Powell Gilbert’s Alex Wilson and David Lancaster describe the key features of both the unitary patent and the UP and consider the relevance of certain aspects of the system to the pharmaceutical industry.
This article, contributed by Powell Gilbert LLP was first published on 22nd December 2014 on the International Law Office website.
Unitary patent and Unified Patent Court – opportunities for the pharmaceutical industry
Unified Patent Court
The proposed unitary patent and the Unified Patent Court (UPC) offer new opportunities for the swift and widespread enforcement and revocation of patent rights across Europe. This update briefly describes the key features of both the unitary patent and the UPC and considers the relevance of certain aspects of the system to the pharmaceutical industry. Adoption by the pharmaceutical industry has been recognised as key to the success of the new system. As well as providing great potential to patent holders, which will be able to protect a market of over 400 million people with one patent, it presents major opportunities for the generic and biosimilar industries, which could apply centrally to revoke such patents in one court at any time up to patent expiry.
Under the current European patent system, applications for European patents are examined by the European Patent Office (EPO). Applications that comply with the requirements of the European Patent Convention are granted and take effect across designated EU member states as a 'bundle' of national patents. Aside from the EPO opposition procedure, in which the validity of all national designations of a European patent may be determined centrally, challenges to the validity of a European patent must be brought before the national courts on a country-by-country basis. Infringement proceedings must also be brought on a country-by-country basis. Therefore, a hallmark of pharmaceutical patent litigation in Europe is that parties are often litigating different national designations of the same European patent in several countries at the same time, and often while also engaged in the opposition procedure at the EPO. The fact that the courts across different countries have their own rules – particularly in respect of evidence and procedure – adds to the complexity and can lead to divergent judicial decisions across Europe. The proposals for the unitary patent and the UPC are intended to address some of these issues.
There is now agreement for the introduction of a unitary patent system in Europe.(1) The proposed system envisages that shortly after the EPO indicates its intention to grant a European patent, the applicant will be given the opportunity to decide whether the European patent will take 'unitary effect' (ie, becomes a unitary patent) or take effect as a bundle of national designations as per the current system. If the applicant elects the unitary option, the unitary patent will take effect as a single patent right enforceable across all participating countries. It remains to be seen how popular the unitary patent itself will become, particularly in view of the fact that, as discussed further below, the procedural benefits of the UPC will also apply to national designations of European patents. In addition, while the unitary patent must be renewed or lapse across all participating countries, national designations can be allowed to lapse in particular countries where patent protection is no longer necessary, thereby allowing the owner to avoid paying unnecessary renewal fees. It is likely that the decision as to whether to opt for the unitary patent will be an economic one, based on the level of unitary patent renewal fees - which are yet to be announced - and the number of countries in which protection is sought. Some uncertainties remain about the procedure by which supplementary protection certificates based on unitary patents are obtained – a relevant consideration for the pharmaceutical industry.
Unified Patent Court
Questions of validity and infringement of unitary patents will be determined solely by the UPC. The Intellectual Property - European Union Authors Alex Wilson David Lancaster first-instance courts of the UPC will consist of a central division (with subject-matter responsibility in three different locations). The branch of the central division with responsibility for pharmaceutical and biotechnology cases will be in London. Numerous local and regional divisions will also be spread throughout all participating countries in Europe. The central division will hear first-instance revocation claims, which will be determined in accordance with the European Patent Convention requirements for patentability.(2) The local or regional divisions will often be the courts of first instance for infringement claims, which will be assessed based on the law as set out in the EU Unitary Patent Regulation and the UPC Agreement.(3) The local or regional divisions may also hear counterclaims for revocation and may elect either to determine validity and infringement together or to refer the counterclaim to the central division (bifurcation). In any event, decisions of any division of the UPC will apply across all participating countries,(4) thereby avoiding the need for parallel litigation in those countries. There will be a single tier of appeal to the UPC Court of Appeal.
In addition to unitary patents, the UPC will have jurisdiction over national designations of European patents, including those already granted when the UPC comes into effect. National designations of European patents may therefore be the subject of revocation proceedings before the central division of the UPC. Any decision of the UPC to revoke a European patent will apply to national designations in all countries participating in the UPC. However, during a transitional period of seven years, national designations of European patents may also continue to be litigated in the national courts. In addition, up to one month before the end of the transitional period, patent owners can elect to opt out of the jurisdiction of the UPC, which is intended to preserve the status quo and avoiding the risk of central revocation of current European patents. There is a 'per patent' fee for opting out, which has yet to be announced. The size of this fee will no doubt be a relevant consideration for those companies with large portfolios of patents. Initially it was expected that pharmaceutical patentees would opt their patents out of the new system, but it now seems that a mixed approach is more likely. Some of the most valuable patents may be opted out, with some divisionals or less fundamental patents being kept in the UPC. In any event, pharmaceutical companies may seek to opt out their most valuable patents to protect against the risk of central revocation, at least until the UPC has been in operation for some time.
The UPC will have its own Rules of Procedure, which will combine features of patent litigation court procedure from different European countries. The rules are in near-final form and were recently the subject of an oral consultation.(5) The Rules of Procedure provide several tools that may be attractive to parties involved in pharmaceutical patent litigation, including:
expert evidence (including the possibility of cross-examination);
orders to preserve evidence (similar to saisie);
disclosure of documents; and
In many cases the range of tools available to the parties in the UPC will exceed those available in some national courts. For example, at present in Germany it is difficult to prove a case of infringement where the evidence needed to do so is in the hands of the defendant. The new system will ameliorate this problem. While the evidence-gathering procedures are expected to be somewhat more limited than those currently available in the UK courts, the Rules of Procedure provide highly relevant possibilities for establishing infringement of pharmaceutical patents which have traditionally been difficult to enforce, such as research tools and process patents or patent claims with in vivo parameters.
By reducing the need for parallel litigation, the UPC should serve to reduce the duration and cost of patent litigation proceedings in Europe. Whether facing validity or infringement proceedings, the fact that proceedings are intended to last around one year, culminating in an oral hearing of around a day, will give potential litigants some assurance that disputes will be resolved promptly. For the generic and biosimilar industries, the UPC provides a means to clear the way across Europe by way of a single decision. Conversely, on the patent owner's side, there is the attractive potential for either a preliminary or final injunction to be applied across several countries simultaneously. As discussed further below, however, the scope for obtaining an injunction before the validity of the patent has been determined appears to have been significantly reduced.
The UPC is expected to come into effect in 2016 or early 2017 following ratification of the UPC Agreement by 13 member states, including the United Kingdom, France and Germany. The Rules of Procedure are expected to be finalised in mid-2015. The 17th draft of the Rules of Procedure was published on October 31 2014 and is available online.(6) A number of revisions in the 17th draft that are relevant to parties to pharmaceutical patent litigation.
In particular, concerns had been expressed about the so-called 'injunction gap' – namely, that in the event that a local or regional division elects to transfer a counterclaim for revocation to the central division, the infringement proceedings may proceed, resulting in the grant of a final injunction before the validity of the patent had been tested, potentially causing irreparable harm to the alleged infringer. To address this, the latest draft states that the UPC "shall endeavour to set a date for the oral hearing on the revocation action prior to the date of the oral hearing of the infringement action".(7) Subject to how the term 'shall endeavour' is applied by the UPC, this would appear to reduce the likelihood of a patent owner obtaining an injunction before the validity of the patent is tested.
The UPC has the potential to become an attractive option for the quick enforcement or revocation of patent rights across Europe. The draft Rules of Procedure provide a number of procedural tools that are likely to be of benefit to potential litigants, possibly more so than those available under some national procedures. As the case law develops, the initial uncertainties about an untested new legal system will gradually be resolved. For the faint of heart, there remains the possibility of opting valuable patents out of the system. However, the fact that the latest draft of the Rules of Procedure indicates that parties will have two opportunities to seek permission to appeal procedural decisions may encourage litigants in the pharmaceutical sector to try out this new system even in its early days.
For further information on this topic please contact Alex Wilson or David Lancaster at Powell Gilbert LLP by telephone (+44 20 3040 8000), fax (+44 20 3040 8001) or email (firstname.lastname@example.org or email@example.com). The Powell Gilbert LLP website can be accessed at www.powellgilbert.com.
(1) See the EU Unitary Patent Regulation Regulation (1257/2012) and the Unified Patent Court Agreement (February 19 2013).
(2) Article 65 of the Unified Patent Court Agreement.
(3) Articles 25-29 of the Unified Patent Court Agreement.
(4) Article 34 of the Unified Patent Court Agreement.
(5) Held in Trier, Germany on November 26 2014.
(6) See www.unified-patent-court.org/images/documents/UPC_Rules_of_Procedure_17th_Draft.pdf.
(7) Draft Rule 40.