This note summarises the latest position regarding the Unified Patent Court ("UPC") and Unitary Patent ("UP") system, and considers the issues that Brexit poses to the establishment of that system.

Unified Patent Court

The UPC will be a specialist court with first instance divisions in Paris, Munich and London and an appeal court in Luxembourg, set up to hear disputes in relation to European patents and so-called unitary patents (discussed further below). Whilst the UPC and unitary patent are two distinct initiatives, they are closely related insofar as they are together aimed at making the process of obtaining and enforcing a patent with pan-European coverage simpler and less costly.

The agreement for the establishment of the UPC (the "Agreement") is an international agreement (i.e. it is not a product of EU law). The Agreement is only open to accession by EU Member States but there is a debate as to whether non-Member States may continue and/or join. Nevertheless, what is clear is that the UPC will be subject to relevant rulings by the Court of Justice of the European Union ("CJEU"). To date, 25 of the current EU Member States have signed the Agreement to signal their intended participation in the UPC (Spain, Poland and Croatia have not).

In order for the UPC to be established, the Agreement needs to be ratified by France, Germany and the UK (being the three participating EU Member States with the highest number of European patents in effect), as well as at least 10 other participating EU Member States. Countries are deemed to have 'ratified' the Agreement once they have deposited the instruments of ratification at the European Council.

Since being published on 13 January 2013, as at the date of posting, the Agreement has been ratified by 12 Member States. Italy, the twelfth State, ratified on 10 February 2017, joining Austria, France, Sweden, Belgium, Denmark, Malta, Luxembourg, Portugal, Finland, Bulgaria and the Netherlands. Therefore, all that is required for the UPC to be established is for the UK and Germany to ratify the Agreement.

The UK announced on 28 November 2016 that it would be ratifying the Agreement. However, this is now not expected to happen until after the General Election called for 8 June 2017.

The German parliament has been debating the national legislation necessary to ratify the Agreement over recent weeks. The legislation received a final reading and vote in the Bundestag on 9 March 2017 and was unanimously approved. The legislation will now be submitted to the Bundesrat for approval. It is thought that Germany will ratify the Agreement by September 2017. Many in the IP profession in Germany, were against Germany abandoning, for the purpose of the UPC, the principle of bifurcation, i.e. how in UPC proceedings, the issues of infringement and invalidity should be tried and/or assessed separately.

The UPC Preparatory Committee has announced that it expects the UPC to be operational by December 2017 – given that there is a four month lead-in period which applies once sufficient ratifications have taken place, Germany would need to ratify in August to meet this target.

This delay by the UK and Germany in ratifying does now threaten to jeopardise the anticipated commencement of the UPC and the UP prosecution system currently scheduled for December 2017. Any delays beyond the originally anticipated timetable (May for the UK, and August for Germany) might push back this start date of December.

Participating States are also in the process of ratifying the Protocol on Privileges and Immunities of the Unified Patent Court ("Protocol"). This will allow certain practical measures to be taken (including the appointment of judges) in order to ensure that the UPC is ready for opening in December 2017 as planned. Thirteen participating States need to sign and consent to (ratify, accept or approve) the Protocol in order for it to come into force. The Protocol has sufficient signatories (including the four compulsory States: the UK, France, Germany and Luxembourg) although a number (including the UK, Germany and Italy) have yet to ratify. The deadline for this in order to meet a December start date is June 2017.

The Unitary Patent

The UP will be a patent granted by the European Patent Office which, upon request by the applicant, will have unitary effect across the territories of those EU Member States which have both: a) ratified the Agreement; and b) participated in the enhanced cooperation procedure needed to establish the UP. This means that, at present, the UP will not apply in Spain or Croatia (as these States have neither ratified nor participated) or Poland (as it has not ratified). The UP prosecution system cannot commence until the UPC is established.

It is well-known that Spain has been a fierce opponent of the proposed UPC/UP system, although concern amongst local business groups has resulted in a motion being submitted for debate by the opposition in the lower house of parliament with a draft resolution that urges the Spanish government to re-consider its refusal to get involved. The motion also suggests that Spain could take advantage of the uncertainty surrounding the UK's role in the UPC system post Brexit, by requesting that the London seat of the UPC's central division be relocated to Spain. On 7 March 2017, the motion was passed, with the governing party opposing. However, this declaration will not bind the government. Given the governing party's opposition to these moves, it is not thought that Spain's official stance on the UPC system will change significantly as a result of the declaration.

Given that Poland has participated in the UP regime but has declared it will not ratify the Agreement, the UP will not come into effect in Poland as the rules currently stand. However, the Advocate General has opined that participating in the enhanced cooperation procedure may legally oblige Member States to ratify the Agreement. It may therefore be that the European Commission takes steps to ensure ratification by Poland.

Croatia, as a relatively new EU Member State, is thought to be waiting to see if/how the UPC system functions before deciding whether to participate. It is not thought that Croatia has any particular objection to the system in principle.

Sunrise period

The starting position under the Agreement is that the UPC will have exclusive jurisdiction over litigation such as infringement and revocation actions in respect of all UPs and all European patents granted for one or more contracting Member States.

However, Germany's ratification of the Agreement, assuming it follows ratification by the UK, will commence the 'sunrise period' which will last for seven years after the Agreement comes into force and during which owners of European patents and patent applications will (subject to some restrictions) declare that they opt out of the UPC's jurisdiction in respect of and for the lifetime of their patents and applications. Five years into the sunrise period, the Administrative Committee of the UPC will carry out a consultation with patent holders to ascertain the extent to which European patents are still being litigated in national courts at that point. As a result of this consultation, the sunrise period might be extended by up to another seven years.

The sunrise period will only apply to European patents (i.e. those granted under the European Patent Convention ("EPC") as bundles of national patents) and not UPs.

UPs may not be opted out of the UPC's jurisdiction. The sunrise period will also not apply to European patents in respect of which an action has already been brought before the UPC.

What happens next?

It is advised that the desirability of opting out is investigated urgently by patentees and their advisers and then pursued as soon as possible if such a decision to opt out is to be made.

As such, with the UPC/UP system now poised to become a reality, European patentees and their licensees should give careful consideration to their portfolios of European patents and applications, in particular, any prospective applications likely to be made within the timeframe of the sunrise period.

Patents which are subject to the UPC's jurisdiction may be centrally revoked, meaning they will cease to apply in all of the ratifying Member States upon a single successful revocation action being brought by challengers. The prospect of central revocation is likely to be one of the key concerns of patentees and may lead to many European patents and applications being opted out during the sunrise period.

However, the disadvantages of centralised revocation should be weighed against the advantages of centralised infringement and enforcement proceedings; the UPC gives European patent holders the opportunity to bring a single set of infringement proceedings which will apply across all ratifying States, as well as the possibility of obtaining an injunction applicable across these States.

A European patent which is not opted out of the UPC's jurisdiction will be subject to the dual jurisdiction of the UPC and the relevant national courts for the duration of the sunrise period. Thereafter, the UPC will take sole jurisdiction.

It is also worth noting that, having opted out of the UPC's jurisdiction, European patentees may subsequently elect to opt back in provided that no action has been brought in respect of the relevant patent in the intervening period in a national court. In all other respects, a European patent holder will be able to opt back in at any point (whether during or after the sunrise period).

The impact of Brexit

As stated above, the Agreement is only open to accession by EU Member States and the UP will only take effect in those States which have ratified the Agreement. In addition, the UP regime is a creation of EU legislation (unlike the Agreement). Therefore, the UK's departure from the EU raises a number of questions about the UK's continued involvement in the UPC/UP system.

The announcement on 28 November 2016 that the UK intends to ratify the Agreement suggests that the political appetite for the UPC/UP regime is still present, notwithstanding Brexit.

In an opinion procured by the Chartered Institute of Patent Attorneys and certain firms, including Bond Dickinson, who are members of the Intellectual Property Lawyers' Association, Richard Gordon QC and Tom Pascoe of Brick Court Chambers opined that in order for the UK to remain eligible to participate in the UPC/UP regime after its legal departure from the EU, the following issues would need to be dealt with:

  1. The UK would need to enter into a new international agreement with the States participating in the UP regime to extend the effect of the UP to the territory of the UK.This seems possible under Article 142 of the EPC which allows contracting States of the EPC to, via special agreement, provide that a European patent granted for those States has a unitary effect throughout their territories.
  2. The UK would need to enter into a new international agreement (probably in the form of a protocol to the Agreement) or amend the Agreement so as to allow its continued participation in the UPC.
  3. Crucially, in both cases, as international agreements which would incorporate EU law (either directly or by reproducing EU legislation), it seems that these agreements would need to contain sufficient safeguards to ensure that EU law is applied uniformly across the territories (i.e. acknowledging the supremacy of EU law, referring certain matters to the CJEU and complying with CJEU judgments on relevant matters).

In addition to the significant legal hurdles, the deference that will be required to EU law and the CJEU (albeit in respect of much more limited matters than is currently required as a Member State of the EU) represents a significant political hurdle to the UK's continued involvement in the UPC/UP regime.

Theresa May, Prime Minister at the time of writing, has expressed that withdrawing from the jurisdiction of the CJEU is an essential feature of her envisioned form of Brexit. It may therefore be that the reach of the CJEU's influence under the UPC/UP system, whilst much reduced compared to its influence over EU matters generally, is considered a politically unacceptable concession to ensure continued involvement in the UPC/UP system.

However, it is impossible to say whether this will necessarily be the view of any Prime Minister after the General Election on 8 June 2017.

Conclusion

The UPC/UP system is moving closer to becoming a reality, with the impending ratification of the Agreement by the UK and Germany being the key remaining obstacles to its establishment. However, Brexit has proved, in this as in other areas, to be a complex and disruptive factor.

Whilst a political will to remain a part of the UPC/UP system and thereafter contribute to the success of the system might still exist within the UK, without additional international agreements and at least limited deference to EU law and rulings by the CJEU, it seems that the UK's withdrawal from the EU will result, for political reasons, in an inability of the UK to participate fully. As a result, it is not clear at this stage precisely what relationship, if any, the UK will have with the UPC/UP following Brexit.

However, patentees should still give due consideration to whether or not they wish to opt out of the UPC's jurisdiction in respect of any of the European patents in their portfolios. The right to opt out will be lost if an action is commenced beforehand in the UPC and so European patent holders will need to be in a position to opt out (if they wish to do so) as soon as possible following the establishment of the UPC/UP system.

The decision to opt out or not is ultimately a commercial and strategic decision, with centralised revocation and pan-European infringement/enforcement likely to be the primary factors to consider.