On Friday at the European Council summit, European national leaders finally broke the deadlock over court location that had been the block to an agreement on the European Unitary patent system.
Under the new system, which is expected to be put to a vote of the European Parliament tomorrow, a single patent can be granted in 25 European States, drastically cutting the cost of obtaining protection of the same scope under the current system.
European Unitary Patents will be enforced by a new international court, the Unified Patent Court. Infringement proceedings will be brought in Regional Divisions of the Court, to be established across Europe including in London. Patent revocation proceedings, and declaration of non-infringement actions, must be commenced in the court's Central Division, which may also deal with infringement actions brought against non-EU domiciled Defendants.
The compromise agreed by the national leaders means that the Central Division will be split between London, Paris and Munich.
- London will have special responsibility for patents in the life sciences: pharmaceuticals, biologicals and medical devices and in chemical fields, such as fuels, dyes, materials and biotechnology. It will also have responsibility for other areas of "human necessities" including agriculture, foods, clothing, games, luggage, furniture and domestic appliances.
- Munich will have responsibility for mechanical engineering patents, including engines, pumps, heating and lighting.
- Paris will be the seat of the President of the Court and responsible for hearing cases outside the specialist areas that have been divided between London and Munich.
The division of responsibility is a political compromise, but makes sense given the strength of the German automotive industry and the UK's leading expertise in life sciences.
Appeals will be heard in an Appeal Court to be based in Luxembourg.
Litigation under the New System
The text of the Agreement is expected to be signed at a Diplomatic Conference this Autumn, following which the individual, co-operating Member States (which do not include Italy and Spain) will need to ratify the Agreement. However, if all goes according to plan, it is understood that the new litigation system may be in place by 2015.
The aim of the international enforcement regime is to simplify the current system where European patents have to be enforced on a country by country basis. The new Courts will be able to grant remedies across the entire area covered by the Unitary Patents, a market of around 400 million people. Some of the details of the system still need to be finalised but the agreement of the European Council sets out the following basic framework:
- Infringement actions will be commenced in the Regional Division of the Court that is local to the Defendant. That court may choose to "bifurcate" the action and hear infringement alone, whilst referring any invalidity counterclaim to the Central Division.
- The Central Division will hear declaration of non-infringement actions and actions to revoke the Unitary Patents, including invalidity counterclaims referred by the Regional Divisions following bifurcation of infringement proceedings. The Central Division may also hear infringement actions where the Defendant is domiciled outside the EU or where a revocation action is already pending before the Central Division. An EU domiciled Defendant cannot however demand that an action commenced in a Regional Division of the Court to be transferred to the Central Division.
The European Council has also proposed that Articles 6 to 8 of the Regulation implementing the Unitary Patents be deleted. These give the Court of Justice of the EU jurisdiction over issues of substantive patent law and the proposed deletion of these Articles (as a result of pressure from the UK) is welcomed by practitioners. The CJEU has no patent expertise and it was feared that its involvement would slow the system down and lead to lack of predictability. Whether the European Parliament will approve the removal of these provisions remains to be seen.
Impact of the New System
This is undoubtedly the most significant development in European patent law since the signing of the European Patent Convention in 1973. The new Unitary Rights covering an area representing about 20% GWP will be enormously valuable and users of the system will need to monitor developments closely as the details are filled in to maximise the opportunities it affords and also to minimise threats. Even on the little information available, the following issues arise that may need early consideration by users.
If infringement and validity issues can be bifurcated, with infringement heard by a Regional Division and validity by the Central Division (mirroring the current national procedure in Germany), it seems that non-EU domiciled Defendants may be at an advantage. They may demand transfer to the Central Division where all issues are heard together, whereas EU domiciled Defendants cannot. It is well known that the current German bifurcated system has led to forum shopping as injunctions can be granted in infringement actions before the Defendant has the opportunity to prove that the patent is invalid. Therefore, companies may decide to structure their business so that importation into the EU market is carried out by a non-EU entity. This may be particularly important in the electronics sector, which has seen extensive litigation particularly in the smart phone field and where the activity of Non Practicing Entities is on the increase.
The new litigation system will also apply to "classic" European Patents granted by the EPO under the current system, subject to the ability of patent owners to opt out of the Unified Patent Court system during a transition period, details of which remain to be clarified. However, given the inevitable uncertainties associated with establishing a new international enforcement system, some users may elect to opt out by filing nationally on important patents where the economies of the Unitary Patent System may not warrant the risk of having all eggs in the same basket.
Powell Gilbert LLP will continue to represent its clients in relation to all aspects of patent litigation, including both validity and infringement. We shall be able to represent clients before all of the Courts of the Unified Patent Court system: the Central Division Courts, all Regional Divisions and in the Court of Appeal.
We are monitoring developments closely and will issue further briefings as more details of the new system emerge.
If you have any questions about this briefing, please contact Tim Powell or Penny Gilbert or alternatively the Partner that you usually deal with.