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Welcome to the September issue of Licensing Executives Society Britain and Ireland's eflyer. In this Issue
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16th September 2011 The Unified Patent (formerly the Community Patent) and Unified Patent Court Will it work? Should you worry? The Council working party on the Unified Patent and the Court is due to meet again today (16th September) and they are on the agenda for the Competitiveness Council on 29th September. The Agreement is due to be signed early next year. Time is short. We urge members in industries that rely on patents, whether only in the UK or around the EU, to consider the proposals for the Unified Patent and Court, and, if appropriate, to make their views know: • to the UK IPO to Sean Dennehey, the Deputy Chief Executive and Patents Director, who leads the Consultation Group, at Sean.Dennehey@ipo.gov.uk, (or at Intellectual Property Office, Concept House, Cardiff Road, Newport. South Wales NP10 8QQ United Kingdom), and/ or to; • their professional bodies.
As Italy and Spain have vetoed an EU wide patent the remaining States have adopted Enhanced Co-operation [1] The Agreement for the Unified Patent Court has been drafted. The timetable is for the Agreement to be ready for signature early next year. The UK IPO (the Patent Office) has set up an European Patent Reform Consultation Group which is considering all the proposals. A sub-group (which includes representatives of LES (B&I)) has produced detailed comments on the Agreement in a “Concerns of Principle” paper, which follows this article, and suggested amendments to the draft dated 14th June 2011 of the Agreement for the Unified Patent Court. The amendments can be found on the the LES B&I website. (The most recent draft of the Agreement, dated 2nd September 2011, can also be found on the website.) The draft Agreement has been described by one member of LES as being “as full of holes as a Swiss cheese” and the gaps need to be plugged. If they are not plugged, the operation of the patent and the Court will not be clear. There will be uncertainly for parties, and the need to apply to the Court, (and which Court, in which Member State?), to decide matters of detail which should have been settled in advance, with all the attendant delay and expense and uncertainty of outcome. LES members are all too well aware how the time taken for applications to the European Court of Justice has led to delays and expense in litigation, as well as the uncertainty that decisions and opinions of the CJEU have created in other areas of intellectual property to date. LES (B&I) is certain that if analogous delays, expense and uncertainty are to bedevil the Unified Patent System, the system will not operate to the benefit of Europe itself and of any businesses operating in Europe in particular. There is also the worry that the existing system of litigation for European Patents granted under the European Patent Convention is to be abandoned and shoehorned into the new, untried Unified Court. Unless the proposals are properly examined and thought through, there is a real risk that the Unified Patent and Court could be worse than the present system of national litigation. The ungainly hurry of the Commission and others to press ahead with adoption of proposals which have not been subject to in-depth examination, is exacerbating that risk. [1] While Italy has raised a challenge to Enhanced Co-operation in the ECJ on the grounds that it is premature, given that the proposals for an EU wide patent have been under discussion for more than 40 years it is difficult to see why this is premature and the remaining countries are going ahead on the assumption that Italy’s claim will be rejected. Further details appear at page 5 of Issue 136 of NewsXchange. _________________ Among the matters set out in more detail in the “Concerns of Principle” are: • The costs of financing the Court system and the risk that Member States will have to share between them any damages awarded for breaches of European law by the Unitary Patent Court; • The need for the judges to be international and to have a proven record in patent cases in order to avoid individual courts adopting national approaches; • The need for an ongoing transition period before existing national courts are no longer able to deal with EPC cases to allow the standards of the Unitary Patent Court to be established at a high level; • That there should be no bifurcation of validity and infringement; • The Court’s procedure needs to be established before the Agreement is signed so that the way in which the Court would operate was clear; • The reviews of the working of the Court needed to cover all aspects of the Court’s activities; • The procedure for SPCs must be established; and • Whether there should be any termination provisions for the Agreement? Robin Nott, email address: laws@les-bi.org
DRAFT AGREEMENT ON Please click here to access a fully formatted version of this paper Introduction Impact on Innovation and Growth
In terms of global patent reform, the Government has listed the following aspirations: As representative informed users of the system we would strongly support a Unified Patent Court which satisfied these aspirations but we have concerns that, in its current form, the proposal now being pursued at European level, has shortcomings and – without amendment – will not only fail to meet most, if not all, of the Government’s aspirations but will also have a negative economic impact both on the UK public purse and for users, most especially SMEs. As it stands, the draft text is likely to create a system which is more expensive for Contracting Member States and/or users, create legal uncertainty for applicants and third parties and risks
impeding innovation, competition and growth in the UK for years to come. As originally proposed, this was a truly European project which was intended to be self-financing while at the same time it was recognised that it would require substantial financial support from Europe especially in the start-up years. Furthermore the Commission was proposing financial incentives to set up a ‘regional[2] ’ system to avoid the cost, complexity, and quality issues that would result if local divisions were to be established in each and every Member State. In the current proposals[3]
the EU is no longer an economic stakeholder and the entire cost of the system (as well as attendant liabilities) will fall to the Member States and/or users. The incentive to create regional rather than local divisions seems to have been lost. The UK assumes proportional liability for infringements of Union law made by other contracting Member States[4].
More significantly, however, setting up and maintaining a pan-EU system of the size and complexity involved will have substantial financial implications for all participating Member States. To the extent that the system seeks to be financially self-supporting, unless Member States are prepared to commit to adequate and sustained funding, it implies high court fees which risks deterring use of the system, especially by SMEs and those least able to afford access. That the EU is no longer a party to the Agreement is a consequence of the recent ECJ decision but there appears to have been no new economic impact or cost analysis of what this means for the UK or other Member States. Additionally the complex and burdensome language and translation requirements will add substantially to the cost both for participating Member States and for users (as will such things as the cost of judicial training, the arbitration centre and legal aid) to an extent that has not been properly analysed or fully understood. As proposed, the new court would have ‘exclusive jurisdiction’ over not only the new Unitary Patents but also over existing European Patents which are currently litigated in national courts. The Unified Patent Court will replace national courts (retrospectively for existing patents) after a relatively short and arbitrary transitional period of five years. After that, users will have no choice[5] but to use the Unified Patent Court regardless of whether it is functioning properly[6].
The national courts will then simply become ‘out of bounds’ for patent matters, even for relatively small cases, e.g. of the type that are currently heard in the UK-IPO or in the Patents County Court, making access to justice potentially more difficult and more costly for all users than it is today. The ‘exclusive jurisdiction’ problem is exacerbated because the Agreement can only be reviewed on limited subjects and then amended unanimously[7]. Furthermore, there are no termination provisions so once signed up to the Unified Patent Court Agreement there is never any going back. Uncertainty for applicants and third parties is exacerbated because the new court, despite stated intentions, will not have a truly European flavour, not least because the composition of local divisions of the court will permit them to exhibit a national character, even embracing less favourable aspects of current national systems[8], leading potentially to inconsistencies of approach across Europe[9]. In short, without further revision, the current draft Agreement will fail to meet the Government’s goals of being accessible and affordable, and creating laws and procedures which are easy to use. It is more likely to increase cost and create legal uncertainty for applicants and third parties, which in turn has the potential to deter innovation, competition and growth in the UK. The current text requires amendment in order to deliver real benefits for business, consumers and the economy. Thus, in addition to addressing the funding issues referred to above, the current text requires amendment. This paper sets out a more detailed analysis of our principal concerns and our views as to what needs changing. The Annex to this paper is a marked-up version of the draft Agreement which addresses further concerns of a more technical nature which also need to be addressed[10]. 1. ARTICLE 5 – The Court of First Instance (regional vs national divisions) 2. ARTICLE 6 – Composition of Panels We believe that the requirement in Article 6(1) that “Any panel of the Court of First Instance shall have a “multinational composition” is essential. However this fundamental principle is undermined by the provisions of Articles 6(2), 6(3) and 6(4) which provide (in Article 6(2) and (4)) for two permanent national judges in a division in certain circumstances with the further provision (in Article 6(3)) that the third judge (allocated from a central Pool of Judges) shall serve “on a permanent basis” at the same division. It is extremely important that the local divisions should, so far as possible, be independent of national traditions and that the rules of procedure of the Unified Patent Court should be applied consistently in the central division and throughout all local and regional divisions without being influenced by pre-existing local traditions or preferences. Although different cases might be dealt with differently on the basis of, for example, their complexity, a particular case should be dealt with in the same way whichever division it is brought in. Local and regional divisions (and indeed the central division) therefore should be fully mixed so far as the nationality of the legal judges is concerned. Article 6(5) provides that local/regional divisions “may” request a fourth, technical judge. We support this discretion. We believe a technical judge will not be required in all cases even where there is a counterclaim for invalidity. In this respect Article 15a(2)(a) should be clarified to make it clear that the “request” in this sub-paragraph is discretionary. 3. ARTICLE 10 – Eligibility criteria 4. ARTICLE 14e – Applicable law 5. ARTICLE 15 – Jurisdiction Certain safeguards in respect of the exclusive jurisdiction of the Unified Patent Court are needed:
(I) we support a transitional period as provided for in Article 58(1) subject to the period commencing from the date of entry “into operation”. This period is intended to allow the Unified Patent Court to develop its personnel, systems and procedures without being overwhelmed at the outset. Ideally the transitional period should end only when the new court system has established a good track record. We believe that the transitional period should be synchronised with the consultation and review provided for in Article 58d and extended automatically until the next review unless it is agreed by all Contracting Member States that the court system is functioning satisfactorily and the transition period can terminate. (II) Article 58(3) provides for a patentees’ opt-out from the Agreement for patents granted and applications applied for before “the date of entry into force”. We believe the relevant date should be the date of entry “into operation” (as only during the period of operation will experience be gained as to the working of the Court) but, much more importantly, the opt-out right needs amendment in the following respects:
(a) The opt-out right was accepted for two (convincing) reasons: first to avoid a retrospective element in that the Agreement should not as a matter of course apply to patents/applications applied for before it came into effect, and secondly, to allow patentees time to evaluate the effectiveness of the new litigation system before taking a decision on where to file patent applications (centrally at the EPO or nationally). This decision on where to file will of course determine whether a granted patent will ultimately fall within or without the Agreement. It is obvious that if the right to opt-out ceases for applications made immediately after the date of entry into [operation] of the Agreement this second objective cannot be achieved. We therefore strongly recommend, subject to (b) below, that the opt-out right should run to the end of the transitional period in
Article 58(1) including any extended period. (b) It is to be expected that some patentees will exercise the opt-out right out of caution. If the new system establishes itself as a reliable and proportionate means of enforcing patents in Europe then patentees will want and should have the right to opt-back-in to the system at any time after its entry into operation. This possibility would promote increasing use of the system as it is seen to function satisfactorily.
(III) Considerable uncertainty exists as to the court costs of the new system (see also our comments on funding in the Introduction and below) and it has been argued that for very many litigants, and in particular SMEs, it is only the ability to enforce patents in one (home) jurisdiction that is primarily required. This has led to proposals to weaken the exclusivity of the court. In principle we favour the exclusivity of the jurisdiction of the Unified Patent Court in order to avoid the creation of parallel jurisdictions with the resulting adverse affect on harmonisation of patent law in Europe. However it must be acknowledged that the costs uncertainties are significant. We therefore propose that as part of the consultation and review provided for in Article 58d consideration be given also to the creation, after the end of the transitional period, of a
limited exception to the jurisdictional exclusivity allowing, possibly, a one-time enforcement of a European Patent (with or without unitary effect) in one jurisdiction. We note that;
Hence, this agreement is a treaty between Members States which gives jurisdiction to a supra-national Court over both the new Unitary Patent and existing (and future) EPs designating individual states. Many cases concerning the validity of both will in practice be determined by the central division of the court. For example, if Spain and Italy decide to sign the Agreement, it is possible to contemplate revocation proceedings in the central division relating to a Unitary Patent and the equivalent EP (ES) and EP (IT). However, under Article 22(4) of the Brussels Regulation, courts of the Member States have exclusive jurisdiction over proceedings concerning the validity of patents registered in their territories. This creates two (related) potential issues. First, does the Brussels Regulation require amendment to permit validity of EPs (especially non-unitary ones) to be determined by this supra-national Court? Alternatively, is (as is suggested by the 10th preambular paragraph to the draft Agreement) the Unified Court essentially a national court (even if “regarded” as a part of the judicial system of the EU), meaning that proceedings brought in the Unified Court may be regarded as being brought in a court of a Member State and hence in compliance with the Brussels Convention?
Second, the previous opinion of the Commission Legal Service (expressed in the context of the EPLP/EPLA) was that Member States could not enter into treaty arrangements which varied the provisions of the Brussels Regulation, since such a power lay only in the hands of the EU itself. This Agreement is, like the previously proposed EPLP/EPLA, a treaty and not an EU instrument. That being so, are Member States acting in accordance with EU law by seeking to vary the jurisdictional arrangements laid down by an EU Regulation? Alternatively, does the fact that this Agreement is contemplated by the EU in the context of the Regulation which will implement Enhanced Cooperation with respect to the Unitary Patent, give Member States sufficient authority to enter into this Agreement? If the latter, would the position not better be clarified by a specific permission in the
implementing Regulation for Member States to enter into the Agreement? We also believe that the current provisions of Article 15a need to be modified to allow a patentee to commence an infringement action (if necessary, for interim relief) before the central division. We believe that this option is widely supported by industry in that it allows industry to litigate with greater confidence in the short term and with greater certainty as to the language regime (the language of the patent). There seems to be no objection in principle to this option since it is available when the parties agree (Article 15a(6)) or if the country of defendant’s domicile does not host a division (Article 15a(1)). These actions may be stayed if infringement actions are subsequently commenced locally (Articles 15a(4) and (5)). We believe that in most cases this will cause delay and unnecessary costs. There is no reason in principle why, if an action is already proceeding in the central division, in accordance with either of these two Articles, the defendant should not be required to respond by way of appropriate counterclaim in the central division. The central division should also be given the right to transfer such a case to a local or regional division if this seems to be right and just in all the circumstances. 7. ARTICLE 15a(2)(b) – Bifurcation 8. ARTICLE 18 – Funding of the Court In any event industry will need to know the level of court fees before the Agreement is made available for ratification and will need to be satisfied that the new system will be sustainably financed at a level which guarantees speed, quality and cost. 9. ARTICLE 22 – Rules of Procedure We believe the Rules of Procedure should achieve a balance between guiding the judges as to how their powers should be exercised without unduly fettering their discretion to ensure that each case is dealt with in an appropriate way. This will create some predictability as to how cases will be conducted and consistency as between different divisions. 10. ARTICLE 29 – Languages We have pointed out that language difficulties may arise as a result of bifurcation (see 5 above), for example where the language of the infringement court is different from the language of grant (at the central division). This would mean that different issues in the same case would be dealt with in two different languages and this will also create difficulties on appeal. It is essential that Article 29 should be amended to ensure that if bifurcation remains an option a consistent language regime is adopted. 11. ARTICLE 37 and 37a – Injunctions 12. ARTICLE 58 – Transitional Provisions 13. ARTICLE 58d – Revision Also, as noted under 5 above, the transitional period should be synchronised with the review and extended automatically unless and until the review process establishes the system is functioning to the satisfaction of all Contracting Member States. 14. Provisions for SPCs
Under the existing SPC Regulations 469/2009 and 1610/96 basic patent is referred to in such a way that it could include a Unitary Patent and on that basis a European Patent with unitary effect could be used as the basis for an SPC application but it is not known where to apply for it. Under Article 9(1) of the SPC Regulation 469/2009 the application should be made to the patent office of the Member State which granted the basic patent but there is no such patent office for a Unitary Patent. There is ambiguous language in Article 9(1) referring to an alternative office to that of the Member State "... on whose behalf [the SPC] was granted...". We believe, the situation can be resolved by amending Article 9(1) so that the authority for granting SPCs on Unitary Patents on behalf of Member States is expressly the EPO. However, this would require amendment of the SPC
Regulation and also the Unitary Patent Regulation so as to ensure that decisions (for example, refusing an application for an SPC) can be the subject of an appeal to the Court under Article 15(1)(g). It would also require marketing authorisations to have been obtained in each of the Member States for which the Unitary Patent was granted which is neither desirable nor required. Alternatively, the Unitary Patent could be considered a national patent in each of the contracting states (as are European Patents patents) and SPCs applied for and granted nationally. However, Article 9(1) of the SPC Regulation again requires amendment to provide how this could occur. 15. Missing Provisions (I) Liability of Accessories (II) Procedures for Service of Proceedings and Pleadings (III) Privilege 16. Termination 17. Issues arising from both the draft Agreement and the draft Regulation for the creation of Unitary Patent Protection – dated 21 June 2011 (I) Infringement of the Unitary Patent (II) National Property Laws and the Unitary Patent (a) By tying this definition to the location of the proprietor, rather than the original applicant, that must mean that it is tied to the current proprietor and this would then mean that relevant property law would change with each assignment. This can only cause confusion. Further, if a new proprietor had not been in existence when the application was filed, which law will apply?
(b) The current draft Regulation does not set out any rules in relation to entitlement – presumably until the applicant elects post grant that the European Patent should be treated as a Unitary Patent, entitlement disputes are dealt with as currently under national law for pending applications – e.g. the UK has jurisdiction to deal with all international pending applications where there is a sufficient connection the UK, but post grant, the case must go to the country of grant. Articles 23 and 24 of the CPC (89/695/EEC – Luxembourg Treaty of 15 December 1989) contained provisions dealing with when entitlement claims could be brought (i.e. a two year post grant window under which entitlement claims could be brought, unless the proprietor had knowledge of its lack of entitlement) and the effect that a successful entitlement claim would have on an existing licensee. Such
provisions should be set out again so that it will be clear how this operates. Without these provisions users and practitioners will potentially have to gain an understanding of 25 national laws and procedures. Thought should be given as to whether these provisions are included in the Regulation itself, or in the draft Agreement. At the moment entitlement issues seem to fall under Article 15(2) of the draft Agreement but, as stated in 4 above, it is not clear whether there is jurisdiction in both the Unified Patent Court and the national courts for such matters or exclusive jurisdiction in the latter. This needs clarification. (c) If the laws of Germany are to apply to the property rights in Unitary Patents where the original applicant is outside the contracting EU Member States, then the majority of ownership disputes in relation to the Unitary Patent will have to be dealt with by German practitioners. This will disadvantage the legal professions in other Member States. Article 38 of the CPC additionally provided that the national law which could apply would be that of the state in which the applicant’s representative had a place of business. This is a better system, as it allows non-EU applicants to select the jurisdiction which is more closely aligned with their first chosen representative. (d) It is a ground of revocation under UK national law that the patent has been granted to person not entitled to it, even though that ground can only be relied upon by the person who is entitled to it. There are no such provisions in the EPC, as entitlement is a matter of national law. The CPC also contained such provisions (Art 56(1)(e)). This needs to be included and we suggest that it is included in the draft Agreement. (e) Which laws will apply to employee inventor compensation claims? Will that be the law of the country in which the inventor was employed? Or the country whose property laws apply to the patent? If German inventor compensation laws are to apply to all Unitary Patents originating in non-EU countries this will be a significant matter. As stated above it should be made clear in Article 15(2) of the draft Agreement, that there is concurrent jurisdiction as between the Unified Patent Court and the national courts to hear matters relating to entitlement, although the Unified Court should only be concerned with such matters when they form part of an infringement or revocation claim or part of a declaration of non-infringement. Further, it should be made clear what should happen if a national court is seized of an ownership dispute and the validity of that patent is then put in issue. Provisions relating to licences of right need to be expanded. Currently Article 11 of the draft Regulation contains only short provisions regarding a proprietor making it known that licences under a patent will be available as of right. However, there needs to be detailed provisions as to the consequences of such a declaration, a forum and mechanism for granting such licences and setting the terms if the parties cannot agree and also for dealing with the compulsory licensing of a Unitary Patent and Crown (or State) user of a patented invention. Far more extensive provisions exist in the CPC and the UK Patents Act 1977. (III) Prior national rights The current draft Regulation contains no provisions to deal with this issue. Given that the requirements for national validation will not have been completed in due time and therefore that it would not be possible subsequently to convert a Unitary Patent into national patents, some provision should be made for to save the Unitary Patent in Member States not affected by art of this type which is only found after grant. Please click here to access a fully formatted version of this paper, including Mr. Justice Arnold’s proposals for “Accessory Liability Sub-Group Members Dr Roger J Burt – European and Chartered Patent Attorney Tim Frain – Director, IP Regulatory Affairs, Legal & Intellectual Property, Nokia Corporation Catriona Hammer – Senior Counsel, GE Healthcare Alan Johnson – Intellectual Property Lawyers Association Kevin Mooney – Simmons & Simmons LLP Robin Nott – Chair, Laws Committee, LES Britain and Ireland Tony Rollins – Merck & Co Inc and Chair, ABPI IPEN David Rosenberg – GlaxoSmithKline Vicky Salmon – Member CIPA, Council and Chair, CIPA Litigation Committee; Partner, IP Asset Richard Willoughby – Laws Committee, LES Britain and Ireland
[1] http://www.les-bi.org/documents/UnifiedPatentCourt-ConcernsofPrinciple_10926472_1__8_.doc2.9-3. [2] i.e. clusters of Member States forming a common, shared division [7[ Article 58(d).
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