC—more particularly for SMEs and start-ups—could, paradoxically, reinforce the attractiveness of the national litigation system to the benefit of a French patent whose value has been reinforced by the PACTE Law, thus creating unexpected competition to the upcoming European system. It will then be necessary, as many practitioners recommend, to finalize what was started with the PACTE Law: France should be able to be directly designated or elected during the national phases of international applications according to the PCT.
Finally, the impact of BREXIT on the fate of the UPC is also an important question: what about the impact of the exit of such an actor from European litigation outside the Agreement? Where will the section that was to be located across the Channel be distributed? In France or Germany (where the headquarters and a section are already located respectively) or elsewhere?
It seems to me that the centralization of the divisions at the level of the headquarters, in France, would be the most pragmatic solution (by facilitating the treatment of disputes) and the most logical since the most important organs of the European Patent Office are located in Germany and France constitutes the second European market. Let’s hope that the French Presidency of the Union will give the French government enough inspiration to encourage such centralization.
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DXThomas
No surprise for a French lawyer wanting to concentrate the Central Division in one and the same location that is Paris. In view of the fierce battle which has ended up with the Central (?) Division being in cut in three parts, I would rather think that this no more than wishful thinking. Germany would like it too. I doubt that the two contenders for the allocation of the duties devoted to London, IT and NL, will accept a “provisional” allocation to either Paris and/or Munich of files in IPC classes A and C. I have not yet seen one convincing or compelling legal basis for such a “provisional” allocation. It is also far from sure that the distribution in Annex II of the UPCA will remain as it is. I could well see that FR and DE will haggle again and should a third location come, both countries would like to keep files in IPC classes A and C and transfer to the third location other IPC classes. One can even have doubts that the UPC is in conformity with union law and Art 6(1) ECHR. Beside the legality of the provisional transfer of duties, a further reason is that a UPC judge can be removed from its post by his peers, but no means of redress are offered to him! See Art 10 of the Statute of the court, Annex I. It is the first time that I see concerns expressed about the position of the SMEs in the UP/UPC system. Up to now SMEs have been used as a fig leaf by the big internationally active industry and big international active litigation lawyers firms, to hide the fact that they were primarily interested in the UP/UPC system. Only those two groups are sure to profit from the UP/UPC system. An impact of EPLA on the SMEs seems to have been carried out, but not for the UP/UPC. In all meetings in which SMEs were informed about the UP/UPC system, they clearly expressed their fears. The level of fees being the strongest deterrent to start with. One very important aspect is that 70% of patents are held by proprietors not residing in a UPC contracting state. The UPC opens those extra-European proprietors a single point of attack for European industry in general and European SMEs in particular. Is this really helping European patent holders? I have some serious doubts. When one further sees that the average number of validations of granted European patents is between 3 and 5, the necessity of a complicated system like the UPC is not manifest. To my knowledge no study about the economic necessity of the UPC has ever been carried out. Claiming that the UPC will bring about a movement of harmonization of European Patent Law is anything but sure. Both the UPC and the BA can decide upon the validity of a granted patent. The EPO for a shorter length of time, the UPC for a longer one. As a UP is a patent granted by the EPO, divisions of first instance of the EPO and BA are bound by decisions of the EBA. There is not even a cooperation mechanism foreseen between the two courts. This is however the case for the EFTA Court and the CJEU. The problem is compounded in that the UP/UPC is first not covering the whole of the EU, and I am not sure that the remaining member states of the EPC will accept case law from an institution they have no influence on it. I do not expect that the number of oppositions at the EPO will diminish. First there is a big difference in fees and the EPO has streamlined the opposition procedure and the BA are making great efforts to lower their backlog. One should also not forget that the backlog has risen due to the blocking of any recruitment at the BA for many years. One wonders if this was not a deliberate attempt to discreetly favour the UPC. Last but not least, the costs for simultaneous interpretation are borne by the EPO, whereas at the UPC, they will be costs of the proceedings to be borne by the losing party. That the costs or damages can have ceilings does not fundamentally change the issue. Independently from the high basis fees at the UPC and in view of the costs for simultaneous interpretation been borne by the losing party, it is clear that the UP/UPC is for contenders having deep pockets. Having practised European integration during my whole active life I am certainly for it, but I am neither convinced nor compelled to think that the UP/UPC system is the right way in matters of IP. There are other, much cheaper, ways to bring about a harmonisation in IP matters.
Max Drei
Well, let's see which EPO Applicants choose which of their patents to make "unitary". For the time being, I'm guessing that only Big Pharma will opt in, and then only for those of their patents thought NOT to be their crown jewels. Why? Because of fears that one rogue court could strike down the patent rights everywhere, on less than well-founded grounds of invalidity. Given that litigation is a last resort, I can well imagine that, for those patent portfolio holders who indeed opt in (to reduce annuity payment budgets), their working assumption will be that disputes between bulk filers will very likely be settled short of a full trial of the action in the UPC (so that venue and forum shopping is very much a secondary consideration). In which case, the big international law firms will still be in the money, even though the UPC judges will be kicking their heels, waiting for work, for decades to come. Meanwhile, amongst SME's, and all those EPO Applicants who validate in 5 or fewer EPC Member States, patent disputes will get resolved as they always were, before the UPC ever came over the horizon. Does anybody here see it working out otherwise?