“Heavy tanker UPC has launched, but it’s far from sailing in safe waters”

Supporters have often described the UPC project as a heavy oil tanker that is difficult to stop once underway. Many a patent expert referred to it thus – even when Brexit and the German constitutional challenge brought the project to the brink of failure.

In one respect, the people who invoked the image of the unstoppable oil tanker were correct. One year ago, the UPC tanker happily left its home port to set sail on the open sea. With captain Klaus Grabinski at the helm, the court is slowly but surely picking up speed.

Batten down the UPC hatches

But have the experts also considered that it is precisely now when the greatest dangers are looming? After all, most shipping accidents happen on the open sea. Piracy, major fires, storms or incorrectly secured cargo – additional dangers lurk when ships leave safe harbour.

Admittedly, the UPC got off to a flying start. With much fanfare, parties filed a considerable number of cases in June and July 2023. After this period, the UPC tanker lost momentum. But since the beginning of 2024, the number of new cases has increased considerably. After one year, the court has 373 cases to process, including 134 infringement and 32 PI cases.

While the UPC has done many things right in its first year, it still has surprises in store: my colleague Christina Schulze correctly points this out in her commentary. But the UPC could still lose the support of companies and lawyers. The project could still fail.

Spectre of SEP regulation

Europe is about to send a second oil tanker on a long voyage: the EU Commission’s proposal for a new regulation for standard essential patents. The EU Parliament recently gave its nod to the commission’s proposal. Multiple critics see the proposal as curtailing the UPC’s powers, which paradoxically is being driven forward by the same authority that pushed the UPC project.

A key point of the commission’s proposal is to establish a competence centre under the umbrella of the European Union Intellectual Property Office (EUIPO) which, in the future, will carry out non-binding essentiality checks. A FRAND determination by mediators would be mandatory before parties can litigate in UPC countries. Owners would be prohibited from enforcing their SEPs against implementers in court during EUIPO examination.

Experts see the move as a danger for the UPC, which would receive fewer SEP cases due to more licensing agreements between disputing parties. Fewer cases also mean less income for the UPC through court fees.

One solution could be the UPC’s own mediation centre in Lubiljana, which is anchored in the UPC agreement. After all, the EUIPO’s competence centre is also just a mediation centre. The problem with the UPC mediation centre, however, is that it is not yet operational. But according to information from JUVE Patent, preparations for the launch will be pushed ahead over the next few months. This is seemingly also supported by lawyers and industry – especially SEP holders – to take the wind out of the commission’s sails.

German-heavy approach

Germany is not exactly known as a great maritime nation; but when it comes to the UPC, it sets the pace. With Klaus Grabinski, Germany supplies the president of the UPC and most of the judges. Courts in Mannheim and Munich recently nominated two more, while disputing parties submitted most UPC cases to the Munich local division. Düsseldorf, Mannheim and Paris follow closely behind.

This is no surprise. Germany is Europe’s strongest patent nation, with important courts at the aforementioned locations. But the UPC is an international court by definition: it is detrimental for US and Asian users in particular it creates the impression that such companies can save money by going directly to the regional courts in Munich or Düsseldorf.

As such, it is vital the UPC has a better distribution of cases in the future, although the court has only a few levers at its disposal: one is an even, high-calibre composition of the panels, and the second is speedy completion of proceedings.

Practitioners know that quick judgments are a key argument for patent proprietors to file a patent action with a particular court. Lawyers and company representatives are already concerned that the high workload at the Munich local division could delay proceedings. However, the UPC reacted in good time. It recently set up a second panel in Munich, appointing two new judges in the process. It also increased the capacity of the judges at the Düsseldorf local division.

But in the next nomination rounds, the UPC must also ensure that it selects not only German judges. A prerequisite for this is that the proceedings are more evenly distributed.

Good financial management

In six years, the UPC will conduct a cash review, after which the court must finance itself from its own resources, such as court fees. Article 37 of the UPC Agreement makes this plain. The UPC managers must therefore keep a watchful eye on the court’s finances. After all, Germany, France, Italy and the like will not want to finance the new court from their own budgets for longer than the seven years stipulated in the agreement.

Therefore, the members of the UPC Presidium not only have to ensure very good judgements but also manage the court’s finances well. However, nobody wants the UPC’s member states to cut off the oil tap in June 2029, thus forcing the UPC tanker to drop anchor.

Farewell on the long journey

But the image of the oil tanker is perhaps false. In fact, the UPC with its various local, regional and central divisions is more like an association of merchant ships steered by highly qualified personnel. This lends credence that the UPC will continue on its safe voyage.

Observers should not underestimate the personal commitment shown by judges and staff of the individual offices since the beginning. They have mitigated the many shortcomings of the case management system (CMS) and have helped lawyers on the verge of a nervous breakdown. But it is not only lawyers who are increasingly annoyed by the complex CMS: the system is baffling the judges, too.

Losing judges to the national judiciary because of a poorly functioning CMS would be a disaster for the UPC. Shipowners know that insufficient or poorly trained staff is another reason for shipping accidents. Developing the CMS into a sea-worthy vessel therefore remains the biggest challenge for those responsible at the UPC.