As previously described in our January 2011 newsletter, there have been on-going attempts to create: (i) a unitary patent for the European Union ("EU") countries (an "EU Patent"); (ii) a European and EU Patents Court ("EEUPC"); and (iii) a unified patent litigation system (the "UPLS") effective across the member states of the EU (the "EU countries"). Both the legality of the UPLS and the translation regime for the proposed EU Patent have been under consideration.

In this newsletter, we report on what is perhaps one of the most important decisions made in the area of patent law to date: the advisory opinion of 8 March 2011 (the "Opinion") of the Court of Justice of the European Union ("ECJ") that declared that the current proposals for the creation of the UPLS are incompatible with EU law.1 The Council of Europe had requested this Opinion on the legality of the UPLS as it wanted to have an independent view in advance of any detailed consultation by the European Parliament. We also report on the decision of the Council of the EU on 10 March 2011 to authorise the use of the so-called "enhanced cooperation" procedure for the creation of a unitary patent,2 along with the European Commission's ("Commission") legislative proposals of 13 April 2011 in respect of such unitary patent protection and the applicable translation arrangements.3

Background

In brief, the current arrangements for litigating patents in Europe have come under some criticism over many years. This is because although the application process and opposition procedures for a "European" patent are centralised (via the European Patent Office ("EPO"); a "European Patent"), once granted, the patent becomes what is colloquially referred to as "a bundle of national patents" depending on the European Patent Convention territories designated by the applicant. Thus, when a claim for infringement is submitted, if more than one patent territory is involved, a Japanese patentee is obliged to litigate under each territorial patent right separately, even though the invention claimed by the patent is essentially the same in each case.

In principle, the proposals to redress this situation are simple: (i) a single Europe-wide patent right: the EU Patent (sometimes referred to as a "unitary patent" or a "Community patent"); and (ii) a single EEUPC to hear matters relating to the infringement and validity of both European Patents and EU Patents, as set out in the UPLS.

Significantly, the UPLS provided that the EEUPC would have exclusive jurisdiction over all patent law issues, without any provision for reference to the ECJ. The proposed UPLS did, however, retain a limited role for the ECJ: if the Court of First Instance of the EEUPC were faced with a question requiring the interpretation of the European Community ("EC") Treaty, or concerning the validity or interpretation of acts of EC institutions, this question would then be referred to the ECJ for a decision that would be binding on the EEUPC (both the Court of First Instance and the Court of Appeal).

The ECJ's role had been limited under the UPLS in response to concerns that the ECJ was not an appropriate forum in which to determine questions of substantive patent law. Such concerns stem, in part, from the ECJ's track record on references relating to trade mark matters.

The ECJ's reasoning in the Opinion

The ECJ did not accept the proposed limitation of its role. It rejected the exclusive jurisdiction given to the EEUPC in respect of patent law. The ECJ said that to follow the UPLS proposals "would alter the essential character of the powers conferred on the institutions of the EU and on the [EU countries] which are indispensable to the preservation of the very nature of the European Union law". According to the Opinion, the proposals would deprive the courts of EU countries of their role and ability to refer issues to the ECJ. Also, the ECJ regarded itself as the only body with ultimate authority to adjudicate on matters of EU law, of which patent law was one aspect.

Further, if a decision of the EEUPC breached EU law, that decision could not be the subject of infringement proceedings nor could it give rise to any financial liability on the part of one or more EU countries. Thus there would be no adequate remedy if a decision of the EEUPC was in breach of EU law.

The envisaged UPLS would confer on an international court (which would operate outside the institutional and judicial framework of the EU) an exclusive jurisdiction to hear a significant number of actions brought by individuals in the field of the EU Patent, and to interpret and apply EU law in that field. This would deprive the courts of EU countries of their powers in relation to the interpretation and application of EU law. It would also deprive the ECJ of its powers to reply, by preliminary ruling, to questions referred by those courts. Consequently the UPLS would alter the essential character of the powers that the EC Treaties confer on the institutions of the European Union and on EU countries and which are indispensable to the preservation of the very nature of EU law.

A modified EU Patent and "enhanced cooperation"

Notwithstanding the ECJ's Opinion in respect of the UPLS and EEUPC, the EU has since taken important steps to implement a new unitary patent (if not an EU Patent) system and corresponding translation regime.

On 15 February 2011, the European Parliament gave its consent to proceed with the implementation of a new unitary patent by 471 votes to 160,4 and on 10 March 2011, the Competitiveness Council of the EU authorised the use of the "enhanced cooperation" procedure for the creation of such a unitary patent.

As explained previously in our January 2011 newsletter, a patent system created under the "enhanced cooperation" arrangement would be mutually valid and recognised only among the individual EU countries that joined the mechanism. In other words, it would be a unitary patent in respect of the countries within the mechanism, but it would not necessarily be the originally-envisaged single EU Patent with effect across the whole of the EU. This is because Spain and Italy have disagreed with the other 25 EU countries on the establishment of a single EU Patent, and currently remain outside the "enhanced cooperation" mechanism. This is on the basis that Spanish and Italian are not included within the scope of languages into which the EU Patent would be translated; the scope is currently limited to the official languages of the EPO (English, French and German).

On 13 April 2011, the Commission published legislative proposals to begin to establish the unitary patent5 and relevant translation regime.6 In summary, the Commission proposes that:

  • holders of European Patents can apply at the EPO for unitary patent protection for the territory of 25 EU countries. The unitary patent will ensure the same level of protection in all 25 countries;
  • pat ent applications can be submitted in any language. However, the EPO will continue to examine and grant applications in English, French or German;
  • for applicants residing in the EU who file their patent application in a language other than the three EPO languages, the cost of translation into one of the official languages of the EPO will be compensated;
  • after the patent is granted, the patent claims will be translated to the other two official languages of the EPO; and
  • for a transitional period of a maximum 12 years, unitary patents granted in French or German will need to be translated to English. Unitary patents granted in English will need to be translated to another official language of the EU. Such translations will be required until high-quality machine translation becomes available to ensure the accessibility of patent information.

There will also be a number of further administrative and political stages that will need to be completed. We will continue to monitor and report on developments as they arise so that Japanese companies can take a considered approach on how best to exploit and protect their intellectual property.

Business impact for Japanese companies

  • Since many European companies, IP judges, other IP professionals and even the Commission do not consider the ECJ as a satisfactory tribunal for the adjudication of patent disputes, the ECJ's Opinion appears to have ended any further attempts of establishing a coherent pan-European patent litigation system.
  • However, there are indications that the EPO and the Commission will continue to try to find a resolution to pan-European patent litigation of European patents. The EPO announced on the day of the ECJ's Opinion that it welcomed the views of the ECJ since they "provide important clarification for the further development of the project", while the Commission has said it will analyse the Opinion very carefully to identify appropriate solutions.
  • The ECJ's position appears to mean that any future solution will need to allow the ECJ to play a role as a referential court in patent matters as well as other EU law issues. This is a feature that many in the profession wanted to avoid.
  • Although there would currently be no litigation system to enable its enforcement, the EPO's view is that this should not prevent progress on the EU Patent. It sees the unitary patent as "a project which is independent from the EEUPC [UPLS] Agreement" and "supports the approach of the Commission to continue the process relating to the enhanced cooperation on unitary patent protection".
  • As such, Japanese companies should be aware that the proposed UPLS is unlikely to come into effect, and that they are required to make do with the current system for now, which can be complex, unwieldy, expensive and potentially inconsistent. This means that choosing where to litigate first remains one of the principal strategic decisions in managing multi-jurisdictional patent litigation in Europe. We will describe this and other practical strategies in a newsletter later in the year.