The UK Government announced yesterday (28 November 2016) that it will continue preparations to ratify the Unified Patent Court Agreement (UPCA) to bring the Unified Patent Court (UPC) system into effect "as soon as possible".
In this alert we consider the implications of the announcement for potential users of the UPC and the accompanying Unitary Patent (UP).
- If the UK and Germany ratify the UPCA, the UPC and UP could come into existence as early as mid-2017.
- However, there is no guidance from the UK Government as to the intended longer-term approach to participation in the UPC and UP post-Brexit. In particular, it is not clear whether safeguards for the UK remaining in the system will be built in prior to ratification nor what form these will take or whether it will form part of the wider Brexit negotiations.
- There is therefore a risk of a subsequent UK departure and/or lengthy constitutional challenges in early cases post-Brexit, and in any event increased uncertainty for potential users of the system.
- Businesses that rely on patents will need to re-start considering their approach to the UPC and UP, but taking into consideration the increased uncertainty.
- In the first instance patentees will need to decide whether to opt out their European 'bundle' patents and applications.
- Patentees will also need to consider whether to elect for UPs or European 'bundle' patents in the future. This is likely to be strongly dependent on the particular circumstances.
The UK Government's announcement ends months of speculation about the UK's next step and may lead to the implementation of the UPC and the UP much sooner than had been widely-anticipated following the Brexit vote. To date eleven countries, including France, have ratified the UPCA. Therefore, if the UK and German governments do ratify the UPCA in the coming months, the UPC and the UP could come into existence as currently envisaged (including with a section of the Central Division Court located in London) as early as mid-2017.
However, the UK Government has not provided any guidance as to its longer-term intentions with respect to the UPC and UP. In particular, there is no indication whether and how the Government will ensure the UK can remain within the system post-Brexit or, indeed, if that is even its intention. If anything, Baroness Neville-Rolfe's statement that "… the decision to proceed with ratification should not be seen as pre-empting the UK’s objectives or position in the forthcoming negotiations with the EU”, suggests that the Government intends to deal with the long-term membership of the UPC and UP as part of the wider Brexit negotiations and potentially, therefore, subsequent to commencement of the UPC and UP.
There are varying opinions on whether the UK could remain a participant in the system post-Brexit and as to the legal and political measures that would be required to enable such continuing UK membership. In any event, commencement of the UPC and UP without having addressed the issue of long-term membership of the UK means that a subsequent UK departure, and/or lengthy constitutional challenges to the Court of Justice of the European Union in early UPC cases post-Brexit are further risks that will need to be considered when (re-)considering European patenting strategies. In a worst case scenario, this could mean the UPC and UP could be as short-lived as Britain's future membership of the EU.
Next steps for potential users of the UPC and UP
Accordingly businesses that rely on patents, many of whom will have put their UPC and UP preparations on hold following the Brexit referendum vote, will now need to dust down their plans and re-start the process of considering their future European patenting strategy within the context of greater uncertainty over the longer-term future of the UPC and UP system.
The first decision such businesses will need to take will be whether to opt their European 'bundle' patents and applications out of the UPC system.
In light of:
- the increased uncertainty regarding the long-term status of the UPC;
- the ability to withdraw an opt out (provided an action has not already been brought before a national court); and
- that there is no fee to opt out or to withdraw an opt out,
in many cases it will be advisable for patentees to opt out their existing European 'bundle' patents and applications, at least in the first instance during the 'sunrise' period prior to the UPC entering into force.
Patentees will then be able to wait and see how the UPC develops, and whether the potential benefits of the system are being delivered before committing to it. They can then decide when faced with apparent infringement of a patent whether to withdraw the opt out and use the UPC or to proceed in the national courts, taking into consideration the particular circumstances at the time, including the political situation around Brexit. Having said that, the key risk of such an approach is if an opponent brings invalidity proceedings or seeks a declaration of non-infringement before a national court - as this will prevent withdrawal of the opt out and so remove the UPC and its pan-European remedies as an option for the patentee, thus retaining the status quo.
Similarly, once the UP has come into effect, businesses will need to decide whether to designate granted applications before the European Patent Office as UPs or as national patents. This is likely to be a more difficult decision for patentees requiring wide patent coverage, given the benefit of the reduced cost and administrative burden of a UP over multiple national patents, which is, however, coupled with the increased risks arising from mandatory use of the UPC. This decision will therefore strongly depend on the specific circumstances at the time of grant of the European Patent application. In this context, the risk that the UK will cease to be a participant in the UP post-Brexit and the uncertainty around how UK rights will be dealt with thereafter means the relative importance of the UK market to the patentee will become an additional consideration.
Consequences for the UPC and the UP
Ultimately, while the UK Government's announcement means that the UPC and UP look likely to go ahead in their current form, and sooner than had been anticipated, the system is not quite as it was as there is a looming uncertainty, at least for UK businesses, as to whether the UK will remain covered.
It remains to be seen whether the legal uncertainty around future UK participation will have consequences on the overall system. By way of example: defendants in early UPC cases could use it to challenge the constitutional basis of the court which in turn could lead to delays, more complexity, increased cost and general uncertainty - the very properties that could discourage users and undermine the attractiveness, and therefore success, of the overall system.
Some industry groups have already called on the UK Government to do what it can to pre-emptively avoid such risks to the extent possible as part of the ratification process. It will be important to stay abreast of such efforts over the coming months in order to frame the decision making process for European patent strategies. We will be following the discussions closely and will provide further updates as and when they happen.
Official press release by the UK Government of 28 November 2016 can be found here.