On 20 March 2020, the German Federal Constitutional Court issued a long awaited decision on the Unified Patent Court Agreement (UPCA), finding that the way the German Parliament approved the UPCA was incompatible with the German Constitution. This decision put the German approval process back to square one, bringing the implementation of the Unified Patent Package to a halt once more.
A European patent system has been in place for many years which allows patent protection to be obtained in most European countries via a single European patent application, and is widely used. However, that system has some disadvantages, notably that once granted, the European patent still has to be ‘validated’ in each individual European country required, and that enforcement of the European patent has to be undertaken in courts in each individual country separately.
In December 2012, the EU Council and European Parliament approved the creation of a Unitary Patent and a Unified Patent Court (UPC) – often jointly referred to as the Unitary Patent Package (UPP). The Unitary Patent (UP) will be a European patent, granted by the European Patent Office, having unitary effect across all of the participating EU Member States, with validity also being determined for all of these EU Member States together. The UPC will provide, for the participating EU Member States, a centralised forum (central division with its seat in Paris and thematic sections in London, focusing on chemistry cases, including pharmaceuticals, and human necessities, and Munich for mechanical engineering cases) for the litigation of “classic” European patents and European patents with unitary effect.
The UPC was defined in the UPCA signed by most of the EU Member States back in February 2013, with the notable exceptions of Spain, Poland, and Croatia (which became an EU member in July 2013). Art. 89 of the UPCA provides that the UPC will enter into force once 13 EU Member States had ratified the UPCA, including the three EU Member States in which the highest number of European patents had effect in 2012, i.e., Germany, the UK, and France.
Despite numerous hurdles and obstacles, the ratification processes in the different EU Member States were progressing slowly but surely. Austria was the first Member State to ratify the UPCA on 6 August 2013, with many other countries following suit. France ratified the UPCA on 14 March 2014, and the quorum of thirteen Member States was reached on 1 August 2017 with Estonia, leaving the UPCA to be ratified by Germany and the UK to come into force.
In the meantime, the 2016 Brexit referendum result cast serious doubts on the future of the UPC, with many fearing that it would result in the UK withdrawing its participation. However, the UK Government ratified the UPCA on 26 April 2018 – this was accomplished by way of a signed letter by Boris Johnson, acting as Foreign Secretary at the time, and deposited with the European Commission. At this point, positive signs were still being sent to the other EU Member States, a government spokesperson trying to dispel any concerns stated:
The UK has ratified the Unified Patent Court Agreement and intends to explore staying in the Court and unitary patent system after the UK leaves the EU. The Unified Patent Court has a unique structure as an international court that is a dispute forum for the EU’s unitary patent and for European patents, both of which will be administered by the European Patent Office. The UK will therefore work with other contracting states to make sure the Unified Patent Court Agreement can continue on a firm legal basis
All eyes turned to Germany at this point. However, confidence was back as the German Federal Government had always been favourable to the implementation of the Unitary Patent and the UPC.
Unfortunately, it quickly appeared that things would not go as smoothly as expected. An issue became increasingly concerning when it was reported in June 2017 that the German Constitutional Court had asked the German President to suspend the ratification, the UPCA having passed the German Parliament on 10 March 2017. This was due to a complaint lodged with the Court by a German attorney alleging that the Unitary Patent Package violated the German Constitution. In summary, the complaint was asserting that:
- the ratification of the UPCA was in breach of the German constitution;
- there is a democratic deficit inherent in the structure of the UPC;
- the UPC judges lack independence; and
- the UPCA is irreconcilable with EU law.
The decision of the German Federal Constitutional Court, expected to be released early 2020, was therefore awaited with particular concern.
This was also the timing chosen by Boris Johnson’s Government to announce, on 28 February 2020, its intention to withdraw from the Unitary Patent and UPC systems. This announcement is a clear departure from the expected direction of the UK Government, which was still publicly confirming the government’s commitment to harmonised intellectual property policy as recently as November 2019, under the tenure of Theresa May. Although the UK had already ratified the UPCA, and a location had been chosen in central London to host the future Court, the current UK Government sought to rescind its ratification, a press office for the Cabinet Office adding that “the UK will not be seeking involvement in the UP/UPC system. Participating in a court that applies EU law and bound by the Court of Justice of the European Union (CJEU) is inconsistent with our aims of becoming an independent self-governing nation.”
Then, on 20 March 2020, the German Federal Constitutional Court delivered, what is seen by many, as the coup de grâce to the UPC. In its decision, the Court dismissed the second, third, and fourth points of the complaint as being inadmissible. However, it held that the ratification of the UPCA was in contravention of the German Basic Law. Although the bill ratifying the UPCA had been adopted unanimously by the German Parliament, it was late evening and only 38 delegates were present for the vote (out of 709). As a result, this did not provide the two-thirds majority required under German law in relation to a decision involving a transfer of sovereignty.
These recent developments in the two most prominent European jurisdictions are significant setbacks, as they will further delay the introduction of the UPC and Unitary Patent systems. In Germany, the decision leaves the door open for the adoption of the UPCA in the future, the simple “fix” consisting of passing the bill with a qualified (i.e., two-thirds) majority. Although the German Government has indicated that it is looking into bringing back the bill before the German Parliament before the end of the current legislative period at the end of 2021, it does not seem to be of the highest priority, particularly at a time of pandemic.
Assuming the German obstacle can be overcome, there are still many concerns surrounding the future of the Unitary Patent and UPC system. The main one being that without the involvement of the UK, the project seems to be a less attractive proposition. Some voices, however, push for the construction of the UPC to move forward without the UK and see an opportunity for renegotiating the UPCA and, at a minimum, renegotiations on operational aspects, e.g., relocation of the London division, and rethink the overall framework so that it does not depend on the involvement of the UK. Other issues need to be addressed in other EU Member States such as Courts in Ireland and Hungary having already ruled that the UPC was incompatible with their Constitutions, and therefore that an amendment will be required to ratify the UPCA.
The German decision, coupled with the UK's intention to withdraw from the UPC system, is certain to delay the introduction of the UPC, may put its future in doubt, and some even consider the project dead in the water. If, however, the German Parliament swiftly ratifies the UPCA, this might generate new momentum and be the light at the end of the tunnel that the other EU Member States could follow. For now though, litigation will have to continue in the same way as it has always done, with high costs involved and cases being litigated at the national level in the different European jurisdictions, even if a single European patent under the current system is obtained.