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Japan – Further Update on the Prospects of a Unitary Patent System for Europe.

19 February, 2012

In 2011, there were several significant developments in relation to the proposals for the creation of a unitary patent for the member states of the European Union (the “EU countries”) and a single European and EU Patents Court (“EEUPC”). The EEUPC would hear matters relating to the infringement and validity of both European patents (the “classical” European patents that are granted by the European Patent Office (“EPO”)) and new unitary patents within a unified patent litigation system (the “UPLS”) effective across the EU countries. In principle, this would alleviate the complex, messy and expensive system of patent prosecution and enforcement that currently exists in Europe.
 
As described in our January 2011 and April 2011 newsletters, there have been many obstacles over several decades that have prevented the EU countries from reaching agreement on the detailed proposals for a unitary patent, EEUPC and the UPLS, most recently with strong opposition from Spain and Italy and the Court of Justice of the European Union (“ECJ”). However, in the past 6 to 9 months, the main EU countries have taken substantial steps to reach consensus, at least politically, and seem poised to agree to a new compromise system. In this newsletter, we report on the recent developments regarding the existing proposals, the main problems that appear to exist, the likely next steps in reform at this critical juncture, and the impact on Japanese companies operating in Europe. 
 
Background 
 
As set out in our April 2011 newsletter, the proposed system would represent a radical change in the way that patents are prosecuted and litigated in Europe. In terms of patent prosecution under the new system, an applicant for a European patent will have the option of requesting a unitary patent covering the 25 out of 27 EU countries that have joined the enhanced cooperation procedure (the “contracting EU countries”). As under the current EPO system, patent applications will be examined and granted in one of the official languages of the EPO (English, French or German), and include translations of the claims into the other two EPO official languages only at this stage.1 In terms of patent litigation, after an initial five-year transitional period, the EEUPC would have exclusive jurisdiction in respect of civil litigation related to infringement and validity for both “classical” European patents and unitary patents.
 
In our April 2011 newsletter, we also reported on the European Commission’s legislative proposals relating to the following regulations (the “Regulations“): (i) a regulation establishing a unitary patent system to cover the contracting EU countries (the “Patent Regulation2); and (ii) a regulation establishing the proposed translation regime (the “Translation Regulation3). 
 
Key developments since April 2011 
 
The principal developments since our last report in April 2011 are as follows.  
 
May 2011:
  • In order to meet the ECJ’s objections that the proposed UPLS was incompatible with the EU treaties, the EU Presidency put forward proposals for an amended UPLS (the “EEUPC Agreement“) under which issues relating to the law of infringement under the unitary patent could be referred to the ECJ.4 It also put forward amended draft Regulations (the “Compromise Regulations“).5
 
June 2011:
  • Spain and Italy filed complaints at the ECJ and challenged the legality of the use of the enhanced cooperation procedure. 
 
October 2011:
  • The EU Presidency published a revised draft EEUPC Agreement.6

 

November 2011:

  • The EU Parliament’s Legal Affairs Committee (known by its French acronym “JURI“) considered the draft Compromise Regulations and EEUPC Agreement and approved a mandate to open formal negotiations with national governments to agree to create a unitary patent. JURI appointed three European Parliament rapporteurs to negotiate with national governments, and agreed that they would treat the Compromise Regulations and EEUPC Agreement as a package (the “EU Patent Package“). Consequently, none of the three laws will be agreed without the others, and all three laws will enter into force at the same time.
  • The EU Presidency published a guidance document7 that envisaged the finalisation of the EEUPC Agreement by 22 December 2011. 
 
December 2011:
  • JURI voted in favour of the EU Patent Package.
  • The UK Parliament’s European Scrutiny Committee (the “UK Parliament Committee“) published a report (the “UK Parliament Report“) in which it criticised the lack of information on the current state of negotiations on the EU Patent Package and expressed concern that problems with the proposals did not appear to have been addressed.8
 
January 2012:
  • On 25 January, Key members of the UK patent community gave evidence to the UK Parliament Committee on the substantive provisions of the draft Regulations, and informed it that patent lawyers across Europe believe the new system to be bad for users, with increased legal uncertainty and costs.9 
  • The text of the Patent Regulation was to be finalised on 26 January.10
  • EU leaders were to discuss the EU Patent Package and agree on a location for the seat of the Central Division at the EU summit in Brussels on 30 January.11
 
Likely next steps 
 
At the time of writing, we expect the following steps to be taken. 
 
13-16 February 2012: A session of the EU Parliament will take place, during which (subject to agreement on the seat of the Central Division) the EU Patent Package will be subject to a plenary vote. If the EU Patent Package is voted through, the European Council will be able to adopt it into EU law. 
 
1 January 2014: The current plan is for the EEUPC to begin hearing cases on 1 January 2014 with a five-year transition period (during which time litigants will have the option of having matters heard before the national courts instead of the EEUPC). 
 
Issues of concern 
 
The speed at which changes have been agreed politically, often without full scrutiny by interested parties, has caused increasing concern. Issues raised by the patent community in relation to the EU Patent Package include the following in particular. These are as yet unresolved. 
 
  • ECJ jurisdiction: There is widespread opposition to the ECJ having jurisdiction to consider substantive patent law, mainly because the ECJ lacks experience and expertise in patent law, but also because of the additional cost and delay in infringement proceedings this would involve.
  • Separate jurisdictions for related validity and infringements actions (i.e. bifurcation):  This system is very similar to the German approach. Some members of the patent community feel that bifurcation is overly favourable to patentees as the infringement procedure is almost always significantly faster than the validity procedure.
  • Costs of the EEUPC: The fees for bringing an action in the EEUPC may be significantly higher than for an action before a national court under the current system.
  • Quality of judges: There are not enough judges with the technical know-how and training necessary to understand patent applications to populate all the proposed panels of the different EEUPC divisions.
  • Language issues: Procedural issues that need to be resolved include, in particular, the language of proceedings, court documents and judgements. 
 
Conclusion 
 
Efforts to agree the EU Patent Package proposals rapidly gathered momentum in the second half of 2011 and the contracting EU countries were scheduled to approve them in a signing ceremony on 22 December 2011.12 Progress towards a more efficient, streamlined and cost-effective European patent system is welcome; however, there is growing concern that, due to political motivation to present a success for the EU (and the Polish presidency in particular), the current compromise proposals have been formulated too hastily and will be implemented without resolution of the issues set out above or the proper evaluation, appreciation or understanding by the users of the system. 
 
However, disagreement over certain key aspects of the EU Patent Package, notably the location of the seat of the Central Division, has afforded patent communities time to unify and voice their objections to national governments and other bodies. With news of unease in Denmark too,13  there is hope that national governments will examine the proposals and address the European patent industry’s increasing concerns before the upcoming plenary vote in February 2012.
 
In addition, pending the ECJ hearing of the claims brought by Spain and Italy (which we expect to be scheduled later in 2012), there is still uncertainty as to whether the new system will become effective. In a recent development, Italy appears to have expressed its desire to join the EEUPC insofar as it deals with “classical” European patents, but without joining the unitary patent. At the time of writing, it is unclear how this is likely to affect the EU Patent Package negotiations.14
  
While it now seems that substantial change is likely in the near future, for the immediate short-term, it will be important for Japanese companies to start to review their European patent strategy and to continue to assess the various new aspects of the EU Patent Package that will no doubt be negotiated by the EU countries during 2012 and beyond. We will continue to monitor and report on developments and their impact on strategic choices for Japanese companies.
 
 
For further information, please contact:
 
Gavin Margetson, Partner, Herbert Smith
 
Dr Frederick Ch’en, Herbert Smith
 
Graeme Preston, Herbert Smith
 
Naomi Lisney, Herbert Smith
 

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