What, if anything, can be salvaged from the UPC Agreement?

Jane Lambert

On 12 Feb 2018 I shall address a seminar entitled the Implications of Brexit on Intellectual Property Law which will be hosted by Queen Mary University of London Centre for Commercial Law Studies at 67-69 Lincoln's Inn Fields (see Jane Lambert Implications of Brexit on Intellectual Property Law 19 Jan 2018 NIPC News). The topic that I have chosen is "What if anything can be salvaged from the Unified Patent Court Agreement?"

The reason I have chosen that topic is that it seems increasingly unlikely that the Unified Patent Court ("UPC") will open its doors before 23:00 on 29 March 2019 which is "exit day" within the meaning of clause 14 (1) of the European Union (Withdrawal) Bill (HL Bill 79).

I say that for two reasons.

The first is that art 89 (1) of the Agreement on a Unified Patent Court provides that that agreement will come into force "the first day of the fourth month after the deposit of the thirteenth instrument of ratification or accession in accordance with Article 84, including the three Member States in which the highest number of European patents had effect in the year preceding the year in which the signature of the Agreement takes place or on the first day of the fourth month after the date of entry into force of the amendments to Regulation (EU) No 1215/2012 concerning its relationship with this Agreement, whichever is the latest." One of the three Member States in which the highest number of European patents had effect" is Germany which is prevented from depositing its instrument of ratification by litigation in its constitutional court that could take months to resolve.

My second reason is that ratification will be effected by a letter signed by the Rt Hon Boris Johnson MP stating that the UK agrees to be bound by the UPC Agreement.  As art 20 of the agreement provides that "the Court shall apply Union law in its entirety and shall respect its primacy" which is incompatible with ending the jurisdiction of the Court of Justice of the European Union in the UK as set out at paragraph 2.3 of HMG's policy paper The United Kingdom’s exit from, and new partnership with, the European Union it is difficult to see how he could possibly sign it.

The UK's departure from the EU before the UPC opens for business will be regretted by most British IP practitioners.  I noted in IP and Brexit - Key Requests to HMG (9 Jan 2018 NIPC Brexit) that the chair of the Intellectual Property Bar Association (of which I am a member) together with the Chair of the IP Law Committee of the Law Society of England and Wales and the Presidents of the Chartered Institute of Patent Attorneys, the Chartered Institute of Trade Mark Attorneys ("CIPA") and the IP Federation, signed a memorandum to the Government entitled Intellectual property (IP) law and Brexit Summary of main requests for the UK government a copy of which can be downloaded from the CIPA website (see IP and Brexit - Key Requests to Government). The memorandum urged the government to  confirm its intention to remain party to the UPC Agreement after Brexit, to work with other parties to the UPC Agreement to implement its provisions as soon as possible and to make sure there are no legal or practical obstacles to British participation in the UPC and the unitary patent after Brexit.

Our departure before the UPC hears its first case would also be bad for British business.  At paragraph 3.14 of his report, Digital Opportunity A Review of Intellectual Property and Growth, Prof Hargreaves wrote:

"This lack of a single unified patent system creates self evident problems for innovative firms attempting to operate in the European market compared with the unified markets of the US, India and China. It causes wasteful duplication in terms of litigation in each jurisdiction – projected private annual savings on duplicated litigation alone are estimated at between €120 million and €240 million. Furthermore, it increases the cost of cross border commerce. Removal of inter EU country barriers in IP could increase UK national income by over £2 billion a year by 2020."

British industry stands to gain more from the UPC than any other country. That is because the cost of patent litigation in England and Wales is significantly higher than anywhere else.  According to Taylor Wessing's Patent Map the costs of a typical claim in the Patents Court is between £900.000 to £1 million compared to €200,000 to €800,000 for France, €100,000 to €200,000 for infringement in Germany and a similar amount for validity and as little as €5,000 to €15,000 in Lithuania.

Efforts have been made to find ways of enabling the UK to remain in the UPC Agreement after Brexit. The Chartered Institute of Patent Attorneys, Intellectual Property Lawyers Association  and the IP Federation consulted Richard Gordon QC and Tom Pascoe on whether that was possible. They advised that it was theoretically but only if the government signed a supplementary agreement with the EU and other states which would be politically difficult for HMG to accept and might in any case be challenged in the Court of Justice of the European Union (see Jane Lambert Just where does Mrs May's Speech leave the Unified Patent Court? 18 Jan 2017). Giving evidence to the House of Commons Science and Technology Committee Mr Johnson on 11 Jan 2017, Mr Jo Johnson MP who was then the IP Minister was asked how this country could remain in the UPC after we leave the EU. Mr. Johnson replied that the UPC is not an EU institution and that such questions as our continued participation and London continuing to host one of the sections of the central division were questions that would form part of the bigger discussion around the Brexit negotiations (see Minister questioned on managing intellectual property and technology transfer 11 Jan 2017 Parliament website).

I am not persuaded by either argument.  They are the same as the case for a European patent court within the framework of the European Patent Convention which was scuppered when the European Parliament's legal service advised that such a court would be incompatible with art 292 of the Treaty of Rome (now art 344 of the Treaty on the Functioning of the European Union). That article precludes member states from submitting disputes concerning the interpretation or application of the Treaties to any method of settlement other than those provided for by the Treaty.

Even though there the unitary patent may not extend to the UK and British judges and lawyers may be excluded from the UPC, a single European patent for the territories of the 27 remaining states and any new adherents and a single court for the resolution of disputes relating to such patents would benefit businesses everywhere including those in the UK. There is perhaps less of an incentive for the remaining states to renegotiate the UPC agreement as their costs of litigation are much lower than ours but it would still be advantageous for them to do so.  The original UPC Agreement was negotiated very quickly and renegotiation would be simply a matter of deleting direct references to London and the UK from the next and inserting Milan or the Hague in its place.   Having come so far it would be a shame for them to give up after we leave the EU.

Should anyone wish to discuss this article, he or she should call me on +44 (0)20 7404 5252 during office hours or send me a message through my contact page.