Unitary patents – more than 40 years to make and a Brexit to break?

Hailed as representing the first-ever truly pan-EU patent system set to come into being later this year, the future of the new Unitary Patent Court (the UPC) has been thrown into doubt.
The UPC is intended to improve the current European patent system (based on the European Patent Convention (the EPC)) as opposed to EU membership under which parties have to litigate patent disputes in individual national courts in the relevant member state. This is expensive, can lead to inconsistent decisions, and is also time consuming for parties. In contrast, UPC enforcement and validity actions will be in one single forum and will take effect in all 25 participating EU member states. It is intended to make it easier, less costly and more efficient to obtain and enforce EU-wide patents. Thus Scotland’s large small-and-medium-sized enterprise technology community could be set to benefit as a result of its implementation and the UK’s continued membership of the UPC. The project started as long ago as the 1970s and there has been a huge amount of work done to accelerate its introduction over the last three or four years. As a result of the Brexit vote in 2016, is there now a possibility that all of that work could have been in vain?

The prospect of Brexit has cast the UK’s membership of the UPC into doubt. Before the UPC can come into force, both the UK and Germany must still ratify it. The UK government indicated last November that it will ratify the UPC, signalling it does wish the UK to remain a party to it, albeit that this ‘should not be seen as pre-empting the UK’s objectives or position in the forthcoming negotiations with the EU’. However, the recent snap general election here has caused a delay in actioning the legislation needed. In addition, there has been a German constitutional challenge to the UPC. The German Constitutional Court (the GCC), as a result, has asked the German government to suspend ratification until the case is decided. There are at least four main grounds for challenge, as only very recently revealed by the GCC, and these are sufficiently complex to make it likely that a decision could cause a significant delay in German ratification. Indeed one argument is that the UPC breaches EU law and this issue may well be referred to the EU Court of Justice (CJEU). Ironically, this argument could even invoke Brexit in its support. This is on the basis that the UK cannot be part of the UPC as it is not, nor will be, an EU member state, which is one of the prerequisites of being in the UPC.

On 27 June 2017, the UPC Preparatory Committee revised its expected timetable and indicated that, at the earliest, the UPC would commence in early to late 2018. However, now that the details of the complaint are known this may prove to be ambitious timing. Notably Brexit is due to take effect on 29 March 2019. If the UPC is not in place by then the UK will no longer be a member state and therefore could not ratify being in the UPC as required. A new UPC agreement may therefore need to be negotiated.

The overall view is that the UK – and therefore Scotland – stands to benefit from being a UPC member. London is one of only three intended locations throughout the EU for the UPC Central Division Court which will deal with life sciences and pharmaceutical patents. London will also have a Local Division Court of the UPC which can deal with infringement and validity issues. While there are no plans for a Scottish-based UPC court, Scottish-based owners of unitary patents will have access to the London courts, and businesses may have local Scottish legal representation there. In addition, there have been suggestions that the London courts may sit in Scotland if a case merits it.

However, there remain serious concerns about the UK’s continuing involvement in the UPC after Brexit. The UPC is only open to EU member states and it seems unlikely that the EU would be prepared to allow any UPC court to be hosted in London if the UK is a non-EU country. Indeed Michel Barnier, the EU’s chief Brexit negotiator, has recently indicated that the EU is reviewing whether the London Central division UPC court will need to be relocated when the UK leaves the EU. Milan has been suggested as an alternative suitable venue. In addition, the UK government has made it clear that the jurisdiction of the CJEU must cease to apply to the UK post-Brexit. The CJEU under the UPC will be the ultimate arbiter of disputes referred to it on questions regarding the construction of EU law. Thus it is not immediately easy to see how legally, or indeed politically, the UK could remain party to the UPC but not be subject to that otherwise ‘forbidden’ CJEU jurisdiction. In practice though, such CJEU referrals may be few and the CJEU can be viewed as acting as an international court whose decisions have no effect on UK law.

The window grows ever shorter for the UPC to come into being before Brexit takes effect. The worst-case scenario may be for the UK to ratify, then the UPC to come into force, followed by the UK ceasing to be a participant post-Brexit. There would inevitably be a difficult process of unwinding the position as many existing EPC patents would have been automatically ‘opted in’ to the new UPC system (the default if ‘opt outs’ are not made). Since these would no longer cover the UK, there would be a need to convert them back into some form of UK national patent or into the existing EU patent system. Additionally, actions may have commenced in the meantime based on unitary patents, which originally covered the UK jurisdiction but would not anymore. If these issues cannot be resolved in time there may be less incentive for the UK to ratify the UPC the closer it gets to Brexit day at the end of March 2019.

For businesses in Scotland reviewing their patent strategy, what does this all mean?

At least for the time being, in so far as decisions/strategy and practice around filing, registering and renewing patents are concerned, it should be business as usual. However, there is a need to be aware of developments in relation to the UPC as there will be a three-month sunrise period post-ratification, possibly at the start of 2018, in which to decide to opt out of existing EU/EPC patents from its jurisdiction. Failing to do this in time will mean such patents are ‘opted in’ by default. This could give rise to unwanted consequences, such as subjecting EU patents post-Brexit to UPC uncertainties as above. In addition, owners of opted in European patents could become party to UPC invalidity proceedings and risk loss of these on a pan-EU-wide basis. It is only possible to opt out again if no such litigation has commenced. This may represent an opportunity to revoke competitor UPC patents opted in (deliberately or not) across the 25 participating EU states. UPC membership and default opting in will also mean reviewing licences of relevant patents to ensure they still accurately reflect the licence scope with regards to territory, etc.

Clearly there must be some doubt over the UPC ever coming into being at all as a result of Brexit and the German challenge, and if it does, its prospects of successfully superseding the existing EPC system. There is also a serious question mark over the UK’s ability to continue as a member. It is thought that the other participating states of the UPC will wish the UK to be part of it, as inevitably it will be a less attractive option for patentees without the UK, one of the larger European economies.

However, the UPC has certainly not been consigned to history, and there is a fair chance that it will be implemented with the UK included by the Brexit deadline. In order to improve prospects of the system’s success, the chances are that there will be support for the UK to find some way to continue to participate and thus reap the benefits of doing so.