The Long Road to a Supranational Patent System in the European Union

On June 29, 2012, Mr. Herman Van Rompuy, the President of the European Council, announced that twenty-five of the twenty-seven Member States of the European Union (EU) finally reached an agreement concerning the creation of a unitary patent system. Anticipated for more than thirty years, the announcement legitimately raised enthusiasm on the part of European authorities, inventors and entrepreneurs. Unfortunately, hope did not last. The day before the European Parliament was to debate and vote on the proposed regulations, the European Council removed three key articles from the draft agreement. In protest, the Parliament cancelled the debating and voting sessions. Today questions remain whether the agreement will be reviewed and adopted any time soon, or if national egos, political pressures, the interests of lobby groups and procedural complexities will keep impeding EU competitiveness.

The EU has no unified patent system. In order to secure EU-wide protection, an inventor must obtain a patent from the European Patent Office (EPO). Then, he must seek validation of his patent in each Member State. Most Member States require the patent to be translated in their official language(s). This generates large translation costs which increase the cost of patenting.  According to the Danish Prime Minister, it can cost up to €20,000 to obtain coverage in just thirteen Member States. Approximately €14,000 of that total comes from translation costs alone. The absence of a unified patent system generates administrative complexities but also legal uncertainties, because the courts of each Member State can rule differently on the same issue within the same patent. This situation does not only impede the competitiveness of individual European companies (especially small- and medium-sized enterprises), but it also hampers EU competitiveness and economic growth in general.

For more than thirty years, all attempts to create a supranational European patent have failed. Negotiations have typically stalled on the sensitive questions of the official language(s) of the patent and the location of a future European patent court. However, since 2009, negotiations have led to concrete proposals, despite the decision of Spain and Italy to not join negotiations in protest over the proposed trilingual patent regime of English, French and German.

Under the “enhanced cooperation” legislative procedure (which allows Member States to pass a regulation without unanimous consent), twenty-five participating Member States worked on the creation of a European Unified Patent Litigation System (UPLS). In 2009, they submitted to the Court of Justice of the European Union (ECJ) a draft agreement on the European and Community Patents Court (EEUPC) for an advisory opinion on its conformity to EU treaties. The ECJ issued Opinion 1/09 in March 2011, which concluded that the draft was incompatible with EU treaties because the EEUPC would interpret and apply EU law despite being outside the EU framework. Shortly after the Court issued its opinion, the Presidency of the Council of the EU presented an Amended Draft Agreement on a Unified Patent Court to ensure its compliance with EU treaties and the ECJ’s decision. In December 2011, after numerous compromises and revisions, the Parliament and the Council of the European Union concluded three important agreements, together called the “EU Patent Package.” The EU Patent Package consisted of agreements relating to the unitary patent, the language regime and the unified patent court.

Based on these agreements, there are two main parts to the new EU patent regime. The first part is the “Unitary Patent,” which will exist in parallel to the traditional national and European patents. To obtain a unitary patent, the inventor will first have to obtain a European patent from the EPO according to the regular process of examination and granting. Once the patent is granted, he will have the ability to request a unitary application of the patent. The EPO will be responsible for “administer[ing] patentees’ requests for unitary effect;” keeping a register of unitary patents, including information related to licenses, transfers, limitations and lapses; managing the translations; and administering renewal fees. If the patent application is submitted to the EPO in French or German, the applicant will have to provide a full translation of patent specifications in English. Alternatively, if the original language of the patent is English, the applicant will have to provide a translation into another official language of the EU Member States. Ultimately, a “high-quality translation machine” will produce the translation.

The second part of the proposed EU patent regime is the much-contested “Unified Patent Court” (UPC). The UPC would be composed of two divisions, a Court of First Instance and a Court of Appeal. It would have exclusive jurisdiction in infringement and revocation proceedings and would ensure the enforcement of the Unitary Patent. The UPC would be under the control of the ECJ, which would harmonize patent law interpretation in the EU.

The location of the seat of the UPC’s Central Division of the Court of First Instance remained a point of disagreement among England, France and Germany. However, after six months of intensive additional consultations, the President of the European Council announced that the participating Member States had finally reached an agreement on this point during the European Council. The seat of the Central Division of the Court of First Instance would be located in Paris. However, to satisfy the demands of England and Germany, the central division would have two thematic branches. One would be located in London and would be in charge of the cases related to chemistry, including pharmaceuticals (classification C of the European Classification System) and human necessities (classification A). A second branch would be located in Munich and would be responsible for mechanical engineering cases (classification F).

This new patent system should greatly reduce the cost of obtaining and maintaining EU-wide patent protection. It would not only reduce translation costs but also potential litigation expenses incurred by patent holders. According to one estimate, €289 million would be saved each year under this system. The Unitary Patent System should also make the European Union market more safe (and consequently more attractive for foreign investment) by limiting the risk of judicial forum shopping, multiple patent lawsuits and conflicting rulings for the same dispute on the same patent. Overall, it should contribute to increasing the competitiveness of European SMEs and support technological innovation and economic growth in the EU.

On June 29, 2012, the European Council proposed a very optimistic implementation schedule that would allow regulations to enter into force by February 2014 with the first unitary patent to be recorded in April 2014. To meet these goals, Parliament had to debate the proposed regulations before proceeding to a vote during a plenary session in July 2012. Then, the Council of the European Union was supposed to adopt the regulations a few days later. During the second half of 2012, the Member States were to have signed the agreement on the Unified Patent Court. After ratification by at least 13 Member States, the regulations would have entered into force in the early 2014.

The implementation procedure might have occurred as planned if the European Council had not suppressed three key articles of the agreement on the United Patent Court  twenty-four hours before the Parliament session. Articles 6, 7, and 8, which respectively define direct infringement, indirect infringement, and the limitations of the unitary patent, were withheld. By doing so, the European Council withdrew most of the ECJ’s competence to rule and interpret substantive European patent law. This decision satisfied some Member State’s governments, law practitioners and scholars, who had argued that the new patent court system was useless and poorly conceived, that other more efficient and less costly ways exist to harmonize the application and enforcement of patent law, and that the lack of expertise and slowness of the ECJ are incompatible with the wish to set up a more competitive European patent system.

But the decision greatly upset Members of the European Parliament, who argued that the change would “infringe EU law” and make the patent regime “not effective at all.” As explained in a July 9, 2012 opinion by the Legal Service of the European Parliament to the Chairman of the JURI Committee (Legal Affairs), Articles 6, 7 and 8 were “at the core of a genuine European intellectual property title” and “an essential part of Chapter II of the proposed regulation regarding ‘Effects of the European Patent with Unitary Effect.’” Therefore, their deletion “would remove the essential element of the substantive patent protection and would leave it incomplete as a European intellectual property title within the sense of Article 118(1) [of the Treaty on the Functioning of the European Union]” by suppressing “a specific measure granting ‘uniform protection’ of the EU patent with unitary effect in the patent regulation.” If the removal of these key provisions is maintained, the new Court of Appeal of the Unified Patent Court would be the last competent court to rule on substantive patent law. This means that European patent policy would be left in the hands of a court unsupervised by the ECJ. Some fear that the EPO’s growing power would naturally influence the Unified Patent Court and compete with the European Parliament, which remains the only institution legitimate to determine  European patent policy.

In reaction to this unexpected political move from the European Council, the European Parliament immediately postponed the debating and voting sessions until September 2012. On October 11, 2012, the Parliament briefly debated the matter and criticized European Council intervention. Currently, the text is back in the Legal Affairs Committee (JURI) of the European Parliament. It is far from certain as to how long it will take before a text is proposed and adopted, if at all.

Additionally, an imminent ECJ decision could also interfere with the creation of a unitary patent. In March and June 2011, Spain and Italy submitted legal challenges to the validity of the decision of the Council of the European Union that authorized the use of the “enhanced co-operation” legislative procedure for the creation of unitary patent protection regime. If the ECJ validates the use of this procedure, the decision will encourage the proponents of the unitary patent to pursue their efforts. If the ECJ holds that it is contrary to the founding treaties of the EU, it is not clear what will remain of the unitary patent project.

After years of placating national egos, working through legal complexities and reaching painstaking compromises, the EU should not renounce the creation of a common European patent system. The European market urgently needs such a system in order to retain its global competitiveness. But time is running out fast, and there is a real danger that the project will fail and have a similar fate as the 1975 Community Patent Convention and the 1989 Agreement Relating to Community Patents, both of which never entered into force because not enough countries ratified them. Behind all of the difficulties the real problem is simply that Members States refuse to give up important symbols of their sovereignty, even if it will be for the benefit of all Europeans. The road to a fully integrated Europe is long indeed.