On 5 May 2015 the Court of Justice of the European Union rejected the appeals filed by Spain against the Unitary Patent Package. This is a landmark decision, clearing the way for more effective protection of innovation in Europe and at the same time resolving some interesting highly political issues of Union law.
The Unitary Patent Package consists of three basic elements, the Unitary Patent Regulation (UPR), the Regulation on translation arrangements and the Agreement on a Unified Patent Court (UPC Agreement). The two Regulations are instruments of enhanced cooperation between a number of EU Member States (currently 24), based on an EU Council decision on enhanced cooperation of 10 March 2011. The UPC Agreement is an international agreement and although it can only be joined by EU Member States, it is not Union law. Together with the already existing European Patent Convention (EPC), these instruments create an autonomous system of substantive law on validity and infringement of Unitary Patents and traditional European patents and an autonomous and comprehensive body of procedural law for patent litigation at supranational level.
The 2011 Council decision allowing enhanced cooperation was opposed by Italy and Spain in a procedure before the Court of Justice of the European Union (CJEU), but that case was rejected by the CJEU in its judgment of 16 April 2013. The two Regulations were adopted on 17 December 2012 and published shortly thereafter. The UPC Agreement was signed on 19 February 2013.
On 22 March 2013 Spain filed appeals with the CJEU against the two Regulations. An appeal against the UPC Agreement was not possible, since this is not an EU instrument. In the meantime, work started on the implementation of the Unitary Patent and setting up the UPC. By now, the Select Committee of the EPO’s Administrative Council has almost finalized the Unitary Patent Rules and it has discussed a first proposal for the UP renewal fees, which became public in March 2015. The UPC Preparatory Committee has almost finalized the Rules of Procedure and is in the process of setting up the actual organization of the court, with the IT system that should allow for online filing of court documents as the main bottleneck. There will soon be a public consultation on a proposal for the system of Court fees. The education and training of candidate judges has already commenced, with modules on validity and infringement taught in Budapest in February and April. However, all that time there still was a risk that the CJEU would find the whole project in conflict with EU law. That has now been resolved and the Unitary Patent Package can now go ahead, the only remaining issue being a sufficient number of ratifications of the UPC Agreement.
Appeal against the Unitary Patent Regulation
The first appeal, C-146/13, dealt with the Unitary Patent Regulation itself. Probably the most important finding of the CJEU is in paragraphs 45 - 48 of the judgment, where the Court says that Article 5 and 7 UPR guarantee that for each Unitary Patent only one substantive law will apply in all participating Member States. This is a big advantage over traditional European patents, for which the substantive law differs per country of registration. Although the substantive law for Unitary Patents is national law and therefore not purely EU law, that is not a problem as in the Court’s view Article 118 TFEU “does not necessarily require the EU legislature to harmonise completely and exhaustively all aspects of intellectual property law”. In practise, the substantive law governing the scope of protection of Unitary Patents will predominantly be the UPC Agreement, as it applies in all participating Member States whose national law might apply. For issues not covered by the UPC Agreement, Article 7 UPR provides the national law that applies across all participating Member States. Thus, according to the CJEU, uniform protection is sufficiently guaranteed.
Spain had argued that the UPR was a violation of the EU rule of law, because granting the patent was not subject to EU review. The CJEU however found that the Regulation “merely (i) establishes the conditions under which a European patent previously granted by the EPO pursuant to the provisions of the EPC may, at the request of the patent proprietor, benefit from unitary effect and (ii) provides a definition of that unitary effect”. As the Advocate-General had already advised, there is no need to evaluate whether the EPO decisions to grant a patent are in conformity with EU law.
The renewal fees for Unitary Patents are to be decided by the EPO in conformity with the UPR provisions. This is done by the Select Committee of the Administrative Council, in which all participating Member States are represented. Apparently the CJEU is of the opinion that this constitutes a sufficient implementation of the fee system by the Member States. The CJEU sees no need for an implementation by the Commission under Article 291(2) TFEU.
Spain had also argued that the UPC Agreement itself was in violation of EU law. However, Article 263 TFEU only allows the CJEU to review the legality of EU acts and legislation, not of international agreements or of measures adopted by national authorities to implement EU legislation. Thus, the legality of the UPC Agreement cannot be reviewed as part of an appeal against the Unitary Patent Regulation.
There were some additional minor arguments, which were also rejected by the CJEU, so the complete action was dismissed. Of course, this will not be the last time for the CJEU to rule on the Unitary Patent Package; although appeals against the UPC Agreement itself and further appeals against the Unitary Patent Regulation are not possible, the UPC itself will have to refer questions to the CJEU whenever Union law is at stake and it will certainly do so. At that stage, the UPC Agreement has to be regarded as national law under Article 5 and 7 UPR, so the CJEU can give guidance on how this should be applied. However, in the current judgment the CJEU has basically already said that the UPC Agreement does meet the criteria of uniform protection under Article 5 UPR and that those criteria do not even mean that protection has to be uniform for all Unitary Patents, just that it has to be uniform across the participating Member States for a given Unitary Patent. That is a reassuring thought for the UPC.
Appeal against the Regulation on Translation Arrangements
The second appeal dealt with the Regulation on Translation Arrangements. European patents can be granted in three authentic languages: English, German and French. The Regulation provides for some translations, but only for a transitional period until good machine translations will be available. Of course, Spain’s main argument was that this is discrimination against other languages, such as Spanish, and against citizens and companies who do not have the means of understanding the three EPO languages.
The CJEU reiterated that there is no “general principle of EU law to the effect that anything that might affect the interests of a European Union citizen should be drawn up in his language in all circumstances”. The difference in treatment of languages must however be proportionate and must not go further than necessary. The Regulation of course does not limit translations under the EPC, but rather provides for additional translations. The CJEU, quoting recital 16, held that “the aim of the contested regulation is to facilitate access to patent protection, particularly for small and medium-sized enterprises”, which is a legitimate objective. The traditional EPC system is very complex and expensive for someone who wants to obtain protection for the whole EU, as it requires validation of the European patent as basically a national patent in all the Member States, providing translations in as far as required and paying annual renewal fees to the patent offices of all these Member States. The Regulation reduces the costs of translations and thereby facilitates access to patent protection. In order to assess whether the Regulation does not go beyond the necessary, “the necessary balance must be maintained between the interests of economic operators and the public interest in terms of the cost of proceedings, and also between the interests of applicants for intellectual property rights and those of other economic operators in regard to access to translations of texts which confer rights, or proceedings involving more than one economic operator”, as the CJEU held. This balance is guaranteed by a compensation scheme for translations, by providing for some translations during a transitional period and additional translations in case of an infringement action, and finally a good faith defence with regard to damages until proper translations are provided. The CJEU thus found the arrangements appropriate and proportionate.
Spain further argued that the Council wrongly delegated the execution of the translation arrangements to the EPO. The CJEU held that this issue was closely linked to setting up the Unitary Patent itself and that giving certain tasks to the EPO is a consequence of that. In allowing this, the Council did not delegate tasks which are uniquely its own, so there was no violation of Union law. In addition, there is no requirement for a translation arrangement to provide an exhaustive body of rules; it may built on an existing system, like that of the EPO.
The translation arrangements also do not violate legal certainty. The rules are clear, precise and predictable in their effect. They provide solutions for all situations. The costs ceiling and the method of establishing the compensation scheme are the responsibility of the Member States, who have set up the Select Committee for this. It seems that the CJEU assumes that the Select Committee will adopt clear rules. If not, there may be an issue of legal certainty later on, but that is highly unlikely.
Infringers acting in good faith are also protected by a rule that in the view of the CJEU meets the requirement of legal certainty, since the UPC may “undertake a case-by-case basis analysis by examining, inter alia, whether the alleged patent infringer is a small or medium-sized enterprise operating only at local level and taking into account the language of the proceedings before the EPO and, during the transitional period, the translation submitted together with the request for unitary effect”. Here it seems that the CJEU expresses its confidence in the proper functioning of the future UPC, which by the way is logical under Article 4(3) TEU.
Thus, the CJEU also rejected Spain’s appeal against the translation arrangements.
Language issues often lead to a political deadlock situation within the EU, which actually prevented the creation of a Unitary Patent for decades. In my view, the CJEU has now made it clear that the arguments often used in such a debate lack a legal basis in Union law. That of course doesn’t mean that politicians will not use them anymore in future, but it does take away a lot of their justification.
The implementation of the Unitary Patent Package can now continue without delay. Whether Spain will join, remains to be seen, but at least the legal arguments for not joining are not valid anymore. Of course, it may be reassuring that Union law will retain its predominant position as confirmed in Article 20 and 24 UPC Agreement anyway, so the CJEU can always interfere when the UPC would not do a proper job.
The CJEU has basically held that the Unitary Patent Package is beneficial for the innovative industry, specifically including small and medium sized entities. It would thus be best for the EU Member States that so far have not fully participated to join this system. That would de facto create a Community Patent after all, though on the basis of a legal system that is much more complicated than the other Community IP rights. It will be up to the UPC to make it work in the best way possible.