ALM Properties, Inc.
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ON THE WAY TO THE EU UNITARY PATENT AND UNIFIED PATENT COURT
IN an unexpected breakthrough on November 19, 2012, the Committee on Legal Affairs of the European Parliament has approved a compromise on the planned EU Unitary Patent and Unified Patent Court. The controversial Articles 6-8 were deleted from the Regulation on unitary patent protection, in order to avoid a duty to refer core questions regarding patent infringement to the Court of Justice of the European Union, whom many practitioners regard as ill-equipped for handling patent cases.
This compromise makes it more likely than ever that uniform patent protection will be available in the European Union (EU) in the near future. The "patent package" could enter into force as early as 2015, after a diplomatic conference has been held and at least 13 member states have ratified the court agreement. Currently, all EU countries except Italy and Spain have signaled their willingness to participate.
THE CURRENT SITUATION
Until the 1970ies, patent prosecution in Europe had to be pursued nationally on a country-by-country basis an expensive and time-consuming route. A first big step towards simplification was made when the European Patent Office (EPO) in Munich started to accept European (EP) patent applications from June 1978 on. A European patent application has effect for all of the (today) 38 member states of the European Patent Convention (EPC), including not only the 27 EU countries but also non-EU countries like Switzerland or Norway.
A single examination procedure before the EPO leads, if the application is successful, to the grant of a European patent. However, a European patent is not a unitary IP right valid in all member states, but a "bundle" of national patents. Once the European patent is granted, the applicant has to decide in which of the 38 member states it should be validated. Each national part of a European patent confers the same rights as a national patent, and renewal fees are paid to the national patent offices.
The EU Commission estimates that for an average EP patent, validation costs in the 27 EU member states alone are EUR 32,000, primarily caused by translation requirements. Renewal costs in the 27 EU member states can be estimated to be about EUR 8,000 for the first 10 years, and another EUR 50,000 for the last ten years of the term of the patent. Thus, while the European patent greatly reduces expenses during the prosecution phase, it can still be very costly in the post-grant phase. Furthermore, the different national parts of a European patent are litigated in the national courts, and the effect of the decision of a national court is typically limited to the country where the court is located. This may lead to parallel litigation in several European countries.
The present attempt to create uniform patent protection within the EU was started by the EU Commission in 2007. The envisaged "patent package" consists of a first EU Regulation on the creation of a unitary patent, a second Regulation on the language regime of the unitary patent, and an international treaty among the member states on the creation of a Unified Patent Court (UPC).
The proposed unitary patent is a single patent which is valid in all participating EU member states. It is centrally administered by the EPO, including collection of renewal fees. It is enforced in all member states (which have ratified the court agreement) with one single infringement proceeding and invalidated in all states with one single revocation proceeding.
Examination is handled by the EPO: an applicant who wishes to obtain a unitary patent files a normal European patent application. Within one month after grant, he has to declare whether he opts for an EP bundle patent for the designated EPC member states, or for a unitary patent for the participating EU member states, plus possibly a bundle patent for the remaining designated EPC member states.
The administration costs of the unitary patent will be lower because no individual validations and payment of renewal fees are required. Furthermore, the unitary patent will only have to be translated into one other language. Even this translation requirement will be dropped, once machine translation with good quality is available, and, at the latest, after twelve years. The renewal fees have not been fixed yet, but the EU Commission promised that all participating member states will get a fair share of the renewal fee income, and none of them will have reduced income compared to the status quo a goal which could only be achieved with high fees.
UNIFIED PATENT COURT
Infringement and revocation proceedings concerning unitary patents will be handled by a yet to be established Unified Patent Court (UPC). The current draft agreement provides that the UPC will not only decide on unitary patents, but also on the national parts of EP bundle patents filed after the treaty comes into force.
For the first instance proceedings, the UPC will comprise decentralized local and regional divisions, and one Central Division. The seat of the Central Division will be Paris, with a branch in London for cases in the fields of chemistry, pharmaceuticals, biotech and human necessities, and in Munich for mechanical engineering. There will be one central court of appeal, located in Luxembourg. The plaintiff has the choice to bring an infringement action at any local or regional division where infringement occurred, or at the local or regional division where the defendant (or one of the defendants) is resident, or at the Central Division, if the defendant is domiciled outside the EU). Isolated actions for revocation or declaration of non-infringement are always brought before the Central Division.
If a counterclaim for revocation is submitted, the court can at its discretion proceed with both the infringement action and the counterclaim, or refer the counterclaim to the Central Division. In other words, the court can opt for the German system of bifurcation!
Any panel (three judges) of a court of first instance, including local divisions, will have a multinational composition. There will be a "Pool of Judges" (technically and legally qualified) who can be allocated to local or regional divisions. The language at the Central Division will be the language of the patent, whereas the language at a regional or local division will be one of the languages of the state/region where the division is located. The language on appeal will be the language of the first instance.
Rules of procedure have been drafted by an expert group composed of judges and attorneys, but the final version has not yet been published. It is expected that the result will be a mix of British ("Rolls Royce") style procedure with discovery and cross examination and lean continental European style procedure. The costs of procedure remain totally open as of to-date.
UNITARY OR BUNDLE PATENT?
For many applicants, the future choice between the unitary patent and the bundle patent will largely be driven by costs. For applicants who typically validate their EP patents in many member states (e.g. pharmaceutical, chemical) costs may be lower with the unitary patent, whereas for applicants for whom protection in three or four major European countries is sufficient, the bundle patent may remain the more costefficient option. It should be kept in mind that with the unitary patent, it will not be possible to reduce renewal fee costs later by dropping individual countries, as can be done with the bundle patent.
During a transitional period of seven years, which may be prolonged for another seven years, (only) owners of a bundle patent will have the option to continue using the national courts, instead of the UPC for litigation. Since it is uncertain whether the new court will be equally efficient and patentee-friendly as German courts tend to be today, applicants may be well-advised to opt for the bundle patent during the transitional period. This becomes even more true, because by the end of the transitional period, owners of bundle patents can "opt-out" of the exclusive jurisdiction of the UPC for the entire lifetime of the patent, with the possibility to "opt-in" at any time later.