The UK referendum result means that London is unlikely to play host to a UPC central division court.

This article first appeared in Intellectual Property Focus Europe 2016 published by Managing Intellectual Property

The decision of UK voters on June 23 to leave the European Union, quite unexpected to many, will inevitably have a big impact on the initiation timelines of the long-awaited Unitary Patent. At a conference organised by Premier Cercle and hosted at the EPO’s headquarters in Munich on July 7, representatives of the EPO and of the Unitary Patent Court (UPC) Preparatory Committee made positive statements regarding the future implementation of the new patent system following the UK’s vote to leave the EU. The EPO’s representatives said that the path to a Unitary Patent system has been paved with obstacles right from the beginning, but that with the support of the user community the right solutions can be found to overcome the last obstacle to full implementation of the system. The work on the Unitary Patent and the UPC is far too advanced to come to a halt, even after the UK referendum.

The representative of the UPC Preparatory Committee said that work dedicated to the technical implementation of the UPC continues to progress as envisaged, in line with the clear wishes of the user community to bring the UPC and the Unitary Patent into operation as soon as possible.

UK ratification

Despite those positive statements, the only way for the implementation process to proceed smoothly and for the system to start on May 1 2017, as previously envisaged, is if the UK government ratifies the UPC Agreement before triggering Article 50 of the Lisbon Treaty. It is difficult to say whether this is likely to happen or not. The UK Parliament has never been against ratification of the UPC Agreement and ratifying it before triggering Article 50 could be seen as a way of improving the UK’s position in withdrawal negotiations with the EU.

By ratifying the UPC Agreement, the UK might also be in a better position to negotiate the possibility of continuing to be part of the UPC even after leaving the EU. Many legal professionals suggest that this option could pave the way for the UPC to be open to non-EU member states in the future, although Opinion no. 1/09 of the Court of Justice of the European Union has stated that non-EU member states cannot participate in the Agreement. Therefore, it is unlikely that this will happen unless there is a strong political will inside the EU leading to an amendment of the UPC Agreement in such a way as to extend it to non- EU member states. It is a common thought among commentators that the new patent system without the UK will be less appealing to users, particularly to those from the United States and Asia. Although this may be true, a system that covers 24 countries at a lower cost than in the past will still be interesting for users, especially if the renewal fee is set lower following the UK’s exit.

Other options

If the UK does not ratify the UPC Agreement before it triggers Article 50 then the implementation of the new patent system will certainly be delayed for some time. In this case, the other contracting states to the UPC Agreement would have two options: a) restart negotiations to amend the Agreement to reduce the number of states whose ratification is required from three to two, and to move the London seat of the central division to another member state; or b) wait until the UK exits the EU, which would automatically result in Italy being the third state whose ratification is necessary to trigger the start the system (Italy was the fourth biggest EU member state in terms of number of validations of European patents in 2012). Even though Italy’s legislation for ratification is well progressed and the country is likely to ratify the UPC Agreement before the end of 2016, the main issue would be the time necessary to negotiate amendments to the Agreement or the time lag between a vote to leave and an actual exit from the EU by the UK. In both cases, the start of the new patent system will likely be delayed by years and therefore it is very important that the UK ratifies the UPC Agreement before triggering Article 50 of the Lisbon Treaty.

Moving seats

Whatever scenario we will be confronted with, the UPC central division seat for so-called human necessity patents (including chemistry and pharmaceuticals), currently located in London, will have to be moved to the territory of an EU member state once the UK exits the EU. The likely candidates to host the central division seat for human necessity would be Milan and The Hague. As mentioned above, Italy was the fourth largest EU member state in terms of number of validations of European patents in 2012 and has maintained this position over the years.

Italian patent law has provided for a specialised court for industrial property and business matters since 2003. The Milan court is one of the most active and experienced in patent law, primarily because the Milan region is the business heart of Italy and one of the most important business centres within the European Union. The Milan court deals with about 70% of Italian patent litigation and has particular expertise in the technology sectors that are currently allocated to the London seat (chemistry and pharmaceuticals). Proceedings on pharmaceutical and chemical patents are the most important for the Milan court in terms of their market impact, if not numerically.

Milan is due to host a local division of the UPC; the premises for such a new court have already been allocated. Because of this, the possibility arises for Italy to host the seat of the UPC central division instead of London. This outcome would certainly be desirable for our country, considering that non-infringement proceedings and a large part of proceedings concerning the revocation of patents will be handled by one of the central divisions, and that otherwise they would be dealt with outside Italy. On July 12 the Italian Prime Minister, Matteo Renzi, met the newly elected mayor of Milan, Giuseppe Sala, to discuss strategies for how the city of Milan and the Italian government can work together to make Milan an attractive destination for European institutions that are currently based in London and will therefore be re-located post- Brexit.

On that occasion the issue of the central division of the UPC was brought to their attention by the Institution of Italian Patent Attorneys and other stakeholders.

Whether there will be a real possibility for Milan to host one of the central divisions of the UPC is a matter for political discussions and therefore difficult to forecast at the moment. What is certain is that the Milan court and its specialist judges hold the necessary patent litigation experience to ensure that Italy would be an ideal location for 34 the new UPC court.