European Unitary Patent And Court Becomes Reality

A years’-long struggle ended Tuesday when the European Parliament overwhelmingly backed the creation of a unitary EU patent and patent litigation court system. The vote followed Monday’s approval by the Council of Ministers.

But hard feelings over a last-minute government compromise, and continuing concerns about whether the new regime will make patenting in Europe cheaper and more accessible to smaller enterprises, continued to rankle. The European Court of Justice (ECJ), meanwhile, appears headed toward rejection of a legal challenge by Italy and Spain, who have refused to join the unitary patent system.

The Council and Parliament agreed on a package that consists of a regulation creating a European single patent through “enhanced cooperation” of 25 of the 27 member states (Italy and Spain aren’t participating); a separate regulation setting up a language regime for the patent; and an international agreement among 26 EU countries establishing a single, specialised jurisdiction to hear patent cases.

The compromise, made without input from Parliament members, “poisoned” the issue, said Bernhard Rapkay, of Germany and the Socialists and Democrats, who wrote one of the legislative reports on the single patent proposal. He accused the Council of gutting the ECJ’s power to enforce the patent regulation in order to lessen Parliament’s decision-making role, a claim denied by Internal Market and Services Commissioner Michel Barnier during the pre-vote debate. The EU high court will have the final say on interpreting patent protection and on language translation issues, Barnier said Tuesday.

Many legislators said the unitary patent will cut application and translation costs, and give inventors more legal certainty. Small businesses will have more access to patent protection, said Raffaele Baldassare, of Italy and the European People’s Party (EPP), another of the three rapporteurs for this issue. He criticised the Council’s “inappropriate” behaviour but said lawmakers decided to compromise to avoid an inter-institutional squabble.

Other members also slammed the Council. Its decision to remove three provisions that fell within parliament’s joint decision-making powers showed a “cavalier approach” to co-legislation said Evelyn Regner, of Austria and the Socialists and Democrats. Those provisions, removed “at the behest of Mr. [UK Prime Minister David] Cameron,” mean Parliament has given up its chance to have an impact on the new patent system, said Eva Lichtenberger, of Austria and the Greens/European Free Alliance. The system will be more complex, with higher litigation costs, she said.

But others said it is about time the EU finalised a unitary patent regime. The project was a “perfect example of what is so wrong with Europe” because it took 40 years to complete despite the screaming need for a single EU patent, said Sajjid Karim, of the UK and the European Conservatives and Reformists Party. The regime will be a “milestone” in the completion of the EU single market, said Angelika Niebler, of Germany and the EPP.

“Enhanced Cooperation” Upheld

Spain and Italy opted out of participation because of the translation agreements, the Council said in conclusions following its December 10 vote on the patent package [pdf]. Patents will granted for the time being in only French, German or English, it said. Spain has also decided not to take part in the unified patent court agreement, it said.

Both countries challenged the “enhanced cooperation” basis for the agreement on several grounds, ECJ Advocate General Yves Bot wrote in an 11 December opinion. They alleged that the Council lacked the authority to agree on enhanced cooperation because creation of a unitary patent falls within the EU’s exclusive jurisdiction to set competition rules necessary for the functioning of the internal market. Bot disagreed, writing that although rights arising from a patent affect trade and competitive relationships within that market, that alone doesn’t mean they relate to competition rules.

Bot also rejected the claim that the Council misused its powers. Governments decided on enhanced cooperation because they couldn’t agree on patent language arrangements, so made use of a tool available to them under the EU treaties, he said. Spain and Italy also argued that enhanced cooperation does not respect the EU judicial system, but the court advisor said Council’s authorisation for setting up the agreement is just the premise for the adoption of other laws to give specific effect to that cooperation.

Enhanced cooperation must be a “last resort,” when goals pursued can’t be achieved within a reasonable time by the entire EU, Bot write. The ECJ can only review whether the Council carefully and impartially examined all the issues relevant to making that determination, he said. In this case, there’s no manifest error of assessment, he said. Bot recommended that the high court reject all the arguments and dismiss the cases. The ECJ isn’t bound by the opinions of its advisors but generally follows them.

Is Unitary Patent as Good as it Sounds?

If a small or mid-sized enterprise wanted to validate a patent in all 25 participating states, or a large majority of them, the new system “is likely to entail a cost advantage and perhaps the availability of a wider geographic scope for that cost will encourage more SMEs to seek protection on that wider basis” in order to derive income from new markets in Europe, said Hogan Lovells (London) patent attorney Daniel Brook. But if an SME seeks protection only in a few countries – for example, an English company that does business in the UK and Germany – the new set-up offers nothing more on the prosecution/procurement side, and parties are likely to continue seeking patent protection only in those key countries, not through unitary patents, he told us.

Whether the patent court system offers any advantages is harder to predict, Brook said. The costs are unknown but are likely to be higher than most individual national patent actions currently cost on the continent, he said. The possibility of forum-shopping inherent in the new system – there will be courts in Paris, London and Munich – may mean SMEs are embroiled in litigation outside their home courts with attendant language and travel issues, he said.

The upside of the new court system is the potential for a single decision that resolves a patent matter EU-wide, Brook said. “That said, not many SMEs are involved in multi-jurisdictional litigation at present, so for them that benefit is unlikely to be great.”

But the Association for Competitive Technology (ACT) industry group said a single patent system will give innovative entrepreneurs a way to become major contributors to Europe’s sustainable economic recovery. Small players will have more exposure to national markets, and standardised and harmonised patent law will give them more legal certainty, said President Jonathan Zuck.

The European Patent Office welcomed the adoption of the unitary patent, saying it puts Europe on a par with its competitors in Asia and the US. Under the scheme, the EPO will be in charge of centrally administering the patent, levying the annual renewal fees and distributing them to the participating EU member states.

Many open questions

The agreement must be ratified by nine member states including the UK, France and Germany, Brook said. Given the views voiced by stakeholders, “that may not be a foregone conclusion.”

At the 10 December Council meeting, Poland expressed concerns, and in Parliament, Janusz Wojciechowski, of the European Conservatives and Reformists, said he would vote against the proposal because Polish academics and scientists believe it’s more costly to SMEs.

Another concern is whether the court system and agreement and regulations will be challenged in the ECJ, either by Spain or Italy once the documents are final or by unwilling court litigants wanting to slow down the process – and whether they’ll be found to comply with EU law, Brook said. Some academics called for an ECJ review earlier this year “but that appears to have fallen on stony ground,” he said.

There is also a large number of practicalities to work out, including the judges, infrastructure of the patent registry and courts and costs, Brook said. Rules of procedure must be finalised, as must the ability of the new Court of Appeal, to be seated in Luxembourg, to ensure that the court system is harmonised regardless of which division is being used, he said.

Governments will have a draft international accord for the patent court system ready in February, said Loucas Louca, justice and public order minister for Cyprus, which holds the current EU Presidency.