This article was originally published on Telecoms.com on September 3, 2014.
The Unified Patent Court (UPC) is the result of an agreement between 27 European countries to create a single patent for Europe (the ‘Unitary Patent’), with a single court (the UPC) to handle validity and enforcement matters.
The creation of the UPC has spurred a great deal of debate in political and legal circles, as well as within industry. Many have questioned whether it is going to be beneficial to patent holders, or whether potentially it could be damaging to certain sectors of the UK economy. At present, it appears likely that the UPC will be operational by 2016.
One concern has been the location and structure of the UPC courts, which will focus technologies in different locations; London will deal with pharmaceuticals and chemicals; Munich will deal with mechanical engineering; and Paris will be responsible for the remaining sectors, including electronics. The impact on the UK’s telecoms and technology industry is unclear, however, many believe that Paris and France will benefit from a perception they are the new centre of excellence. A further concern is the approach to be adopted, known as ‘bifurcation,’ which will ‘split’ infringement actions from validity actions into separate proceedings.
The UPC Structure
The UPC is based largely on a German model of court system; the effect being that the court will be comprised of different divisions, each of which will have its own judges and territorial coverage, and the local/regional divisions will serve different functions to the Central Division. The Central Division will have exclusive jurisdiction to determine issues of validity for Unitary Patents and will hear cases in three locations – Paris, London, and Munich, with each being responsible for certain technologies. Regional divisions will cover multiple jurisdictions that group together; for example, the Nordic countries might form a single regional division, whereas Holland intends to have a ‘Local Division’ just for Holland, and Germany intends to have four ‘Local Division’ each covering different parts of Germany.
The location of the Central Division in Paris, London, and Munich may also present concerns for specific industries. In the legal community, we have seen a rise in the demand for a local presence centred on the locations of the UPC divisions. This echoes the demand for a local presence of legal advisers around the European Patent Office (‘EPO’), despite the fact that qualified legal advisers across Europe are equally able to assist in respect of European patent matters before the EPO. Whether new ‘centres of excellence’ will develop around the UPC divisions is perhaps the most interesting unknown. If they do, London may benefit in pharmaceutical expertise, but will it be at the expense of other specialisms? Will we have a brain drain of expertise in the electronics sector to Paris, possibly to the detriment of the UK sector?
Parties commencing proceedings in the UPC will need to consider the court structure, as well as the location of the defendant, which may have a consequence as to the language used in the case, and perhaps the speed of the case. Overall the timeline for proceedings under the new regime could be very different to existing practice. For example; the time from commencement of proceedings in the Central, Regional or Local division, to an appeal to the Court of Appeal (in Luxembourg), together with the possibility of one or more references to the Court of Justice of the European Union (CJEU), could mean the better part of a decade from start to finish. This sadly does not compare well to existing arrangements such as the time in England to pass through the High Court, Court of Appeal and the UK Supreme Court of around three years.
The ‘Split Proceedings’ issue
This is known as ‘bifurcation’ and is the system that has been operating in Germany for many years, but not typically in the U.S. and English patent courts. In effect, a different court will decide if you infringe a patent from the court determining if the patent is valid. The risk is that the two courts move at different speeds so that a company could be injuncted from selling a product found to infringe, only for the patent some time later to be held invalid (and by a different court).
As telecoms devices are rarely single component devices, the different components that comprise the device will invariably be covered by a bundle of patents. An injunction based on a single one of those patents will mean that the device must be pulled from the market. While companies in the past could limit exposure to injunctions, by moving their manufacturing and distribution businesses to jurisdictions in Europe where injunctions are not granted until the validity of the patent is assessed; the impact of injunctions issued by the UPC is that they have pan-European effect, and may do so before validity has been tested. In that case, in Europe, there is no hiding place.
The potential effect is to drive industry, beyond the borders of Europe. Perhaps if the courts, hearing an infringement action, are prepared to suspend the infringement case (and so delay the granting of an injunction), allowing the validity case to be heard, the risk will be mitigated. Until the system starts sadly we are far from certain this will be the case in practice. Sadly, this is where politics interfered with sense. As one in house lawyer expressed it; “[A] politically acceptable UPC arrangement, is not the same as a better system.” This is simply the price we pay for political compromise being required before the differing countries of Europe could decide on the new regime. And in such situations it is not surprising that those negotiating may not fully understand patents and the economic impact of an injunction.
Whatever the experience of the new regime, it makes sense to be thinking about it before you find yourself using it.