From October 2016 to March 2017 the team is joined by Guest Kats Rosie Burbidge and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Tian Lu and Hayleigh Bosher.

Thursday, 3 March 2016

The UK Implements the Unitary Patent - Statutory Instrument passed

This Kat reported on the publication of the draft Statutory Instrument that will implement the Unitary Patent and Unified Patent Court in UK law, with a promise of a detailed report later.  As a quick reminder, the Intellectual Property Act 2014 contained enabling provisions to allow the necessary law changes to be made by secondary legislation, namely this Statutory Instrument, resulting in the curious position that primary legislation (the Patents Act 1977) is now being amended by secondary legislation.  This is perhaps paradoxical, but not unusual nowadays.

None too diligently, this moggy has been studying the Statutory Instrument.  This being too great a task for a single fictional feline, he has been greatly assisted by his colleague Robert Barker.  What follows is a joint venture.

Latest News
In the meantime, the Government has lacked no diligence, and the draft SI was approved by the House of Commons on 1 March and the House of Lords on 2 March.  The Hansard report reveals that the discussion in the House of Commons lasted precisely 16 minutes.  Edward Vaizey, Minister for Culture and the Digital Economy, stated that the "new court and patent will be ready for business in early 2017".  He also speculated (implausibly in the humble opinion of this moggy) in relation to a possible UK exit from the EU:

"if we left Europe as a result of the referendum, I suspect it would be a decision for the UK Government whether they wanted to rejoin the European patent court. Of course, we would have to rely on our European partners to decide whether the UK could be a member."
Much of what might happen if the UK leaves the EU is unknowable, but since the Unitary Patent is created by EU Regulation, the UPC Agreement is an agreement between EU member states, and the Court of Justice of the EU has already ruled that a European Patent Court including non-EU members would be contrary to the EU treaties (see Katpost here and press release here which discuss further) - to name just a few reasons - that seems improbable.

So what does the SI - the "The Patents (European Patent with Unitary Effect and Unified Patent Court) Order 2016" to give it the full proposed title - do?  Well, it amends the Patents Act.  Some of the amendments are absolute, some apply to classical European patents (non-unitary) only, and some apply to unitary patents only - particularly Section 60 relating to patent infringement. Moreover, it applies some sections of the Patents Act to Unitary Patents, and disapplies others.  To make sense of it, the amendments must be read in the context of the Patents Act, and so this Kat is delighted to share with our dear readers our working copy of:
Eagle-eyed readers will already have seen this Kat's first quibble - he remains of the opinion that the joint effect of Article 2 EPC and the UPC Agreement is that for UPC contracting member states there can only be one law of infringement applying to all patents - national, and European whether classical  (also called "bundle") or unitary, as he argued here and here.  Whereas now there will be three laws of infringement under UK law, and a possible fourth one if you count the UPC Agreement text itself.  They differ in the definition of contributory infringement, and also in the definition and application of certain of the acts that are exempted from patent infringement.  Frequent Kat commenter Meldrew has written on this already, and this moggy generally agrees with his analysis.  For readers of the TL;DR persuasion, that may suffice.  But for Unitary Patent junkies, there follows a detailed exegesis of the SI and its effects.

1. Analysis of the Statutory Instrument
As will be explained below, the Statutory Instrument does not, in this Kat's opinion, entirely succeed in directly implementing the provisions laid out in the Agreement on the Unified Patent Court (“UPCA”) with respect to unitary patents. Ostensibly, this may not be that important: the Unified Patent Court (“UPC”) will only consider unitary and bundle patents under the UPCA (probably – see next paragraph); national courts will only consider EP bundle and national patents under national law. However, there may be occasion where a national court must consider what infringes a unitary patent (say, in a licencing or threats action). In which case, the differences between the national law and UPCA definitions of infringement result in legal uncertainty.

But if national laws of infringement relating to classical European patents vary, there is a further problem: there is no direction in any relevant legislation as to which law should be used in an EP bundle action brought before the UPC. Should the definition of infringement as defined in the UPCA be applied, or the definition as implemented by national law? If the latter, assuming that not all Contracting Member States will implement the UPCA identically (a fair assumption), which of these national implementations should apply?  That of the place of infringement (but what if that takes place in more than one country)?  That of the defendant?  It does not seem at all clear.

2. Overview of the Statutory Instrument
As mentioned briefly above, the Statutory Instrument does not provide whole new sections to be directly added to the Patents Act. Rather, a series of amendments are provided, and two Schedules. The amendments mostly involve adding short phrases or sentences to existing articles, such as “or the Agreement on a Unified Patent Court” where appropriate. The Schedules provide an explanation of how the Act relates to the unitary patent and the Unified Patent Court.

Schedule A3 lists which sections of the Act apply to unitary patents. It also provides modifications of the Act for unitary patents – essentially, this part instructs the reader to read words into the Act for unitary patents which aren’t there for UK and EP (UK) patents. For instance, Schedule A3 states that when applying Section 60 to unitary patents, references to “the United Kingdom” should be references to “the territory of a Contracting Member State in which the European patent with unitary effect has effect”.

Schedule A4 defines the exclusive jurisdiction of the Unified Patent Court regarding actions relating to patents and Supplementary Protection Certificates. It also defines the “opt out” of the UPC’s jurisdiction (according to Article 83 UPCA), and lists the sections of the Patents Act which do not apply to actions where the UPC has exclusive jurisdiction.
Merpel playing the ol' Statutory Instrument

3.  Welcome aspects of the Statutory Instrument implementation
3.1 Provision of a law relating to the unitary patent
Article 5(3) of EU Regulation No 1257/2012 (“the UPR”) requires member states to provide a law which defines the scope of protection of a unitary patent. Ostensibly the SI has achieved this, by amending s. 60 and other relevant provisions such that they are applicable to European patents with unitary effect (“unitary patent”).

This Kat wonders however whether the Unified Patent Court will in fact apply the national law relating to unitary patents (of the country of the patentee) as required by Article 5(3) of the Regulation, since they may differ from one another due to differences of implementation.  Also, there is no corresponding provision for classical European patents as mentioned above, so it is unclear which national law should apply.  So the practical thing would seem to be for the UPC to apply the UPC Agreement wording directly.  The only difficulty is that Article 5(3) UPR says something different.

3.2 Taking away the national effect of European patents with unitary effect
Article 4(2) UPR requires member states to ensure that unitary patents do not have the effect of national patents in the manner of a classical European patent.

Section 77(1) Patents Act 1977 (“PA 1977”) states that a European patent (UK) shall have the same effect as if it were a national filing. The SI provides a new subsection, s. 77(10), which states that s. 77(1) does not apply to unitary patents. The SI therefore fulfils the requirement of Art 4(2) UPR.

3.3 A new exemption to infringement
Newly-added subsection 60(5)(j) provides an exception to infringement for acts which "consist of a use referred to in Article 27(c) of the Agreement on a United Patent Court". The Article in question refers to the use of biological material for the purpose of breeding, or discovering and developing other plant varieties. This new exemption applies to GB, EP(UK), and unitary patents under PA 1977.

4. Problematic aspects of the Statutory Instrument implementation
4.1 Definition of direct infringement of a patent
On the face of it, section 60(1) PA 1977 as amended when applied to EP (UK) patents and unitary patents does not define direct infringement of a patent in the same way as Article 25 UPCA. There are a number of points of divergence, some of which include:
  • Art 25(a) and (c) UPCA do not explicitly have a territoriality requirement for infringement of a product patent, but s. 60(1)(a) and (c) PA 1977 do
  • “Subject matter” protected under the UPCA is not necessarily the same as “the invention” protected by s. 60. PA 1977
  • “placing on the market” (UPCA) is not necessarily the same as “disposes of” (PA 1977)
However, the definition of direct infringement in the UPCA is near-identical to the definition in the Community Patent Convention (“CPC”). The Patents Act was amended to implement the CPC, and according to s. 130(7) PA 1977, the Patents Act is intended to have the same effect as that defined in the CPC. This by extension therefore applies to the UPCA definition of primary infringement. It does seem strange, though, that the SI has not also included the UPCA in s. 130(7) alongside the CPC. This would perhaps have overridden any other apparent inconsistencies between the PA 1977 as amended and the UPCA.

To infringe a GB or EP (UK) patent by offering a process, PA 1977 stipulates that the infringer must offer it for use in the UK. To infringe a unitary patent, the infringer must offer it for use in the territory of any Contracting Member State where the patent has effect. UPCA stipulates that, for both unitary and EP bundle patents, the infringer must offer it for use in the territory of any Contracting Member State where the patent has effect. The scope of protection against offering a process in an EP bundle patent is therefore broader under UPCA than under PA 1977.

4.2 Definition of indirect infringement of a patent
Section 60(2) PA 1977 as amended stipulates a double territoriality requirement for infringement: for UK and EP (UK) patents, both supply and use of the invention take place in the UK to infringe; for a unitary patent, both must take place in a Contracting Member State where the patent has effect.

Article 26 UCPA states that to indirectly infringe a patent, both supply and use of the invention must take place in the territory of any Contracting Member State where the patent has effect (it is worth noting again that Article 26 UPCA and the definition of contributory infringement in CPC are defined very similarly). This section applies to both unitary and bundle patents.

There is therefore disparity between the scope of contributory infringement of an EP (UK) patent according to PA 1977 or UPCA: the UPCA affords an EP bundle patent a broader scope of protection. Supply across Contracting Member State borders would infringe the EP (UK) patent under UPCA, but not under PA 1977.

4.3 Exceptions to infringement
Some exemptions to infringement have a broader scope (or narrower scope, depending on which way you look at it) depending on whether it is defined in the UPCA or the PA 1977 as amended.

4.3.1  Exemptions for accidental entry of vessels and planes
Regarding exemptions for vessels and planes which enter a territory accidentally (ss. 60(5)(d) and (e) PA 1977, and Art 27(f) and (g) UPCA), the relevant vessel or plane which qualifies for exemption from an EP bundle patent differs – PA 1977 states that the vessel must be of any state other than the UK to qualify for exemption from an EP (UK) patent, but UPCA states that the vessel must not be of those Contracting Member States in which the patent has effect.

Similarly, for EP (UK) patents under PA 1977, the exception only applies to vessels entering UK territory; for EP bundle patents under UPCA the exception applies to vessels entering the territory of any Contracting Member State where the patent has effect.

4.3.2  Exemptions for aircraft with lawful entry
Regarding exemptions for aircraft with lawful entry, it appears that there may have been a clerical error in the drafting of the SI.

According to UPCA, Art 27(h), acts specified in Article 27 of the Convention on International Civil Aviation (Chicago Convention), where they concern aircraft which do not belong to Contracting Member States, are exempt from infringement.

According to PA 1977, s. 60(5)(f), for GB and EP (UK) patents, exempted aircraft are defined in s. 89 Civil Aviation Act 1982, which is in effect an implementation of Article 27 of the Chicago Convention.

For unitary patents, according to SI 2016, exempted aircraft are defined as “an aircraft other than an aircraft of a Contracting Member State in which the European patent with unitary effect has effect”. That is, the Chicago Convention / Civil Aviation Act requirement for defining the aircraft is lost for unitary patents in the PA 1977. It may be that this modification specified in Schedule A3 is not intended to directly replace this part of the Act when applying it to unitary patents, but that it should be read in conjunction with the original text. This would mean that the Chicago Convention / Civil Aviation Act requirement would still apply. However, this seems incongruous, seeing that all of the other modifications listed appear to be intended to directly replace phrases in PA 1977. This SI implementation therefore might not properly reflect the exemption as defined in the UPCA.

4.3.3  Bolar exemption
In line with the SI, both the “narrow Bolar exemption” (s. 60(5)(i) PA 1977) and the “broad Bolar exemption” provisions introduced into PA 1977 by the Intellectual Property Act 2014 (ss. 60(6D) to 60(6F)) apply to GB, EP (UK) and unitary patents. Whilst the “narrow Bolar exemption” is provided in the UPCA (Article 27(d)), it does not state that the broad Bolar exemption should apply to unitary patents. This implementation is therefore not in accordance with the UPCA.  This Kat speculated that the implementation of the "broad Bolar exemption" as a definition of the "experimental use" exemption rather than as a separate exemption was intended as an elegant way to keep an exemption that was broader than that defined in the UPCA. Nevertheless, it results in a different scope under UK law as compared with the UPCA itself.

4.4 Difference of GB and EP (UK) scope of protection
Following on from the exemption provisions above, the SI provides a new exemption under s. 60(5)(k) PA 1977, which corresponds to Art 27(k) UPCA - exemption for the acts and the use of the obtained information as allowed under Articles 5 and 6 of Directive 2009/24/EC (the Computer program directive), in particular, its provisions on decompilation and interoperability. However, according to s. 60(6H) PA 1977 (also provided by the SI), this exception only applies to EP (UK) and unitary patents, and does not apply to national patents. That is, there is a difference in scope between a national patent and an EP (UK) patent. This is a direct contradiction of s. 77(1) PA 1977 and Art 2 EPC, which states that a European bundle patent should be treated as, and afford the same rights as, a national patent.

4.5 Difference of EP (UK) and unitary scope of protection
There are a number of instances in the SI where certain provisions and modifications of the infringement law apply only to unitary patents, for example indirect infringement as discussed at 4.2 above. The UPCA applies the same law to both unitary and EP bundle patents. Therefore, where the scope of protection afforded to an EP (UK) patent differs from that of a unitary patent under PA 1977, the SI implementation seems contrary to the UPCA.

4.6 Honest prior use
Article 28 UPCA states:
An honest prior user.
"Any person, who, if a national patent had been granted in respect of an invention, would have had, in a Contracting Member State, a right based on prior use of that invention or a right of personal possession of that invention, shall enjoy, in that Contracting Member State, the same rights in respect of a patent for the same invention."
Section 64 PA 1977 provides the UK law relating to honest prior use. The SI has not amended this section, but Schedule A3 of the SI states that section 64 applies to unitary patents; the same definition applies to GB, EP (UK) and unitary patents. The unamended section states that:
“a person who in the United Kingdom before the priority date of the invention [uses the invention] has the right to continue to do so” (emphasis added)
It seems to this Kat that the Patents Act has not been amended to entirely give effect to Article 28 UPCA. According to PA 1977 as now amended, only use protected by a prior use right in the UK does not infringe a unitary patent – the SI does not amend PA 1977 to recognise that, for a unitary patent that falls under UK law according to Article 5(3) UPR, use in a Contracting Member State other than the UK should also be protected from liability according to the applicable law in that Contracting Member State.

5. An oddity for interest
5.1 Requirements for Crown Use compensation for an amended patent
Section 58 has been amended by the statutory instrument to read:
“Where an amendment of the specification of a patent has been allowed under any of the provisions of this Act, or, in the case of a European patent (UK), has been allowed under any of the provisions in the Agreement on a Unified Patent Court, the court shall not grant relief by way of compensation under this section [unless certain criteria are met]”
It is interesting to note that this has been amended to include amendment at the UPC, but not amendment at the EPO (for example in opposition or limitation proceedings).  It is not clear (at least to this Kat) why this is, or why there is no similar amendment to the similarly-worded Section 62(3) PA 1977 (see next section).

5.2 Restrictions of damages in an infringement action
No analogous amendment has been made to Section 62(3) PA 1977. This section relates to restriction of damages in an infringement action where an amendment of the specification has been allowed in an infringement case, and reads:
“Where an amendment of the specification of a patent has been allowed under any of the provisions of this Act, the court or comptroller shall, when awarding damages or making an order for an account of profits in proceedings for an infringement of the patent committed before the decision to allow the amendment, take into account [restrictive criteria]”
Schedule A4 states that this section does not apply to proceedings at the UPC. Similarly, Schedule A3 does not specifically list Section 62 as applying to unitary patents. Nevertheless, section 62(3) PA 1977 still applies to EP (UK) patents. So, as this Kat understands it, if an EP (UK) patent is amended at the UPC, there might be restrictions on compensation for Crown Use in a subsequent national action in the UK under Section 58, but there could be no similar restrictions on damages recoverable in a subsequent infringement action in the UK.  If any kind reader can cast any light on this, the IPKat would be grateful.

If you have read all the way through to this point – congratulations! If your head now hurts as much as this Kat’s – apologies! If you disagree with any of this analysis, or even perhaps if you agree with it, do please leave a comment.  Likewise, please comment if you have identified any further issues that this Kat may have missed.


Confused cat said...

Strange comments indeed about the UK re-joining the UPC after a Brexit. I have yet to see an explanation (let alone a convincing one) of how that might work.

My main concerns, however, relate to the divergences in the laws of infringement for the four different categories of patents (national vs. opted out EPs vs. unitary EPs vs. not opted-out EPs). Given Spain's arguments relating to Article 118 TFEU, judges of the UPC may be reluctant to fix the matter (at least for the latter two categories) by relying upon direct references to the UPCA. Thus, significant problems could be caused by those countries that have ratified the UPCA without amending their national laws. With respect to the laws of infringement, at least France currently falls into that category - and, unless I have missed something significant, Germany looks set to follow suit.

What a fine mess we could be getting into!

Rowan Freeland said...

This is an important step on the road to UK ratification, but it is not the only one. The agreement on the Privileges and Immunities of UPC judges and court staff reached last week by the Preparatory Committee needs to implemented into the national laws of the UK. It is likely that the internal drafting and approval procedure will not be complete when the Scottish purdah begins on 24 March for the election on 5 May, and then we will be in the civil service purdah for the referendum on 23 June. If the vote in the referendum is for a Brexit, it is likely then to be politically impossible for the government to proceed to ratify the UPC Agreement; but unless and until the UK ceases to be a member state, the UK's ratification will be a condition precedent for the UPC Agreement to enter into force. So if the coming into force of the UPC Agreement (in the event of a UK Brexit vote) is not to be delayed by the two years or more that it will take before the UK actually leaves, there will need to be an agreement (by all signatory states) to amend Article 89.

Anonymous said...

What do you think the chances are that Ed Vaizey, who led the Commons debate on this, understands any of this? Being cynical, it may well be to the Government's advantage if he doesn't understand what he was meant to be debating. That way he can't be found to have intentionally misled Parliament when making statements such as the one quoted in the article.

Joe said...

I'm not sure there's much of an issue with the direct infringement provisions. The UK courts should only be competent to hear cases of infringement of the UK part of an opted-out EP. One would have to file a suit in, say, Germany under their EP(DE) if there was direct infringement in Germany. The fact that the UPC would be competent to hear a case of direct infringement in any territory in which an EP has been validated is, I would imagine, the intention: the UPC effectively replaces the national court of the place of infringement.

Thus the UPCA must have a broader (territorial) scope than the Patents Act, because the Patents Act only relates to the UK. The UPCA relates to all of the Contracting Member States the patent has effect in, but there are no cross border issues.

The main issue of substance, and one which makes not opting out look more attractive, centres around contributory infringement as you have noted at 4.2. It is interesting that the effect of the UPCA is to make what is considered as a bundle of separate rights effective in separate countries, act instead as a single right effective in a single territory made up of those countries.

Confused cat said...

So what happens with a not opted out "bundle" patent that is litigated at the UPC?

Let's assume that the relevant national law under Article 5(3) of Reg. 1257/2012 is UK law. Does the UPC apply Section 60 as applicable to non-unitary patents, or does it apply Articles 25 to 27 of the UPCA?

I have seen commentary that definitively states that "For determining the infringement question relating to European or Unitary Patents, the UPC shall apply the articles regarding direct infringement (article 25), indirect infringement (article 26), limitations of the effect of a patent (article 27), and exhaustion of rights (article 29) provided in the UPC Agreement".

I cannot see the UK Courts going against the wording of the UK Patents Act. Thus, if the above-quoted commentary is correct, does this mean that the applicable law of infringement for the UK will be determined by the court in which the patent is litigated?

As there are substantial differences between the different laws (e.g. with respect to indirect infringement) such a conclusion would hardly be consistent with fundamental provisions governing legal certainty!

Confused cat said...

Upon reflection, instead of referring to the indirect infringement provisions, I should have perhaps have referred to the experimental use exemption in Section 60 (6D) (vs. that in UPCA Art. 27(b)).

I had quite forgotten that the Member States are taking a narrow interpretation of "European patent" - to mean, for example, "EP(UK)" rather than just EP. Baroness Neville-Rolfe made that clear in her letter relating to the amendments to UK law.

It is an interesting question whether the definition of "European patent" in the UPCA ("a patent granted under the provisions of the EPC, which does not benefit from unitary effect") supports that view. Perhaps those who are more familiar with the legislative history of the UPCA can comment.

However, the Baroness has also put forward a (rather tenuous) argument that Article 149a EPC overrides both of Articles 2 and 64 EPC - and so we should perhaps not take every statement in her letter to be true.

On this latter point, I have always puzzled over why an ability to conclude "special agreements" should somehow be interpreted as meaning that long-standing, fundamental tenets of the EPC (such as Article 2 and 64) can be overridden when the "special agreement" in question contains no explicit provisions to that effect!

Confused cat said...

Final thought - is the Baroness' interpretation of "European patent" (e.g. meaning just an EP(UK), and not the whole bundle) consistent with the prevailing interpretation of the opt-out scheme?

That is, if "European patent" in Article 83(3) UPCA is interpreted to mean the whole bundle, then how on earth is it that the same term is interpreted to mean something different in the context of Article 26 UPCA?

Meldrew said...

The U.K. implementation is nonsense on stilts, but that is what is to be expected when you get a politically driven compromise that resulted in a UPC Agreement and UP Regulation that was not understood by those agreeing it.

Let's see what the courts make of it.

It will be particular fun when someone is found infringing by the UPC for acts that a national court would not find infringing. This is the inevitable result of how the UK is proposing to implement the UPC and UP. The fundamental tenets are fundamental. The mental implementation will be fun and mental.

Confused cat said...

As far as I can figure, implementation of the UPP will mean that, instead of one (national) law applying to one patent in any given country, there will instead be at least three different laws of infringement to choose from.

For cases brought before the UPC, there will be two possible laws of infringement, namely: (1) for EPUEs, the national law applicable to EPUEs in the Contracting Member State identified under Articles 5(3) and 7 of the UP Regulation; and (2) for not opted-out EPs, Articles 24 to 29 of the UPCA, plus (if necessary) provisions from laws specified in Article 24 of the UPCA.

If we accept the view of the Preparatory Committee (as set out in their interpretative note on Article 83 UPCA), the national courts will, for both opted-out and not opted-out EPs, apply a different (third) law of infringement - i.e. the national law applicable to opted-out EPs.

There are plenty of EP applications that, at present, could qualify for unitary effect. For those applications, therefore, the applicable law will depend upon all of the following factors:
- whether a request for unitary effect is filed (possible up to 3 months after grant); and, for non-unitary (parts) of patents in Contracting Member States of the UPCA
- whether an opt-out is filed, whether the patent is effectively opted out via the commencement of a national court action during the transitional period and whether an opt-out, once filed, is later withdrawn.

Thus, for such patents, all three different laws of infringement are current possibilities. Further, there are many situations in which the law that will actually be applied will not be known unless and until a court action is commenced. This could even affect patents for which unitary effect is requested - as there remains a possibility for that unitary effect to be cancelled and for a national court action to commence.

As such, this situation reminds me of Schrödinger's famous thought experiment - as we will not know what the result is (i.e. applicable law of infringement) until we "open the box" (i.e. litigate) and find out what the court decides. For such "Schrödinger's patents", the possibilities for clever tactics and forum-shopping abound!

The situation could be particularly confusing for those MSs (such as Germany and France) where there is no distinct national law applicable to EPUEs. Whilst the UK's implementation clearly has its (arguable) flaws, you have to give the IPO credit for attempting to improve matters by providing specific laws for EPUEs and opted-out EPs.

Nevertheless, I have to laugh when I look at recital 25 of the UP Regulation - which appears to assume that introduction of the UPP will improve legal certainty. Much like what happened with the "Bolar" provision, the Commission clearly underestimated the ability of the Member States to create chaos from order!

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