Will the UK be excluded from the planned Europe-wide patent court?

Will the UK be excluded from the planned Europe-wide patent court?

The potential impact of Brexit on the UK- and European-wide patent system may surprise you, and it is one of the first areas where we are seeing how our European neighbours will approach negotiation with the UK. This coming week will see a meeting of the EU Competiveness Council, and in the lead-up the rumours are that the UK is being told to ratify an agreement or face exclusion from the planned Europe-wide patent court.

Why does this matter? The patent system is a driver for innovation. It offers and delivers huge economic benefits. We would be worse off by far without it. Patents depend upon a timely, efficient, respected and value-for-money system of enforcement. We achieve this in the UK and as a result, alongside Germany, we dominate the European patent litigation regime. Patent litigation in the UK raises hundreds of millions of pounds per annum to the exchequer and this is why when it was proposed to form a pan-European Court to potentially replace the national system in each country, the UK fought hard to host this new Court.

In the end it was agreed that Paris, Munich and London would share the hosting of the main Court and the UK has already built its court rooms. However, the referendum result puts the role of London as host in question because the present agreement does not allow non-EU states to participate; notwithstanding the original idea was a Court for Europe quite separate to the EU.

This proposed Unified Patent Court (UPC) for Europe is created by the Unified Patent Court Agreement (UPCA) – an international treaty between EU Member States. The key EU legislation that would govern the new system is in the form of EU regulations. Whilst the UPCA is not part of the EU law, it restricts ratification to EU Member States, and thereby the UPCA presupposes that non-EU States cannot be signatories of or participants in the UPCA. Post-Brexit this would leave the UK outside the UPC system.

To fully understand whether the UPC is better than the present arrangement we need to look at what we already do. Since 1977, the European Patent Office (EPO) has provided a centralised procedure to grant patents for Europe. Today a person applying for a patent can apply to 38 countries, all of which are signatories to the European Patent Convention (EPC) – far more than the present 28 members of the EU. The current ‘classical’ European patent granted by the EPO is not unitary; it confers a bundle of separate national patents which can only be enforced in individual countries. In principle that might mean that a patent owner may have to sue on the same patent 38 times.

Currently, all EU Member States have agreed to take part in the unitary patent system, except Spain and Poland, whereas a total of 38 countries have signed the EPC. Therefore, this new court is sadly not achieving its full potential because it cannot include countries like Norway and Switzerland who are in the EPC but not the EU.

Since 2008 the EU has taken over the unitary patent project and associated court but that has not always been popular with EPC jurisdictions that are not in the EU, as it will leave them only half in the new regime of patents and half out. For this reason, as we explain later, the UK may have friends and supporters inside and outside the EU if we can find a path to UPC acceptance for non-EU countries.

Ratification by 13 states is required for the UPC to go live, and three of those must presently be the UK, Germany and France. So far 11, including France, have ratified. This leaves the UK in a key position to allow the Court to start or not.

The consequence of the referendum is the UK must now decide whether to ratify knowing that as it stands, the UK will be out of the UPC in 2019 because only EU members can be part of the regime. Therefore UPC ratification ought to be part of the Brexit negotiations, both to ensure we do not sleepwalk into a less important role for the London legal market, but also to prove the UK’s statement that we have not turned our back on Europe, we want to embrace a bigger Europe of sovereign states beyond the EU.

You might think the UK would be using their ratification card to negotiate for a chance to participate in the court or return it to a non-EU entity. Sadly this may not happen because pressures are building from our continental cousins to press the UK to ratify so as not to delay the court, before we know if the UK can participate.

Pre-Brexit the UPC cannot operate at all unless the UK ratifies the UPC Agreement. It seems to be the present intention that the UK simply ratifies and later sees whether it is possible to keep a slice of European patent litigation. However, if we hold out then we can negotiate our future to host the UPC court as a non-EU entity, or find a way to prepare ourselves to compete with it post-Brexit if we let it remain an EU entity. It may be a slim or vein hope but simply doing nothing is a far worse alternative.

Some believe that we could stay involved in the UPC after Brexit. This might be possible but mere ratification without conditions or future participation would be an error. The better course would be to hold back ratification until we negotiate our future. There are three options to consider:

  1. We agree to be part of the UPC post Brexit; the UPCA allows that; however the price for membership is that the Court of Justice of the EU will be supreme over this part of our law.
  2. We press for the UPC to revert to its pre-2008 intent of being a court that is part of the European Patent Convention framework and nothing at all to do with the EU, so that all 38 may participate on equal terms uninfluenced either by the European Commission, Parliament or the Court of Justice. This would allow the UPC to operate beyond EU borders. It is likely that EPC countries which cannot participate in the Unitary Patent would support this motion, as this would allow countries such as Norway and Switzerland to participate in the UPC.
  3. If we cannot be part of the UPC, we shall be running our own system alongside it just for the UK. In that case we should not let it start by ratification until the UK has worked out the best way to compete with it once it goes live.

The EU Council meetings next week will be one of the first chances to see how willing both sides are to work together for a better Europe.