“UPC is like an orchestra missing crucial instruments for the full sound”

Expectations were high from the start, and it’s fair to say that the UPC has met many of them. Case numbers have grown rapidly, and the European court has become the go-to venue for international companies and SMEs alike. With the increasing number of rulings, from the Court of Appeal especially, a body of case law is gradually taking shape. And is providing users with legal certainty. Only this week, the court reached another milestone, as the UPC community celebrated the official start of the Patent Mediation and Arbitration Centre in Ljubljana.

What’s more, a closer examination disproves frequent accusations that the UPC has a strong pro-patent holder bias. Internal statistics from some law firms suggest that courts rule in favour of patent holders (as claimants) and users (as defendants) in more or less equal numbers. This is particularly true for the German divisions, which critics frequently accuse of favouring claimants in their rulings.

Only a truly European court has a future

As such, the biggest sticking point remains the strong dominance of the German local divisions. Unsurprisingly, German and non-German lawyers hold divided opinions on the issue. A recent survey by EPLAW of its members on the distribution of UPC cases clearly shows that lawyers from Germany view the current situation as being little to no cause for concern. At the same time, virtually all others see an urgent need for action.

It cannot be emphasised enough how important it is to find sensible and effective solutions to this issue. Those in charge at the UPC have understood this, as evidenced by Peter Tochtermann, presiding judge at the Mannheim local division. During a hearing he had urged claimants to make use of local divisions in other countries. If the German local divisions continue to dominate, the court will lose credibility as a truly European response to the parochialism of national courts. The UPC also needs the input of all judges, with their national perspectives, to develop a truly European body of case law.

Non-members under pressure 

Furthermore, many UPC sceptics see their concerns confirmed, that the court will become a German regional court wrapped in a European cloak. And this deters other potential member states from joining the UPC. This in turn undermines the European idea behind the court.

At the same time, non-member states feel increasingly drawn into the vortex of the UPC’s long-arm jurisdiction since the CJEU decision in BSH v. Electrolux. Several UPC cases have recently applied this ruling, which allows courts in Europe to extend the scope of their decisions beyond their actual territory. Only this week, the Court of Appeal confirmed its international jurisdiction over European patents even outside the UPC’s territory in FujiFilm v. Kodak. And in March, the same court referred further questions on the matter to the CJEU. Thus, it looks very much like the vehicle of long-arm jurisdiction is here to stay.

This is creating pressure on countries outside the UPC. Swiss, Spanish and Polish lawyers told JUVE Patent that stakeholders of the patent community in their countries are concerned about this development. They view it as a threat to their national court system. Furthermore, they feel that long-arm jurisdiction is pressuring their countries into the UPC, even though those countries do not actually want to be part of it – at least for now.

Poland revisits question of membership

It could very well be that the practice of long-arm jurisdiction has played a role in prompting the Polish authorities to revisit the question of UPC membership. According to a Polish lawyer, this has already sparked strong – and largely critical – reactions among patent experts in Poland. According to JUVE Patent sources, Poland plans to host a broad stakeholder conference on the unitary patent protection system in late September.

Poland and Spain are the two major EU markets not yet integrated into the system. If they joined and maybe some or all of the signatory states like Ireland and Hungary ratified the agreement, this would make the UPC a truly European court. Without them, the system is like an orchestra missing instruments that are essential to its full sound.

But as long as German dominance prevails, stakeholders in Poland and elsewhere are unlikely to support joining the UPC. So, no matter how much one waxes lyrical about Germany’s traditionally strong position as a centre for patent litigation being at the root of the dominance of German divisions, keeping the status quo is not an option. Not, if the UPC wants to be a European success story.

Balancing act for SMEs

In terms of the UPC’s work itself, the overall assessment among the majority of users has been largely positive so far. Especially with praise for the court’s speedy proceedings and efficient processes.

The European court was primarily intended to make it easier for SMEs to enforce their patents across multiple countries. So far, large international companies from the mobile communications, digital technology, pharmaceutical, and medical technology sectors have used the UPC most frequently. However, various law firm estimates suggest that SMEs also bring between 20% and 30% of cases.

Traditionally, small and medium-sized enterprises are more cautious when it comes to litigation. However, the costs of a lawsuit at the UPC might also discourage some parties. JUVE Patent research suggests €300,000 for first-instance judgments including revocation claims in non-SEP proceedings represents an entry-level price point. This is no small financial burden for an SME to shoulder. In addition to legal fees and court costs, the court can sometimes impose a “security for costs”. If a small business cannot afford this, it can lose the case by default. This might make smaller companies think twice before they file a claim, especially against bigger companies.

So, after three years of the UPC, the verdict is mixed. Many things are working well, but the UPC still has its work cut out to become a truly European court.