Although a key aim of the Unified Patent Court is to provide an EU-wide forum in which small and medium sized businesses (SMEs), in particular, can litigate patent disputes swiftly and inexpensively, SMEs are concerned that the complex structure of the UPC may be more expensive and cumbersome than the existing system.  Here is a summary of some of the main issues for SMEs.

Litigation costs

The UPC is said to be considerably cheaper than the current system, particularly for SMEs, but it’s still not clear that this will be the case.

While bringing an action in the UPC should be cheaper than bringing separate actions in three or four different EU Member States, it probably wouldn’t be cheaper than litigating in one Member State only (which may be enough to bring about a pan-European settlement).  It also seems clear that a panel of three judges (in the UPC) will cost more than a single judge (the norm in national patent proceedings).

Further, and importantly, the court fees are still to be determined. Given that they will account for only part of the cost of litigating, it is imperative that they be set at an affordable level for SMEs.  

Language of the proceedings

While a patentee can choose to sue in the infringer's home territory or where the infringing activity is occurring, an alleged infringer has no such choice.  The system does give some protection to defendants facing proceedings in another country, but an SME trading on the internet could still face a pan-European injunction claim brought in an unfamiliar language in a distant division of the UPC.  Broadly speaking, Local Divisions of the UPC will use the language of the Member State in which they are based; Regional Divisions will use the language designated by that division's participating member States; and the Central Division will use the language of the patent (English, French or German).

On a more positive note, competition for business between different divisions of the UPC means that patent proceedings in English (outside the UK) are far more likely to occur than they do under the current system. A number of planned Local and Regional divisions have announced that they will hear some proceedings in English, while the Nordic-Baltic Regional division (between Sweden, Estonia, Latvia and Lithuania) has confirmed it will hear proceedings in English only.

Forum shopping

Some forum shopping will be inevitable.  Litigants will have considerable choice of venue and, at least in the early years, some divisions may be faster than others, while others may acquire a reputation for being pro-patentee or pro-defendant. The worry for SMEs is that they may be sued in a division where the odds are stacked against them.  The impact of forum shopping has, however, been minimised to some extent by uniform procedural rules and the Court of Appeal’s broad, unifying, jurisdiction.

Bifurcation and the ‘Injunction Gap’

Under the draft procedural rules, UPC divisions can separate issues of infringement and validity (i.e. bifurcate). If a case is bifurcated, the Local or Regional division deals with infringement, the Central Division with validity.  Infringement proceedings may be stayed pending a final decision on validity and must be stayed where there is ‘a high likelihood’ that the patent claims will be held invalid. SMEs have been concerned that they may, following a finding of infringement, be required to withdraw a key product from the EU market, only to learn a year or so later, when they are no longer in business, that the Central Division has found the patent invalid (the so-called 'injunction gap'). 

Fierce lobbying by tech giants such as Google, Microsoft, BlackBerry, Apple and Samsung has diminished this risk significantly. A recent change to the 17th draft procedural rules requires the Central Division to hear the validity case before the infringement case wherever possible. This should close the injunction gap and reduce the attraction of bifurcation.

Quality of judges

Justice before the UPC will depend on the quality of its judges.  Although they are intended to have "the highest standards of competence in patent litigation", this may be difficult to achieve in practice.   It is not clear whether it will be possible to train judges to an acceptable standard in all countries, or even whether the UPC has sufficient budget to do so.

It is also important that training should not concentrate solely on bringing up to standard judges from countries without established patent courts.  To ensure that judges apply the procedural rules consistently (not simply deciding cases as would in their home jurisdictions), all UPC judges will require training.

Barring future IPEC claims

After a transitional period of 7 to 14 years, the UPC will have exclusive jurisdiction over both unitary patents and existing and future European patents.  This means UK SMEs will lose the benefit of the highly successful Intellectual Property and Enterprise Court (IPEC) for European patents (unless the UPC proves flexible enough to provide equivalent benefits).

Conclusion

The UPC is undoubtedly a good idea in theory: it should provide a faster, more efficient system for SMEs.  Whether or not it does, will depend on two important matters:  the fixing of appropriate court fees and the adequate selection and training of judges. If the right judges apply the rules of procedure fairly and consistently at an affordable price, the UPC will represent an exciting opportunity for businesses of all shapes and sizes.

As long as doubt remains over these key issues, however, SMEs may feel under pressure to opt their existing European Patents out of the new court system and adopt a wait and see approach; research-intensive SMEs may even contemplate filing national instead of European patents, in an attempt to avoid the system altogether.  This would be a blow to the success of the UPC and, potentially, to the SME’s themselves (who cannot influence the UPC's decisions if they do not participate). 

A longer version of this article is available in Intellectual Property Magazine here.