The UK has decided to leave the Unified Patent Court. What does this mean for the IP sector?

The UK government announced on the 27th February as it published its approach to Brexit negotiations that the UK will not be seeking involvement in the UP/UPC system. The statement was accompanied by the reasoning that participating in a court that applies EU law is inconsistent with the UKs aim of becoming an independent self-governing nation.
This is a huge blow to the project, with the UK formally a key participant in the project with its formation framed around the UKs participation. Although the agreement has yet to be ratified by Germany, the remaining participant Member States will need to consider whether the project remains viable/lucrative without the UK.
What is the Unitary Patent Court (UPC)

The EU is planning on providing the option for businesses/inventors to apply for unitary patents. This is a means by which businesses can obtain patent protection for their inventions across multiple EU countries through a single application. The current system of the European Patent System requires patents registered at the EPO to be validated in each of the countries that businesses with the patent wish to apply to. This creates a complex process (requirements to translate patents into the native language), time consuming and costly process.
Before unitary patents can be applied, a judicial framework needs to be established to be able to handle disputes over the unitary patents. The Unitary Patent Court (UPC) has been developed to perform this function.
European patent owners will be subject to the UPC’s jurisdiction unless owners ‘opt-out’ those patents. This means where those patents are opted-out (of the UPC), disputes over their validity or infringement will be heard before national courts as is the current case.

Challenges facing the UPC
The UPC has faced legal challenges and uncertainty over Brexit. With the UK now formally announcing it will no longer participate, due to the UPC requirement to adhere to EU law and the overarching jurisdiction of the CJEU in relation to the UPC system, at odds with the UKs Brexit strategy of fierce independence.  
Germany's ratification process has been held up by a legal challenge brought before the country’s Federal Constitutional Court. The complaints arise from concerns that the ratification involves the transfer of sovereign rights from Germanys judiciary to another organisation, with the transfer of patent litigation powers to the UPC. There have also been complaints regarding whether the judges if the UPC will be independent in the sense that is prescribed by the German constitution and whether the way the reforms have been structured will align with the constitutional mandate to promote Germany's integration within the EU. 

What are businesses reaction to the UPC?
The recent decision by the UK will come as a ‘huge disappointment’ to the patent attorney trade and to SME’s. The UKs lack of involvement will most likely affect small businesses, with one of the main benefits for the UK would have been lowering the cost and time of patent enforcement and challenge.
Of course from the outset the UPC presents advantages of being able to simultaneously gain patent protection across all Member states by-passing complex and time-consuming requirements. However if a successful dispute is brought forward to the UPC, all rights across all member states could be lost, creating a huge risk for the industries involved. This is a particular worry for life science industries that depend heavily on their ‘blockbuster’ treatments that could face jeopardy if a successful dispute/infringement is brought forward. However the prospect of a pan-EU interim injunction against an alleged infringer may be attractive. Life sciences companies, both originator and generic, are likely to want to have some input in shaping the law and jurisprudence in this area. 
Pharma companies are likely to keep a patent portfolio outside of the UPC, meaning they would continue to be able to defend their patent rights in individual proceedings in each of the EU countries in which their rights apply.
In the TMT sector there is a larger volume of patents, especially patents essential to technology standards, Standard essential patents (SEP), than for blockbuster inventions.
The high volume of these patents in the TMT sector, means that national infringement proceedings in Europe for technology patents typically seek to enforce more patents in each case than pharmaceutical patent cases. This is because there is a safety in numbers, because even if some of the patents are invalidated, the patent owner will win and obtain financial compensation provided that one patent is valid and infringed. This probability of finding often encourages alleged infringers to settle agreements and/or enter into cross-licensing agreements.  Therefore patent applicants in the technology sector are much more likely to use the UPC to enforce their existing European patents. This is because a single litigation before the UPC should be more cost effective than parallel patent litigations in various European jurisdictions. If the UPC invalidates some of the patents in suit then there are others to fall back on.
The UK is not completely out of the UPC, with a European Parliament think tank of the opinion itself that UK membership post Brexit still possible, with the main barrier actually being the UKs own red line. Membership of the UPC would have been greatly beneficial for IP lawyers and patent attorneys, as London was planned to be the location of the Life Science division of the UPC, the UK would have had significant influence over the development of UPC related jurisprudence, influence that it will no longer have.

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