Deal reached: Unitary patent court to have three homes

27 Jun 2012 | News

Forty years’ horse trading has ended in a eurofudge, as EU heads of state have agreed on a compromise proposal to split the court that will litigate the EU Unitary Patent between Paris, Munich and London

Last updated on 29 June 2012 17:18 CET to include first reactions to the official outcome of the EU summit

The Unitary Patent Court that is to be set up to deal with disputes arising from the EU Unitary Patent, will not quite live up to its title. EU leaders agreed today (29 June) on a proposal that splits the EU patent court between London, Paris and Munich.

Once all related legislation has passed through the EU legislature, and the agreement has been ratified by the national parliaments, the landmark deal will put an end to negotiations that will have lasted almost forty years.

Under the deal, the main seat of the court will be located in Paris - with two specialised divisions in Munich and London. Helle Thorning-Schmidt, the prime minister of Denmark, claimed that it was necessary to create additional thematic clusters in Munich and London due to the "highly specialised nature of patent legislation."

The London division of the court will be dealing with life science and pharmaceutical cases, with the Munich based court handling mechanical engineering. In a win for the French, Thorning-Schmidt also announced that the first president of the court of first instance "should come from the member state hosting the institution."

Historic breakthrough

While this deal may appear to undermine one central aim of setting up a single European patent, - which is to reduce costs - the co-located Court will be empowered to give a single judgement under a single court system that will apply in the 25 EU member states that are signed up to the deal.

Announcing the compromise after the EU summit in Brussels, European Council president Herman van Rompuy called the agreement a "“historic breakthrough,” saying agreement had been reached "on the last outstanding issue, the seat of the Unified Patent Court." Thorning-Schmidt, who led the negotiations with Van Rompuy said the deal will be "good for growth and business in Europe."

The ability to enforce or challenge a patent in a single action everywhere in the European Union apart from Italy and Spain, will be a significant advance on the situation at present. Currently, patents granted by the European Patent Office (EPO) in Munich must be challenged or defended in national courts. Not only is this expensive, but it can cause confusion when different courts reach different conclusions.

At the same time the agreement on the patent court means the EU can go ahead with the Unitary Patent itself. Under the current system, an inventor who seeks a patent across the EU has to file to the EPO and have the resulting approved patent translated and re-filed for every individual EU member-state in which the patent is to be recognised. Under the Unitary Patent, the translations are cut back to just the three official EPO languages of English, German and French, and the patent doesn’t have to be re-filed country-by-country.

Europe is falling behind

In a first reaction, EU Internal Market Commissioner Michel Barnier pointed out that Europe is falling behind the US and China in number of patents granted. "The new rules, once in place, will increase the potential for inventions and innovation within the European Single Market and reassert Europe's competitiveness," said Barnier, who believes the first unitary patent will be registered in 2014.

Rouget F. Henschel, partner at US law firm Foley & Lardner, said the new breakthrough "has the potential to unseat the US as gold standard," pointing out that the new EU system might prove to be more cost effective than its US counterpart: "While the speed of litigation under the new EU court system may perhaps be somewhat slower than under the existing national courts, the cost will certainly remain far less than US litigation," he said.

In the run-up to the summit, a spokesperson for Barnier had told Science|Business, “The heads of state and government will hopefully reach a final agreement on a truly European patent system.” He added, “We urgently need to adopt a unitary patent protection in Europe. We need to slash the cost for businesses, and we need to boost innovation also for smaller companies by making patents cheaper and simpler."

Travelling circus

The first public reaction to the proposal - which was leaked in advance of the EU summit - to split the Unified Patent Court came earlier this week from MEPs in the Alliance of Liberals and Democrats for Europe. Guy Verhofstadt (ALDE group leader) said it wasn’t the “neatest solution” but on balance it is good  that after  40 years of waiting it looks like the final obstacle is about to be overcome. “My only dismay is that the Single EU patent has been delayed for so long as result of language and territorial disputes, despite the obvious benefits,” he said, adding, “the compromise will at least enable work to begin.”

Swedish MEP Cecilia Wikstrom of Folkpartiet, who is ALDE coordinator on the European Parliament’s legal affairs committee, agreed it is good news the protracted debate over a single European patent may now be reaching a conclusion, but she said, “The compromise being suggested for the seat of the court to be spread across three countries is a regrettable - but typical - compromise between member states designed to keep everyone on board. It must not be taken as a precedent for future decisions on the location of EU agencies and bodies or Europe really will become a travelling circus.”

Intense diplomacy

This final fudge has come about because while none of the three governments vying to host the Unified Patent Court was prepared to give ground - despite the intense diplomacy of the current Danish Presidency - a promise was made by the Council following an informal Council meeting in January that a final agreement would be reached by the end of June, on this, the last outstanding issue in the whole patent package.

On the surface, the whole issue may seem like a parody of European politics - yet another bun-fight among the leading EU members over a seemingly trivial matter of national pride. But in fact, lurking just below the surface is a much more fundamental dispute over who will prosper most from invention in Europe. The three hosts – Munich, Paris and London – are the three biggest sources of invention in the EU, and each has its own deep-seated legal traditions and patent case-law.

With each travels a busload of lawyers, patent agents and technical consultants who are experts in their own national systems. Finally, each country’s biggest technology companies have been concerned – in some cases at the prodding of their lawyers – that basing the court in one country or another might disadvantage them.

Defining and delineating

As Magali Poinot, Legal Manager of the EU’s Innovative Medicines Initiative noted, several departments of EU institutions are already based in different locations, and such arrangements have been shown to work. “But the increased costs should not be underestimated: the question is therefore, ‘What will be the added-value for the EU citizens,” Poinot said.

Thomas Hoehn, Director of the Intellectual Property Centre at Imperial College London believes the important question is how the powers and responsibilities of the London and Munich arms of the Unitary Court are defined and delineated. “The advantage is that specialist expertise in these two locations can be leveraged,” Hoehn said. “After all most parties and their lawyers have to travel to argue their case in court wherever it is located,” he told Science|Business.

Nikolaus Albert Thumm, Chief Economist at EPO had declined to comment on the leaked proposal to co-locate the Unitary Patent Court saying, there is no EPO position on decisions taken at the EU level. However, “The EPO generally very much welcomes any breakthrough on the unitary patent package,” Thumm said. “Europe and its industry need this reform urgently to the benefit of all involved stakeholders,” he told Science|Business.

Economic benefits

From the Commission’s perspective, this has been a classic case of a Single Market initiative that has been held up since the 1970s on a host of parochial issues, involving a powerful professional class. The Commission estimates the economic benefits of action would be enormous. At present, translation and administration costs in Europe push the expense of patent protection up to €32,000 across the EU, compared to €1,850 in the US. This disadvantages European industry – especially small companies from which many innovations come.

But from the perspective of many patent attorneys and some technology multinationals, all the political compromises that went into forging an acceptable package could end up producing an even worse system than already exists - an expensive multi-seat court, based on an obscure section of EU law that has only been tested once before, and that may itself cost so much to administer that the promised economic benefits will prove illusory.

EPO President Benoît Battistelli remains hopeful, "The simplification of the existing patent system will bring particular benefits to small and medium-sized enterprises and to innovators in universities and research centres," he said in a first reaction after the breakthrough. Battistelli also said he believed the EU "has demonstrated its conviction that boosting innovation and strengthening the competitiveness of its industry" are the best ways to counter the current economic uncertainties. 

A political solution with no practical benefit

Chris Mercer, President of the Chartered Institute of Patent Attorneys in London hit out at the compromise proposal saying it is, “a political solution with no practical benefit”. One of the problems with the existing patents system in Europe is "forum shopping" in which a party to a dispute can start a legal action in the country which is likely to be more favourable to that party, and Mercer said if the proposed Unified Court has three seats, it is likely the same sort of "forum shopping" will continue. It will also not solve the problem of inconsistent decisions.  “In order to avoid forum shopping and to assure that there are consistent decisions, there should be a single, central court,” Mercer told Science|Business.

The Unitary Patent and its associated court are already compromised by the fact that Spain and Italy declined to join because both are aggrieved patents will not be required to be translated into Spanish and Italian. That led the 25 other member of the EU to invoke the ‘enhanced cooperation’ mechanism in March 2011, under which it possible for a number of states to form a breakway group and adopt common rules, if EU-wide agreement is impossible.

Next steps

Next week, the European Parliament is set to adopt a common opinion on the Unitary Patent proposal during its plenary session in Strasbourg. After the vote, the regulations on the single patent and the translation arrangements will have to be formally adopted by the national ministers in Parliament's counterpart in the EU legislature - the Council of the European Union.

Because the patent deal is based on an international treaty, heads of state and government of the participating member states will have to sign the agreement at a separate conference, after which national parliaments will have to ratify the treaty. At least 13 member states will have to ratify the agreement for it to enter into force. 

With reporting by Nuala Moran, Richard L. Hudson and Peter Koekoek

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