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What is the Unified Patent Court? Litigation department
31 March 2016

On February, the 25th, the Preparatory Committee for the Unified Patent Court (UPC) published the rules on Court fees and recoverable costs before the UPC, which – contrary to French courts – will be self-financed, meaning that the claimants will have to pay a fee (we will study the mechanism below). For many, the UPC remains difficult to process in a simple way and the objective of this newsletter is to cover a few key notions.

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• A European Court having jurisdiction for European patents

The UPC is provided for by the Agreement of 19 February 2013 which was signed by 25 Member States of the EU in the context of enhanced cooperation. It is a jurisdiction that most Member States will have in common (Croatia, Poland and Spain do not take part because they did not sign the agreement) but it is not a community court; however, it will be subject to Union law and to the European Court of Justice.

The UPC will have jurisdiction over the incoming unitary European patents (created by (EU) regulation 1257/2012 which will enter into force at the same time as the UPC) as well as over all European patents. However, holders of European patents (with no unitary effect) will be given the choice to remain under jurisdiction of National Courts by excluding jurisdiction of the UPC during the first seven years starting when it enters into force. This is the “opt-out” mechanism, which will not be subject to taxes.

• What will be the impact of the UPC in patent litigation?

At the moment, patent litigation is not unified in Europe, to the difference of the United States. This means that it is not possible to seize a single European Court to request invalidation of a European patent: it is necessary to go before as many National Courts as there are Member States in which the invalidation of the patent is sought. This is the same for infringement since Member States do not have jurisdiction over infringement facts committed on the territory of another Member State. This has advantages (a national patent case is generally cheaper and bears less risk) but also disadvantages (acting everywhere in the EU can be very expensive in particular in respect with translation costs and National Courts may contradict one another).

The objective of the UPC is to unify this litigation: it will be possible to seize the Court having jurisdiction to obtain the invalidation of a patent on the territory of all participating Member States, or a verdict against an infringer (no matter where the infringement took place).

• How will the UPC be organized?

The UPC will have a Court of first instance and a Court of appeal.

The Court of first instance will be subdivided into two bodies. A single central division will have jurisdiction essentially over validity of European patents, non-infringement actions and concurrently over infringement actions if the defendant is established outside the territory of a participating Member State or if there is no local/regional division in the Member State where the infringement took place. This central division will have its seat in Paris and sections in London and in Munich. Cases will be dispatched among those three places according to the relevant technical field: London will have jurisdiction for the most part over metallurgy and chemical patents, including pharmaceutical patents; Munich will have jurisdiction over heavy industry (mechanical engineering, weapons, heating, etc) and the Parisian seat will have the broadest jurisdiction (textile, physics, electricity, including telecom patents, etc).

The UPC will also have local/regional divisions: each Member State will be able to have (at least) one or to join other Member States to have a single regional division. Their jurisdiction will mainly be over cases of infringement committed within their territory as well as patent invalidation counterclaims. Paris will have a local division separated from the seat of the central division.
The Court of appeal will be a single body located in Luxembourg.

• What will be the practical consequences for companies?

Although the objective of the UPC is to unify patent litigation, there will probably be a relatively clear difference among cases before the central division and cases before the local divisions.
Before the central division, it should be borne in mind that the validity of a patent will be decided in a single case for the entire EU (except Croatia, Poland and Spain). This means that the stakes of a validity case will be more important than those of a national case, even though appeals will be possible.

For infringement cases, each State will have the choice to have its own local division and national particularities will probably be important, in particular in the first years. As long as infringement facts will span across the territory of several divisions (notably on the Internet), it will be necessary to assess the practice of each one of these divisions and to select the division most favorable to the claimant’s interests, even if this means bringing a case in a foreign language. Forum shopping will likely be important, all the more because local divisions will have jurisdiction over patent invalidation counterclaims.

It should be noted that the language of the proceedings will not automatically be the language of the relevant Member State. Before the central division, the language will essentially be the language of the patent (namely one of the three official languages of EPO, English, French and German). Local divisions will probably have several different possible languages, with various rules to elect one of them. For example, the French local division will exercise in French and in English.

In respect with the cost of a trial, although it will certainly be less than proceedings before several national courts, it should be superior to the cost of a French trial, notably because the budget of the UPC will for the most part be borne by the parties. The claimant will have to pay a fixed fee depending on the nature of the action (€20.000 for an invalidation action, €11.000 for an infringement action, etc). This fee will also apply to counterclaims. The claimant will also have to pay a value-based fee for actions exceeding a value of €500.000, whose amount will vary between €2.500 and €325.000 (maximum if the value of the action is more than €150 million). These fees shall be paid once per action, no matter the number of claimants or patents; a portion shall be paid back in case of withdrawal or settlement (the percentage depends on the state of the proceedings).

It should be noted that small and micro-enterprises will be able to get a 40% reduction on the total fees.

These fees, along with representation costs, shall be recoverable, but there will be ceilings whose amount will depend on the value of the proceeding (between €38.000 for a proceeding of €250.000 and €2 million if the value of the proceeding is more than €50 million).

• When will the UPC become operational?

The UPC will enter into force as soon as the Agreement of 19 February 2013 will be ratified by at least 13 signatory States, including the three Member States in which the highest number of European patents had effect in 2012, namely France, Germany and the United Kingdom.

In March 2016, 9 States already signed the Agreement including France: there are still four Member States needed, including Germany and the United Kingdom. It is expected that the remaining ratification take place during 2016 so that the UPC enters into force in February 2017, at the earliest.

These expectations may however be challenged depending on the result of the referendum planned in June 2016 in the United Kingdom, on Brexit. If the UK was to exit the EU, this would not prevent the Agreement to enter into force (the UK would be replaced by Italy as the third country having the highest number of patent having effect in 2012), but it would require a renegotiation of the Agreement on the UPC, because London is expressly designated to have a section of the central division of the Court of first instance. In this instance, the entering into force of the UPC would probably be delayed, perhaps for several years.

A faster solution would be for the United Kingdom to ratify the Agreement before the referendum of next June, which would allow for it to enter into force in the contemplated timeline. In case of Brexit, this would give time to find appropriate solutions to replace the London section (for example by Milan) in the context of a global negotiation for the exit of the UK.

This solution is not unrealistic since the first ratifying instrument was approved by both chambers of the British Parliament on 10 March 2016, meaning the only things now needed are the royal approval and a second ratifying instrument.

 

Michel ABELLO & Guillaume DUBOS

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