Draft agreement on a Unified Patent Court and Draft Statute


Further Evidence in Writing for the European Scrutiny Committee: Draft Agreement and Regulation on a Unified Patents Court

Henry Carr QC

Chairman, Intellectual Property Bar Association


1. Following my oral evidence to the European Scrutiny Committee on Wednesday 25th January 2012, I have been asked by the Committee to provide further evidence on the following questions:-

(i) The location of the Central Division (and Court of Appeal) and the extent to which it will enhance the economic prosperity of the country where the Central Division is located.

(ii) Whether Europe as a whole, or alternatively particular countries, are likely to benefit from the current proposal.

(iii) The position taken by Italy and Spain in relation to Unitary Patents.

(iv) The alternative to the inclusion of Arts. 6-8 in the Regulation, and the extent to which this alternative has been considered by the Commission.

(v) Any other issues that occur to me following the Committee’s line of questioning, including reasons why member states are keen to press on with the proposal and the effect on UK interests.

Impact of the location of the Central Division / Court of Appeal of the Unified European Patent Court

2. Annex I is a briefing note that I have received from the Intellectual Property Lawyers’ Association ("IPLA" [1] ) concerning the benefit to the UK of securing the Central Division. The essential points are as follows.

3. Although estimates vary, the current annual spend by industry (much of it from overseas) on patent litigation and associated advisory services in the UK is about £700 million. If the Central Division is located outside the UK and, if, as a result, most litigation is conducted elsewhere, this is projected to decline significantly. By contrast, the volume of patent cases heard in the UK (and consequent annual spend) may increase considerably, if the Central Division is located here. This seems conservative, as all validity challenges and all declarations of non-infringement will be heard by the Central Division.

4. The Central Division will create a significant number of highly skilled jobs. By way of comparison, the European Patent Office is located in Munich and employs at least 7000 people (the briefing note suggests a higher figure). Four times as many German nationals are employed at the EPO than UK nationals. Whilst the Central Division will not require as many staff, it is likely to be a major European institution, with consequent indirect enhancement of its location. As previously noted, if the Central Division goes to Germany, the bulk of the patent system, from grant to enforcement would be there.

5. If the Central Division is not in London, the current proposal will bring no benefit to the UK and considerable disadvantage to the UK economy overall.

6. It is not clear that there has to be only one seat of the Central Division. One option would be for the Central Division itself to have separate "seats" of which one would be the UK. From a UK perspective, this would be better than nothing. Alternatives such as these have not been considered.

Whether Europe as a whole, or alternatively particular countries, are likely to benefit from the current proposal

7. For the reasons already given in my evidence, I do not believe that Europe as a whole is likely to benefit from the current proposal. Because of its fundamental flaws, it is likely to be significantly worse than the existing system. However, the country where the Central Division is located is likely to benefit disproportionately from a system which is, as a whole, worse (see above).

8. The CCBE paper expressed concern about forum shopping and SME defendants finding themselves brought into a remote forum. There is a real fear in some quarters that some SME’s will fold because they are unable to get themselves properly represented in a distant European division and/or, if subject to a Europe-wide injunction from a remote court in a bifurcated system on their main product line, will simply not have the funds (without a product to sell) to enable them to establish that the patent is in fact invalid within a reasonable time. That would amount to a denial of justice. I am not persuaded that this concern has been taken on board.

9. These concerns are not just shared by the professions and the judiciary. They have also been expressed by industry. For example, on 16th December 2011 the CBI and IP Federation wrote to Baroness Wilcox describing the current proposals as "deeply flawed" and that they would, if accepted create a patent system worse than at present. The letter was endorsed, inter alia, by the Bioindustry Association. There is anecdotal evidence that substantial research-based undertakings are so concerned that they have started to file national instead of European patents, in an attempt to avoid the system altogether.

The position taken by Italy and Spain in relation to Unitary Patents

10. For about the last 10 years, Spain has argued that the proposed Unitary Patent (previously named the EU Patent) should be filed in English as the sole language, or alternatively in all the official languages of the EU. Spain has consistently refused to accept a language regime comprising English, French and German but not Spanish. Similarly Italy has refused to accept a regime that does not include Italian.

11. As a result, on 10 March 2011 the Council of the European Union authorised "Enhanced Co-operation" in respect of the EU patent, a procedure whereby a group of Members States may go forward with a proposal notwithstanding that unanimous agreement between all EU Member States has not be reached. As Spain and Italy are not part of that group, the EU patent was re-named the "Unitary" patent. Spain and Italy have launched proceedings in the CJEU seeking to nullify the decision to adopt Enhanced Co-operation. Those proceedings [2] are pending.

The alternative to the inclusion of Arts. 6-8 in the Regulation, and the extent to which this alternative has been considered by the Commission

12. Annexes 2 and 3 are Opinions of Professor Sir Robin Jacob in relation to Arts. 6-8 of the draft Regulation. The first Opinion sets out why the inclusion of Arts. 6-8 would be (a) unnecessary and (b) disastrous. The further Opinion elaborates why Arts. 6-8 are unnecessary, and answers an argument to the contrary from an unnamed source in the Commission.

13. An essential point is that Art. 3(2) of the draft Regulation states that:

"A European Patent with unitary effect shall have a unitary character. It shall provide uniform protection and shall have equal effect in all participating member states"

14. It follows that, in the absence of Arts. 6-8, the Regulation already provides for uniform protection, and no participating individual member state is free to ‘go it alone’. This applies just as much to infringement as to validity. As Sir Robin explains:

"Only valid patents can provide rights. It is just as important to unitary effect that the provisions concerning validity are uniform as that the provisions concerning infringement are uniform. If the logic of the author [from the Commission] is correct, it would also be necessary to provide in the Regulation for all matters concerning scope and extent of protection. This would mean incorporating the relevant provisions of the European Patent Convention. But no-one suggests that this is necessary."

15. The next question is, what is the alternative to the CJEU to ensure uniform protection amongst participating member states? The answer is the Central Division and the Court of Appeal, which are being established by the current proposal. In these courts (unlike the CJEU) the judges will have specialist expertise in patent law. Further, it must be envisaged that these Courts will interpret the validity provisions to ensure ‘unitary character’. It is wholly unclear why a different regime is proposed in respect of the infringement provisions. Many granted patents are invalid upon analysis. Moreover, for many patent cases, validity and infringement are closely related. [3] The current proposal contemplates that the CJEU alone in the system would be required to consider the law of infringement but required not to consider the law of validity. Against that background, the proposal makes no sense at all.

16. In the Scrutiny Committee’s Report of 20 December 2011, it asked whether there was a body of countervailing expert opinion which welcomed the advent of the Court of Justice's involvement. I have not seen any. Indeed, it is unclear whether any impact assessment has been done by the EU authorities of the effect of requiring the CJEU to determine questions of infringement when it cannot determine questions of validity, in the manner proposed.

17. I believe that the Commission is aware of the Opinions of Sir Robin Jacob, and of an Opinion to like effect by Professor Dr. Rudolf Krasser of the influential Max Planck Institute. However, these views have been brushed aside, in spite of no published opinion to the contrary. Furthermore, the Legal Affairs Committee of the European Parliament is also pressing on with Arts. 6-8. These Articles are likely to be contained in the Regulation, given that the major political groups are backing it, without any regard to its implications. Given the complexity of the law, it is for question whether those political groupings fully understand their implications.

Any other issues that occur to me following the Committee’s line of questioning, including reasons why member states are keen to press on with the proposal and the effect on UK interests

18. The current proposal is moving forward relentlessly, in spite of a groundswell of objections from the IP judges throughout Europe, the professions and industry. It was suggested in oral evidence by Mr Roberts, President of CIPA, that the most likely explanation for this is that the EU wishes to announce a success. A single patents court for Europe has been under discussion for decades. No doubt, it would feel like an achievement to bring this project to a conclusion. That is not, I believe, an excuse for inadequate legislation [4] . The UK Government has said of this proposed legislation that it is "essential that we get the details right" (letter from Baroness Wilcox. of 16th November 2011 referred to in footnote 4 above). That is the overwhelming view of those working with the system.

19. The fact remains that the current proposal is for a worse regime than the existing one. One of the Senior Research Fellows of the Max Planck Institute in Munich wrote a critical paper on the proposals recently, in which he observed that "a bad court would be worse than no court at all." [5] This too reflects a widely held view.

20. What makes for good short-term political announcements in the EU does not make practical long term sense for industry. There is a risk that the politicians will agree the current proposal and move on, leaving industry to pick up the pieces after the politicians are gone. The most significant change to the patent landscape in Europe in over 30 years must surely improve the system significantly, not make it worse, just for the sake of hurried enactment of legislation.

2 February 2012

[1] IPLA’s members conduct most patent litigation in the UK.

[2] C-274/11 Spain v. Council; C-295/11 Italy v. Council.

[3] The ECJ noted in GAT, Case C-40/03 at para. 17: “In practice, however, the issue of a patent's validity is frequently raised as a plea in objection in an infringement action, the defendant seeking to have the claimant retroactively denied the right on which the claimant relies and thus have the action brought against him dismissed. The issue can also be invoked, as in the case in the main proceedings, in support of a declaratory action seeking to establish that there has been no infringement, whereby the claimant seeks to establish that the defendant has no enforceable right in regard to the invention in question.” (emphasis added). That case, which concerned the rules of exclusive jurisdiction under the Brussels Regulation and not the substantive law on infringement, itself illustrates the problems in dividing determination of validity and infringement.

[4] Note also that o n 16 th November 2011 , Baroness Wilcox wrote to Martin Korolec, the Polish Under - Secretary of State , when Poland had the Presidency of the EU. The letter said that there were “significant issues” which had to be resolved before the UK could consider adopting the draft court agreement . These were not just the location of the Central Division but included cost, Article 6-8, rules of procedure and a number of other points. None of those issues have been resolved .

[5] Jaeger, All Back to Square One? An assessment of the latest proposals for a patent and court for the internal market and possible alternatives. (December 15, 2011) Max Planck Institute for Intellectual Property and Comp e tition Law Research Paper No. 12-01. The paper states that the current proposals “ show flaws on both the level of the substantive patent and of its flanking court model” and that “it is neither desirable nor advisable to p ush a bad follow up compromise to the EEU/PC model through the legislative process at any cost.” Yet, the EU stands on the brink of doing that.

Prepared 22nd February 2012