EU moves to break patent deadlock

The European Commission launched its long-awaited strategy for breaking decades of deadlock in the effort to create a European Union-wide patent on Tuesday, proposing a compromise and urging national governments to overcome their divisions in the name of innovation.

The aim for the past thirty years has been to replace national patents with ones that are valid across the European Union, in the same way that American patents are applicable throughout the United States.

The fragmented regime in Europe makes it much more expensive for inventors to protect their creations. A company wishing to register a patent in just 13 of the 27 countries in the Union has to pay 11 times more than for a patent covering the whole of the US, according to the Commission.

A costly business

Defending or attacking a patent is also expensive. The Commission estimates that a patent litigation can cost anywhere between €50,000 and €1.5 million. What is more, litigation under the current regime is also prone to inconsistencies: patent courts in different countries can reach conflicting conclusions in a patent dispute.

Overcoming these problems is seen as vital to the European Union’s long-stated aim to become more competitive with the United States, Japan and emerging economies such as China and India.

Last-chance saloon

Two years ago European Commissioner Charlie McCreevy vowed to make one final stab at creating a single, or Community patent. He organised a hearing with patent attorneys, academics and companies at which a wide range of views were expressed. But apart from a small minority who oppose patents on principal, most attendees encouraged the Commission to persevere with the Community patent.

They also supported a separate initiative by the European Patent Office based in Munich, Germany, which aims to create a single system for all patent litigation in the 32 countries that are members of the EPO, which includes the 27 EU states.

Earlier this year McCreevy suggested that the most pragmatic way forward would be for the European Union to become a signatory to the European Patent Litigation Agreement (EPLA), but the idea was shot down by, among others, France.

Last month opposition mounted when the legal department of the European Parliament stated that it would be unconstitutional for the EU to sign up to the EPLA.

Stepping back

Stepping back from this idea a little, McCreevy has now proposed that the EU create its own litigation area, based on the EPLA, with courts of first instance dotted around the European Union and one central court of appeal.

“Recent discussions with member states show polarised positions on patent jurisdiction arrangements with, on the one hand, member states supporting the draft EPLA, and on the other hand, member states favouring the establishment of a specific Community jurisdiction for patent litigation on European and Community patents based on the EC Treaty,” the Commission said.

McCreevy, who is known for his pragmatism, has suggested a mix of the two: “Consensus could be built on the basis of an integrated approach which combines elements of both EPLA and a Community jurisdiction,” the Commission said.

In practice this would mean de-centralised courts of first instance, using the judges and the resources of national patent courts, with a centralized appeals court connected to the European Court of Justice – the European Union’s ultimate legal authority.

“The way forward could be to reflect on the creation of a unified and specialised patent judiciary, with competence for litigation on European patents and future Community patents. This system could be inspired by the EPLA model but could allow for integration in the Community jurisdiction,” the Commission said.

Large firms like it…

Large innovative companies are clamouring for a change to the status quo. EICTA, a trade group representing technology firms including Philips, Siemens, Nokia, as well as non-European companies including Microsoft, Toshiba and Xerox, welcomed the Commission communication.

Change “is urgently needed to improve patent litigation in Europe in terms of cost and legal certainty,” said Mark McGann, the group’s director general. “Improvements are also necessary, especially in the interest of small and medium-sized enterprises (SMEs) to avoid that companies with bad intentions take advantage of the system,” he added.

He gave an example of what could happen to an unsuspecting small player under the current regime: “It is currently possible to start infringement proceedings against an SME in France on Monday, against the same SME in Spain on Tuesday, in Italy on Wednesday, in the UK on Thursday and to force the SME into a foul compromise deal on Friday – meaning that it will have to pay royalties for an alleged patent infringement – because it would otherwise have no chances of survival due to the different law suits and translation costs brought against it,” he said.

…but SMEs want improvements

However, some including campaigners fighting to keep patents out of the software industry argue that one single patent litigation system along the lines of the EPLA could be more, not less expensive for SMEs who plan to use their patents only in their home countries.

They say there is no need for an EPLA because fewer than 10 per cent of patent disputes involve more than one country.

Others argue that McCreevy’s proposal will fail to achieve any harmonising of the European patchwork of patent regimes.

Sven Bostyn, a lecturer at Amsterdam University and a patent attorney, said he has his doubts about McCreevy’s ideas for a single litigation system. “Already it’s a second best solution,” he said (the ideal answer being a single Community-wide patent).

“What will come out of the political debate would be a third or fourth best solution,” he said.

Legal uncertainty to remain

The problem with an EPLA-style system for the EU is that judges in different countries will still take opposing positions in a dispute. “Take the UK and the Netherlands, for example. The two countries have different interpretations of the concept of ‘inventive step’. How would it work if a patent were disputed in both countries? The situation would be as legally uncertain and fragmented as it is now.”

Then there’s the question about how judges in national patent courts would react if they were suddenly made answerable to the ECJ in Luxembourg. “I don’t think judges will accept the ECJ route. I doubt patent attorneys will want much to do with it either,” Bostyn said.

“On a practical level I’m not sure what MrCreevy is proposing is feasible,” he said.

On balance, though, the initial responses to the Commission communication were positive. “Today’s Communication is a long awaited step in the right direction. We applaud the Commission for re-opening the debate on patent protection in Europe,” said Jonathan Zuck, president of the association of competitive technologies, a trade group that champions the interests of small players in the technology industry.

“It’s true that interim stages on the way to a Community patent aren’t perfect but hopefully this will lead to a single European patent,” he said. While some SMEs prefer a system based on mutual recognition of existing national patent jurisdictions, most favour a move towards a single European market for patents.

“This is definitely a step in the right direction,” he said, adding that the pressure now is on politicians to overcome their differences: “We urge the member states and the European Parliament to work together with the Commission in order to deliver the much needed improvements for SMEs.”