IP community losing appetite for Unified Patent Court

In recent years, those responsible for the Unified Patent Court project have often spoken of the importance of momentum for the launch of the European patent court. This meant above all the support of politicians in the 25 participating EU states, but also of representatives from in-house patent departments, the legal profession and patent judges.

The mood and support in the patent community has fluctuated considerably in recent years depending on the amount of progress the project made or the number of setbacks it suffered. The Brexit referendum in June 2016 put the first big question mark over the Unified Patent Court and the participation of the UK. Almost as soon as the result came in, many in the patent community began to doubt the UPC would launch. However, the project made headway and gradually gained more support in the years following. But then, the German Constitutional Court rejected the German UPC legislation on 20 March this year.

Dip in support

Three weeks later, the results of the JUVE Patent survey, in which fully 602 patent experts took part reveal that support for the UPC has sunk again. One stand-out result is that 55.3% of those surveyed no longer favoured a Unified Patent Court in its current form – in other words, a UPC which does not include the UK. Only 33.6%, favour a UPC as it currently can be constituted. The remaining 11.1% declined to answer.

“There exist well-established national infringement courts and proceedings, e.g. in Germany, which offer fair infringement proceedings with reasonable effort, timing and costs,” one respondent says. “I would welcome a UPC system without the UK as an alternative venue.”

Considering the generally positive attitude many patent lawyers previously had towards the unified court project, the results are another turning point in the UPC’s development.

Last week, JUVE Patent asked the European patent community their views on the current state of the UPC. The survey received 602 responses. Just over half of respondents, 51.5%, are patent attorneys. The second-largest group of respondents is litigation lawyers at 29.9%. In-house lawyers and patent attorneys make up 11.5%. Judges make up 2.3% of the results. Finally, 4.8% described their profession as ‘other’. JUVE Patent did not enquire which country the respondents came from.

Industry still wants Unified Patent Court

It is mainly patent attorneys and litigation lawyers who participated in large numbers in the JUVE Patent survey and who no longer believe in the UPC. 56.5% of the patent attorneys and 59.4% of the litigation lawyers surveyed are no longer in favour of the UPC. 71.4% of the judges surveyed no longer support the court. This means that it has lost support in large and important parts of the community.

Within industry, however, the biggest group continues to support the patent court in its current form. 49.3% of the participants from in-house departments continue to support the current project. 47.8% disagree with the following statement, “The current UPC system has failed, I would prefer a new initiative for a court that covers the area of the European Patent Convention”.

However, support from industry is not overwhelming either. 43.5% of in-house representatives no longer support the current UPC, while 40.6% support a new initiative.

UPC fatigue sets in

UPC fatigue thus seems to be setting in. The UPC has recently undergone several blows. Firstly, in late February, the UK government announced it would no longer seek to take part in the unitary patent system. Then a month later, the Federal Constitutional Court found the German UPC legislation unconstitutional.

The first consequence of the ruling from Karlsruhe is the German government can no longer complete the current UPC ratification process. It must put the laws through the Bundestag again – this time with a two-thirds majority of all members of the German parliament. For the UPC this means, in the best case, the court will be further delayed. All of these issues, combined with the looming threat of Brexit, has led to a drop in confidence that the UPC will ever come to fruition.

Just this week the UK government reiterated its intention to no longer participate in the UPC.

Many had long considered the participation of one of Europe’s largest economies, with its proven patent system and experienced patent judges, crucial to the UPC’s success. Now, however, the patent community has changed its mind. 58.8% of JUVE Patent respondents would also use a UPC without the UK, only 14.0% would not. Apart from the current UPC project 43.4% would prefer a European patent court with the UK, 41.4% would not.

Keep calm and carry on

The results of the JUVE Patent survey suggest mainly patent lawyers and patent attorneys are now concentrating on ‘business as usual’ for their planned litigation in Europe.

Furthermore, the survey results suggest uncertainty with regards to the final decision of the German Constitutional Court. In response to the statement, “I am confident that the German government will be able to ratify the UPC laws with a two-thirds majority” 42.9% of people answered yes. On the other hand, 35.5% answered no, with 21.6% declining to answer.

Previously, the German government had announced its intention to move forward with the UPC. Christine Lambrecht, the Federal Minister of Justice, said in late March, “I will continue my efforts to ensure that we can provide European innovative industry with a unitary European patent with a European patent court. The federal government will carefully evaluate the decision of the Federal Constitutional Court and examine possibilities to remedy the identified lack of form before the end of this legislative period.”

However, the mood of the parliamentary groups represented in the furthering of the UPC is uncertain. So far, the project has relied on a sufficient majority in industry and the legal profession. It seems this majority is on the ropes.

No new alternative

The current situation is a further blow for Europe’s hopes for the UPC. The mood of the market seemed to be that it has faced one too many hurdles. However, respondents to the JUVE Patent survey are still relatively undecided what should happen now. In response to the statement, “The current UPC system has failed, I would prefer a new initiative for a court that covers the area of the European Patent Convention”, only 43.5% of those surveyed answer ‘no’. If this is taken to mean a small majority of respondents disagree with the above statement, then just under half do not think the UPC system has failed – yet.

This group would not prefer a new initiative for a court which covers the area covered by the European Patent Convention which includes the 38 member states of the European Patent Office. There is less of a stark difference in this answer, with 41.7% of people agreeing with the statement and 14.8% declining to answer. However, there remains a discrepancy in these answers. Although the majority of respondents are no longer in favour of a UPC in its current form, more respondents did not agree that the current UPC system has failed.

This suggests that, although many patent experts are despondent with the continual uncertainty surrounding the UPC, the project is not yet seen as a failure. The UPC has a second, albeit slim, chance of making it through parliament. Therefore, such optimism is not unfounded.

Another brick in the wall

Participants also responded to the statement “The current system of experienced national patent courts works fine. There is no need for another initiative for a European patent court”. The responses are similar to the results on whether the UPC system has failed; 41.6% disagree while 37.5% agree. For this question, at 20.9%, a high number of respondents declined to answer.

“It should be an EU system, without the UK and without non-EU EPC countries”

For some respondents, a unified system is still on the cards. But, contrary to the prevailing UPC plans, one respondent says it should be part of the European Union. They say, “There is a need for a unified system. However, this system must be part of the EU to ensure the rule of law and independence of the court.” Another respondent corroborates this view, but suggests a different option altogether. “A European initiative for a patent court system is needed, but none of the options mentioned in your survey is convincing. It should rather be an EU system, without the UK and without non-EU EPC countries, that is similar to the working EU system for enforcing trademarks and designs. There is no sense in trying to re-invent the wheel.”

Thinking outside the box

Other participants note that something akin to the UPC could function in the future. “Any industry could eventually use a centralised way of litigating patents,” says one respondent. However, one argues that the fragmented structure of the European Union is in itself the biggest obstacle to achieving a Unified Patent Court. “A centralised court would be something that you put on top of an environment that is already truly integrated politically, socially and economically. The UPC simply cannot be the first brick of the wall. At this stage of the EU integration process, there is simply no way to achieve a centralised jurisdiction for patents without also causing profound inequalities among the diverse EU national jurisdictions.”

“There was never any need for an entirely new legal structure and court system”

Another respondent commented, “There was never any need for an entirely new legal structure and court system. Trademarks and designs work perfectly well as a harmonised and unitary system. It is no wonder the system has failed. It is time for a fundamental re-think based on simplicity and access by SMEs. The law should not be designed to reflect what large international corporates want.”

Smaller companies impacted

An unexpected outcome of JUVE Patent’s survey was numerous comments pointing out the impact of a UPC on small- and medium-sized enterprises. JUVE Patent did not address this subject specifically. However, several respondents left comments mentioning the negative effect a UPC could have on SMEs. Some small countries with high numbers of SMEs, for example Slovakia, already argue that a UPC would put their developing innovative industries at a disadvantage due to high costs. The high costs are the result of high administrative and judicial costs generated by a Unified Patent Court. For example, installing IT systems and training judges.

One respondent says, “Regarding the UPC, the reason for scepticism is general unfairness for small member states. We strongly believe that it would have a disastrous effect on our economy and smaller midsized companies.” A UPC would mean SMEs cannot choose in which jurisdictions to litigate, even if their market is only one member state. For many SMEs, this choice is superfluous.

“I have always been against the UPC which is an SME-killer”

Another respondent agrees. They say, “As a lawyer, I have always been against the UPC which is an SME-killer. It’s too expensive, too quick, forum shopping, foreign language.” Another says, “The cost risk is higher in the UPC system than in the national German court system, which is to the disadvantage of SMEs.”

On the other hand, another respondent perceived benefits a UPC could bring SMEs. The respondent argues that the current pan-European court system often disadvantages this size of company. This is because of the need to litigate in multiple countries. They say, “Excessive litigation costs disfavour SMEs. Different decisions in different countries lead to fragmentation of the single market. The UPC will solve these problems and thus improve the competitivity of European firms.”

Major industry still in favour

But it is above all big industry that sees advantages in a European patent court. Even before Easter, representatives of major patent applicants such as Bayer, Siemens, Ericsson and Nokia had already spoken out in favour of a European patent court – regardless of whether it is called UPC or takes a different form.

Gabriele Mohsler, vice president of patent development at Ericsson, for example says, that a European patent court is still in the interest of a company like Ericsson. The company has large patent portfolios and a strong licensing business. “Even without the UK, the UPC is interesting for us. We can still cover a large part of the EU with just one patent application, which we can also enforce more easily if necessary,” Mohsler says.

For UPC officials, the fact that the industry still supports the project, as confirmed in this survey, is welcome news. UPC politicians will not be able to ignore the will of the industry, after all they are the main users of the new court.

It is vital that a second vote on the UPC legislation in the German Bundestag is well prepared. There can be no room for further objections, otherwise the dream of a European patent court is over. (Co-author: Mathieu Klos)