The conclusion of the European Patent Convention 1973 (EPC) and creation of the European patent led to a harmonised system for patent applications across Europe. However, a successful application under this system results in the grant of a bundle of national patent rights, which must be enforced on a national basis, and thereby the potential for multiple parallel proceedings across Europe. As well as the obvious cost implications, this produces a risk of divergent decisions in different jurisdictions, practical difficulties and greater complexity. In response to these issues, various attempts have been made across the years to develop a pan-European patent litigation system. The EEUPC is the latest such proposal.
This note summarises the development of the EEUPC and highlights some of its key principles and issues. It also provides a brief overview of the proposed European Union patent, which is intended to be established in parallel.
European Union Patent (‘EUP’)
- The EUP would be in addition to the EPO system and national patents in Europe.
- Past attempts at an EUP have failed; the key problems have typically been linguistic issues and issues over the judicial arrangements. A practical language solution has now been proposed, using machine translations (with no legal status) unless there is a dispute.
- The European Commission is renewing its efforts to create an EUP; the latest version of the proposed regulations was issued in October 2009. Political agreement was announced in December 2009 on the main issues, apart from languages. The new right will take 1-1½ years to be introduced, assuming language issues are resolved.
A Harmonised Patent System: The Challenges
There have been many practical bars to harmonisation, in particular the problems of the vast range of languages across Europe, and the varying judicial systems. Within the EU, the focus has historically been on developing a ‘Community’ or ‘European Union’ patent (see highlight box). However, there have also been two notable attempts to create a pan-European patent litigation route, both of which ultimately failed:
1. Judicial measures
In the 1990s the Dutch courts asserted jurisdiction over patent infringement across Europe based on the so called ‘spider in the web’ doctrine, usually where the main defendant was domiciled in the Netherlands. This practice was blocked by the European Court of Justice (ECJ) in 2006 when it held there was no scope for such jurisdiction under the Brussels convention where the validity of patents was in issue or where the claims involved different defendants based in other countries.
2. International agreement
In June 1999, the EPC Contracting States set up a working party on litigation whose aims included drawing up an optional protocol to the EPC which would commit its signatory states to an integrated judicial system. This led to the proposed European Patent Litigation Agreement (EPLA), which would have provided for an integrated judicial system for European patents which designated countries that had signed up to the agreement. The system was to include harmonised rules of procedure and a common court of appeal. Negotiations over the EPLA reached a fairly advanced stage, but met an impasse when it was determined that only the EU institutions could approve such matters.
Development of the EEUPC
A European Commission white paper, entitled “Enhancing the Patent System in Europe” which was adopted in early 2007, identified the need for a Community patent and proposed a centralised patent judiciary to deal with litigation on both European patents and the Community patent. The proposal suggested an integrated approach which combined features of the EPLA and the previous Community patent proposals, in the form of a European Community Patent Court, with competence for European patents to the extent that EPC Contracting States signed up. A draft agreement and statute was published at the end of 2008. With the entry into force of the Lisbon Treaty in 2009, the term ‘Community’ is no longer used in this context and is replaced by ‘Union’ as in ‘European Union Patent’ (also known as ‘EU Patent’).
In March 2009, the European Commission issued a recommendation to the European Council to authorise the Commission to open negotiations for adoption of an agreement creating a new litigation system. It is expected that the EEUPC would need to be created by concluding an agreement, in accordance with Article 218 of the Treaty on the Functioning of the EU (TFEU), involving the European Union and its Member States on one hand and the other EPC Contracting States on the other hand.
The litigation proposals are now termed ‘European and European Union Patents Court’, referring both to patents granted in the EPO (‘European’) and the proposed new single patent (‘European Union’). In addition to the draft agreement and statute for the court, draft rules of procedure for the EEUPC have already been published, and detailed discussion of these documents is ongoing. Alongside this, a reference to the ECJ has been made to confirm that the proposed agreement for the EEUPC complies with the TFEU. This is necessary as it is intended that the EEUPC would have jurisdiction for any future EU patent which is implemented. Assuming that the ECJ delivers a favourable opinion during 2010, the EEUPC Agreement will be opened for formal negotiation and the EFTA countries will be the first to sign it. Final signature cannot be expected before the end of 2012, followed by a ratification process taking a further two years. Therefore, the system will not be up and running until at least 2015. It is also possible for some EPC states to decide not to adopt these measures so that a ‘patchwork’ results.
The size of the European market means that, if adopted, these changes will justify substantial investment by businesses in developing a strategy for, and proper handling of, EEUPC litigation. We may also see Europe becoming more attractive to so-called patent ‘trolls’.
Importantly, it was announced on 04 December 2009 that consensus had been reached by the Competitiveness Council on the principal contentious issues concerning EEUPC such as procedural language, optional bifurcation of revocation proceedings (see below) and transitional period. This was a vital step.
Key Principles of the EEUPC
- The EEUPC courts would be solely competent for revocation actions and infringement actions in relation to European and EU patents (subject to the transitional provisions for European patents allowing plaintiffs to continue to sue nationally, and for patentees to opt out of the system in respect of prior filed patents). Decisions of the EEUPC courts would have effect throughout the territory or territories where the relevant patent is in force.
- Patents granted by national patent offices would remain outside the scope of the EEUPC.
- The EEUPC court structure would consist of a Court of First Instance, comprising local and regional divisions and one central division, with a right of appeal to a single Court of Appeal. Standalone revocation claims must be brought in the central division.
- At first instance, three judges would sit in all cases, two of whom must be legally qualified and one technically qualified. In a local division, two of the judges would come from the host nation, whilst the third would be a judge taken from the central pool. In the central division, all three judges would be taken from the central pool.
- The Court of Appeal is to sit in a multi-national composition of five judges, three of which should be legally qualified and two technically qualified.
- All judges should have a high degree of specialisation in patent litigation or technical expertise (as the case may be), and a training framework would be set up to improve and increase expertise and to share this expertise across the region.
- Oral testimony and cross-examination will be strictly limited, and the court should endeavour to complete the trial within one day.
- Where first instance proceedings are held in a local or regional division, the language of the proceedings will generally be the official language of the particular state, or one of the official languages of the European Patent Office if this has been designated as the language of proceedings for that local or regional division.
- The language for proceedings at the central division will be the language in which the patent was granted.
- At the Court of Appeal, the language of the proceedings should be the same as that for the proceedings before the Court of First Instance.
The prospects for EEUPC being introduced are considered good, although some EU Member States are contesting the proposal before the ECJ on the basis that EEUPC should (they argue) be operated under the ECJ structure. (The ECJ will hold an oral hearing on these issues, the date of which will be set after February 2010.) It is also open to the European Parliament to reject the Agreement.
Much attention has been focused on the draft procedural rules. Although it will be several years before these are of practical relevance, industry and practitioners have pressed for early attention to drafting of the rules so that all issues are thoroughly considered, well in advance. The current draft of the rules makes it clear that the procedure will be ‘front-loaded’, in the sense that the plaintiff will need to set out from the start the evidence and legal arguments relied on, together with claim construction where appropriate. If it is likely that further evidence will be required, this should be outlined. This type of procedure is already familiar to lawyers in many European countries, although it is very different from, for example, English procedure where the case evolves over several months and all evidence is submitted shortly before the trial. Some practitioners have proposed that the initial stages should comprise identification of all issues, but that in complex cases there should be a later stage comprising substantiation in detail (including evidence).
The current proposals then provide for the defendant to have four months in which to prepare its detailed defence (including any counterclaim for revocation), with the plaintiff having a further three months to reply. This timetable has been criticised as too slow. There have also been suggestions by practitioners that there should be an interim cross-examination stage for complex cases, around two months before the trial, if such cases are to be managed effectively.
Another area that has prompted discussion is the handling of revocation counterclaims. As is well known, for example, current practice in Germany is for infringement and revocation claims to be handled in different courts, in entirely separate proceedings (‘bifurcation’). It seems that under EEUPC, this will remain an option at the discretion of the Court. Therefore, the German divisional Court is still likely to bifurcate (ie refer validity issues to the Central Division), at least in complex cases or where there is an EPO Opposition, whereas other divisional Courts will be less likely to do so. Accordingly, one can expect forum shopping to play a role in cases where infringement is alleged in more than one country, since jurisdiction will continue to be based on either the defendant’s domicile or the location of infringing acts. Forum shopping may also occur if particular courts gain a ‘rocket docket’ reputation.
Where cases involve a variety of legal issues, such as contract law in addition to patent law, it seems that the relevant national court will continue to have a role, insofar as the case extends beyond the limits of the EEUPC jurisdiction. Other areas not within the exclusive EEUPC jurisdiction, according to the present draft Agreement, include for example: entitlement disputes; actions for declarations relating to essentiality in respect of technical standards; and employee inventor compensation claims. The interaction between national and EEUPC proceedings will add potential complexity.
It is also important to bear in mind that the national case law accumulated prior to the introduction of EEUPC will be of limited authority. The law of patent validity applied by the Court will be the European Patent Convention; and the law of infringement will be that set out in the EEUPC Agreement (based on certain established European principles). Whilst these are fairly straightforward and comprise familiar concepts, they do not deal in any detail with potentially difficult issues such as exhaustion of rights, non-literal infringement and the correct approach to validity and sufficiency of patents for selection inventions, for example. The relevance of the merits to interim injunction applications is also uncertain. National courts currently have divergent views on such issues and it is likely to be some time before the law ‘settles down’ under EEUPC. (The degree to which court panels comprise judges from different countries is likely to influence the speed with which consistent decision-making evolves.) Furthermore, during the transitional period (currently proposed as five years), there will continue to be many cases handled only at a national level.
With so many uncertainties and risks, businesses will need to think very carefully about whether to use the new system during the transitional period, and whether to opt out prior-filed patents entirely.