Another milestone in the long-running effort to establish a unitary European patent was reached on 11 December, when the European Parliament voted in favour of the "patent package" approved by the Council of Ministers the previous day, comprising the unitary patent regulation, the regulation relating to translations, and the agreement concerning a new Unified Patent Court ("UPC").  Subject to ratification by the individual EU member states, the first patents with unitary effect could be granted, and the UPC established, as early as 2014.

Previous developments in this regard have recently been reported here and here.  In this update we explore some of the differences between the unitary patent and the existing European patent system under the European Patent Convention ("EPC"), as well as outlining the structure of the UPC and the potential benefits and pitfalls for patentees and third parties.

What is a unitary patent?

At present, patent applications filed under the EPC are searched and examined centrally at the European Patent Office ("EPO"), then validated in individual member states, where the granted patent will be treated in the same way as a patent granted by the national patent office.

Under the new system, prosecution of applications at the EPO will remain unchanged until grant, whereupon patent applicants will be presented with the new option of validating a "European patent with unitary effect".  If this option is chosen, a single patent right will then be granted, providing coverage for 25 of the 27 EU member states (Spain and Italy having opted out).  The new unitary patent is therefore somewhat similar in principle to the existing Community Trade Mark and Community Registered Design in that it provides a single, multinational intellectual property right.

The existing country-by-country validation route will continue to exist alongside the unitary patent.  However, these will become alternatives: it will not be possible to obtain, for example, both an EP(UK) patent and a unitary patent, but only one or the other.

It should be noted that the EPO is not an EU institution and includes non-EU member states such as Norway and Switzerland.  Spain and Italy have also opted out of the unitary patent.  Such countries will not be covered by the unitary patent and so if protection is desired in these countries as well as those covered by the unitary patent, it will be necessary to validate the European patent in these counties separately.Following the grant of a unitary patent, a single annual renewal fee will be payable directly to the EPO.  Details of the fee schedule have yet to be finalised, but the new regime should represent a significant reduction in costs for patent applicants wishing to protect their invention in all 25 participating EU member states as this avoids the need to pay 25 sets of renewal fees in parallel.

All languages are equal...  but some are more equal than others

A further financial burden for patentees at present arises from the requirement in many countries to provide translations of European patents as part of the validation procedure.  European patents are granted in English, French or German, with a translation of the claims into the other two languages.  While some countries have dispensed with any further translation requirements, a significant number have not, and require translation either of the claims or of the entire text of the patent into their national language.

Under the new unitary patent system, unitary patents granted in French or German will be translated in full into English.  Unitary patents granted in English will require a full translation into another official EU language. No further translations will be required at the grant stage, although, in the event of legal proceedings, a translation into an appropriate language may still be required.

The reduction of translation requirements thus eliminates a significant portion of validation costs.  This may be especially advantageous for academic institutions and SMEs, who are more likely than large corporate applicants to need to work within tight budgets.  Furthermore, the European Parliament has proposed a compensation scheme for translation costs for SMEs, non-profit organisations and universities which file a patent application in a language other than the three official ones.

One court to rule them all

The most complex, arguably most controversial, and potentially most significant aspect of the unitary patent package relates to the establishment of the new Unified Patent Court ("UPC").

A system of local, regional and central divisions of the UPC will be created across Europe to hear patent litigation cases.  Cases should be heard at first instance in the local or regional division of the Court in the state where the defendant is based, with the language of the proceedings normally being that of the patent.  If the defendant is based in a non-EU country, has no local subsidiary within the EU, or if their country of residence does not have a local or regional division, then actions will be heard at first instance before the Central Division.  The local and regional divisions will also have discretion, in the case of infringement actions, to refer counterclaims for revocation to the Central Division.  A Court of Appeal, sitting in Luxembourg, will hear appeals from the courts of first instance, while Lisbon and Ljubljana are destined to host patent arbitration and mediation centres.

Despite its name, the Central Division will in fact be decentralised: although the Central Division will be based in Paris, it will also operate in Munich (with responsibility for mechanical engineering cases) and London (for cases relating to chemistry, materials, pharmaceuticals and biotechnology).  However, all divisions of the court, regardless of geographical location, will follow the same rules of procedure in an effort to ensure uniformity and consistency in decision-making across Europe.  Cases will be heard by a panel of three judges with a multinational composition, and in the Central Division at least one judge will be qualified in an appropriate technical field.

A layer of complexity is added by the fact that the applicable law relating to infringement and validity will be that of the state where the patentee is based.  Questions remain regarding whether referrals to the Court of Justice of the EU may be possible, which would threaten to cause significant delays and increases in cost during litigation.  However, the existing harmonisation of national laws across Europe thanks to the EPC and the Community Patent Convention should minimise any differences in legal provisions between different member states, while the dominant position of English in the translation provisions ensures that UK-based patent attorneys will be well-positioned to act for plaintiffs or defendants across Europe.

In principle, the UPC court system is intended to increase legal certainty and lower litigation costs relating to European patents: a single court decision with respect to infringement or validity will take effect across 25 of the 27 EU countries, without the need to pursue costly legal action in several countries simultaneously and without the possibility that courts in different countries arrive at contradictory conclusions starting from the same facts.  For patentees, this may represent a double-edged sword: while it will become easier to pursue infringers on a Europe-wide basis, it will also become more straightforward for patents to be declared invalid across the entirety of the EU. 

Furthermore, following an initial 7-year transitional period, the UPC will also have sole jurisdiction over all European patents, whether unitary or non-unitary.  The only way to avoid the jurisdiction of the UPC following the expiry of the transition period will be to pursue national patents in individual countries without going via the EPO, and therefore applicants concerned about the possibility of Europe-wide revocation of their patents may wish to consider this as an option.

What next?

In order to come into force, the "patent package" must now be ratified by 13 member states, including the UK, France and Germany.

Potential for upset exists in the form of the legal challenges filed at the CJEU by Spain and Italy against the "enhanced cooperation" procedure which has allowed the EU to press ahead with its proposals without Spanish or Italian participation.  However, the opinion of the Advocate General, which was released on 11 December, strongly suggests that the CJEU will find against the Italian and Spanish governments, clearing this potential blockage to implementation of the unified patent legislation.  A final decision is expected early in 2013.

Significant concerns have also been raised by industry, by academics and by patent practitioners with respect to some of the proposals.  Concern centres around the possible role of the CJEU, the continued uncertainty over costs, and the potential for bifurcated infringement and validity proceedings.  Some of the contentious points remain in the text approved by the European Parliament and therefore the possibility exists that one or more national parliaments may delay ratification while these issues are reviewed.

The current resurgence of Euroscepticism in the UK also raises the probability of British ratification being withheld, while, in Germany, influential anti-software-patent lobbyists and environmentalist groups may seek to use this opportunity to air grievances relating to the patent system in general.  Nothing can therefore be taken for granted at this stage.  The European Commission remains confident, however, that ratification can be completed by November 2013, with the proposals entering into force by early 2014.

The Bottom Line

If and when implemented, the Unitary Patent and Unified Patent Court may offer a significant saving for patent applicants with regard to the costs of obtaining and maintaining patents across the EU, as well as potentially offering a route to cheaper and faster pan-European litigation with a greater degree of legal certainty regarding infringement and validity.  Applicants should beware, however, that revocation of a unitary patent would take effect across Europe, and that even non-unitary European patents will ultimately fall under the jurisdiction of the new courts and an as-yet untested legal system.  Applicants may therefore wish to take the precaution of filing multiple national patent applications if the prospect of UPC jurisdiction raises concern.

Developments in relation to the unitary patent are now moving quickly, and further details will be reported in due course.