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What next for the Unitary Patent and UPC?

Posted on 19 March 2020

After many years in the planning, the EU's planned Unitary Patent and Unified Patent Court (UPC) regime has been on hold for the last three years due to two obstacles: Brexit, and a constitutional challenge to the whole regime in Germany. Whilst the UK did take steps following the Brexit vote to ratify the UPC Agreement (symbolically, on World IP Day in 2018), and continued to profess a desire to be involved in the regime on the basis that the UPC was an international court, this approach has now been abandoned.  Instead, the Johnson Government's position, confirmed via statements issued to the press rather than through any formal announcement, is not to seek involvement in the Unitary Patent and UPC system.  This is said to be on the basis that participation in a court applying EU law, and which is bound by the European Court of Justice, would be "inconsistent" with the UK's post-Brexit aim of being an "independent self-governing nation". 

As for the position in Germany, the Federal Constitutional Court is due to deliver its decision on Friday 20 March. Many predict it will reject the constitutional challenge. However, it is not entirely certain, even in that scenario, that the German Parliament will then proceed to ratify the UPC Agreement.  In August 2019, for example, the German Government said that it would be necessary to consider the 'factual and legal consequences' of the UK's withdrawal from the EU. 

On the assumption the challenge in Germany fails, and Germany does proceed to ratify the UPC Agreement, what is the likely outcome for the Unitary Patent and UPC regime, with the UK no longer involved? The UPC Preparatory Committee has issued a brief statement that work on the implementation of the UPC continues and that, once Germany is in a position to ratify, arrangements will be made to deal with the 'practical implications' of the UK's departure. Clearly, however, these implications will be substantial. There will need to be some significant changes to the regime, including revisions to the UPC Agreement.  Member States will also be vying to host the pharmaceuticals division of the Central Division, which had been due to operate in London. This could go to another EU city or, perhaps, the Central Division could now operate from a single jurisdiction (most likely Paris in that scenario), rather than being split into three divisions.

The more pertinent question though is: will the regime remain attractive to industry, without the UK's involvement?   Those businesses that already saw value in the Unitary Patent, in particular, will likely remain interested, provided they are convinced that sufficient EU territories of interest to them are involved (bearing in mind that not all EU Member States plan to participate from the outset).  However, they will expect the costs, such as the levels of renewal fees, to be adjusted for the fact that the UK is no longer involved (not least as they will need to maintain separate patent protection in the UK). 

As for the UPC, however, many businesses had already expressed concerns about the potential cost and uncertainty of the new court regime, even before Brexit and the constitutional obstacle arose. The UPC will have exclusive jurisdiction over Unitary Patents, but it will also have jurisdiction over standard European Patents, albeit during a transitional period that jurisdiction will be shared with national courts. Also during that transitional period, standard European Patents can be opted out of the UPC regime. Once opted out, a standard European Patent will be outside the UPC's jurisdiction for the remainder of its term, although the opt-out can be withdrawn. Many holders of existing standard European Patents were already planning to opt their patents out of the UPC's jurisdiction - there will be a sunrise period to allow them to do so in advance of it opening its doors. 

UK businesses then cannot completely forget about the UPC, even if the UK is not involved. First, if they own a standard European Patent, it will be at risk of being invalidated across all those EU Member States that are party to the UPC Agreement, unless they opt it out of the UPC (and do so during the sunrise period). Once opted out, however, a patent challenger would need to bring invalidity proceedings in each relevant Member State separately. Secondly, UK businesses are at risk of being sued in a UPC division for patent infringement – either for infringement of a Unitary Patent, or of a non-opted out standard European Patent. If they lose that action, and are found liable for infringement, they will be at risk of liability for damages across all relevant Member States (and possibly beyond the EU's borders), as well as potentially sizeable costs.  

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