Germany tries again to ratify Unified Patent Court-Agreement

Europe

A bill for approval of the Agreement on the Unified Patent Court (UPCA), legislation that would allow Germany to ratify this convention and to participate in this international patent court system, was introduced into the Bundestag on 28 September and is now being reviewed by parliamentary committees ahead of a formal vote in which lawmakers will be seeking a two-thirds majority.

Background

In March 2020, the Federal Constitutional Court declared the approval law of the Agreement of 19 February 2013 on a Unified Patent Court (UPC) null and void for formal reasons. However, just a few days later minister Christine Lambrecht, Federal Ministry of Justice and Consumer Protection (BMJV), stated that a new approval law should be passed by parliament in the current legislative period so that the UPCA can be ratified by Germany in 2021.

As a result, on 10 June 2020, the Federal Ministry of Justice and Consumer Protection presented a bill and requested commons for a new approval law, which is almost identical in wording to the previous law overturned by the Federal Constitutional Court. Despite a surprisingly high number of critical comments, this bill was adopted as a government draft before the parliamentary summer break and submitted to the Bundesrat on 7 August 2020 for comment. The Bundesrat decided not to object to the bill in its parliamentarian session on 18 September 2020. The bill was submitted to the Bundestag for deliberations on 28 September 2020 and was referred to the competent committees on 8 October after its first reading in the parliamentary session. A formal vote on this bill is pending.

Withdrawal of the UK should not affect entry into force of the UPC-Agreement

Having the Bundestag and Bundesrat pass this legislation again with a two-thirds majority should satisfy the objections of the Federal Constitutional Court and finally result in the establishment of the UPC. The fact that the UK has in the meantime left the EU and, as a follow-up to Brexit, announced that it no longer wishes to participate in the European unified patent system is briefly mentioned in the bill's introduction. These brief remarks, however, contain some disputed elements, which will likely give rise to considerable legal discussions even if the German parliament passes the bill with the necessary qualified majority.

The bill states that the UK's withdrawal from the UPCA on the basis of Brexit does not prevent its implementation. The rules on entry into force into the UPCA should ensure that the three member states with the highest patent activity (Germany, France and the UK) are able to participate in the court system at the start of the UPC. The rules on entry into force were interpreted in such a way that the unforeseen withdrawal of one of those three member states would not affect the entry into force of the UPCA for the remaining member states.

Furthermore, Art. 89(1) UPCA does not explicitly designate the UK as a member state, but makes its entry into force conditional among other considerations on ratification "by the three Member States which had the highest number of European patents in force in the year preceding the year of signature of the Agreement".

If the UK withdraws from the UPCA, it loses its status as a member state of the UPCA. Italy, as the most active country in terms of patents, shall automatically move up among the remaining countries.

Has the UK already left the UPC-Agreement in accordance with the applicable law?

The UK has already left the EU. Furthermore, on 20 July 2020, the UK officially withdrew its ratification of the UPCA. So far, there is no uniform assessment of whether this withdrawal of ratification alone is sufficient to ensure that the withdrawal from the UPCA conforms with the applicable law, or whether further termination acts by the UK are necessary. The UPCA itself contains no provision for withdrawal from or termination by a member state. The applicable Vienna Convention on the Law of Treaties provides for the possibility of withdrawal or termination only if the relevant agreement is either provisionally applied (Article 25) or is already in force (Articles 54 and 56). However, neither of these conditions applies to the UPCA.

If the UK has not yet withdrawn from the UPCA in a legally effective manner, legal uncertainties could arise due to the fact that it has already withdrawn from the EU. With this in mind, Patrick Breyer, Member of the European Parliament, raised the question to the Commission and the Council in early summer whether Germany is currently allowed to ratify the UPCA. According to EU case law (CJEU Case 22/70), member states may not enter into agreements with third countries, which affect EU legislation or alter its scope.

The UK has been considered a "third country" since Brexit. Although the EU, together with the UK, could enter into obligations in relation to patent litigation, member states no longer have the right to do so.

The Commission replied on 15 July 2020 that it would welcome a swift ratification of the UPCA by Germany. It also notes that the UK will not participate in the unified patent court system as well as the unitary patent system at the end of the transitional period following Brexit, since this is only open to EU member states. This implies, of course, that there is no need for a formal withdrawal of ratification or termination of the UPCA by the UK.

Location of a new section of the central division

Art. 7(2) UPCA explicitly provides that the first instance central division of the UPC will have its seat in Paris with additional sections in Munich and London. According to the explanations in the bill, however, the UPCA should not be interpreted in such a way that a section location in an original member state, which has withdrawn from the UPCA, is to be established or maintained.

According to Art. 65(1), 7(2) in conjunction with Annex 2 UPCA, the London section of the central division is responsible for patent litigation in the important fields of Human Necessities, Chemistry and Metallurgy. Its discontinuation due to the UK's withdrawal from the UPCA would lead to this jurisdiction being transferred to the remaining sections in Paris and Munich for a transitional period.

How these fields will be temporarily distributed between the two remaining sections in Paris and Munich is currently unclear, but all remaining UPC member states have reportedly agreed to this transitional solution. This decision should avoid further delay caused by negotiating on where a new section replacing the London section of the central division will be located. So far, Italy (Milan), France and the Netherlands have reportedly expressed interest in hosting the replacement section. However, it can be assumed that other interested UPC member states will come forward and that the allocation of jurisdiction will then be renegotiated in principle between UPC member states, which will ultimately lead to a corresponding amendment of the UPCA.

The long road to the European unitary patent system

The introduction of the bill into the Bundestag constitutes a further step towards the creation of a European Unified Patent Court and the European unitary patent system. It remains to be seen, however, whether the Bundestag and the Bundesrat will be able to pass the bill for the new approval law with the required two-thirds majority of members as smoothly as hoped.

The uncertainties caused by Brexit and the question of the UK's withdrawal from the UPCA in accordance with applicable law may also create legal obstacles. In any event, due to the UK's withdrawal from the UPCA, it loses one of the most patent active member states and thus the unitary patent system loses part of its attractiveness for businesses. In addition, due to the abolition of the London section, it will be necessary to reach an agreement with the remaining UPC member states about who will take over the UK's responsibilities on a permanent basis. Negotiations on this could be long and difficult. Finally, in terms of German ratification, it is possible that someone will again file a constitutional complaint against the new approval law  with the Federal Constitutional Court, which could again cause significant delay.

Germany and the other member states of the UPCA still have to navigate some challenges before the introduction of the European patent with unitary effect, the UPC and the resolution of associated conflicts. However, legal and political difficulties have been overcome in the past on the road to creating a European unitary patent system, which means that these current difficulties can be overcome as well.

For more information on the German bill for approval law regarding the UPCA and patent law in Germany, contact your regular CMS partner or local CMS experts: Dr. Thomas Hirse, Robert Steiniger, LL.M.