Milan, Paris and Munich in serious debate over UPC competencies allocation

That Milan will host the third and final available UPC Central Division seat seems inevitable. However, according to a recent report in Italian business paper Il Sole 24 Ore, present discussions have developed to focus on the proposed distribution of the International Patent Classification (IPC) classes between the three central locations, the other two of which are Paris and Munich.

Milan argues for pharma

According to the Agreement on a Unified Patent Court (UPCA), Paris, which also hosts the president’s office, has jurisdiction over cases involving textiles and paper, fixed constructions, physics, and electricity. The agreement allocates the Munich section of the Central Division mechanical engineering, lighting, heating, weapons, and blasting.

However, discrepancy has emerged regarding whether the IPC classes the UPCA had previously assigned to London – human necessities (i.e. pharmaceuticals), chemistry, metallurgy – will automatically be transferred to Milan. Many experts had expected this, in the event that the UPC states opt for Milan as the third seat.

After the Brexit-related withdrawal of the UK from the UPC project, representatives initially agreed that the former London divisions would first go to Paris and Munich until a final decision was made. In the meantime, Milan has remained in the race as the only candidate to succeed London.

UPCA under scrutiny

It appears that the discrepancy has occurred due to the distribution of compentencies as laid out under Article 7(2) of the UPCA. As it stands, the Italian position is that the division of competencies is not a consequence of Brexit. This is because the UPC has not fixed the geographical location under Article 7(2).

Thus, while the UPC Administrative Council should have independent leave to amend the agreement regarding the geographical location, i.e. it can update the third division from London to Milan, it is unclear whether this also requires a change of the allocation of competencies decided when those involved drafted Annex II of the UPCA.

According to IL Sole 24 Ore, the French and German governments have agreed to transfer the former London seat to Milan. However, the governments have apparently also proposed that the Paris UPC division will take over patent cases which include SPCs, while the Munich division will hear cases concerning chemistry and metallurgy. This would leave the Milan central division in charge of pharmaceutical patents without SPCs, and non-pharmaceutical biotechnology cases.

In its report, Il Sole 24 Ore refers to Italian government documents, the existence of which Italian lawyers have confirmed to JUVE Patent. Despite a request from JUVE Patent, the UPC Administrative Committee and the German government have so far not commented on the dispute between the three countries.

Carlo Nordio

Parliamentary consensus remains

Naturally, Italy’s patent lawyers, as well as many political stakeholders, are less than enthusiastic about the prospect of Milan losing the bulk of its compentencies. Italy remains an important jurisdiction for patent law, especially in pharmaceutical and life sciences cases.

The Hague confirming its withdrawal of interest as the third UPC Central Division location provided the northern Italian city with a chance to demonstrate its clout on the European stage. The Italian government officially fielded its choice in 2020.

The question of competency is a hot topic in the Italian parliament. Currently, the desire for Milan to host the UPC’s third seat is not in doubt; despite recent political upheaval, parliament has so far broadly shown bi-partisan support. According to JUVE Patent sources, numerous MPs have submitted questions to the competent ministers, in particular Minister of Justice Carlo Nordio.

Taking a stance

Meanwhile, Nordio has written to his French and German counterparts, pleading the case for Milan retaining London’s former competencies. According to IL Sole 24 Ore, Nordio is strongly against Paris and Munich taking on the majority of Milan’s competencies. This corroborates the general Italian position, which according to sources, is that those involved are unhappy with the current plan.

However, there is talk that those in charge of Italy’s UPC operations may be prepared to accept some compromises. For example, the Italian division could hand metallurgy-related patents to Munich while retaining competency to hear chemistry cases. According to reports, the counter-argument also proposes handing Paris pharmaceutical patent with SPC cases, but only where the patent’s infringement or validity is not up for debate.

Redraft and review

Furthermore, the UPC’s 17 ratified member states have agreed the treaty as it stands. This could mean the governments need the wider opinion of country representatives who will play a key part in the court’s activities. While this is what stakeholders in Paris, Munich and Milan are currently debating, it is clear that the relevant parties will have to redraft the UPCA, should Milan retain only minimal competencies.

Should the three countries agree on a distribution of the classes, the UPC contract would still have to be adjusted. The contract still currently lists London as the third seat of the central chambers. According to experts, the Administrative Committee could make these adjustments under Article 87(2) of the UPCA without the 17 member states needing to vote. Experts currently dispute whether this also applies to the adjustment of the responsibilities for the parts of the central chamber in the UPCA Annex.

A boost for the future

Thus, with the court set to open its doors on 1 June 2023, time is of the essence. France, Germany and Italy coming to an agreement would be favourable, in order to ensure the court’s users have clear direction when it comes to filing cases.

Furthermore, stakeholders must also take into account whether the current distribution of UPC legally qualified judges is sufficient to cover cases at the Milan court. JUVE Patent is currently not aware whether the court will second judges from the central division in Paris and Munich to Milan, or whether it will appoint new judges for the city.

As for Italy, there is no doubt that the relocation from London to Milan would be a boost for the country, and for patent representation in southern Europe more generally. It would enhance Italy’s reputation as a burgeoning go-to hub for patent litigation, while raising the profile of its small but visible patent market. With the start date in the UPC’s sights, the next question is how quickly a decision – or a compromise – can be reached. (Co-author: Mathieu Klos)

Update 3.03.2023: German government confirms talks

Meanwhile, the German government has confirmed the talks between Italy, Germany and France concerning the allocation of responsibilities among the three central division seats. A spokesperson for the Federal Ministry of Justice told JUVE Patent, “It is true that the three countries are holding trilateral talks on the issue in question. Once an agreement is reached, the intention is to first inform the other member states of the outcome of the discussions and then start negotiations in the relevant body.” In this case, the ‘relevant body’ is the Administrative Committee.

However, the German government did not confirm a decision in favour of Milan. The spokeperson said, “The establishment of another central chamber division of the UPC in Milan requires an amendment to the UPC treaty. The contracting member states decide jointly on an amendment.” They added that if and when the contracting states will decide on an amendment is uncertain, but it is likely to be soon.

The German government also pointed out that, regardless, the court will begin its work on 1 June. The ministry spokesperson said, “The responsibilities of the central chamber division formerly intended for London will be exercised by the central chambers in Paris and Munich on a transitional basis until a final agreement is reached.”

JUVE Patent updated this article on 03.03.2023 to reflect the latest correspondence between the publication and the German Federal Ministry of Justice.