The Court of Justice of the European Union has today rejected Spain's second round of challenges to the Regulations establishing a unitary patent via enhanced cooperation across participating member states.   

Business impact 

No redesign of the proposed unitary patent (UP) now needed but still a complicated picture: Whilst, thanks to the Court of Justice's rejection of the latest Spanish challenge today, the idea of a single patent right which is valid and enforceable across (most of) the EU will not now need to go back to the Commission drawing board, there remains a complicated mix of patent protection options across the EU with several member states not signing up for the new unitary right or its enforcement system (the Unified Patent Court (UPC)).  This may lead to patchy coverage for a system that was designed to achieve a one-stop-shop for patent rights and litigation in the EU and obviate the need for the multi-jurisdictional litigation that we currently see across Europe. 

In summary:  

  • No UP coverage in Poland, Spain, Italy or Croatia (but UPC enforcement of European patents (EPs) in Italy)
  • Late joiners to the European Patent Convention  – European patents applied for before 2008 (for Croatia) and 2007 (for Malta) which are coming up to grant will not be able to extend to those states as they were not signatories to the European Patent Convention (EPC) at that time
  • General uncertainty over functioning of new court system and fears of revocation of all European patents at one go may lead many to consider exercising the opt-out option for EP
  • A return to national patent filing? Ratification - 7 more needed
  • Brexit would mean that the UK could not be part of the UP or UPC systems  

Details on the above bullets:

  • No UP in Poland, Spain, Italy or Croatia: The UP (often referred to as a "European patent with unitary effect") will not apply in Poland (which participated in the enhanced cooperation procedure to establish it but has then not signed the UPC Agreement (UPCA) establishing the UPC). Neither Italy nor Spain participated in enhanced cooperation so the UP will not be part of the laws of these member states. Croatia has not signed the UPCA nor participated in the UP so there will be no UP coverage there on either basis.  Thus the use of enhanced cooperation will create a patent right valid in only 24 of the 28 EU Member States.
  • No UP but UPC enforcement of EPs in Italy: Since the new UPC will hear proceedings relating to current European patents as well as UPs, the fact that Italy has signed the UPCA will mean that it will take part in the new UPC system, although without the involvement of unitary patents.
  • Late joiners to the European Patent Convention: European patents applied for before 2008 (for Croatia) and 2007 (for Malta) which are coming up to grant will not be able to extend to those states as they were not signatories to the EPC when the applications were made. Thus if a UP is requested when such applications come to grant, it will not be possible for it to cover these states even when Croatia has signed the UPCA and participated in the enhanced cooperation for the UP (Malta has signed the UPCA and agreed to the UP enhanced cooperation).
  • General uncertainty over functioning of new court system and fears of revocation of all European patents at one go may lead many to consider exercising the opt-out option for EPs: European patents have national designations and are separate national rights (proceeding from an initial single central application to the European Patent Office (EPO) under the EPC system), but will be treated by the UPC as if they were a single right with patentees risking centralised universal revocation along with the attractions of EU-wide injunctions.  Opt-out provides an alternative option where patentees can maintain their current national enforcement strategies whilst  watching the functioning of the UPC in its initial years.  There is an ability to opt back into the UPC system, although this will depend on whether proceedings have already been brought in a national court.
  • A return of national patent filing? To avoid the new system in its entirety, patentees may look to register new patents individually at national patent registries (rather than centrally at the EPO) so as not to be entangled in the new system since nationally registered patent are outside the UPC's jurisdiction.
  • Ratification: 7 more countries are still needed to ratify the UPCA but this may just be a matter of time and practicalities as the physical locations for the new courts have not yet been confirmed let alone built/reconfigured and the IT systems made read. Once the 13th ratification occurs (as long as the UK and Germany are among them, France having already ratified) the UPC and the UP will come into effect.
  • Brexit would mean that the UK could not be part of the UP or UPC systems:  Patentees would need to apply separately for patent rights in the UK and to enforce them separately too. The UK would be in a position rather like Switzerland, Norway and Turkey – inside the European Patent Convention but outside the new UPC system.  Spain would also sit outside unless they change their minds about the whole system now that their attempts to challenge it have failed (twice).  For more on Brexit see our recent publication here.   

See the CJEU judgments C-146/13 and C-147/13.

The CJEU's response to Spain's specific challenges

Decision in Case C-146/13 on Regulation 1257/2012 implementing enhanced cooperation in the area of the creation of unitary patent protection:

  • Judicial review  
    • Spain: Administrative procedure preceding the grant of a European patent is not subject to judicial review to ensure the correct and uniform application of EU law and the protection of fundamental rights, which undermines the principle of effective judicial protection.
    • CJEU: The Regulation is not intended to delimit the condition for granting EPs which are exclusively governed by the EPC, and therefore this procedure is not incorporated into EU law. The Regulation merely 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 provides a definition of that unitary effect.   
  • Article 118 TFEU   
    • Spain: Spain also submitted that the first paragraph of Article 118 TFEU (Treaty on the Functioning of the European Union) concerning the uniform protection of intellectual property rights throughout the EU is not an adequate legal basis for the regulation.
    • CJEU: The CJEU observed that unitary patent protection would prevent divergences in patent protection in participating Member States and thus provide uniform protection within those states.  
  • Renewal fees  
    • Spain: Spain challenged the assignment to the participating Member States acting in a select committee of the Administrative Council of the European Patent Organisation of the power to set the level of renewal fees and to determine the share of distribution of those fees.
    • CJEU: The CJEU observed that, according to the TFEU, it is for the Member States to adopt all measures of national law necessary to implement legally binding Union acts. Moreover, it inevitably falls to the participating Member States, and not to the Commission or the Council, to adopt all the measures necessary for the purposes of carrying out those tasks, given that the EU – unlike its Member States – is not a party to the EPC. The Court added that the EU legislature did not delegate any implementing powers which are exclusively its own under EU law to the participating Member States or the EPO. 

Decision in Case C-147/13 on Regulation 1260/2012

Regulation 1260/2012 concerns the translation arrangements.  Spain alleged infringement of the principle of non-discrimination on the ground of language.

In Spain's opinion the Regulation establishes, a language arrangement for the UP system which is prejudicial to individuals whose language is not one of the official languages of the EPO (English, French and German). Spain submitted that any exception to the principle that the official languages of the EU have equal status ought to be justified by criteria which are other than purely economic.

The CJEU emphasised the legitimate objective of the Regulation: the creation of a uniform and simple translation regime for the UP so as to facilitate access to patent protection, particularly for small and medium-sized enterprises (SMEs).  The high costs of the current European patent system had an adverse effect on SMEs in Europe in respect of innovation and competition.  These language arrangements would make the system "easier, less costly and legally more secure".  The Regulation was therefore proportionate, maintaining a balance between the interests of UP applicants and other economic operators by a number of mechanisms (including a compensation scheme for the reimbursement of translation costs, a transitional period until a high quality machine translation system is available for all the official languages of the EU, and a full translation of the UP for operators suspected of infringement in the event of a dispute).

The CJEU also held that the second paragraph of Article 118 TFEU constituted the correct legal basis for the Regulation, as it established the language arrangements for a European intellectual property right (namely, the UP), defined by reference to the EPC.