Patently impossible? An update on recent developments in respect of the Unitary Patent and Unified Patents Court (UPC)

The future of the European Unitary Patent Package has been a hot topic in patent circles since the UK referendum resulted in a vote to leave the EU.  More information about the package, made up of the unitary patent and unified patents court, can be found at our dedicated webpage here, including a summary of the system here.

In brief, the system is intended to provide Patent Proprietors pursuing applications through the European Patent Office with the option of a patent which is a single, indivisible right covering all of the participating member states (the unitary patent), and a single court with jurisdiction for infringement and revocation actions in this regard and ultimately also with regard to patents issued under the existing “classical” system as a bundle of independent national rights in respect of individual member states (the unified patents court).

The Unitary Patent Package will enter into force on the first day of the fourth month after ratification by thirteen signatories, which must include the three member states in which the highest number of European patents had effect in the year prior to signature of the Agreement – at present these are the UK, France and Germany.  Some provisions enter into force early, during the so-called “sunrise period”, which starts on the first day of the first month after the necessary number of ratifications.

Earlier this month, the Netherlands became the eleventh signatory to ratify the UPC Agreement, following ratifications by Bulgaria and Finland earlier this year.  Italy is also close to ratification.  This means that, in theory, all that remains for the Agreement to enter into force is ratification by Germany and the UK.

Both of these countries have taken steps towards ratification, including producing at least draft versions of the necessary national legislation.  However, the UK referendum result has signalled an end to the UK’s intention to remain a “permanent” member of the EU, and this has created uncertainty in relation to the future of the Unitary Patent Package.

The consequences of a signatory to the UPC Agreement leaving the EU after ratification and/or entry into force of the Package are not explicitly set out in the Agreement, and there has been much debate around this issue, and in particular the questions of whether the UK could legally continue to participate in the system, whether the chemical & pharmaceutical branch of the Central Division of the UPC could still be located in London, and what would happen if the UK ratified the agreement and then left the EU.

The IP Federation, the Chartered Institute of Patent Attorneys (CIPA) and the IP Lawyers Association have engaged English barristers Richard Gordon QC and Tom Pascoe to advise them on a number of questions relating to the legal consequences of “Brexit” in respect of the Unitary Patent Package, and their opinion has recently been published.  The full opinion can be found here.

In summary, it was concluded that for the UK to participate, or continue to participate, in the unitary patent and UPC after leaving the EU would require an international agreement with the EU and participating member states.

Such an agreement would only be legally enforceable if EU constitutional principles were protected – in other words, the UK would be required to accept the supremacy of EU law in its entirety in respect of patent disputes before the UPC. This would include, for example, competition law, fundamental rights arising under the Charter and general principles of EU law, as well as the specific patent rules contained in, for example, the Biotechnology Directive.

There would also remain a possibility that the Court of Justice of the EU (CJEU) could later rule that non-member states were precluded from inclusion in the modified Unitary Patent Package.  This possibility creates a great deal of uncertainty, which seems difficult to resolve because it would only be possible to seek a pre-emptive opinion in this regard if the EU became a party to the UPC Agreement.

Alternatively, in the event that the UK was to ratify the UPC Agreement in its current form – before leaving the EU – so that the system could get up and running, and the UK subsequently left the EU without the necessary international agreement being reached, the most likely outcome is that any divisions of the UPC situated in the UK would have to cease operating.

Hence it appears that there are some significant hurdles to be overcome before the UPC can move forward.

Ratification of the UPC Agreement in its current form would require action by the British Parliament, which in the present political climate may be difficult to achieve, and in this scenario the UK’s continued participation after leaving the EU would depend on the negotiation of a suitable international agreement with which the CJEU is satisfied, as mentioned above.  Ratification before such an agreement is in place would run the risk that such an agreement could prove impossible to reach, and/or of a later, unfavourable, ruling by the CJEU – either of which could lead to shutting down any UK-based division of the UPC.

Thus, it seems unlikely that the UK would ratify the UPC Agreement in the immediate future or during the period while it is negotiating the terms of its exit from the EU.

While the UK remains in the EU but does not ratify the UPC Agreement, the system cannot come into force in its current form.  In this scenario, in the event that an agreement for continued UK involvement cannot be reached, there would be no change to the current UK patent litigation system upon leaving the EU, and no UPC in operation elsewhere in Europe.  This would seem to provide the UK with a stronger position both in respect of negotiating the terms of its exit from the EU and in respect of minimising the disruption of its patent litigation system during this period.

However, the other UPC contracting states do have some alternative options: the UPC Agreement could be amended to remove the UK as a country which must ratify, or a brand new agreement could be drafted using most of the existing language and that agreement would need to be ratified afresh.  Neither of these is a straightforward solution, and a third option has been put forward by some commentators as the best solution – the creation of a new and far more inclusive agreement that would allow countries such as the UK and Switzerland to participate.  As far as we are aware, this has not yet been formally proposed.

It appears to be generally accepted that a unitary patent package without the UK is a much less attractive prospect, and it has been speculated that the drive to bring the Unitary Patent Package into effect may not be strong enough to overcome this perceived reduction in the system’s value.  For obvious reasons, there has been much discussion of the UK’s position, but it is worth remembering that Germany has not yet ratified.  It is possible that this is because the timing of the implementation of the system needs to be controlled, and the last of the compulsory ratification states to ratify will have ultimate control over when the system comes into effect.  There have been suggestions, however, that Germany is less keen to go ahead with a unitary system which does not include the UK.

For the moment, the UK is still a part of the EU and preparations for the UPC to enter into force are continuing as before.

For further updates on developments in respect of the unitary patent and UPC, watch this space!  In the meantime, if you would like further information or advice in respect of the unitary patent package – or other IP matters – please feel free to contact us.