Unitary Patent: Political Struggle and Shift of Competence towards Central Division

Was it like this as the European Council decided on the Unified Patent Court?

As reported here and elsewhere [1, 2, 3], the European Council agreed on the EU Unitary Patent and a EU Unified Patent Court at last week’s Brussels EU summit after volatile negotiations – by ‘suggesting’ two significant amendments (see summit conclusion, page 2, item 3) as compared to what was know from the latest available draft text of the Unitary Patent Regulation dated 23 June 2011 (see here and here).

EU Court of Justice: The more severe one of those amendments that apparently was pushed through by UK Prime Minister David Cameron to please his eurosceptics allies at home, demands

that Articles 6 to 8 of the [Unitary Patent] Regulation [...] to be adopted by the Council and the European Parliament be deleted

essentially meaning that substantive EU patent law will not any more be subject to legal order of the Union highest court, the European Court of Justice (CJEU). I share my colleague’s view that this is nothing less than “an open declaration of deep mistrust, if not political warfare of significant parts of the  UK conservatives against the CJEU and thus the European Union as a whole.

This move, however, could not escape the eyes of the European Parliament, which originally wanted to nod through this matter tomorrow (4 July 2012) whereas meanwhile the item was removed from the agenda under the harsh critics of rapporteurs Bernard Rapkay (S&D, DE) and Klaus-Heiner Lehne (EPP, DE): “scandalous breach of procedure“, “oriental bazaar” (did they read this item?), ”case would go straight to the European Court of Justice“. Due to the Council’s amendments, the first reading is thus rendered null and void.

It appears that the proudness of the Danish Presidency as well as the official cries of joy of e.g. EPO President Benoît Battistelli (“historic breakthrough“) and EU Commissioner Michel Barnier (“decisive step“) came far too early while stakeholders ask themselves if this mess could not have been prevented by a more transparent process, more cooperation with the potential system users, less political tactics, and less national egoisms and horse trading. It is depressive to say, but if the implementation of a reasonable EU patent system was the litmus test for Europe’s capacity for efficient policy-making, the conclusion can only be that the striking deficiencies of the EU’s political management appear to be insurmountable.

In this situation, Mr. José Manuel Barroso offers his version of what has happened at the European Council summit in a speech in today’s plenary session of the EU Parliament:

There was a compromise on this between the participating Member States, but it unfortunately comes at the price of the deletion of important Community elements of the original Commission proposal. Whilst [...], the Commission has therefore reserved its position and I have made this reserve very clear to Heads of State and Government during the European Council. The situation will now require an assessment between the three institutions. We are ready to work with you [i.e. the EU Parliament ] on this.

This statement may enter the history books of the European Union as it clearly expresses the level of chaos reached in the patent debate. Apparently, the Heads of Government – particularly Cameron, Hollande, and Merkel – simply ignored Barroso and his Commission, being exactly that EU authority that comes closest to a government, which now in turn takes  the side of a Parliament that is increasingly frustrated an furious about Europe’s executive leaders. This summit may turn out to be historic in a slightly different way as was assumed by the Presidency!

Shift of Competences: However, the second amendment the European Council agreed on relates to the distribution of competences among the various local, regional and central divisions of the 1st instance of the Unified Patent Court.

The latest draft Unified Patent Court Agreement (UPCA) available is Doc 15289/11 of 7 Oct 2011 (“Draft Agreement on a Unified Patent Court and draft Statute”). Therein Articles 15 and 15a regulate the Competence of the various divisions. As a general rule, however, Art. 15a (6) UPCA allows that parties may agree to bring an action before the division of their choice, including the central division.

Local/Regional Divisions are competent to handle:

• infringement actions;
• actions for provisional and protective measures and injunctions;
• actions for damages/compensation derived from provisional protection;
• actions relating to the use of the invention prior to the granting of the patent;
• actions relating to the right based on prior use of the patent.

The action is to be brought before that Local/Regional Division in whose member state(s) the defendant is domiciled or the infringement has occurred. If the defendant is domiciled outside the territory of the UPC contracting states, the action will be handled by the Local/Regional Division in whose member state(s) the infringement occurred.

Either a Local/Regional Division or the Central Division is competent to handle the following legal instruments, depending on whether a parallel infringement action is pending:

• Revocation counterclaims:

The Local/Regional Division handling the parallel infringement action may

1. proceed with both the infringement and the revocation or
2. refer the revocation counterclaim to the Central Division and stay the infringement proceedings or
3. refer the whole case for decision to the Central Division, if the parties agree.

• Actions for declarations of non-infringement and
• Actions for revocation of patents:

If an infringement action is pending between the same parties and relating to the same patent, such actions will be handled by the Local/Regional Division. Otherwise, such actions are to be brought before the Central Division.

The Central Division is exclusively competent to handle:

• Actions on compensation for licences an the basis of Art. 11 UPR (Declarations of willingness to license); and
• Actions concerning decisions of the EPO in carrying out the (administrative) tasks referred to in Art. 12 UPR.

These rules were based on the general principle of subsidiarity and the willingness to well-balanced the European patent court architecture to the particular benefit of SMEs, as infringement actions are exclusively handled by local/regional divisions and a choice between a bifucated (infringement local/regional, revocation central) and a combined system (both infringement and revocation local/regional) is provided.

Now, the concluding Doc EUCO 76/12 did not only clarify that the Central Division of the Unified Patent Court will be split among Paris, London and Munich with Paris obtaining the main share, but also provided some new competence rules affecting the Central Division and the Local/Regional Divisions:

Concerning actions to be brought to the central division, it was agreed that parties will have the choice to bring an infringement action before the central division if the defendant is domiciled outside the European Union.

Furthermore if a revocation action is already pending before the central division the patent holder should have the possibility to bring an infringement action to the central division.

There will be no possibility for the defendant to request a transfer of an infringement case from a local division to the central division if the defendant is domiciled within the European Union.

Further to those amendments that enable infringement actions to be brought before the Central Division if a revocation action is already pending there or if the defendant is domiciled outside the EU, another regulation apprently agreed on 5 December 2011 in Doc 18239/11 (limite) appears to even more shift competences from the Local/Regional Divisions to the Central Division, as it requires that,

if the alleged infringement has occurred in the territory of three or more regional divisions, the defendant has the possibility to bring an infringement action to the central division.

Apart from the fact that it presently is totally unclear how many Regional Division will (have to) be set up so that this rule probably refers to “three or more local or regional divisions”, any Germany-wide infringement would immediately meet this requirement as it is expected that Germany will receive three local divisions (presumably Munich, Mannheim, and Düsseldorf). That is, practically any patent infringement defendant before a German court could for tactical reasons request the case to be transferred to the Central Division in Paris. That certainly would be further bad news for German patent expertise and infrastructure.

Contrary to the nature of the original rules of Doc 15289/11 dated 7 Oct 2011, the amendments in Doc 18239/11 and Doc EUCO 76/12 will result in a more or less centralised patent court system in which all more important patent litigation cases will be handled by the Central Division, as non-European defendants and infringements covering a larger territory (whatever “in the territory of three or more regional divisions” might mean in the end) are faily common.

(Photo 2012 by Ashwin Kumar via Flickr under a CC license)