The new Unified Patent Court (UPC) having jurisdiction over European patents across European Union (EU) states was thrown into considerable doubt by the referendum of the British people to leave the EU (Brexit). The outlook seemed sunnier when the UK government announced its intention to ratify the UPC Agreement. However, the clouds are gathering again now that a general election has been called in the UK for 8 June 2017.
Will the UPC happen or not? If the UK ratifies the UPC agreement as it says it will, then the chances of the UPC coming into force are good – and by the end of 2017 if all goes according to plan. If the UK fails to ratify then all bets are off.
Why the doubt? The UK said it would ratify before triggering Article 50 starting the Brexit gun but they didn’t. Now we have the general election which effectively stalls law making until Parliament sits again on 9 June.
Will they ratify? We will just have to wait and see.
If they do, will they stay in post-Brexit? That looks doubtful if the stated aim of the UK government is to remove the UK from the jurisdiction of the Court of Justice of the EU.
But can the UK afford to avoid the CJEU entirely post-Brexit? The pundits cannot see how, but we are in uncharted waters. For the UPC a lot depends on ratification and the Brexit talks taking place over the next two years.
So, where are we now? What could possibly go wrong? What should you be doing?
Where are we now?
As things stand, of the 25 member states of the EU who participated in development of the Unified Patent Court (UPC), 12 have made the necessary preparations to ratify the Unified Patent Court Agreement (UPCA), including France. The ratifying states have to include France, Germany and the UK. Both the UK and Germany have also signalled their intention to do so. That means that, as soon as the UK and Germany actually do ratify the UPC it will be set to open for business.
However, that is not all that is practically required. There is also the matter of the Protocol to the UPCA on Provisional Application (PPA) which provides for the implementation of measures and the doing of things (eg hiring the judges) in the run-up to the opening of the UPC.
Further ratifications are needed to put this in place on top of those needed for the UPCA itself. They need to get on with it as the target date for the PPA becoming effective is 29 May 2017. The Preparatory Committee expressed complete confidence that this would happen and that all was happiness and light in their world. That was before the UK Prime Minister May announced she was seeking a general election on 8 June 2017. This was overwhelmingly passed by Parliament on 19 April. As all law makers in the lower House of Commons now have to seek re-election it effectively puts legislation on ice until after the election. It looks as if a casualty of this could well be the UPC ratification.
For now, let us assume that the requisite states sign the PPA. Then the Provisional Application phase of the UPC will work to the UPC being open for business in December 2017.
If all goes to plan the ‘sunrise period’ for the opt-out of existing European patents would start in September 2017, providing a three month window to enable patentees to avoid the UPC entirely from the day that its doors open.
What could possibly go wrong?
On 19 March UK Prime Minister May started the two year process for leaving the EU (Brexit). The dust is settling and we are seeing a growing realisation on all sides that this is going to be a complicated (very), fractious (at times) and long process, that could even go well beyond the two years provided for it. Up until the point when Brexit happens, the UK will remain a full member of the EU. At the heart of the negotiations will be the nature of the UK’s trading relationship with the rest of Europe. There is talk of a ‘hard Brexit’, meaning a complete divorce from all institutions of the EU – as well as softer versions in which some forms of EU institution and regulations maintain their primacy for a period post-Brexit. As The Economist newspaper put it:
'The deeper the trade deal, therefore, the more Britain must play by the EU’s rulebook and, perhaps, accept the de facto supervision of its courts.'
In calling the election Prime Minister May is seeking to boost her majority and get a strong mandate for her negotiations with the EU on Brexit. There is speculation that it is also to be able to force through the resulting deal if the terms on offer don’t look so attractive.
Why is this relevant to the UPC?
Much to my, and a lot of other people’s, surprise the UK government signaled its intention to ratify the UPCA back in November 2016. The planning, previously stopped because of Brexit, got moving again. The announcement of the general election has blown things off course yet again. In an unpredictable world in which nobody has any past experience to rely on, read what follows with as much or as little salt as you like. Brexit still matters to the UPC in the short run in terms of its survival and in the long run in terms of the UK’s membership of it if it does make it into being. At the heart of this is the on-going, but largely ignored, tension between the UK’s stated intention to participate in the UPC and its more general determination for the UK not to come within the jurisdiction of the Court of Justice of the European Union (CJEU) – the ultimate authority for aspects of the legal framework of the UPC.
The UK government had previously stated its intention to ratify the UPCA before triggering the Brexit negotiations but didn’t get round to it. The fact that this did not happen can be seen as merely a logistical issue bound up in the workings of government, or something more sinister. Everything in the Brexit negotiations is a bargaining chip. It could mean that the UPC will become subsumed within the broader context of Brexit negotiations (otherwise known as haggling).
To be able to ratify the UPCA there needs to be a Statutory Instrument drawn up. This is a form of secondary legislation but it still needs to pass through both Houses of Parliament and a committee stage.
There is a small window after the election when this could be done without significantly delaying the start date but the government will have a lot on its plate. If the UK fails to sign up to the UPC we become stalled again. That will put the UPC project back into severe doubt as it would require renegotiation by the states involved. While not quite back to the drawing board, it would likely cause substantial delays lasting years. However, while there is still hope that the UK will ratify the UPC as it said it would, the odds are longer now than they were.
If the UK does sign up to the UPCA in time, the odds of the UPC opening its doors on or soon after December 2017 are greatly enhanced. The Court will then function for at least two years with the UK as a participating state and it should enable it to carry on thereafter whether or not the UK remains part of it. We shall have to wait and see whether the UK government lives up to its promise.
What should you be doing?
This is a waiting game. Things will be clearer in July as to whether the UK will be in a position to ratify the UPCA. While there remains a possibility that the UPC will start in late 2017, patentees need to be prepared. On the defensive side, the opt-out is the most immediate issue for patentees. The court is brand new with no case law and no track record to help you decide on its worth.
Your existing portfolio of EP patents will potentially be exposed to a single revocation action covering all UPC contracting states. If that is a worry, then consider an opt-out strategy that at least protects your crown jewels from a pre- emptive strike in the form of revocation proceedings.
What is your attitude to that risk of exposure to the new court?
Different technology areas will have different experiences. An IT SME whose value is bound up in its patents may well want to remove them from this comprehensive form of pre-emptive revocation attack. On the other hand a multinational consumer products company with a large portfolio may consider the exposure a risk worth taking for at least its medium and low priority cases if not its high priority patents.
A pharma company typically with a comprehensive European filing program may see the potential downside of a single revocation action against one of its blocking patents a risk not worth taking.
On the offensive side the potential for essentially pan-European enforcement may enhance the value of your patents and that upside may be worth the risk of comprehensive revocation. There is no right answer, but a plan of sorts – from do nothing to opt-out everything – is needed.
You should also think about IP contracts and how they can be tailored to meet the challenges and opportunities of the UPC if and when it happens. For example, work out your strategy for who, as between a licensor and a licensee, can decide on the optout. In short, patentees need to keep abreast of developments and be prepared.