The UPC: Will it happen? And, if so, will it work?

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

A cross-section of intellectual property gurus from the UK, France, Germany, Belgium and Spain recently had a meeting of the minds at international TMT law firm Olswang’s London office. Led by Advisory Panel Chairman Sir Robin Jacob in his keynote address, the event allowed for discussion and debate about the European Unitary Patent system and the Unified Patent Court (UPC). An industry panel (consisting of David Rosenberg, VP of IP Policy for GlaxoSmithKline; Paul Leaves, Director of Patents for Imagination; Emil Pot, General Counsel of Belgium-based SME ActoGeniX; and chaired by Olswang’s Richard Price with contributions from Olswang's Jean-Frédéric Gaultier, Thomas Lynker and Kevin Cordina) dealt with a variety of questions from the floor.

The long-awaited and much-heralded European Unitary Patent system and the Unified Patent Court (UPC) appears to be coming closer into view.

A huge amount of work, largely by volunteers, has been done in devising a system of patent filing and litigation aimed to operate to the same high standards right across the EU – and be comparable to, or better than, what is offered in the other major IP blocs, such as the United States, Japan and China.

However, the practicalities around the UPC’s actual arrival in Europe remain shrouded in uncertainty. The general consensus of industry practitioners is that it will continue to be unclear until the system is finally up and running.

Will it happen?

• Big three decision makers: Only France has ratified the core Agreement – Germany has not even started its process yet, and will not do so until later in 2016. The UK is going through the Parliamentary motions.
• Brexit breaker? A decision by the UK to leave the EU would likely kill the project, since London is home to of one of the three parts of the Central Division of the UPC.
• If so, where? The UPC cannot happen without physical courts – the UK and France have identified sites; Germany is due to have four sites and none has been earmarked.
• The UPC cannot happen without judges either – in spite of the rush of applicants (1,300 or so), the composition of panels (a minimum of three per case) having the necessary quality right across the EU is some way off – and no terms or conditions for judges to serve have been agreed, still less where the money is coming from.
• The best guess is that the whole system will not be up and running until sometime in early 2017 at best, according to Sir Robin (not 2016, as hoped).

Will it work?

• On the patent filing side, it will only work if it is cost-effective – and unlooked for translation costs are going to push up the expense, as explained by Olswang Partner Kevin Cordina.
• Nevertheless, businesses that are used to designate four or more countries in the EU when filing for existing European Patents will benefit from reduced filing costs.
• Businesses, including those in the tech area, which typically file in fewer than four EU countries, will find it more expensive – and a lot more expensive than in the US.
• In the UPC, the pan-European injunction will be a formidable weapon at the disposal of patentee-claimants. At present injunctions have to be sought and granted country by country. To that point, Emil Pot, GC of Belgian-based SME ActoGenix, said the prospect was “frightening”.
• Sir Robin expressed the view that it is unrealistic to expect the courts to be self-funding – so where is the money coming from?
• The biggest worry – shared by everyone – is whether the judge panels, and their judgments, will be of sufficient quality right across the EU – from Sweden and Scotland to Slovakia and Malta. Without inspiring the confidence of potential customers, it will not be used.

Upsides and downsides

• Bifurcation – splitting the patent infringement and validity parts of the case was a hot potato, but the word is that judges and practitioners in Germany have cooled on their earlier insistence on bifurcation, which, if true, is an enormous step forward.
• Trolls (non-practising entities) will see the UPC as a happy hunting ground – as they did in the US. However, it sounds as if the likely senior judges are alive to this.
• Opting out existing European Patents from the system – and whether to do this or not – is another major uncertainty. To avoid a central patent revocation attack, most businesses (not trolls of course) would be wise to opt out, and opt back in again if and when about to sue.
• Having to opt out – and shoulder the huge admin burden for large portfolio owners – is a major headache. Sir Robin even suggested that it was open for patentees to claim this is a breach of Human Rights legislation. This could be another blockage in the pipeline!

Read Olswang’s full analysis and quotes from the speakers in this summary.