On December 11, 2012, the European Parliament approved a legislative package aimed at establishing a single unified European patent system.

The Current System

Presently, an applicant files a single patent application with the European Patent Office (EPO) and if the application satisfies the requirements of the European Patent Convention (EPC), the EPO will grant the application that can then be validated in any EPC Contracting State as a national patent.

Proceedings before the EPO must be in English, French or German but a significant number of Contracting States require the text of the patent be translated into their national language upon validation. It has long been recognized that the translation costs and the payment of multiple national renewal fees present a significant burden to small and medium-sized entities. The European Commission estimates the cost of having a patent recognized in every EU country under the current system is approximately €36,000; of which €23,000 is translation costs.

Legal proceedings concerning the validity or infringement of any patent are heard in the courts of that particular country.

Unitary Patent

In the future, in addition to the current system, patent applicants in Europe will have the option of selecting a single unified patent right. The unitary patent will be examined and granted by the EPO as before but, unlike current European patents, it will have unitary effect for the territory of the 25 participating states. Italy and Spain have opted out of the agreement due to concerns over the language regime.

The unitary patent must be in one of the three official languages (English, French or German) and, if the text is in French or German, it must be translated into English upon grant. Where the language of proceedings is English, the text must be translated into another official language of an EU member state. A single renewal fee will be paid by the patentee to the EPO. The European Commission estimates the new system will cost applicants seven times less than the current system. The unitary patent will have identical scope and protection in all participating countries and it is a single legal right covering all participating countries, rather than a bundle of individual national patent rights.

Unified Patent Court

In conjunction with the unitary European patent, a specialised patent court will be created (Unified Patent Court or UPC) with exclusive jurisdiction for litigation relating to European patents and European patents having unitary effect. The UPC will comprise a Court of First Instance, a Court of Appeal and a Registry. The Court of First Instance will consist of a central division (with its seat in Paris and two sections in London and Munich) and several local or regional divisions in the Contracting Member States to the agreement. The Court of Appeal will be located in Luxembourg. In general, infringement proceedings will have to be initiated at the location of the infringement or the place of domicile of the defendant. It is hoped that the UPC will address the inconsistencies found under the current system where patents may be litigated in more than one jurisdiction.

What Does This Mean for Canadians?

With the reduced renewal fees and translations costs, obtaining a granted unitary patent is likely to be much less expensive for Canadian companies. This benefit needs to be weighed against the strategic disadvantage of having a single legal right covering much of the European Union. Competitors wishing to invalidate a unitary patent need only to commence one proceeding, the success of which will eliminate protection for much of Europe. This contrasts with the current system where multiple proceedings must be successful in order to secure unfettered access to the entire European market. Therefore, the bundle of national rights, while being more expensive to obtain, is more costly to challenge.

A holder of a unitary patent is likely to have fewer choices of where to commence infringement proceedings as the new system specifies certain court locations and has rules for determining where infringement proceedings should be commenced. In short, it is apparent there will be significantly less scope for forum shopping under the unitary system than under the current system.

On a commercial level, licences involving European patents will need to address the unitary patent concept. For example, instead of granting a territorially-defined license to a particular national patent, the licensee will have to divide a single unitary patent into a number of different licenses by territory. Whether this will have adverse tax implications, or create transfer pricing issues, remains to be seen.

Within a relatively short amount of time, patent agents, patent lawyers and IP managers will have to revise their European IP strategy to take into account the challenges and opportunities of the unitary patent and unified patent court.

While it is possible to stick with the status quo for the time-being, there are major benefits to the new system. So the question is, will you take the plunge immediately or sit on the sidelines and watch and learn from other applicants who jump right in?