Unitary Patent Update: It's back to school for the unitary patent



The AmeriKat sporting her A/W 2012 outerwear

The AmeriKat is perplexed that it is already the end of the September.  With the autumnal smells lacing the air, it can only mean two things:  cuter outwear and the kick-start of the final chapter of the unitary patent saga.  Following a summer which saw the various EU institutions, national governments and patent professionals musing on the legality of the inclusion of Articles 6 to 8, this morning Spain and Italy began presenting their case as to why the Council's 2011 decision to push forward the unitary patent proposals under the "enhanced cooperation" procedure breached EU law (see Spanish reference here and the Italian reference here).  With the Legal Affairs Committee of the European Parliament set to debate the final draft texts of the Proposed Regulation and Draft Agreement at the next session on 10-11 October 2012 and the Cypriot Presidency eager to pass the legislation, it all looks like a go for the proposed unitary patent system. 

In July, shortly after the EU Council's agreement on the location of the Central Division and the European Parliament's "emasculation" following the Council's suggested deletion of Articles 6 to 8 which delayed the planed vote on the proposals, the AmeriKat organized a debate.  The debate, chaired by Lord Neuberger, Lord Justice Aikens and Lord Justice Kitchin, aimed to flesh out the key points that concerned industry users and practitioners on the proposed system (official transcript here).  The debate drummed up strong views from across a diverse section of the profession and industry, as well as novel points on procedure and areas where work still needed to be done - for example, the need for a harmonized approach on accessory liability.

A few months on, last week, Bird & Bird hosted an event in their London office recapping the proposals and what is next.  The AmeriKat was unable to attend, but sent her trusty guest Kat and colleague, Lorraine Neale (Allen & Overy) to report on the event on behalf of the Kat.  Lorraine has this to say:

"Last Thursday, in the absence of AmeriKat who was having a very brief feline respite in the Channel isles, this guestKat attended a seminar entitled ‘A Pan–European Debate on the Proposed Unitary Patent System’, organised by Bird & Bird in their London offices. Her proudly displayed IPKat badge ensured that she received welcoming smiles, and a level of interest that she is unaccustomed to on these occasions …. Ah the hallowed status of being a Kat for an evening!

Introducing the seminar was Chelsea Roche, an Associate in Bird and Bird’s London IP Group, who gave an excellent overview of the current proposals for the proposed unitary patent. She was followed by Dr. Claus Becker, Associate and Patent Attorney in the Munich office, and Marie Wormser an Associate in the Paris office, who presented differing German and French perspectives on bifurcation, Articles 6-8 of the Proposed Regulation, and the location of the Central Division of the Unified Patent Court (All for One?). Taliah Walklett, Legal Counsel, Litigation, Legal and IP at Nokia, gave critical a perspective from industry, and finally Judge Colin Birss QC talking “from the perspective of someone who reads IPKat like the rest of you” gave a refreshingly down to earth and positive spin on the issues.

Acknowledging that the patchwork approach to patent protection in Europe is affecting the ability of European businesses to compete, Chelsea Roche addressed the question of whether the problems in the current system have been adequately addressed by the proposed unitary patent package. By way of a background she outlined the problems with the current system under the EPC, and then summarised the various attempts over the last 40 years to introduce changes to the system. Chelsea noted the major breakthrough/turning point in December 2010 when the process of enhanced cooperation allowed 25 member states to push ahead with the implementation of the unitary right (despite opposition from Italy and Spain whose June 2011 action against the Council was heard today). Ever since progress had been rapid – some saying too rapid, with the agreement on the text of the unitary patent package (two draft Regulations and one draft international Agreement), in December 2011 and at the end of June 2012, a compromise as to the location of the central division of the Unified Court. However controversy still reigned with respect to Articles 6-8 of the proposed Regulation, which define what amounts to infringement of a unitary patent (direct and indirect) and limitations to infringement. Chelsea explained that as these provisions will be governed by EU law; their inclusion in the Draft Regulation meaning that the Unified Court will be obliged to refer questions of their interpretation to the CJEU.  

Understandably people are concerned that this will lead to substantial delay, uncertainty and questions of substantive patent law being presided over by a nonspecialist judiciary. The EU Council has suggested the deletion of Articles 6-8, which did not go down well with the European Parliament, who considered this to be unlawful. As a result the vote on the Unitary Patent package, which was due to take place in July 2012 was postponed, and is now due to be discussed again on 10th October. Furthermore the Cypriot presidency is keen and pushing for an agreement to be reached by the 10th December 2012 . Chelsea then outlined two particularly contentious aspects of procedure: the ability of a local division of the Unified Patent Court to grant an EU wide injunction, and the discretion given to local and regional divisions to ‘bifurcate’ infringement and validity. She then handed over to her German and French colleagues for further discussion of these issues.

Germany loves France - or do they?

Dr Claus Becker took to the podium declaring that it was his intention to be the valiant defender of bifurcation (which musketeer?). He acknowledged that one of the main concerns regarding bifurcation was that it was pro-Plaintiff, as an infringement trial is generally faster that a validity trial, potentially leading to bigger companies, or even non practising entities (patent trolls) enforcing weak patents against SMEs. This coupled with an ability to obtain speedy injunctions could put the SME out of business. Claus pointed that ‘speed’ was favourable to the local company too, when faced with a foreign infringement of their IP rights, and that in any event it was possible to stay infringement proceedings pending the outcome of parallel revocation proceedings if the patent was ‘weak’. A second concern was that of claim construction, with bifurcation allowing different interpretations of the scope of protection (broadly in the infringement trial and narrowly in the validity trial). Claus believed that it was possible to avoid this with a cross consideration of case statements, and that in any event the proposed Appeals Court would ultimately iron these differences out by apply a uniform interpretation. With regards to the deletion of Articles 6-8, Claus opined that there was “much ado” in the UK, with a general consensus that these articles should not be included. In Germany the opinion was more polarised with several leading patent lawyers eg Dr Pagenberg and Prof Krasser favouring their deletion, whilst others such as Prof Tilmann ["Whose views are not those of Hogan Lovells", reminds the AmeriKat], believing them to be indispensable. The German Patent Attorney Association had declared that they could live with both solutions and do not really care!

Finally with regards to the Court’s location, Claus stated that the real concern in Germany was that, as the present draft encompasses several possibilities of transferring first instance cases from the local/ regional divisions to the central divisions, this could lead to a reduction of cases heard in Germany, with the consequence that the know-how and experience of the German IP judges in Dusseldorf, Berlin and Mannheim would be underutilised.

Marie Wormser, apologising to Claus, declared that he had unfortunately not won her over on bifurcation! Indeed she appeared steadfastly against it. Amongst several arguments put forward by Marie against bifurcation, was that being optional, it would result in some local and regional courts, in Germany (familiar with the system) and other small countries (not willing to rule on validity which is more technical), bifurcating, whereas in other countries like France or the UK, the local divisions would be more eager to keep the whole case together. There was a fear that this would increase forum shopping, this being facilitated by the fact that in the current Draft Agreement it is enough to have a ‘threatened’ infringement to give a jurisdiction to a local court. Marie advised that if one had to live with bifurcation, it would be imperative to ensure the introduction of sufficient safeguards into the current drafting of the Proposed Regulation: a stay of the infringement action should be systematic rather than remain at the discretion of the local/regional court, or alternatively if infringement proceedings are not stayed, the injunction should be subject to the compulsory depositing of a bond by the patent owner (currently at the discretion of the local /regional court).

Marie reported that the deletion of Articles 6 to 8 were much debated in France too, where there was a general reluctance to give jurisdiction over infringement to the CJEU. However Marie pointed out that the issues were very complex - one problem was that the basis for the draft Proposed Regulation is Article 118 para 1 TFEU and this article concerns the “establishment of measures for the creation of European Intellectual Property rights to provide Uniform Protection”. So the question is whether the deletion of Articles 6 to 8 from the Regulation is compatible with this legal basis. If removed would the Regulation still be valid? Would it not increase the risk for the Regulation to be invalidated by the CJEU?

Marie hoped that some clarity would emanate form the CJEU hearing on the 25th September. With regards to the Central Court’s location in Paris, the French people were obviously not disappointed, but that this was justified on the basis that the Paris courts already have exclusive jurisdiction in France over patent matters, and for more than 10 years they have been dealing exclusively with IP cases. Furthermore Marie believed that it is important to preserve the institutional and geographical independence between the Central Division(rule on the validity and infringement) and the EPO (the organ that is going to deliver the patent). Ending with the much used phrase, “We will see!” Marie acknowledged that there were a lot of uncertainties about the future of this Regulation.

Not what the AmeriKat will be wearing this Fall

Giving an industry perspective Taliah Walklett stated that a system that allowed for bifurcation would place European industry at a significant competitive disadvantage. A vicious circle could easily develop: businesses or distribution hubs in the EU will face an increased risk of injunctions from patent litigation, over competitors who have no assets in the EU. This will put European business under more pressure to reach cross-licenses with their non-European competitors. To secure those licenses in such a climate European business are likely to pay higher royalty rates than non-European competitors. This would limit cash that is available fro R&D purposes, and then also means that companies will apply for fewer European patents unlike their non-European counterparts. This in turn would lead to an increased risk of injunction, completing the circle.

Judge Colin Birss QC revealing that he was “involved a bit in the Rules” but not in any negotiations for the unitary patent, said that he wanted to pick up on some positive notes because most of the discussion that one hears, especially in London, is negative. He thought that the unitary patent will happen - despite our moaning.  It was however essential to be using the appropriate and proper means, and our best endeavours to make it as good as we think it can be – because then it could turn out to be a really good system. ["Time to refocus our efforts, seems to be the message", says the AmeriKat] The system we end up with will necessarily be a compromise, and we need to get used to this. However Judge Birss thought that we should be positive that that we have gained a system which fundamentally looks quite a lot like what the British regard as a ‘proper’ court system – a system where you can have disclosure, discovery, and cross-examination of witnesses. It is important for those to whom these are important things, that we do not let this slip away.

Judge Birss thought that bifurcation was a compromise to the German/Austrian systems, and that in his opinion one can solve all of the problems that bifurcation is supposed to solve by having a good system of interlocutory relief. With respect to Articles 6-8, and the jurisdiction of the CJEU, Judge Birss acknowledged that there was a need for in European system to be governed by a European body. He thought that the Appeals Court could fulfil this function and he did not see why one necessarily have to go to a higher level. However he also acknowledged that most legal systems have to higher legal arrangement (UK, France, Germany), and that there was some value in having two instances of appeal. With regards to the deletion of Articles 6-8, although disclaiming that he was not an expert in these matters, he personally he did not think it mattered because his view was that once the instrument is passed the general application in European Law will put the Regulation into the jurisdiction of the CJEU in any event. As to the location of the Central Division, Judge Birss admitted that he completely agreed with the French. He believed that it was important that the real part of the Central Division was not in Munich. One really did not want to have a concentration of all things concerning patents in Europe in one place.

Judge Birss reminded everybody that the agreement is not just about unitary patents, it will also catch normal EP patents, and furthermore that contrary to what the EPO believe, it will impact them. He concluded (sharing Marie’s concerns) that this arrangement is a recipe for forum shopping. However, unlike Marie, he felt that there was a risk that more, rather than fewer countries, would begin to bifurcate, and that there would be a race to the bottom. At the moment the only two countries in Europe that bifurcate are Austria and Germany – and they are good at it.! In the future there may well be situations where there will be pressure on the courts and the court systems all over Europe to try and be better than the Austrians/Germans. Judge Birss concluded with the concern that there was a real risk that the legal systems will feel a pressure that the only way that they will have any patent litigation is by doing whatever it is faster, better, cheaper, maybe dirtier than other people - and that would be a really bad thing."

All-in-all, no surprises or outrageous opinions emanating from the seminar, but the session nevertheless acts as a useful summary of the issues that will be floating up to the top of everyone's minds this Fall (no, not Autumn) while memories of the Olympics and soggy, rainy summer days quickly fade away. 

The Amerikat will be back later on to report on any news following today's CJEU hearing and if the expected new consolidated drafts of the Regulation and Agreement are forthcoming.