What will the UPC Patent Mediation and Arbitration Centre bring us?

Although the declared aim is to give the Centre a key role in the midst of the Unified Patent Court (the “UPC”) implementation, doubts might be expressed concerning the appropriateness of the establishment of a specific mechanism of ADR within the UPC system and its benefit compared to other ADR service providers. In addition, the scope of activities of the Centre still needs to be clarified and a number of provisions of the UPCA and the RoP concerning the Centre remains incomplete and leaves room for interpretation.

Furthermore, there are still a number of details to be worked out before the Centre can become operational and it is not certain that the Centre will be able to start its activities on June 1, 2023.

The objectives of the Centre, which will have its seats in Lisbon and Ljubljana, are listed in the Rules of Operation of the Mediation and Arbitration Centre, published on July 8, 2022:

• to make available institutional support for the mediation and arbitration proceedings,
• to provide mediation and arbitration rules, fee schedules, model clauses for use in mediation and arbitration and other regulations,
• to provide facilities for which the parties can use to carry out mediation and arbitration proceedings,
• to promote and organize the training of mediators and arbitrators in cooperation with the UPC training centre in Budapest, and if appropriate, other relevant institutions.

Scope of intervention of the Centre

The Centre will provide facilities for mediation and arbitration of patent disputes falling within the scope of the UPCA, pursuant to Article 35(2) of this UPCA.

Said scope of the UPCA is defined in Article 3, which provides that the UPCA applies to “(a) European patent with unitary effect, (b) supplementary protection certificate issued for a product protected by a patent, (c) European patent which has not yet lapsed at the date of entry into force of this Agreement or was granted after that date, without prejudice to Article 83, and (d) European patent application which is pending at the date of entry into force of this Agreement or which is filed after that date, without prejudice to Article 83”.

It remains to be determined whether the Centre will be able to decide disputes over patents not covered by Article 3 of the UPCA, in particular opted out European patents or national patents, especially in the context in which the parties to an agreement would have submitted their dispute to the Centre for the purpose of a settlement of their dispute concerning a global portfolio of patents. A narrow and literal interpretation of its scope of competence would certainly make the Centre less attractive for ADR proceedings.

Conversely, the question also arises as to whether the parties can submit their dispute over patents covered by Article 3 of the UPCA to another arbitration and mediation service provider. The lack of exclusivity conferred by Article 35(2) of the UPCA alludes to the possibility that the parties will be free to submit their dispute to another arbitration or mediation centre. This non-exclusivity of the Centre in UPC matters also has a textual basis in Rule 11(2) of the RoP which provides for the confirmation by the UPC of settlements or arbitral awards on patents falling with the scope of the UPCA “irrespective of whether it was reached using the facilities of the Centre or otherwise”.

Article 35(2) lays down another rule which leaves room for interpretation: a patent may not be revoked or limited in mediation or arbitration proceedings. Therefore, the question will arise as to whether the Centre will have no power to decide on the validity and patent scope issues, or if, rather this exclusion concerns only decisions that may have an effect on third parties, so that the Centre may have to hear questions of validity or patent scope with an inter partes effect. Good arguments exist to underpin the latter interpretation, and are supported by Rule 11(2) of the RoP which states that the UPC shall confirm the terms of any settlement or arbitral awards, “including a term which obliges the patent owner to limit, surrender or agree to the revocation of a patent or not to assert it against the other party and/or third parties”.

The parties encouraged to resort to arbitration/mediation and to make use of the Centre

The use of alternative dispute resolution mechanisms is strongly encouraged by the UPCA and the RoP because of the direct attachment of the Centre to the Court. In this respect, the judge-rapporteur has a key role, since one of his tasks is to seek amicable solutions, in particular during the interim proceedings.

Article 52(2) of the UPCA provides that the judge-rapporteur shall explore with the parties the possibility for a settlement, including through mediation, and/or arbitration, by using the facilities of the Centre. Rule 104(d) of the RoP further states that the interim conference shall enable the judge-rapporteur to explore with the parties the possibility to settle the dispute and to make use of the facilities of the Centre. In addition, Rule 332 of the RoP on the general principles of case management provides that “active case management includes: (..) (e) encouraging the parties to make use of the Centre and facilitating the use of the Centre (…)”.

Finally, Rule 11(1) of the RoP invites the Court to propose for the parties to make use of the facilities of the Centre “if the Court is of the opinion that the dispute is suitable for a settlement”.

Enforcement of settlements and arbitral awards

The rules concerning the enforcement of settlements and arbitral awards are also not unambiguous.

Article 35(2) of the UPCA provides that the rules of enforcement of decisions handed by the Court shall apply “mutatis mutandis to any settlement reached through the use of the facilities of the Centre, including through mediation”, and Article 82 of the UPCA states that the decisions from the Court “shall be enforceable in any Contracting Member State”. Said provisions can be seen as an incentive to use the facilities of the Centre to reach a settlement by comparison to other ADR service providers, because it suggests that only settlements reached through the Centre will be enforced in the same way as decisions handed down by the Court. It should also be noted that Article 35(2) applies to “any settlement”, “including” settlements reached “through mediation”, which implies that also settlements reached through arbitration can benefit an enforcement mechanism equal to that for Court decisions. This explains the reference made to the consent awards in Rule 11(2) of the RoP on the confirmation mechanism.

Article 79 of the UPCA further adds that “the parties may, at any time in the course of proceedings, conclude their case by way of settlement, which shall be confirmed by a decision of the Court”.

The combination of Articles 35(2) and 79 raises many questions and is likely to lead to conflicting interpretations. On the one hand, it could be argued that settlements benefit from an enforcement mechanism equal to that for UPC decisions only if they are confirmed by a decision of the Court. On the other hand, it seems possible to interpret these provisions in such a way that any settlement reached through the Centre (i) shall be directly enforceable when no litigation is pending before the UPC, and (ii) has to be confirmed by an enforceable decision of the Court when litigation is pending before the UPC.

Furthermore, it is not clear whether this enforcement mechanism is also open to settlements reached without using the facilities of the Centre. On the one hand, the scope of Article 35(2) seems to be limited to settlement “reached through the use of the facilities of the Centre”. On the other hand, Rule 11(2) of the RoP holds that settlements (or arbitral award by consent) are eligible for a confirmation decision by the Court “irrespective of whether it was reached using the facilities of the Centre or otherwise”.

As for arbitral awards, they are not covered by Articles 35(2) and 79 of the UPCA. It can therefore be concluded that arbitral awards – except consent awards, pursuant to Rule 11(2) of the RoP which are essentially an arbitral award recording a settlement – would not be enforceable through the provisions of the UPCA, but rather would be enforced under the New York Convention as any other arbitral awards.

Rules of operation of the Centre

The Rules of Operation of the Mediation and Arbitration Centre published on July 8, 2022 contain certain rules which are worth mentioning here.

First, although the Centre has its seats in Lisbon and Ljubljana, mediation and arbitration proceedings can be organized elsewhere.  Second, the working language of the Centre shall be English, French and German. Third, the Centre will establish and maintain a list of arbitrators and mediators in the field of patent law. The director and the expert committee shall work together to determine the criteria and qualifications for arbitrators and mediators to be admitted to the list, which then have to be accepted by the administrative committee.

That said, many details still need to be worked out in the coming weeks/months (e.g. establishment of the organs (director, expert committee) of the Centre, or the drawing up of the list of arbitrators and mediators), and it is not certain that the Centre will be able to start its activities on June 1, 2023.

Final remarks

The UPCA and the RoP, by establishing the Centre and inviting the use of arbitration and mediation proceedings, confirms the current trend to promote the use of alternative dispute resolution mechanisms in patent disputes.

We expect that the Centre will develop its activities in particular in the context of the determination of damages, after the infringement and validity has been decided by the Court. The consecutive nature of the damages proceedings and the more stringent confidentiality warranties for the parties are all factors that may lead to such matters being referred to the Centre.

Another area in which the Centre could develop its activities is FRAND dispute resolution. Although there seems to be no basis for the UPC to decide on FRAND in a standalone action (e.g. a declaratory action that a patentee or implementer acted in compliance with its FRAND obligations, that a certain set of licence terms would be FRAND, or an action to have the UPC decide the terms of a FRAND licence), it is likely that the UPC will decide on FRAND when brought as a defence in infringement proceedings. In this context, the parties might be invited by the judge-rapporteur to refer the FRAND dispute to the Centre. In addition, the parties might be entitled to use the facilities of the Centre for example for the purpose of determining FRAND terms and conditions, in the event that there is no pending dispute before the UPC, assuming, as previously discussed, that the Centre is entitled to handle matters which involve patents not covered by Article 3 .

That being said, many questions remain unanswered to date, in particular concerning the Centre’s scope of intervention and the enforcement of settlements and arbitral awards reached through the Centre, and will need to be addressed in practical cases in the coming months.