Potential "sunrise period" for unitary effect applications
Selection of judges
Europe is about to experience the single biggest overhaul of its patent system since the introduction of European patents almost 50 years ago. The landscape is changing with the introduction of unitary patents (UPs) and a Unified Patent Court (UPC).
With the Bundesrat, one of the two chambers of Austria's parliament, having recently approved the Protocol to the Agreement on UPC on provisional application (PAP-Protocol), Austria is one step closer to ratifying this treaty. Once Austria has formally ratified the PAP-Protocol, it will come into force, allowing the final preparatory steps for the UPC to take place.
The PAP-Protocol is one of the three treaties that underpin the new UPC system. The other two are the Protocol on Privileges and Immunities of the UPC (PPI), which confers legal status on the UPC, and the UPC Agreement (UPCA), which is the treaty that establishes the UPC system itself.
The expectation is that the UPC may become operational in late 2022, or, perhaps more realistically, in early 2023. This article discusses some of the recent developments and key challenges in bringing in this new system.
Under the current European patent system, countries that are members of the European Patent Convention (EPC) share the common patent granting authority, the European Patent Organisation, which is based in Munich, Germany. This organisation acts through the European Patent Office (EPO) to grant European patents, which may be designated in any one or more of the countries that are EPC members. The existing European patent system requires patents registered at the EPO to be validated in each of the countries in which the business wishes the patent rights to apply, including translating those patents into the respective native language of each of those countries, except in countries that have French, German or English as an official language. The EPO has a post-grant opposition process, which allows third parties to challenge the validity of a patent within nine months of grant, though this can be a very slow procedure. Additionally, the grant of a European patent in fact results in a bundle of national patents that are separately in force and are litigated nationally, sometimes leading to fragmented decisions across Europe.
The new system will introduce UPs, which are European patents that have a unitary effect across all participating member states via a single unitary right. The aims of the UP system include making the patent process more cost effective and improving the level of patent protection by making it possible to obtain uniform patent protection in the participating member states. Under the new system, applications for UPs will be made via the EPO, and the examination procedure under the current system will still apply, but, as a granted UP will have unitary effect across all participating member states, it may, for some businesses and industries, provide a cost-effective alternative to the current (bundle of national) European patents.
The introduction of the new UPC will result in a single court that has exclusive jurisdiction over UPs and all European patents, subject to exceptions during an initial seven-year transitional period (which may be extended for another seven-year period). During this transitional period, European patents (but not UPs) may still be litigated either before national courts of participating member states or the UPC, unless they have been opted out from the jurisdiction of the UPC. After the transitional period, all European patents will fall under the exclusive jurisdiction of the UPC and new opt outs will no longer be available.
The advantage of the UPC is that there will be a centralised forum for pan-European patent infringement and revocation actions, meaning that a UPC judgment will be enforceable across all of the participating member states, ensuring greater consistency and, as UPC case law develops, certainty.
Again, one of the aims of the UPC system is to make multi-jurisdictional patent litigation more cost effective. However, the UPC will not have any jurisdiction over national patents, and there will still be a need for national litigation in non-participating countries, including Spain, Poland and the United Kingdom, which formally withdrew from the UP and UPC system in July 2020 following Brexit, and in respect of EPs which have been opted out during the transitional period.
The UP and UPC system has been in development for over 10 years, with the UPCA being signed on 19 February 2013. In order for the UPC to come into force, at least 13 EU countries, including the three with the most European patents in effect in 2012, must pass national legislation to ratify the UPCA, and deposit their instrument of ratification with the general secretariat of the European Council. The ratification process has been held up by a number of issues, the details of which are outside the scope of this article, but which have included objections to the proposed requirements for translations of UPs, constitutional challenges and the United Kingdom's withdrawal following Brexit.
With respect to ratification, Germany, France and the United Kingdom were the three countries with the most European patents in effect in 2012, but following the United Kingdom's withdrawal, Italy has replaced it as the third country with the most European patents in effect in 2012. France and Italy ratified the UPCA – in 2014 and 2017, respectively – but, the United Kingdom's withdrawal aside, ratification by Germany has been one of the main hurdles to overcome for the UPCA to come into force. Recent developments, however, have moved things forward.
Germany ratified the PAP-Protocol in September 2021, followed by Slovenia in October 2021 and Austria in November 2021, although a number of formalities still need to be undertaken before Austria can deposit the instrument of ratification. The PAP-Protocol provides for the final practical preparatory steps for the UPC to take place, such as the assembly of the Court's governing bodies, adoption of all the secondary legislation, and finalisation of the budget, the IT infrastructure and the appointment of the judges.
Once Austria has deposited the instrument of ratification, the provisional application phase will be launched. The phase is expected to last approximately eight to 12 months and is the final phase of the UPC's setup, comprising the implementation of the UPC as an international organisation with legal personality. During this phase, the UPC preparatory committee becomes the UPC administrative committee, one of its competences being the appointment of the UPC judges.
With the recent steps taken in Austria to ratify the PAP-Protocol, the final preparatory steps of the UPC are moving closer. The final hurdle to overcome before the UPC can become operational is that the UPCA must be formally ratified by the final member state, Germany. Legislation which enabled Germany to ratify the UPCA came into force in August 2021, but at the time of writing, Germany has not yet deposited its instrument of ratification with the General Secretariat of the European Council, and will not do so until the preparatory phase is underway and completed.
The UPC system will have legal effect on the first day of the fourth month after Germany deposits its instrument of ratification, although the precise timeframe for its operation remains unclear as it depends on the timely commencement and completion of the provisional application phase and the date on which Germany ratifies the UPCA.
The UPC preparatory committee concluded in August 2021 that "at this point in time, it is estimated that the UPC will start operations around mid-2022". It is, however, generally accepted that this timeline is unrealistic. Alexander Ramsey, chairman of the UPC preparatory committee, commented in September 2021 that:
There is a certain amount of tasks that we haven't had the opportunity to do yet since it needs to be done during the PAP, when the Court has gained legal personality. We have a good grasp of what these tasks are and we deem that they can be concluded in a period of eight months. If the PAP starts, let's say, in December 2021 it is thereby possible that the work can be concluded early fall 2022. This is of course an estimation and if things take a little bit longer due to unforeseen events there will be a delay. Germany will not deposit its ratification until we are confident that the Court will be functional.
It is therefore considered more likely that the UPC will not open its doors until the end of 2022 or the beginning of 2023.
The sunrise period, whereby the opt-out register (under the responsibility of the UPC registry) will go live, will start three months prior to the UPC start date. Patentees will be able to opt out from the exclusive jurisdiction of the UPC when it comes into effect, the default being that all European patent applications and European patents with a filing date of 1 March 2007 or later will be subjected to the jurisdiction of the UPC (UPs, however, cannot be opted-out) and, after the end of the transitional period, under its exclusive jurisdiction.
Under article 7(2) of the UPCA, the central division of the UPC's Court of First Instance, which is primarily competent for actions for declarations of non-infringement and revocation actions, shall have its main seat in Paris, with sections in Munich and London (as well as local and regional divisions across other participating member states). Cases shall be distributed between the three sections, depending on the technical field of the patent(s) in suit. The central division based in London was due to handle chemical, metallurgical and life sciences cases, the central division based in Munich will handle mechanical engineering cases and the central division based in Paris will handle other cases, including software, telecoms and physics.
However, the United Kingdom's withdrawal from the UPCA means that London can no longer host one of the three sections of the central division and the question of which city or cities should be succeeding London and take over those cases is yet to be decided.
Members of the IP communities in Italy, the Netherlands and Ireland, in particular, have expressed an interest for the London section to be relocated to Milan, The Hague/Amsterdam or Dublin, respectively. However, it is thought that the most likely option is that the cases which would have been heard in London will be redistributed among Paris and Munich, at least as a provisional solution so as not to further delay the entry into force of the UPCA.
This is notably based on the position that the latter would not require going through the lengthy, uncertain (and potentially fatal) process of having to amend the UPCA in order to add a reference to whichever city would be designated and ratify the UPCA again as a redistribution to Paris and/or Munich would not require an amendment. However, some discordant voices have raised concerns about such position and considered that a provisional transfer to Paris and/or Munich may raise legal issues.
Potential "sunrise period" for unitary effect applications
The EPO has suggested that it may introduce an optional stay of the publication of the mention of grant of EPs until the Unitary Patent Regulation enters into force (which will be on the same day as the UPCA) so as to enable applicants to request a unitary effect for such EPs. This is because requests for unitary effect must be filed no later than one month after the mention of grant of an EP is published in the European Patent Bulletin.
A final decision on this has not yet been made, and practicalities and conditions (such as the cut-off date for European patent applications eligible to the optional stay) are still to be determined. The EPO select committee – which is responsible for overseeing the EPO's activities in relation to the UP – had indicated that this issue would be discussed at its 16 December 2021 meeting; however, at the time of writing, the EPO has not published any communications or minutes of the meeting.
One important outstanding issue, which will take place during the final preparatory phase and which is being watched with interest, is the appointment of judges. This process is expected to take a considerable amount of time. The UPC preparatory committee has indicated that it will seek to initially appoint a pool of around 90 judges, of which five would be full-time judges (including the presidents of the Court of Appeal in Luxembourg and the president of the Court of First Instance, which must be a French national).
The opportunity to apply for both legal and technical judgeships was opened in 2016 and re-opened in 2019. As a high number of applications for both legal and technical judges was received, it is currently anticipated that the selection will be made among these applications (except those from the United Kingdom, as they are no longer eligible) and that no new applications will be accepted for the time being. Once the pool of judges has been appointed, they will receive training in the UPC training centre in Budapest, although it may need to be moved to another location because Hungary has still not ratified the UPCA.
Around 10 years after the UPCA was signed, the UP and UPC seem closer than ever to finally become a reality. However, a few thorny issues, including the relocation of the London section of the central division, still need be resolved before this happens.
In addition, the final practical preparatory steps which will allow the UPC to become fully operational, including the finalising the IT and case management system, ensuring facilities for the UPC and divisions are secured and ready, the hiring of staff and, of course, the appointment of judges, still need to be carried out. These will take time, and, as Alexander Ramsey acknowledged, may lead to unforeseen delays.
Although the exact timeframe for the UPC becoming operational remains uncertain, it is evident that the process is forging ahead, and businesses which have not already done so should start or resume their preparations for the new system potentially coming into force within the next 12 months. This includes defining their patent portfolio and litigation strategies, training their teams on the new system and rules, reviewing and updating IP clauses in contracts, licence agreements and co-ownership agreements to take account of the new system, and, perhaps first and foremost, given that the sunrise period will kick off three months prior the UPC enters into force, get ready for the opt-out process.
For further information on this topic please contact Jules Fabre, Stephanie de Beer, Sarah Taylor or Katie Lo at Pinsent Masons by telephone (+44 121 200 1050) or email ([email protected], [email protected], [email protected] or [email protected]). The Pinsent Masons website can be accessed at www.pinsentmasons.com.