London's patent firms are picking up the pieces after the UK government's decision to withdraw from the Unified Patent Court. This means rethinking strategies and reassuring clients that the City remains an attractive location to litigate. Boutiques with no pan-European offering might have to work hard to secure the same flow of work. But most patent litigators and patent attorneys remain optimistic about the chances of London's patent firms on the global patent stage.
22 May 2020 by Amy Sandys
For the European patent market, the UK’s decision to withdraw from the UPC is the latest disappointing development. London’s patent firms would have fared well. The Europe-wide network of courts promised a pharmaceutical division in London. The UPC would have given London’s patent firms the opportunity to develop their practice across borders. Clients are feeling the loss of years of carefully-honed strategy.
However, most of London’s patent firms have adopted a positive attitude to the situation. “The status quo remains the status quo because the UPC hasn’t happened,” says one UK patent attorney. More delays from Germany means London’s patent firms and courts have time to rethink their plans. At the very least, the UK patent market is determined to ensure that London remains a coveted location for patent litigation.
London’s patent firms have a certain amount of flexibility to redraft and reshape future UPC strategies. Many firms have a team dedicated to acting on the latest UPC guidance and responding to clients accordingly. However, for industrial clients with litigation plans reliant on the development of the UPC, the future is less secure. Sectors such as electronics and telecommunications viewed the UPC as potentially helpful. This is especially with regard to cost and alleviating the adminstrative work involved in litigating across several countries.
Ian Kirby, partner at Carpmaels & Ransford, says his firm put in contingency plans from the start. “The firm spent a lot of time talking to clients and coaching them about how to proceed with a potential UPC. We put in a huge amount of effort – but of course, the court never materialised.”
Richard Pinckney, partner at Bristows, says, “Our sense is that the UPC decision is disappointing for clients. We get the impression that clients are questioning whether the system is at the point where it no longer provides the benefit that potential users were hoping for. Our overall view is that potential users of the system are therefore cautious about the future.”
For the most part, clients regard the unitary patent as a positive development towards uniform patent protection. With the UK no longer a part of the unitary patent, some argue the country is automatically less viable for actively-litigating companies.
This is especially because, for many larger companies, the main cost in patent and IP work are filing fees and renewal. Here, the UPC was an attractive prospect in terms of lowering the cost. This is because companies must no longer secure renewal from each national court individually. But alleviating worries on cost is again up to the firms.
“Firms can assist the client to adjust its whole European strategy,” says Morag Macdonald, partner at the London office of Bird & Bird. “Even if UK litigators will no longer have the chance to participate in the court system, there will be occasions when parallel UK proceedings will be useful.”
“They can perform an important role advising a company to decide how best to conduct its European litigation plans.”
But it is an almost unanimous view that London’s patent courts are among European leaders. Kirby says, “There is no reason why, in the short- to medium-term, the UK courts should suffer.” UK jurisprudence is integral in informing much case law across Europe. The market regards UK judges as good all-rounders, with enough technical background to grasp complex evidence and concepts.
The same is true for barristers. According to JUVE Patent sources, all UK IP barristers were advised to apply for judicial UPC roles. One UK IP barrister told JUVE Patent, “I think the IP bar is good at litigation and good at oral advocacy.” Given its alignment with UK case law, oral advocacy is a key part of any potential UPC. “I was excited about, and pro-, the UPC project,” they say.
Although barristers and judges may no longer be involved, many hope their efforts will not be in vain. Kevin Mooney, partner at Simmons & Simmons and vociferous UPC advocate, says, “In any potential UPC court, understanding how to apply common law principles will be as much a requirement as the application of civil law principles. Thus, it is not unlikely that London will be able to help out in the UPC.”
Furthermore, the UK courts cross-examine expert evidence. This allows the court to deal with complex issues such as insufficiency, obviousness and inventive step in a very detailed manner. The UK patent courts offer highly-detailed judgments and provide reasoning for their decisions. Hopefully, say UK patent litigators, this expertise will see the court fare well in any new system. The courts could act at least as a point of reference against complex UPC judgments.
A potential outcome of the UK’s absence from the UPC is that courts in Germany, France, the Netherlands and Italy will attract more work. After all, it is these countries in which patents are most often validated. But another litigator suggests that most European patent cases play out along a UK-Netherlands-German axis. Sometimes the client adds another court, for example France or Italy, depending on the jurisdiction in which it decides to litigate. But the courts in the UK and the Netherlands are most often favoured for nullity suits. Clients look to the German courts for infringement decisions.
Mooney says, “If you look at judicial expertise, ability to adjudicate in English, and ability to deal with validity and infringement, then the Netherlands is a front-runner.”
The larger of London’s patent firms already have strong capacities in the Netherlands and Germany in particular. Thus, even in the event that fewer cases are heard in the UK courts, big firms will still have an interest in supporting the main UPC main divisions.
However, in order to compete with European court systems, the UK patent market acknowledges it must make some concessions. For example, companies often cite cost as being one of the most unattractive aspects of the London courts. Compared to the rest of Europe, it is hard to keep costs in patent litigation down. And the value of the case determines where a client decides to litigate. If the case is very high-value, there is a chance the client might decide it should be heard in a potential UPC centre. This would be as well as being heard by the UK patent courts.
On the other hand, some lawyers see no choice of forum in which medium-sized companies can litigate. The IPEC looks after SMEs, the Chancery courts looks after, as one patent lawyers puts it, “the Rolls-Royce cases.” It could be time for the UK to consider a middle ground, more akin to the rates charged in Germany. But if this does not materialise, perhaps UK firms also need to look again at their Dutch and German patent firm offerings. Litigators argue the axis will remain important, even if a UPC emerges.
This focus is made all the more imperative as Germany continues to struggle with its so-called injunction gap – a current hot topic in German patent jurisprudence. But in order for the UK to cement itself as the first choice for nullity and infringement actions in Europe, say litigators, speed is of the essence. For strategic reasons, the courts need to ensure they are not falling behind in supplying their judgments. This is a factor in which the European courts can be seen to have the edge.
When the UK’s rejection of the UPC first came to light, lawyers saw it as a particular blow for the pharmaceutical bar in London. For pharma-focused litigators, the court would of course have provided the perfect opportunity for big-ticket, cross-border cases. The previous UK government under Theresa May even earmarked Aldgate Tower, near the City, as the UPC’s London, and pharmaceutical, division. Now, if the UPC is to go ahead, the European patent community must find a new location.
But UK lawyers believe the pharma industry stands to weather the UK withdrawal. The courts enjoy a historic reputation for ruling strongly on pharma cases. This is down to their thoroughness when ruling on validity challenges.
Mooney says, “The UK courts will keep their pharmaceutical cases, at least in the medium-term. London’s patent boutiques also all have strong pharma practices. And, although Germany’s courts are also good for pharma as well as biotechnology, just having good judges might not be a strong enough pull factor.”
Furthermore, in the current coronavirus climate, many pharmaceutical companies are seeing an uptick in work. This is having a positive side effect for firms. As one patent litigator told JUVE Patent, “We have already welcomed three new clients in the past two months.”
But difficulties could still emerge elsewhere. London would do well to set out its views on FRAND and SEPs in the coming months. One patent lawyer says, “I am pessimistic in terms of non-pharmaceutical cases being heard in London post-UPC. On the side of the companies, it will be hard to justify carrying out parallel litigation with high costs on cases such as telecommunications. Boutiques in particular will have to think carefully about how best to market their non-pharma practices.”
A difference lies too in how international firms with solid cross-border litigation teams could approach a UPC, in comparison to London-centric boutique firms. There were already rumours of some national boutiques eschewing borders to create regional offerings. But the lack of UPC opportunity could see boutiques working harder to prove their credentials to clients. “The UPC could put the complexity of referral relationships under stress,” says Kirby.
That being said, pharmaceutical work is an undeniable strength of the UK’s patent boutiques. Theoretically, the UK should have no probems retaining its capacity to hear pharmaceutical cases. For mixed firms such as Carpmaels, which used a potential UPC as a catalyst to expand its patent litigation arm, its success with pharmaceutical litigation is beneficial.
Kirby says, “The UPC was important, but it wasn’t the sole reason for our expansion. When we thought the UPC would happen, we had a 12-month training programme to prepare ourselves and our clients. We saw it as an opportunity for patent attorneys and litigators to practice together, but that has always been our model – UPC or not. The teams will still work closely together to support our clients.”
The UK withdrawal from the UPC has also dealt a blow to US firms making their way into the UK capital. Some firms, such as Kirkland & Ellis and WilmerHale, were ahead of the curve. Both set up shop in London a few years ago and are already big names in a busy market. But other US firms, which had looked to London as a perfect strategic spot, are having second thoughts.
For example, in order to participate in the UPC, US firms will need a lawyer called to the bar in the country of a UPC division. This could mean diverging from an office in London to a location such as Munich, along with the necessary administration costs involved.
One patent litigator told JUVE Patent that, in the current system, the US firms are at a disadvantage. For some hoping to benfit from the UPC, London was a key strategic location. Now their European outlook must take into consideration other potential UPC jurisdictions. But the UK’s departure, and the constitutional court’s latest decision, means more uncertainty.
Stephens says, “The loss of the UPC is a big disappointment. It means that all firms have to now review their strategy. From the side of Bird & Bird, though, the firm will not really need to change its approach given our geographic reach.”
There is no doubt that the UK, and European, courts are facing the biggest upheaval in a generation. The coronavirus and Brexit implications have caused another set of worries, frustrations and rethinks for patent firms and courts. One UK patent attorney says, resolutely, “The UPC is not only a sick animal, it’s a dead one.”
From this perspective, there’s no hope left for a positive decision by Germany. “If there was any hope, the turmoil caused by COVID-19 has ended it,” they say. “How could you articulate a reasonable divergence of funds to the UPC with Europe in its current state?”
But this is not a prevailing view, it seems. According to JUVE Patent’s research, there still is still optimism among the remaining contracting member states. Stephens says, “The European Commission thinks very long term; it is likely to have another go at trying to implement the unitary patent and the court. But if the commission does want a unitary patent and a UPC, there’s no doubt the UK will be on the outside. UK firms will definitely have to rethink their strategies so as not to be left behind.”
Pinckney says, “In Bristows’ experience, litigants see the UK courts as a key part of any patent enforcement strategy, and we expect this to continue to be the case if the UPC goes ahead and in whatever form.”
The wider issues in Brexit also remain a problem for London’s patent firms and courts. Surveys conducted by independent bodies have shown that the UPC is far down many lawyers’ lists of priorities. Protecting the rights for supplementary protection certificates (SPCs) is, for example, more pressing for firms heavily involved in pharmaceutical litigation.
Macdonald says, “Although overall it could be less of an issue than the UPC, currently Brexit and how to deal with the recognition and enforcement of judgments going forward is more of an immediate problem for the industry.”
Kirby says, “Brexit has more potential to harm the UK’s position as a leading IP jurisdiction, rather than anything UPC related. But something would have to go very wrong in the Brexit negotiations, and how we as a profession react, to significantly diminish our current standing.”
Currently, the UK government is the focus of much lobbying by IP interest groups. Many are determined to clarify just how integral cross-border IP and patent work is the country’s economy. Litigators are sure that the government will definitely maintain the strength of the IP courts. Patent attorneys, too, should fare well for now. Article 48(2) of the UPC Agreement confirms that European patent attorneys have the same rights as any other lawyer to represent parties at the UPC. This is provided they have appropriate qualifications.
For now, the Ministry of Justice in Germany is preparing active approval for the UPC bill to resubmitted to German parliament, following its surprise ruling at the end of March. All legislation pertaining to the UPC must be redrafted. However, the vote is not likely to occur before the end of the year. The expected time period is another at least eight months before the mechanisms of the UPC begin to turn.
According to Mooney, time is on London’s side. He says “All in all, it will be 18 months before there’s even the hint of a start of a UPC. This is a considerable period of time in which London’s patent firms can decide on how best to formulate their future strategy.”