The European Union member states are preparing to introduce a new European Patent with Unitary Effect and a single Unified Patent Court with divisions located throughout Europe. With this package of broad patent reforms, the significance and the scope of patent litigation in Europe is expected to increase substantially. By creating a truly unitary European patent protection system, with a supporting court system, the EU is making its patent enforcement system much more attractive and globally competitive.

From both legal and economic perspectives, the new system, particularly the new Unified Patent Court (UPC), is the biggest game-changer in European patent law in history, bringing about fundamental changes for patentees, defendants, their counsel, judges and everyone involved in patent litigation in Europe.

Status quo and reform objectives

Patent protection for inventions may currently be achieved in Europe on two paths: either through national patents, which are valid and provide protection only in the respective granting member state, or through a European Patent, granted by the Munich-based European Patent Office. The present European Patent is not a single uniform IP right providing protection across the entire EU. Rather, it must be validated with each respective national patent office and then only exists as a bundle of national patents. When infringement occurs, the patentee must bring separate actions before courts in every single relevant jurisdiction. Similarly, the defendant must endeavor to have the patent invalidated separately in every jurisdiction. This system is not only costly and burdensome for the parties, but also bears the inherent risk of conflicting decisions.

The imminent introduction of the European Patent with Unitary Effect and the creation of the Unified Patent Court aim to create homogenous, EU-wide patent protection. Under the new system, it will be possible to obtain an injunction against an infringing product valid across the entire EU (i.e., in all the participating member states) with just one legal action. For companies, this puts the vast majority of the single European market at stake in future patent litigation in Europe, thereby significantly increasing the economic and strategic importance of such cases.

The European Patent with Unitary Effect

The new European Patent with Unitary Effect will be based on the existing European Patent. To be afforded the protection of the unitary effect, the patentee must apply for this patent during application for or subsequent to the grant of a European Patent. The European Patent Office will continue to be the competent body for examination and granting of such patent applications, as well as for handling opposition proceedings.

The Unified Patent Court

The centerpiece of Europe’s patent reform is the Agreement on a Unified Patent Court, signed by 25 EU member states in early 2013. The UPC will make it possible to enforce, attack and defend a patent before one single court, with effect for all participating member states. The UPC will have jurisdiction not only for the new Unitary Patents, but also for the existing European Patents, pending patent applications and Supplementary Protection Certificates. The Court of First Instance is composed of local divisions (set up in individual member states), regional divisions (which can be set up jointly by member states that do not wish to establish a local division of their own) and the central division, which will be based in Paris, London and Munich. The appellate court will be set up in Luxembourg. Local jurisdiction in individual cases will be determined among the local and regional divisions, taking into account the place of infringement or the defendant’s seat.

In principle, the local and regional divisions have competence to handle infringement suits, while the central division shall handle invalidity actions. However, under the new system, an invalidity action may also be brought before the local or regional divisions as a countersuit to a pending infringement action. Thus, while the UPC retains the principle of bifurcation known from the German system, in practice many cases are expected to be handled as combined infringement and validity proceedings before the same division.

Once it is up and running, the UPC will have exclusive jurisdiction for such cases. An exception exists in two respects for the European Patents, patent applications and Supplementary Protection Certificates existing at that point in time. First, for a transition period of initially seven years, the UPC and the national courts will have alternative jurisdiction. Second, the patentee may declare to opt out of the jurisdiction of the UPC, either for individual patents or entire portfolios. By declaring an opt out, the patentee can prevent his patent from being declared invalid by the UPC with effect for all participating member states. On the flip side, however, the patentee thereby also deprives himself of the possibility to obtain an injunction for infringement of the patent with pan-European effect.

This puts the burden on patent holders – not only European, but all global companies with important European Patents in their portfolios – to evaluate whether and for which patents opting out of the jurisdiction of the UPC provides strategic advantages. Some large industrial European patent holders have announced that they intend to test the new system using a part of their patent portfolios.

The proceedings before local divisions will be held in general in the official language of the member state where the respective local division is seated. Due to the high number of patent cases being brought in Germany each year, Germany will be the only member state to host four local divisions (based in Munich, Mannheim, Düsseldorf and Hamburg). Debate about the use of English as a permissible second language for proceedings is ongoing. At the regional divisions, the participating member states are free to decide their official languages. For example, Sweden, Estonia, Latvia and Lithuania have agreed that English will be the language of their joint future Nordic-Baltic Regional Division seated in Stockholm. Generally, parties are free to agree, with the consent of the court, on the language of the patent as the language of the proceedings. At the central division, the language of the patent, which is currently English for the vast majority of European patents, will always be determinative.

Outlook

As of the date of publication, 24 of the 28 EU member states are fully participating in the new system. Only Spain and Croatia do not participate at all, while Poland and Italy participate partially. Spain filed two complaints against various aspects of the patent reform package with the European Court of Justice. The first was dismissed and the second is still pending. The Agreement on a Unified Patent Court will enter into force after ratification by at least 13 participating member states, which must include Germany, France and the UK. Until then, a set of procedural rules is being created, the (currently 17th) draft of which is far advanced. Some practical questions must be resolved, including selection and training of judges, the implementation of a unitary IT system and the specification of court fees.

Against this background, the UPC is currently not expected to be fully operational before 2016. Then, in the first few years, the new system will come with considerable legal uncertainty. Many of the new material and procedural provisions will require interpretation, and the quality of the local and regional divisions scattered across Europe will initially be difficult to assess. It likely will take some time until reliable lines of case law have been established.

In view of the substantially increased significance of these cases, there are interesting times ahead for European patent law – and for all involved.