On July 9, 2021, the German Constitutional Court issued a landmark decision with implications for many companies doing business in Europe. For decades, the European Commission and EU member states strived to create a pan-European Unified Patent Court (UPC). Over the years, the project had to overcome so many hurdles that numerous commentators doubted whether the new patent litigation system would ever be set up.
Here we go again
When the German legislature first passed a law ratifying the UPC Agreement (UPCA), an individual patent practitioner filed a constitutional complaint. In February 2020, he succeeded in having the law nullified on constitutional grounds. That did not deter the government from pushing ahead. It added language to the explanatory comments and sent the bill back to parliament. This time, it passed the lower and upper chambers with the necessary two-thirds majorities.
Several opponents filed constitutional complaints against that second law ratifying the UPCA. In addition, they asked the Constitutional Court to grant preliminary relief. In accordance with constitutional customs, the German president put his pen down to await the decision of the Constitutional Court.
No violation of constitutional rights
With its decision of July 9, the Constitutional Court denied preliminary relief. The decision is based on two grounds. First, the Constitutional Court emphasized that in accordance with standing case-law the requirements for preliminary relief are strict, in particular when an opponent aims to prevent the ratification of an international treaty. In the case at hand, the opponents had failed adequately to substantiate why ratification of the UPCA would impinge on their constitutional rights and cause them irreparable harm.
Second, the Constitutional Court disagreed with the argument that article 20 of the UPCA impacted on the primacy of EU law and the established exceptions from that principle under German constitutional law. In accordance with article 20, the UPC shall apply EU law in its entirety and shall respect its primacy. During the court proceedings, the German government argued that this provision merely restates the law when it refers to the primacy of EU law. In its decision, the Constitutional Court agreed and, at the same time, emphasized that it would continue to exercise reserved powers in accordance with its Maastricht and Lisbon judgments.
On a final note, the decision of July 9 also indicates the outcome of the pending proceedings on the merits. The constitutional complaints will be dismissed, because they are inadmissible for the same reasons.
Theoretically speaking, the German president could now go ahead, sign and promulgate the law ratifying the UPCA. Under constitutional customs, he merely is expected to await the decision regarding preliminary relief. We are yet to see whether he will wait for the decision(s) dismissing the proceedings on the merits to be issued. In any case, it appears likely that the law will be ratified soon, and that it will come into force on the day following promulgation.
What does this mean for the UPC and potential users of the new system? There are additional steps that need to be taken before the new patent litigation system can go live. First, a sufficient number of participating states need to sign the Protocol on Provisional Application of the UPCA. This will result in the release of necessary funds for setting up the infrastructure. Second, Germany must deposit its instrument of ratification. Three months from then, the UPCA finally will enter into force and the litigation system launches.
Implications for companies doing business in Europe
After so many twists and turns, any sensible commentator will be cautious in making statements about the future of the UPC. That said, for the first time in years it now appears that the pan-European patent litigation system may finally come into being. This entails advantages and disadvantages, such as the availability of pan-European injunctions and pan-European patent invalidation proceedings. Admittedly, nobody can predict the quality of judgments issued by the future court. For owners of European patents who are concerned about losing their IP rights, now is the time to identify the crown jewels and to opt out of the system.