What you need to know and do starting from now.

The Patent system in Europe is changing. Not quite yet, but soon.

  • Starting from sometime between about2015 and about 2016 you will be facedwith new decisions when the EuropeanPatent Office grants your patents. Thosedecisions are therefore applicable to thepatent applications which you aredrafting and filing today.
  • Starting from sometime between about2015 and about 2016 you will be facedwith deciding whether you want all yourexisting European Patents to be subjectto the jurisdiction of a new, untested andpossibly expensive court system.
  • The only way to avoid the new UPCsystem in its entirety will be to filenational applications in EU memberstates. Staring from today, you shouldbe considering making national filingson your important cases which arecoming up to the 12 month Conventiondeadline or the 30 month PCT nationalphase deadline.

The change is the introduction of the Unitary EU-wide Patent (UP) and the Unified Patent Court (UPC). It is a change which has been discussed for more than 40 years. However, for much of that time there was so much

uncertainty as to both the form of the changes and whether or not they would come into force (too many of what Donald Rumsfeld would call "unknown unknowns") that it was futile to worry too much about them. That is no longer the case.

Primary legislation was agreed in December 2012 and February 2013, and we can now make reasonable assumptions as to when the changes will take effect. Although many of the details remain to be worked out, we now know enough to be able to offer our clients and associates practical advice on the subject. This article, which is likely to be followed by updates in due course forms part of that advice.

But don't we already have European Patents?

Since the European Patent Office (EPO) opened for business it has granted more than two million European Patents in accordance with the European Patent Convention (EPC). It is important to realise that the EPC is an international treaty which sits outside the legal framework of the European Union (EU).

Although all member states of the EU are contracting states of the EPC, the EPC has also been ratified by countries such as Turkey, Norway and Iceland that are not members of the EU. A European Patent or "EP" is filed, examined and granted centrally by the EPO in a single language (75% in English, 5% in French, 20% in German).

However after grant the patent splits into a bundle of national patent rights in each of the designated states. Each of those national rights is subject to the individual language requirements of the corresponding designated state. Each of those national rights exists as a separate article of property which may be owned by a different party in each designated state. Each of those national rights are kept in force by payment of separate renewal fees to the patent offices of each designated state. Although there is a 9 month window in which a European Patent may be challenged and, if found wanting, revoked centrally by the EPO Opposition Division, all other litigation, both infringement and revocation actions, must be conducted separately in national courts for each of the designated states.

The good news is that the familiar EPO will grant Unified Patents in the same way as it grants "classic" European Patent today.

However under the forthcoming system, following grant patent proprietors will be required to choose between covering at least

some EU-member states with classic European Patents or Unitary Patents.

It looks very likely that the changes will finally happen. The EU politicians certainly think that they have completed their task and that all that remains to be sorted out are mere details which can be safely left to the technocrats in the European Commission, the judges in the courts and the users of the system. The final Agreement was signed on 19 February 2013. That Agreement needs to be ratified by 13 of the 26 signatory states (including the UK, France and Germany as major patenting countries) for the new system to come into effect in those states which have ratified.

The European Commission have said that they

expect the new system to be up and running by 2014. This is widely thought to be overly optimistic both because ratification is expected to take a while in many countries (Denmark and possibly Ireland may need to hold a referendum on the changes), because amendments will need to be made to the Brussels Convention Regulation which regulates civil law jurisdictions within the EU, and because it will take time to set up the court structures and train the judges.

Most commentators expect the new system to be up and running within 1 to 3 years from now (June 2014).

The Unitary Patent system has been carried though the EU legislative machinery using the "enhanced cooperation" mechanism. This allows a majority of countries to proceed to agreement leaving behind those countries who wish to opt out. At present, Italy and Spain have opted out of the Unitary Patent Regulation and Spain has opted out of the Unified Court Agreement and so they will not be part of the new system unless their national policy changes. They are both challenging the legality of the use of enhanced cooperation and there is a chance that the Court of Justice of the EU (CJEU) will find one or both of the pieces of legislation illegal. However the chance of that happening is considered to be very low, especially as we now have the preliminary opinion of the CJEU (the Advocate General's opinion) which is favourable and unlikely to be overturned in final judgement.

How will the Unitary Patent Work?

The route to a Unitary Patent (UP) will begin with the current system for European Patents (EPs), with examination and grant of a European application (EP application) by the EPO. Applications may be filed directly at the EPO or via the PCT. There will be no need to indicate that a UP is required until shortly before grant by the EPO. At that point there will be on option for the applicant to indicate to the EPO that they wish the European Patent which the EPO proposes to grant, to be treated as a Unitary Patent in those European States that have ratified the Unified Patent Court Agreement. The Application will then be granted as a UP in those countries and as a bundle of national European applications in other states. Both the EP and UP parts of an application granted by the EPO will be subject to the EPO's usual opposition and post-grant amendment provisions as contained in the European Patent Convention (EPC).

According to the rules as they currently stand,

Applicants will be able to proceed as they do now and tick the box for the European Application to become a bundle of national European Patents. If that is done then the validation requirements of each state will need to be met, translations filed as required, and annual renewal fees paid to each contracting state. Such a route may be attractive to Applicants who require protection in only a few states, especially if those states are members of the London Agreement on translations and consequently have little or no requirements in respect of the filing of translations.

If the Applicant ticks the box for the European Application to become a Unitary Patent, then protection in those European Union member states that have ratified the Agreement and are in the new system (and there will be at least 12 to start with) will be via the Unitary Patent route. Patent protection in countries which are not in the Unitary Patent system, both EU member states which may join at a later date and non-EU member states with can never be in the UP system unless they also join the EU, will be obtainable from the granted Application as a national right via the normal validation route. What will not be allowed is a pick-and-choose approach to which states you wish to cover with your Unitary Patent. When you choose the UP route, your UP will cover all of the states that are in the UP system at the time of grant. Double protection from a single application will not be allowed, so you will not be able to cover say, France with a UP and an EP (FR)

What will the requirements for a UP be?

A Unitary patent will be granted in English, French or German because those are the three official languages of the EPO. The transitional provisions of the Language Regulation states that if the UP is granted in French or German, then on grant a complete translation into English must be filed.

If the UP is granted in English, then a translation into any other language of another state of the EU must be filed. Factors which may influence an Applicant's choice of translation language include cost (some translations are cheaper than others), the language of the court in which litigation is likely to take place and the language of the defendant in any anticipated litigation. Some

Applicants may already have a suitable translation available. For example, an Applicant with a corresponding Brazilian patent may already have a Portuguese translation, and many applicants will have prepared a Spanish translation in order to validate the patent in Spain outside of the Unitary system.

After grant a unitary patent remains in force as a unitary right with a single owner. A single annual renewal fee will be payable to the EPO.

So, do you want a Unitary Patent?

From a cost perspective the difference between obtaining and renewing a Unitary Patent versus a bundle of national EP patents will turn on how many states you usually validate your EP patent in.

If you normally choose only a handful of states for EP validation, especially if those states are members of the London Agreement (for example, GB, FR, DE, NL) then the Unitary Patent system is unlikely to save you money. For Applicants who validate more widely, obtaining a UP rather than a bundle of national EPs is likely to be cheaper

A more important question for many applicants will be how they view the Unified Patent Court. Do they see the UPC as putting their European patents at risk of central revocation or as a welcome opportunity to enforce patents in many states via a single court action?

The UPC court is discussed below. Continuing to validate patents coming out of the EPO as "classic" EPs may seem like a way of avoiding the jurisdiction of the new court. However, as explained below, classic EPs will also fall under the jurisdiction of this new court although there are time-limited opt-out provisions for classic EPs which are not available for Unitary Patents.

The Unified Patent Court

The Unified Patent Court is a single court to be set up to hear disputes concerning Unitary Patents in Europe. In order to ensure that the court has sufficient business it will also, subject to transitional opt outs, gain jurisdictions over classic European Patents in so far as they cover EU member states that have ratified the UPC Agreement.

Although described as a single court, in reality the UPC will be split over many sites, use different languages and be presided over by various combinations of patent judges drawn from the national judiciary of ratifying states.

Much of the work, including most revocation actions and all requests for declarations of non-infringement will be carried out by the UPC's Central Division (CD). This will be split between London, Munich and Paris with patents relating to pharmaceuticals, chemistry, metallurgy and human necessities (IPC classification classes starting with A or C) being assigned to London, Patents relating to mechanical engineering, lighting, heating and weapons (IPC classes beginning with F) will be assigned to Munich. Patents relating to everything else, including Telecoms will be assigned to Paris.

There will be a Court of Appeal in Luxemburg together with limited grounds for referral to the existing European Union Court of Justice (EUCJ).

Luxemburg will also be the location of the Court Registry although it is planned that all of the Registry's work will be carried out remotely via an electronic filing system.

The Central Division will also handle many but not all actions for infringement. Infringement actions may also be begun in either a Local Division (LD) or Regional Division (RD) which covers a territory in which the infringement takes place or where the defendant is domiciled.

Local Divisions will be set up in countries having sufficient business to support them. They are expected to be in London, Paris, Germany and possibly Italy.

Regional Divisions will be set up by groups of countries which have a sufficient number of cases to support a court only when their cases are combined. Sweden, Lithuania, Latvia and Estonia have concluded an agreement to set up a Regional Division in Stockholm using English as its language. Two or three further Regional Divisions are expected.

Which language will the Court Divisions use?

The Central Division will use the language of the Patent which will be English 75% of the time, German 20% of the time and French 5% of the time.

Local Divisions will use the language of the host state unless the Local Division decides to adopt English, French or German. They may also work in the language of the Patent (English, French or German) at the request of the parties.

Regional Divisions will be able to choose a language from the states which come together to form the Regional Division, unless they choose to adopt English, French or German. The Baltic states and Sweden have chosen English as the language of their Regional Division.

Regional Divisions will also be able to work in the language of the Patent (English, French or German) at the request of the parties.

Appeals will be held in the language of the first instance and the Registry will be multi-lingual thanks to the promised IT system.

Far from leading to litigation in the babel of EU languages as had been feared, it appears that the UPC system is likely to operate mainly in English, French and German. Based on subject matter split, it expected that 5 to 10% of Central Division business will take place in Munich with the remainder more of less equally split between London and Paris.

Who will preside over the courts?

Unless the parties agree for a case to be heard by a single judge, all first instance court Divisions will be presided over by a panel of three or four judges.

In the Central Divisions that will consist of two legally qualified judges of different nationalities joined by a "technically qualified" judge. The identity of these "technically qualified" judges is unclear, but it has been suggested that they be drawn from the ranks of the EPO's Boards of Appeal.

In Local Divisions courts will be presided over by one or two local judges and one or two foreign judges seconded to them to give a total bench of three.

Regional Divisions will have two regional judges joined by a foreign judge.

Local and Regional Divisions may be supplemented by an additional technically qualified judge drawn from a central pool at the request of the court or one of the parties.

The Court of Appeal will consist of three legally qualified and two technically qualified judges.

All judges will receive training and it is hoped that this together with the movement of judges been Divisions will dilute national differences over time.

Court fees and other costs

The UPC is to be funded by its users via court fees. This is in contrast to some national patent courts at the moment. We do not yet have a schedule of fees but given the start-up costs and a system which uses panels of multiple judges, it is expected that the costs to be passed on to users will be significant.

It has been agreed that the fees will be proportional to the value of the dispute. It is therefore difficult to see how cross-subsidy to smaller parties from big pharma and the likes of Google and Apple will be avoided.

However, there may be cost savings due to the reduction in opportunities for parallel litigation and more efficient procedures due to active judicial case management.

What will the UPC be like?

The rules of procedure of the UPC are still in draft. They are an attempt to meld together UK common law and diverse continental civil law traditions. Key features include a procedure which encourages active judicial case management including the holding of an interim case management conference and which requires the parties to put their full case forward in writing at an early stage. There will be no automatic right for parties to cross examine witnesses although witness evidence is likely to be required to be submitted at an earlier stage of the proceeding, possibly during pre-trial witness hearings.

There are provisions for parties to appoint experts and for the Court to appoint experts although the Judges have a great deal of flexibility in how they interpret those provisions. It is expected that, rather like proceedings before the EPO Opposition Division, the procedure will be mainly carried out on paper culminating in a short oral hearing.

We believe that UK Patent Attorneys will be well placed to operate in the new Court due to their experience of both EPO Opposition hearings and the English Patents County Court which has consciously revised its rules of procedure to bring them close to how the UPC is expected to operate.

Forum shopping

One of the justifications for setting up the UPC was that it would reduce opportunities for forum shopping. By that measure the UPC Agreement would appear to have failed.

A pre-emptive revocation action or an action for a declaration of non-infringement must be brought at the Central Division so a party wishing to pre-emptively clear a patent out of the way has no choice of Division. A Patentee wishing to launch an infringement action will be able to choose between launching an action in a division determined by either the location of the defendant, the location of the alleged infringement or, subject to their being an allegation of infringement in three or more states, in the Central Division. Infringement actions may also be brought in the Central Division if the defendant is domiciled outside of the EU (or in Spain which is outside of the UPC Agreement) or domiciled in an EU-state which does not have a Local or Regional Division.

Thus, the Patentee has some scope to select a more "patent friendly" court and competition between courts for business may occur. Furthermore, it seems that a Patentee is unlikely to find him- or herself dragged off to an obscure Local Division and forced to defend their patent in an unfamiliar language unless he or she decides to permit that to happen by launching an infringement action in the Local Division first.

Counterclaims for revocation brought at a Local Division in response to an infringement action will at the judges' discretion be heard alongside the claim for infringement or sent off to the Central Division. This gives some scope for bifurcation of cases where the infringement action is heard in the Local Division and the validity action decided by the Central Division.

There are various rules concerning acceleration and the point at which the bifurcation takes place which are aimed at mitigating the drawbacks of bifurcation.

Opting out

All Unitary Patents will be subject to the exclusive jurisdiction of the UPC.

But there are currently about 600,000 classic European Patents in force and when the UPC

comes into being these patents, or at least the parts of them covering member states of the EU that have ratified the UPC Agreement will automatically also fall under the jurisdiction of the UPC unless the Patentee files an opt out request at the UPC Registry. Our advice at the moment would be for patentees to exercise their right of opt-out because they will be free to opt back in to sue if they choose unless a national court action has already started. The right of opt-out exists for the first seven years of the Court. Beyond that time period it is unclear as to whether an opt-out will be available (the Article of the agreement granting the opt-out is unclear as is whether the opt out period will be extended). It is now reasonably clear that once opted out a patent will remain opted out for its entire life (unless deliberately opted back in)

What should I do now?

We can provide you with more details of the UPC, its rules of procedure and its costs and risks in due course as and when more information emerges. It is likely that for many applicants, the addition cost of opting out and the potential savings on paying a central renewal fee will be the determining factor. Those fees amounts have yet to be set.

Applicants should also remember that they have the option of filing ex-PCT national applications (for example UK national applications) and that such applications will be completely untouched by the UPC.. A UK national patent is relatively quick, straightforward and cheap to obtain and is granted by a Patent Office which does a full examination but which is generally regarded to be patent-friendly.

When filed and prosecuted alongside a European Application, a service which Abel & Imray is able to offer because our Attorneys are dual qualified, a UK national application can offer significant piece of mind at a relatively modest incremental cost.

Keep up to date

It is expected that more information about the Unitary Patent system will emerge in the coming months. There are a number of ways in which you can keep up to date with developments:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.