On the 26 April 2018 the UK ratified the Unified Patent Court (UPC) Agreement bringing the Unitary Patent System (Single European Patent) one step closer.
The aim of the UP is to create a “European patent with unitary effect”, meaning that a patent granted by the European Patent office (EPO), under the guidance of the UPC is recognised across all European Member states that participate in the scheme. The patent granted will be uniformly protected across all Member states.
Although the UK is the 16th member of the European Union to ratify this agreement, the Unitary Patent System (UP) cannot come into force until 10 member states including France, Germany and the UK have ratified the UPC Agreement.
To date Germany has put its ratification process on indefinite hold while its Federal Court resolves a constitutional challenge but it is anticipated that the German courts will endeavour to identify a way to ratify the agreement as soon as possible, as the political will for the UP to succeed is very strong. Once Germany ratifies the Agreement the UP will come into effect on the first day of the fourth month after this ratification, so the patent eyes of Europe are very much focused on Germany.
The UK’s continued support of the UP Post-Brexit is also a major consideration here – the will to remain seems there regardless of the UK leaving the EU and this is discussed further at the end of this article.
Replacing an onerous system
The current patent system requires that an individual inventor or company validates its patent in every European state in which it requires protection. This process can be very time consuming and incredibly expensive, the legal fees charged for validation alone can be extortionate, with translation costs and application fees to also consider. Equally, if there is a challenge to the validity of the patent across the various member states then legal action must be brought and defended separately within each member state.
It is not hard to envisage that this course of action could become very complex and would need legal expertise in each applicable Member State. Equally it is easy to see how this again can be incredibly time consuming, and prohibitively expensive – and a significant challenge for individual inventors. In addition, remedies available in the member states can also differ leading to a lot of uncertainty for individuals and companies.
Unity and simplicity
The concept of the UP is to simplify the system and to minimise the costs to the applicant and provide greater uniformed protection across all member states, which could be 26, if they have all ratified the UPC Agreement. The renewal process is also simplified, with the UP providing a system which will allow for the payment of one single renewal fee in a single currency.
Transfers, licensing agreements and other rights associated with patents would also be simplified, managed by the EPO only. It is argued that litigation is perhaps the greatest advantage of the UP, reducing complexity and cost, with the proprietor only needing to fight its battle in one court, with remedies consistently applied.
Increased threat from patent trolls
Whilst centralising patent protection to the UPC has its obvious advantages, the process could have an unexpected consequence. A proprietor may find its patent under threat across multiple member states at the same time. Whereas previously the validity of a patent had to be challenged in each member state and a decision on the validity made individually.
Under the new system a proprietor could find themselves having their patent invalidated across all member states from one decision made by the UPC. This issue has led to a number of high profile companies objecting to the UP as it could increase the threat of Patent Trolls, whereby a Patent Troll uses patent infringement claims and the legal system to make a profit and has no intention of using the patent to develop a service or manufacture goods. The threat is often so severe that the company will pay substantial amounts in legal costs or settlements to try to mitigate the action.
Previously, Patent Trolls would need to launch a legal challenge in each member state which could be time consuming and expensive and to some extent may have deterred this type of activity. However, as the new system simplifies the whole process a Patent Troll can launch a single action in the UPC which, if successful, could invalidate the patent held by an individual or company throughout all member states at the same time. Patent proprietors could feel more threatened by this and be prepared to settle the costly demands of the Patent Trolls to prevent the action going to court.
Costs could increase
Another issue that needs to be considered by the proprietor of a patent is whether a UP is cost effective, especially if it is a company that owns the patent. Although we have seen that the cost of a UP should be generally less expensive than validating a patent in all individual member states, a patent proprietor should consider whether there is a real requirement to have the patent validated in each state.
For example, a company may not require patent coverage throughout Europe or may regularly allow patents to lapse depending on how a market performs. In this instance having a UP will not allow a company as much flexibility that individual territorial patents would allow. A company may find that a UP costs more to maintain as traditionally it only tends to renew in a couple of member states which under the old system would be cheaper than under the UP system, which allows for much widespread coverage.
Another cost issue that needs to be considered, particularly when the UP system first comes into operation, is that only those member states that have ratified the UPC Agreement will be able to operate this system. Therefore, a company applying for a UP may not be able to secure the widespread coverage it had hoped for. It will need to carefully weigh up the results of its cost-benefit analysis before deciding whether to apply for a UP.
Patent proprietors, especially companies, will need to consider issues that could arise where a patent is owned by more than one person, especially where the owners come from different European countries as different national laws may apply when the companies or proprietors want to utilize the patent protection.
It is also worth considering the fact that not all patent applications made within Europe will qualify for UP protection. Companies or proprietors should carefully consider all the territories that they require protection for. As previously stated not all member states will be included when the system commences, so the UP will not be valid for those member states. In addition states that are not members of the EU will not be part of the system – for example Switzerland.
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The impact of Brexit
With the UK entering a period of uncertainty with regards to Brexit it is unclear what effect this will have on Intellectual Property rights. As an example any UP granted prior to the UK leaving the EU will not be valid for the UK from the date the UK leaves the EU. The UK has tried to address this issue and the UK government has reiterated and highlighted the importance of patent protection and the UK’s continued involvement in the UP and the UPC post Brexit. The will to remain involved is there, although clearly there will need to be a review of the system to reflect the change in legal status of the UK and the other member states.
In theory, the Unitary Patent and the Unitary Patent Court appears to offer a simple solution to a very complex issue. The application, validation, renewal and litigation processes have all been simplified and harmonised with the view of providing better and more flexible protection to patent holders.
However, as we have seen there are areas where the UP could cause more significant problems such as the apparent encouragement for Patent Trolls to target patent holders. In addition, the apparent cost saving benefits may not be as significant as expected, with coverage not being as widespread as thought. In order to be a true Unitary Patent system all European member states will need to ratify the UPC Agreement and, only then will it become clearer whether a “simple idea” can become an effective one.