House of Lords EU subcommittee: Is the UK Government's rejection of the UPC "cutting off its nose to spite its face"?

Last month, the UK Government revealed that the UK would not seek membership of the Unitary Patent Court (UPC).  News of the UK Government’s position filtered out slowly. The first indications came in the form of the UK’s Brexit negotiating objectives. These objectives established the UK government’s "red line" that the UK will not agree to any obligations for UK laws to align with EU laws. IAM-media subsequently reported that a spokesperson from the PM’s office had confirmed that the UK would not be seeking involvement in the UPC. The government has not issued an official written statement on the matter.

The news that the UK will no longer be seeking participation in the UPC was met with dismay by many in the UK patent community. The UK IPO and successive IP ministers had previously supported the UPC project. Boris Johnson, in his former role as the Foreign Secretary, himself signed the orders for ratification of the UPC by the UK. However, it seems the UK's continued membership of the UPC is no longer in-line with the UK's Brexit strategy, described by the Government as “taking back control of our laws”.

The Government's new position was yesterday considered by the EU Justice sub-committee (a sub-committee of the House of Lords EU select committee). The sub-committee is chaired by Lord Morris and has the role of scrutinising EU proposals on justice issues such as intellectual property. The sub-committee heard evidence from Julia Florence (immediate former president of CIPA) and Daniel Alexander QC of 8 New Square. The discussion focused on two main issues,:1) the likely impact of the Government's position on UK legal professionals and businesses, and 2) whether the Government's position actually made any sense with respect to its broader strategy for establishing the UK's position as a strong independent state. 

The impact on UK practitioners and businesses

Julia Florence commented that the Government’s announcement on the UPC was "extremely disappointing" to the UK patent attorney profession and SMEs. The hope had been that the government would make an exception to the “red line” in the technical area of patents. Asked whether the Government’s position was a “death blow” to the UK’s membership of the UPC, Julia Florence noted that, should the UPC project continue, there may be future opportunities for non-EU member states to join. A European Parliament think-tank was itself of the opinion that UK membership of the UPC post-Brexit was possible. The main barrier is now the UK's own red line. 

Navigating the red lines

However, if the UPC goes ahead without the UK (which is far from certain), Julia Florence indicated that it was the current understanding that all European Patent Attorneys, including those based in the UK, would have rights of representation at the UPC. Importantly, Julia Florence could also see no reason why lack of UK involvement in the UPC should impact negatively on the UK’s influential position as a EPC member state.

Mr Alexander commented that the impact of the UK’s lack of further involvement in the UPC was most likely to affect small businesses. One of the main purported benefits of the UPC for the UK would have been a lowering in the time and cost of patent enforcement and challenge. Mr Alexander cited the extensive legal inefficiencies and costs of the current system which requires enforcement and challenge in each individual EU member state.

However, there is a risk that the potential impact of the UK’s lack of continued involvement in the UPC has been over-stated. Neither witness before the select sub-committee mentioned any disadvantages of the UPC, or of the UK membership thereof. However, many larger companies had been predicted to opt-out of the UPC for as long as possible, to avoid the risk of EU-wide revocation of important assets. There were also concerns that innovation in the software sector may be stifled by EU wide injunctions. On the other hand, these disadvantages may still apply to UK based companies operating in the EU if the UPC project continues.  

Does the UK Government’s position make any sense?

In view of the potentially significant disadvantages to the UK of not participating in the UPC proposed by the two witnesses, the sub-committee asked if the UK Government position therefore amounted to the UK cutting off its nose to spite its face. Mr Alexander commented that the issue was actually more completed than this. 

The UK Government’s position is that UK membership of the UPC is incompatible with their red line that the UK should no-longer be required to align with EU law. Mr Alexander voiced his respect for the ideological position on which Brexit is founded. However, Mr Alexander stressed that such a position did not justify rejection of the UPC project.  On the contrary, Mr Alexander argued that the UK was harming its future position as a strong self-governing state by rejecting the practical means of co-operation represented by the UPC. Particularly, under the UPC, the UK could have punched above its weight on the international stage. If the UPC continues without the UK it will do so without UK judges and without the UK being able to influence jurisprudence.

Importantly, Mr Alexander pointed out that any references to the CJEU from UK courts would be limited and not related to substantial aspects of patent law (e.g. novelty, inventive step etc). Substantial patent law would remain the purview of the EPO, which is already (theoretical) harmonised across EPC member states. The only aspect of patent law that might justify a referral would be SPCs, patent eligible subject matter, remedies under the enforcement direct and competition law. Mr Alexander therefore stressed that these issues would generally not arise in “common or garden” patent cases. However, references to the CJEU on patent eligible subject matter might be one issue that would have given the UK Government pause for thought. One only has to consider the debate surrounding the patent eligibility of natural plant products, to appreciate the potential legal complexities involved. Patent eligibility is far from a niche topic in the agri-tech and software sectors.

UK membership of the UPC would undoubtedly have been beneficial to UK patent attorneys and IP lawyers. As the location of the Life Science Division of the UPC, the UK would have had particular influence over the development of UPC related jurisprudence, influence that it will now no longer be able to have. However, it is worth remembering that there are potentially significant disadvantages as well as advantages represented by the UPC to UK businesses. UK companies operating in Europe may still be subject to the jurisdiction of the UPC, should it come into force. Those who see the UPC as more of a risk than an opportunity will now be hoping that the withdrawal of UK participation heralds the failure of the UPC project as a whole.