by | May 11, 2021 | Patents

On 25 March 2021 I took part in the Matinal IP & Competencia conference that is held once a month by the Competition and Industrial Property Law Section of the Barcelona Bar Association; this one was called “Legal problems related to the Agreement on a Unified Patent Court”. I attach a link to the presentation: Matinal ICAB – UPC (2021)

I would like to take advantage of the opportunity of this blog to briefly summarise some of the issues that I studied in order to prepare my speech. I will also refer to the regulatory package included in the UPC system, the European patent with unitary effect and the IP Action Plan published by the European Commission on 25 November 2020 [COM(2020) 760 final] which was partly the reason for my study.

The Agreement on a Unified Patent Court is an international treaty the validity of which has been made subject to the regulatory package related to the European patent system with unitary effect, mainly consisting of Regulations (EU) No 1257/2012 and No 1260/2012.

In general terms, this system envisages that European patents, in other words those granted according to the EPC and the EPO, will have unitary effect in all the Member States that belong to the system, among which Spain is not currently included, which I think is the right decision. These patents will only be drawn up in English, German or French and the national courts will no longer be competent for disputes between individuals related to such exclusive rights instead a supranational body will be granted competence for such purpose, the UPC, which will neither be a body of the EU.

In this respect, the European patent system with unitary effect and the UPC coming into force are among the proposals included in the IP Action Plan.

The Commission points out that the current system is fragmented and complicated, which is not beneficial, according to its explanations, to innovative EU companies being allowed access to fast, effective and affordable protection instruments and it will also ensure a regulation that is fully in accordance with the needs of the new ecological and digital economy.

The solution proposed in the Commission’s Action Plan is to launch the unitary patent system. According to the Commission, this system would simplify patent rights being granted, since a patent would be obtained with unitary effects that could encompass up to twenty-five Member States and the costs to obtain and maintain it would be lower. Moreover, regarding disputes, the Commission suggests that the fact there would only be one court, the UPC-Unified Patent Court, should enhance legal security, avoid parallel proceedings being filed in numerous Member States and would considerably reduce court costs. In this way, the Commission Action Plan defines the unitary patent system as being a key instrument for the industrial recovery of the EU, in particular for the renewable energy, aerospace, defence and mobility ecosystems and it even ventures to suggest that it could begin operating in 2022.

However, the Commission’s enthusiastic proposal is not without serious problems in its content that require an in-depth and composed reflection and perhaps an approach should be adopted that is different to the system proposed in the aforementioned regulatory package.

I consider the following problems that could be highlighted here:

1. All the advantages of the system are based on a presumption that is not entirely true from a statistical standpoint, which is that anyone that intends to obtain a patent in the EU wants it for all the countries in the EU and the disputes related to such patents are filed in the jurisdictions of each and all of such countries in the EU or most of them. This presumption is not in accordance with the real situation and in practice it could imply, a priori, that what seems like a cost saving device however actually is not. It should be recalled that, among other things, access to the UPC would not be free of charge instead there would be some fixed and variable fees that not everyone will be able to afford (depending on the economic value of the action) and that would also be higher for revocation proceedings than for those related to infringement.

It also seems that the consideration explained by the Commission is only from one point of view, the one of the proprietor of the exclusive right. However, no analysis has been conducted from the standpoint of competition, the difficulties for competitors to access the UPC or the possibility of needing to face an even more complicated framework for patent rights, precisely stemming from the facilities provided by the system, which would not require any approval whatsoever when patent rights are granted with effects in the Member States of the UPC. It is neither analysed from the perspective of the impact it could have on citizens’ access to competitors’ products due to the deterrent effects implied by the system for SMEs.

2. The system will mean an absolute transfer of substantive and judicial legal competence regarding patents, mainly related to their validity and infringement, to a supranational body, the UPC. Certain matters of a private law nature are withdrawn from the competence of the Member States without the EU being an institution holding competence for them; therefore neither will the CJEU be competent, because such competence will be assigned to a supranational body that is outside the Member States and the EU. Therefore, the Member States will give up their control to regulate fundamental aspects related to a matter that is of undisputable importance for their economic policies.

3. The United Kingdom is one of the Member States that has shown to be most in favour of the system, taking part in its enactment and housing one of the sections (in London) of the Central Division of the UPC, and the one that would deal with some of the most crucial matters with the greatest impact on the health policies of the Member States, the validity of patent rights for chemical and pharmaceutical products. However, the UK withdrew its ratification instrument of the Agreement on 20 September 2020 as a result of Brexit. The suitability of the system without the United Kingdom being involved should be reconsidered since it is one of the countries with the greatest tradition regarding patents and whose courts, which enjoy high international prestige and repute related to patents, will continue creating case law that will not necessarily be in line with that of the UPC.

4. It should be analysed from the standpoint of international law whether or not the United Kingdom withdrawing its ratification instrument, which took place on 20 September 2020, is valid and effective (Article 56.1 of the Vienna Convention on the Law of Treaties-CVLT). Otherwise, this could finally bring the UPC project to an end since, due to the United Kingdom needing to be a party thereto, there would be no doubts about its consideration as an international court; therefore contradicting Opinion 1/09 of the CJEU.

5. Due to the withdrawal of the United Kingdom from the UPC, it must still be analysed whether or not the AUPC could come into force without the United Kingdom, which apparently could not happen according to Articles 89, 7.2, Annex II of the AUPC and the interpretation of the Treaty, within the scope of Article 31 of the CVLT. Any amendment to the AUPC must be unanimously agreed by all the signatory Member States. From the standpoint of the EU, this required unanimous decision could be used to be able to reconsider whether or not the system, as it is currently planned, is suitable or if other alternatives should be found, such as the one planned for disputes related to EU trade marks and designs.

6. Not only do the United Kingdom and Spain not belong to the system, but neither do Bulgaria, Poland, Croatia, the Czech Republic or Hungary, the latter due to a decision adopted by its Constitutional Court on 26 June 2018 that ruled the incompatibility of the AUPC with the Hungarian Constitution. On this point we would also like to mention that there are two reports issued by the consulting firms Deloitte (2012) and PwC (2017) requested by the Polish government and the Industrial Property Office of the Czech Republic respectively, which also provided an opinion related to the negative economic impact that application of the system would have on the national industry of such countries. These reports were taken into account when these Member States adopted a decision not to ratify the Agreement.

7. Moreover, the compatibility of the AUPC with the proposals in Opinion 1/09 of the CJEU has neither been resolved. This Opinion issued by the High Court of the EU determined that an international court cannot be deemed competent to apply EU law and replace national courts. According to the CJEU case law, it does not seem that the UPC, as it is currently regulated, can overcome the problems raised in the aforementioned Opinion [The judgement of the CJEU of 4 November 1997 (c337/95), 14 June 2011 (c-196/09) and 6 March 2018 (c-284/16)].

8. The challenges filed in the German Constitutional Court, the BVerfG, both regarding the ratification instrument of the UPC and the functioning of the EPO, another supranational body, could be used as a guideline to identify the problems arising in the aforementioned system and, in whatever manner these may be resolved, are worthwhile being dealt with and considered by the promoters of the AUPC.

Some of the grounds could be a foreboding of future regrets and, among these, the following should be highlighted: The possible unconstitutionality of the agreements that propose the unconditional prevalence of EU law, due to infringing the principles of subsidiarity and proportionality on which the EU is based (Articles 5.1 and 5.4 of the TEU); or the consideration of supranational bodies as courts, instead of being regarded as administrative bodies, whose decisions, in all cases, should be able to be subject to review, the impartiality of such supranational bodies not being guaranteed by the aforementioned international agreements that regulate them and whose decisions affect individual rights and, in particular, fundamental rights (BvR 2480/10, BvR 421/13, BvR 756/16, BvR 786/16 and BvR 561/18).

Regarding point 8 above, it should be recalled that a challenge is currently being processed in the BVerfG against the second ratification agreement of the UPC by the Bundestag. The challenge against the first ratification agreement resulting in unconstitutionality being ruled and took three years to be processed (see our news here).

Two unconstitutionality appeals have been filed in this second challenge. Both appeals must still be admitted by the BVerfG for the relevant procedures. As took place with the first challenge, the BVerfG has petitioned the President of the Federal Republic of Germany to abstain from signing the ratification agreement.

The contents of the appeals in the BVerfG are not yet known. It is only known that the same patent attorney who challenged the first ratification agreement has also filed one of the unconstitutionality appeals (BvR 2217/20), but it is still not known who is behind the second appeal (BvR 2216/20).

Even though Spain does not belong to the UPC system, we know that the Spanish institutions are continuing to be active in their proposal to promote a truly European patent system. Perhaps it is the right time to persevere with this incentive, taking advantage of the United Kingdom’s withdrawal and the consideration stemming from the grounds for unconstitutionality raised in Germany, calling upon the other countries involved so that the patent system in Europe does not become a right that only a few can benefit from.

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