The Future Patent System of the European Union

By Niklas Mattsson, Partner, European Patent Attorney at Awapatent,[Patent]

By now, regardless of home country, most people who are active in the IP field have heard that the member states of the European Union (EU) have agreed on new legislation concerning unitary patent protection throughout the union. Most have also learned that some EU countries are outside of the system, and that the new system will form an alternative to the existing regime rather than replacing it altogether. In this article, the main features of the new system will be explained, and some strategic advice will be provided.


The existing system for obtaining and enforcing patents in Europe is based on national jurisdiction. For 35 years it has been possible to obtain a central grant decision from the European Patent Office (EPO) on a European patent application, and this grant decision is binding on all of the 38 European Patent Convention (EPC) contracting states. Subsequent litigation concerning validity and infringement has to be carried out on a country-bycountry basis. Once a European patent has been granted it is also necessary to validate the patent in countries where protection is desired, which is a costly process. The current state of affairs has long been considered to be suboptimal, and many attempts have been made to improve the situation, at least in those EPC countries who are also members of the EU. Now, it looks as though these attempts are finally paying off and we hope to see a new EU patent system in place sometime during 2015. In essence, new legislation and a multilateral agreement on a unified patent court will create a unitary patent right for most of the EU territory.


Features of the existing system

Currently, it is possible to obtain a patent with validity in 38 contracting states to the EPC through a single patent application filed with the EPO. Among the contracting states are all the 28 member states of the EU, but the EPC is distinct and separate from the EU, and does not form part of the EU legislation.


Pursuant to the EPC, the procedure to grant is centralized. Also, within nine months from the grant decision, any third party may dispute the validity of a patent in a centralized opposition procedure handled by the EPO. The EPO maintains its own body of jurisprudence, embodied by decisions on patentability and validity from the various Boards of Appeal of the EPO. Over the 35 years that the EPO has been operational, the guiding principles have been developed in such a way that the procedure is now largely considered to be wellbalanced and predictable, leading to high-quality patents in a market of substantial size.


However, the system is not without deficiencies. Once granted, a European patent is subject to the separate jurisdiction of each country where it is valid. In order to become an effective national patent right in one or more of the contracting states, the granted European patent must be validated there. Different contracting states have different validation requirements; some require a translation of the complete patent into the official language of the state, whereas others require translation of the claims only, and yet others have dispensed with the translation requirements altogether but still require registration of an address for service. After validation, annual maintenance fees are payable in each country where protection is to be upheld. Of course, the validation procedure and subsequent national maintenance fees add significantly to the total cost of obtaining and maintaining patent protection in Europe. We have estimated the cost of validating a standard European patent in all the available EU states (i.e. those 28 EPC countries that are also EU members) to be approximately RMB 260,000, of which approximately RMB 180,000 are translation costs. If only the largest 5 countries that have no translation requirement are selected, the validation cost is still approximately RMB 35,000.


Another aspect of the present system, which is also commonly perceived as a drawback, is that the result of the national validation procedure is a collection of national patents. While these patents share a common origin in the form of the granted European patent application, they are in effect separate, national rights, subject to national jurisdiction. This collection of validated patents from a common source is frequently referred to as a “bundle” of national patents, and a European patent validated in this way is called a “bundle patent.” Any matters concerning infringement and/or validity of the bundle patent must be dealt with on a country-by-country basis. It goes without saying that carrying out patent litigation in many different countries is very costly. Matters are made worse by the fact that there are differences between individual EU member states, for example in the interpretation of substantive patent law, the procedural rules of litigation, the amount of cases that are tried and, consequently, the experience of judges in adjudicating the often very complex issues involved. The EU leadership has attempted to solve these problems for a very long time, and many attempts have failed. Now, however, 25 EU members have adopted laws that create the possibility to obtain Unitary Patents, and an agreement which creates a new, supranational patent court.


European patents with unitary effect

The first aspect of the new patent system in the EU is the introduction of a new title of intellectual property. Through two EU Regulations adopted on December 17th 2012, it will become possible to obtain, from the EPO, a patent covering 25 of the 28 EU member states (all EU members except Italy, Spain and Croatia) without the need for validation. Such a patent is referred to as a “European Patent with Unitary Effect,” or “Unitary Patent.” It is important to note that this introduces an additional option for parties seeking patent protection in the EU, and that it will still be possible to use the old validation process to obtain national, “bundle” patents instead, if desired. Important, too, is that the procedures at the EPO for filing, prosecuting and obtaining the grant of European patent applications will be unchanged, as will the opposition procedure. In other words, the familiar practice of the EPO, as developed over almost four decades, will remain.


Instead of validating a granted European Patent in the 25 participating EU countries, a patent holder will now have the option to obtain a Unitary Patent for these countries. This is accomplished by simply filing a request for unitary effect with the EPO. The request must be filed within one month from the publication of the grant decision. Unitary effect can only be obtained if the claims of the granted application are identical for all of the 25 states, and a Unitary Patent may only be transferred, revoked or allowed to lapse in the whole area. Also, if there are several patent proprietors, for example different proprietors for different states, all proprietors must act in unison to request unitary effect. These rules, and others, are in place to safeguard the unitary character of the patent throughout the participating states. Annual maintenance fees for the Unitary Patent will be payable to the EPO during the 20 year lifetime of the patent. A novel aspect of the new system is that it introduces the possibility for a patentee to obtain a reduction in the annual fees, which is available if the patentee files a statement with the EPO stating that the patent is available for licensing. Neither the amount of the annual fee or the reduction have yet been fixed at this point so it is difficult to say whether or not this option will reach the stated goal of facilitating technology transfer.


As stated above, the option of obtaining a Unitary Patent will only be available within the EU member states, and not all countries have chosen to participate. Due to political issues, mainly having to do with the language regime, Italy and Spain have not accepted the new laws, and it will not be possible to have a Unitary Patent valid there. Also, several EPC member states are not EU members, and a Unitary Patent will therefore not be valid there either. As a consequence, it will be necessary to make sure that validation is done in those nonparticipating countries if protection is desired there, in addition to requesting unitary effect in participating EU member states.


With regard to languages, a European patent application may be filed in any language, but must be translated early in the procedure to one of the EPO working languages, English, French or German. It follows that a European patent is always granted in one of these three languages. In the new EU legislation, it is envisaged that all Unitary Patents will eventually be made available in all EU languages through the use of translation software. It is recognized, however, that these translations are not yet of sufficiently high quality, so there is a transitional period of no more than 12 years, during which there is a translation requirement also for granted Unitary Patents. If a Unitary Patent is granted in German or French, a translation of the patent into English must be filed. If the patent is granted in English, the patentee may choose any other EU language in which to translate the patent. The translation must be filed together with the request for unitary effect within one month of the date that the patented was granted.


As to the practical consequences of obtaining a Unitary Patent, the most obvious one is that the cost of protecting an invention in the EU is substantially lower using the option of registering unitary effect, especially compared with the cost of validation in all participating states. Instead of the estimated RMB 260,000 for full validation, it is estimated that the cost for obtaining unitary effect will be a mere RMB 6,000. During the transitional period, when a translation into one language must also be filed, the costs will be somewhat higher, around RMB 22,000. Of course this too is a substantial savings and lower than the cost of validating a “bundle patent” in only 5 countries. In other words, the new system offers more patent protection for less money. On the other hand, unitary effect also means that all of the eggs are in one basket - if the patent is lost in litigation then it is lost for the entire territory. Also, it is not possible to trim the geographical scope of a Unitary Patent over time, by allowing it to lapse in certain states and remain valid in others.


In addition to applying to all patent applications filed when the system is up and running, the new option will also be available for European patent applications already pending on that date. In other words, if an applicant is interested in obtaining a Unitary Patent on his or her existing application, he or she is advised to consider whether there are tactical measures that could be taken to ensure that the patent is not granted until the new rules are in effect.


Unified patent court

The second aspect of the new patent system in the EU is the establishment of a patent court, the Unified Patent Court (UPC), having jurisdiction over all European patents and the power to take decisions with effect in all of the participating countries. The court is established through a multilateral agreement on a Unified Patent Court opens only to EU member states, which was signed by 25 member states on February 19th 2013. Unlike the Unitary Patent legislation, the court agreement was signed by Italy, but Spain and Poland refrained. Croatia, being a new EU member since July 1st 2013, has yet had no opportunity to join either.


The general aim of the new court is to do away with the need for parallel, national litigation in the patent area. This is achieved by one legal proceeding for all member states, which will reduce the costs borne by the parties, bring the same result for all countries, and make it more difficult to use complicated forum rules to stall proceedings. The proceedings in the court will be comparably quick, with the time to a first instance decision of no more than twelve months, and the court will employ professional judges with special training in patent matters in order to guarantee high quality and consistent decisions.


Importantly, the UPC is to have exclusive competence not only over the new Unitary Patents, but also to all European patents granted and validated in the classical way, i.e. the “bundle patents,” and to supplementary protection certificates (SPCs) for medicines and plant protection products. Also, it will have jurisdiction over all such patents and SPCs, regardless of whether they were granted before or after the court becomes active.


The drafters of the agreement have recognized that not all patent proprietors may be pleased with having to submit their existing “bundle patents” to the jurisdiction of an untested new court. Therefore, a transitional period of seven years has been introduced, during which it will be possible for proprietors of bundle patents to “opt out” of the court’s jurisdiction. If a statement to opt out is filed for an existing bundle patent, the UPC will not have jurisdiction over that patent, and national courts will retain jurisdiction over the national parts of the bundle in the same way as in the existing system. Regardless of the length of the transitional period, the opt out will remain throughout the lifetime of the patent, unless the opt out statement is withdrawn by the proprietor. In addition to, and independently of, the possibility to opt out, it will also be possible during the seven year transition period to initiate actions concerning bundle patents in the national courts, despite that such patents may also fall under the jurisdiction of the UPC.


According to the court agreement, a statement to opt out must be filed with the court itself. On the other hand, opting out is not possible if an action concerning the same patent has already been initiated in the UPC. In other words, if a proprietor desires to opt out an important bundle patent from the UPC’s jurisdiction, it is advisable to do so as soon as it is possible, in order not to be “trapped” within the UPC, for example by the early filing of an invalidation action by a competitor. Because of this scenario, and because an opt out statement can be withdrawn at any time, it is expected that the court could face a very large number of opt out statements during the initial period of operation. As a solution, it is being proposed to introduce a sunrise period before the court comes into operation, during which advance opt out statements could be filed with the EPO. The possibility to opt out is not available for Unitary Patents.


With regard to the structure and organization of the UPC, various political compromises and negotiations are showing through. The court will have two instances: a first instance which renders an initial decision, and a second instance for hearing appeals of first instance decisions. Whereas the second instance is composed of only one entity and located in Luxembourg, the organization of the first instance is significantly more complex. To begin with, it is divided into different divisions: a Central Division; several Local Divisions, in individual member states; and several Regional Divisions, shared between two or more collaborating member states. The Central Division, competent to hear all cases of invalidity and those infringement cases with defendants from outside of the participating states, is in turn divided into three sections, located in Paris (also the seat of the court), in London and in Munich. The technical area of the subject-matter of a Central Division case will control where it will be heard, with pharmaceuticals and chemistry in London, mechanical engineering in Munich, and everything else (including telecommunications and information technology) in Paris.


The court agreement contains detailed provisions concerning what types of cases should be filed in which division of the court, as well as rules on what languages are permitted. Also, rules of procedure for the UPC are in the process of being finalized. A fifteenth version of these rules were subject to public consultation during the fall of 2013, and it is widely believed that these rules are now nearly in their final form.


Remaining issues and entry into force

Some details of the new system have yet to be decided upon. The most important of these concern money. In particular, the cost of key user fees are not yet clear. Such unknown fees include the renewal fees for Unitary Patents, and the court fees for starting different actions at the UPC. Public consultation on proposals concerning these fees are expected to take place during the first half of 2014. Another debated fee is a proposed fee for filing an opt out statement for an existing bundle patent. Many have commented that it is unfair to have to pay for not wanting to be subject to a new court, in particular as this court was not in existence at the time the patent in question was obtained. It looks likely that there will be a fee for opting out despite such criticism.


The court and the option to request unitary effect will become operational after 13 member states have completed the process of ratification of the court agreement. Different commentators have different opinions on when this will be. At present, the consensus points to mid-2015 as a likely time of entry into force of the new provisions

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