Fordham Report 2014: The European Unitary Patent and the Unified Patent Court

Margot Fröhlinger:
the internal UPC optimist

It is no surprise that the AmeriKat would be covering the session on the Unified Patent Court.  As she made her way outside into the bright American sunshine to the lecture theater on Broadway that would be her home for the next several hours of patent law she was bemused by what would be the first speech after Sir Robin Jacob's (UCL) customarily brief introduction.

Margot Fröhlinger, the Principal Director of Patent Law and Multilateral Affairs at the European Patent Office was the first presentation of the session speaking on the million dollar question "Will the Unitary Patent become a success? " a talk aiming to dispel the concerns of the Unitary Patent and UPC.  The billing described the talk as emphasizing that "despite the current uncertainty about the level of renewal fees for the Unitary Patent (UP) and despite concerns about the future functioning of the Unified Patent Court (UPC) the UP is likely to become a success."   The factors that were mentioned as making the system a success were the "thoroughness of the preparatory work" and "the quality of the future judges." As Fröhlinger would surely have described her, the AmeriKat has historically been pessimistic about the UPC so the disbelief on the AmeriKat's face was evident when she read these words on the conference programme.   But with her usual focused flourish, Fröhlinger did not disappoint in delivery her brand of UPC optimism.

"An optimist may sell you that the UPC and the unitary patent will be the best of all possible worlds", began Fröhlinger, "the pessimist may fear that may be true."  The current doubts and concerns relate to the level of renewal fees and the functioning of the UPC - the efficiency, quality and fairness of its judgments.  Conferences, she noted, are often dominated by how to opt-out of the system, not how to use the system.

What, oh what will the renewal fees be?  Care to take a spin
on the WHEEL....OF.....FORTUNE!?

Fröhlinger explained that work on the renewal fees has just started.  The fees will be somewhat higher than the users hope but lower than the users have feared.  On the one hand the renewal fees will be attractive to business but they will also  have to generate sufficient income for the EPO to balance the budget.  To assess what figure will make the renewal fees attractive for users one has to take into account what the users pay.  Today, users generally validate in only four countries.  The renewal fees are likely to be somewhat higher than the amount that is paid for four designations, but not significantly higher.  The value for money that the unitary patent represents, she emphasized, was in the simplified administration of the patent portfolio by virtue of the broad geographical coverage of protection and more seamless enforcement.

The second concern related to the functioning and uncertainty of the UPC.  Eventually, the exclusive jurisdiction of the UPC may become an incentive rather than a deterrent for choosing the UPC, explained  Fröhlinger.  During the transitional period of 7-14 years, an EP may become the subject of litigation in several jurisdictions.  This can be avoided by choosing the unitary patent and UPC.  Concerns about the quality and efficiency of the UPC and the uncertainty resulting from the unfamiliarity of the new system are likely to be dispelled soon after the system comes into operation.   Fröhlinger considered that European IP practitioners have already experienced this with the creation of the EPO and OHIM.

Will the UPC be a lottery of whether or not
the judges hearing your case are experienced?

Fröhlinger pointed to the work of the Preparatory Committee who are tasked with the implementation of the UPC.  She noted that their work is very thorough.  They have just revised their roadmap which foresees the UPC coming into effect not before the end of 2015.  This, she observed, signals the Preparatory Committee giving priority to quality over speed.  She also explained that the 16th draft of the Rules of Procedure were recently finalized by a group of expert lawyers and judges and is now being revised by the Preparatory Committee.  Importantly, the preparatory work for the recruitment of judges has already been launched and has resulted in 1,300 applications for legally or technically qualified judges.  Among the legally qualified judges Fröhlinger stated that it was likely that you would find the most qualified patent judges in Europe.

She concluded by stating that the concerns from patent holders on the possibility of central revocation was unfounded.  "There is no need to be afraid of the UPC unless you have a bad patent", she declared.  Concerns on bifurcation and the grant of injunctions will be reviewed by the Preparatory Committee but bifurcation is unlikely to be the Big Bad Wolf that everyone has feared.  Indeed, she pointed to the mock trial at the last IP judges conference in Venice where all the judges decided not to bifurcate the proceedings.  She also noted that there will not be automatic injunctions in Europe as all judges consider the factors.  The AmeriKat is less convinced by that point as the difference between the exercise by the judges in granting a preliminary injunctions in the Member States can be quite different.  Fröhlinger's final comment was that "the only place where 'success' comes before 'work', is in the dictionary".  A pessimist would say that "failure" comes before both of those words, but after Fröhlinger's speech who would dare be pessimistic about the UPC?

Judge Rosas emphasizing
the importance of the now
infamous Opinion 1/09

Hon. Allan Rosas of the CJEU  discussed the impact of Opinion 1/09 in the creation of the UPC.  A self-confessed non-IP expert,  Rosas explained that the CJEU does not have jurisdiction over patent issues although it does hear related issues, for example on SPCs and stem cell patentability.  This, he noted, may change to a certain extent in the future.  One of the question marks for someone who has not followed the negotiations and preparations, like himself, was to what extent mattersin the UPC will be specifically Union law and what will be national law.

In the past, Judge Rosas noted that that the CJEU has accepted that the EU can commit itself to internationally binding disputes such as the WTO.  In Opinion 1/09 the Court held that the EU could not commit itself to the then draft Unified Patent Court Agreement which was in relation to a scheme which would have involved an international organization with participation of other EU Member States.  Judge Rosas stated that this was of course very different from what one was used to in relation to trade marks and other examples in which you have a Union agency with a possibility of appeal to the Union courts in Luxembourg.  Indeed, Rosas continued, that feature of the draft Agreement as it existed at the time was a problem.  The problem specifically arose from the fact that according to the draft Agreement the national courts of the EU Member States would have been deprived (a word noted to have been abused in the Opinion) of their right to submit preliminary ruling requests to the CJEU in the fields where this international court system would have had exclusive jurisdiction.

Sir Robin Jacob, unusually not reading a patent law book
in the UCL library

Judge Rosas observed that Opinion 1/09 is one of the most important decisions of the CJEU in the last ten years.  It is of certain constitutional significance as it underlines somewhat more than in the past the role of the national judge in the EU Member States as an integral part of the EU judicial system.  The national courts would have been deprived as to what would have normally been the position.  It was obviously argued before the court in the oral hearing that there was no problem with the Agreement as the court had ordered in the past that the Benelux court could submit preliminary reference questions to the CJEU.  In the Opinion, the court stated that the Benelux court is different as it is a common court to three Member States - the Netherlands, Belgium and Luxembourg.  In reply to this argument the CJEU hinted that this alternative approach that may have been possible. Judge Rosas stated that if one looks at the Unified Patent Court Agreement as it was ultimately signed more than a year ago to a certain extent the Agreement is based on a Benelux approach as it is a court common to the Member States.  There are several provisions in this agreement which clearly are inspired by the Opinion of the CJEU.  It is underlined in several places that it is envisaged that the UPC will be subject to the normal rules and principles of Union law to the extent that it will be dealing with Union law and that will be an interesting issue in the future, i.e., where the line between Union and non-Union law is drawn.  This division is a problem that Judge Rosas stated is observed in many fields of law.

Judge Rosas concluded

"One should not interpret [Opinion] 1/09 as some view or hostility of the court vis-a-vis a unitary patent.  Many people of the court, including myself, felt rather bad that the Opinion led to a negative result.  But sometimes as a judge you have to look at the constitutional and legal realities which lead to the conclusion that we came to.  But now of course the situation looks a bit different."

Sir Robin stated that IP lawyers' view of the CJEU is zero, citing the decision in Brustle as an example where the view of the Court is likely to be absolute zero.  He therefore asked Judge Rosas whether the CJEU is fit for hearing IP cases.  Judge Rosas said that he was in favor of a generalist approach:

"At the CJEU you hear all types of areas - transport, environment, immigration and criminal law.  All of these fields have the same concerns.  It is a classical debate in all Member States.  I would personally think that it is even healthy that people who are not great technical experts hear the cases and provide an external judge's view.  You cannot have a court system that consists solely on technical experts.  Obviously, the consequences of this are harsh words."

Wim van der Eijk, the Vice-President Directorate-General Appeal at the EPO responded to Sir Robin's question about the effect that central revocation in the UPC will have on EPO oppositions by stating that it could have an effect on the number of oppositions filed.  He considered that central revocation actions in the UPC could be viewed as an alternative but if there is not much trust in the system you may not wish to only seek revocation of the patent in the UPC.  His overall view was that he would not be surprised if the UPC lead to fewer opposition actions.

Like Jimi Hendrix, Judge Grabinski
wants to know from
the UPC candidates
"Are you experienced?"

Hon. Dr. Klaus Grabinski of the German Federal Supreme Court observed that bifurcation will happen only in exceptional cases, for example where there is parallel litigation before several local or regional divisions where a counterclaim for revocation is filed.  It would make sense in those cases that the Central Division would decide on revocation.  Judge Grabinski's guess was that bifurcation
would be the exception, not the rule.  This would also be the case for the local divisions in Germany.  Judge Grabinski viewed the current system as actually "not too bad" in that decisions are handed down in number of jurisdictions to first instance within a year.  Some courts are a bit more expensive, but they are not too expensive.  Europe also has a loser pays costs regime which is one reason why unlike in the US the troll problem is not too bad.  Judge Grabinski observed that when a new system starts there is always a lot of uncertainty as users do not know how the courts will interpret provisions in an agreement.  Echoing Margot's comments, this uncertainty is comparable to the situation with the EPO - no one really knew how it was going to work.  There is a chance that the new system will be a success but like his comments at AIPPI in Helsinki last year, the selection of judges will be a very important issue.  Referencing the Statute in the Unified Patent Court Agreement, he pointed to the provision on the appointment of judges who are appointed by the Administrative Committee.  When appointing judges they will ensure the best legal and technically experienced judges are appointed, as well as ensuring that the judges are selected from a broad geographical spectrum.  Judge Grabinski agreed with both of these factors in the selection of judges but the latter criteria could be misused.  His formulae for users getting comfortable enough to rely on the system would be that on a panel of three legally qualified judges, at least two should be experienced.  This would leave the lesser experienced judge to learn on the job.  If the panel is the other way around - one experienced judge and not two - then the system will be a "a mess".  Judge Grabinksi advised that users should check who is appointed as a judge to decide whether the system can be reliable.

Sir Robin, who is the chairman of the Advisory Committee looking at the selection of the judges noted that amongst the 1,300 applications for the UPC judges there were really good candidates - more than enough "good people to staff the court in order to be one of the most respected courts anywhere in the world".  A big claim, from a big IP legend and a once highly vocal critic of the UPC.  

Dr Janssen - getting ready for some
shopping in the UPC

Dr. Bernd Janssen of the German firm Uexküll & Stolberg was also positive about the potential of the UPC to be a success.  However, he noted that there will be an important role of forum shopping and the competition between the local courts who are tasked with hearing infringement cases.  With that competition Dr. Janssen considered that the infringement courts would be patent friendly.

David Laliberté, the Director of IP Policy at Microsoft also thought that the system has the potential to be better, but it also has the potential to be worse.  A lot of what happens in the coming months will help answer that question, David noted.  He said that Microsoft tends to be optimistic that the solutions will be forthcoming.  To support this view, he noted that the 16th draft of the Rules of Procedure addressed some of their concerns, namely with provisional injunctions the rules on which now provide for a balancing of interests exercise.  There are, however, other areas that need to be addressed and he looks forward to the public hearing to address these issues - for example on bifurcation where they would like to see some more restrictions on the judge's wide discretion as to when bifurcation can occur.  Although David noted that Judge Grabinski considered that bifurcation may not happen save for exceptional cases, David would have preferred a system where there was more predictability on that issue than the wide discretion that is afforded to judges currently.  David concluded by stating that the success of the system and the participation of users depends on the question of fees and costs.  That is currently a huge unknown.

John Temple Lang doubting
the number of experienced
patent judges in Europe

John Temple Lang at the Brussels office of Cleary Gottlieb Steen & Hamilton LLP considered that there were two sets of problems.  The first concern was the quality of the judges and how they would behave in certain circumstances.  He said that we do not know enough to have to have the confidence to be optimistic or pessimistic about the future of the UPC.   "I would not have thought that there were 1,300 experienced patent judges.  I am not reassured that the potential judges will need training as I do not think that you can get sufficient training to substitute for patent litigation experience", he stated.  The second concern was that the effect of the UPC will be that it will add considerably to the number of courts before which patentees can be faced in litigation.  There will be a lot of forum shopping and tactical manoeuvring.  This will be "confusing and unsatisfactory".  The only way that that problem can be avoided is by extremely tough case management - if the judges are strict enough then they can minimize the procedural manoeuvring and forum shopping.  John said that to carry this out, the court would need to have at least of majority of experienced judges in each of the UPC courts.  Judge Grabinksi agreed on this - noting that having recently participated in a mock trial with an interim conference and several case management issues, only experienced patent judges would have the skill to effectively manage the cases.

All signs point to appeals in the UPC - but which court gets to decide?

Sir Robin raised a final issue for the panel discussion - that of appeals.  Sir Robin summarized the issue that lead to disagreement and division in the Rules of Procedure Committee.  One school of thought says that appeals will cause delays but the other school says that you need appeals to achieve uniform case law to reduce forum shopping and clarify other issues.   Fröhlinger chimed in saying that throughout the negotiations it was always the Court of Appeal who could grant leave to appeal on procedural orders.  The text at the time said that you could appeal a procedural order if granted by the court of first instance or the Court of Appeal.  Before a text is adopted,  it undergoes linguistic revision by the Council of Ministers.  The linguists said that it did not make sense that the court of first instance and the court of appeal should be both specified as giving permission to appeal, because in the definitions "The Court" is defined as both.  So they replaced the wording.  Fröhlinger stated that it was always understood by the Member States during the negotiations and now that the Court of Appeal would be capable of permitting procedural appeals.  She also noted that on the website of the Preparatory Committee clearly states that the Court of Appeal can permit leave to appeal on procedural orders as it is a principle of international law that you should give an authentic interpretation of what has been agreed.

Judge Grabinski did not agree with this, although he admitted he did not know about the story on the linguistic point.  He said that we have to interpret what is in the Agreement.  He feared that there could be an onslaught of appeals on each and every decision of the court.  Sir Robin disagreed.  He did not think that every case will have an appeal.  He considered that the sensible Court of Appeal which needs to be robust and commanding, would control the number of appeals it hears choosing only to hear those issues of procedural importance to the efficient functioning of the UPC.