An Update on Unitary Patent

cropped-pph-blog-kep.jpgThe Unitary Patent is approaching fast and it will bring a significant change in the European patent system as we know it today. Besides its indisputable advantages, it has its risks and possible disadvantages as well. In this post, we have gathered the most frequent questions about the Unified Patent Court and the Unitary Patent system expected to come into force probably in 2019.

What is the Unitary Patent?

The Unitary Patent (UP) is a European patent with unitary effect. Unitary effect can be registered for a European patent upon grant, replacing validation of the European patent in the individual member states concerned. Unitary patents will co-exist with national patents and existing European patents.

What is the Unified Patent Court?

The Unified Patent Court (UPC) is a common court of the member states. The court will hear cases regarding infringement and revocation proceedings of European patents (including unitary patents) valid in the territories of the participating states, with a single court ruling being directly applicable throughout those territories.

Member states of the Unitary Patent

The Unitary patent system has 26 member states (all EU member states excluding Spain and Croatia). 15 member states (AT, BE, BG, DK, EE, FI, FR, IT, LT, LU, LV, MT, NL, PT, SE) have already ratified the agreement. Germany and the United Kingdom should ratify it for it to enter into force. At the beginning each patent will have different territorial coverage for their entire lifetime depending on the date when the Unitary Patent protection was obtained for them and how many countries ratified the agreement at that time.

Member states of the Unified Patent Court

The Unified Patent Court system has 25 member states (all EU excluding Spain, Croatia and Poland). 14 member states have already ratified the agreement. Germany and the United Kingdom should ratify it for it to enter into force. More countries, including Germany turned to the national constitutional court for verifying the jurisdiction of the UPC.

When does the Unitary patent start?

When asked, the Unitary Patent System and the UPC system start together “always in the next year”. The year will probably be 2019. A Unitary patent may be requested for any European patent granted on or after the date of entry into force of the UPC agreement.

When does the UPC start?

UPC starts together with the Unitary Patent System probably in 2019.

Unitary patent and UPC after BREXIT

Participation of the UK in the agreements is a political decision which will have to be made by the EU and the UK. It may be addressed as part of the Brexit negotiations. The UK has the opportunity to have more time with “floating” the membership and ratification. If the UK does not accept the agreements, it is presumed that Italy’s existing ratification will be accepted as one of the “mandatory three”.

Where is the Unified Patent Court located?

There is a Court of First Instance and a Court of Appeal. The court of First Instance has a central division and a group of local division. The central division has a seat in Paris and sections in Munich and in London or in Milan. The court of Appeal is located in Luxembourg and it also serves as the registry. The training of judges takes place in Budapest, while Lisbon and Ljubljana host the Patent Arbitration and Mediation Centres.

Competence of the UPC

The Unified Patent Court has competence to hear cases regarding

– The Unitary patent

– European patents registered in countries for which the agreement is applicable.

There is a 7-year transition period (extendable) for European patents without unitary effect. The patent owner may opt-out from the jurisdiction of the UPC.

What does “opt-out” mean for a European patent?

Opt-out is important for the owners of European patents who do not want the unitary patent or the exclusive jurisdiction of the UPC. The patent owner may opt-out from the competence of the UPC so the national patent judges get back the competence over the European patent. Furthermore, patent proprietors have to act in common to exercise the opt-out. Once the opt-out is registered, it takes effect for the entire European patent bundle and for the entire life-time of that patent. Administration fees will have to be paid. You may opt-out before the first request of UPC action. Entitled persons for opt-out are e.g. before the UPC registered patent attorneys or the colleagues of Pintz & Partners. Opt-out can be revoked.

What is the language of proceedings?

The language of proceedings in the central division is the language in which the patent was granted. The language before a local (regional) division can be the language of the state hosting the local division, however, there are exceptions to change the language into the European patent language. In general, the documents must be translated to the given language of the procedure. The costs shall be covered by the plaintiff.

What is bifurcation?

In general bifurcation is a judge’s ability in law to divide a trial into two parts. At an infringement action before the UPC you may initiate a counterclaim for invalidity of the given European patent. UPC decides whether or not to hear the infringement and the validity case together. The central division will most likely decide to hear it together. The local division can also do the hearing, however, if one of the parties requests, the case goes to the central division.

Fees

The court fees will be made up of a fixed fee, combined with a value-based fee when the value of a case is above the set ceiling of 500.000 €. The fixed fees at an infringement action or at a counterclaim for infringement are 11.000 EUR. The additional value-based fees range from 2.500 EUR to 325.000 EUR depending on the value of action. E.g. in a case where the value is between 750.000 – 1.000.000 € the additional fee is 4.000 EUR, whereas for a value between 9.000.000 – 10.000.000 € the additional fee is 65.000 EUR.

At a revocation action the fee is 20.000 EUR. There are a lot of other fees as well (e.g. an application for rehearing costs 2.500 EUR).

You must pay the same fees at an appeal.

In limited situations the Court may raise the costs upon request. The Court may also lower the costs upon a request (in case of SMEs, universities, etc.). Small and micro-enterprises are entitled to pay only 60 % of the fees if they fulfil some formal and content requirements (e.g. e-filing, one language which is the procedural language of the patent; the reason for the reduced fees is that the regular fee would be unreasonable in respect of the financial capacity of the applicant, etc.).

Recoverable costs

The losing side is usually ordered to pay the winning side’s costs. The ceiling for recoverable costs depends on the value of the proceeding.

E.g. up to 250.000 € the ceiling for recoverable costs is 38.000 EUR. Between 1.000.000 – 2.000.000 € value the ceiling is 200.000 EUR and so on. More than 50.000.000 € value the ceiling is 2.000.000 EUR.

In case of appeal, the amount may be doubled.

Why are the UPC fees so high?

Unfortunately, the court is not an EU institution, therefore it does not receive central support. The court must employ highly trained and well-paid professionals. The same applies to the parties and their patent attorneys.

The discounted fees for the smallest companies in Eastern European jurisdictions are also very high. Probably they will not pay the recoverable costs. It is often easier to liquidate the company.

Assignment of the Unitary patent

It may only be assigned, revoked or limited in respect of all the member states, however it may also be licensed partially in any of the participating countries.

How much does the Unitary patent cost?

There is no official fee for filing a unitary patent request, but maintenance fees will certainly have to be paid. Also, upon entrusting a professional attorney with filing a unitary patent request, service fees can occur. Regarding annuities, the fees begin at 35 EUR (2nd year) and end at 4855 EUR (20th year).

The typical annuity fees:

  • 4th year: 145 EUR
  • 5th year: 315 EUR
  • 6th year: 475 EUR
  • 7th year: 630 EUR
  • 8th year: 815 EUR
  • 9th year: 990 EUR
  • 10th year: 1175 EUR
  • 11th year: 1460 EUR
  • 12th year: 1775 EUR

What is the deadline for filing the Unitary patent request?

The request must be filed within one month after the granting of the common European patent, more exactly after the date of publication of the mention of the grant in the European Patent Bulletin. This time limit is non-extendable. Any request for re-establishment of rights shall be filed within two months of the removal of the cause of non-compliance with the period, but at the latest within one year of expiry of the unobserved time limit. The request shall state the grounds on which it is based and shall set out the facts on which it relies.

Translation requirements

Where the language of the European patent is English, a full translation of the specification of the European patent into any other official language of the European Union (you may choose from 23 languages) must be contained in the request.

Where the language of the European patent is German or French, a full translation of the specification into English must be provided.

These translations are for information and have no legal effect. No translations will be required after this six-year (or max. twelve-year) transitional period.

What are the advantages and disadvantages?

Benefits:

– The EPO acts as a one-stop-shop, all post-grant administration will be handled centrally reducing costs and the administrative workload.

– The renewal fees have been set at a very competitive level.

– The online register will include legal status information relating to patents – notably on licences and transfers.

– Unified Patent Court (UPC) will hear cases regarding infringement valid in the territories of the participating states, with a single court ruling being directly applicable throughout those territories.

Risks:

– The Unified Patent Court (UPC) will hear cases regarding revocation proceedings of the unitary patents valid in the territories of the participating states. That means only one successful nullity action is enough to revoke our validated patents in all European patent member states. This risk is avoidable if you choose the traditional way of the European patent validation and request the “opt-out” from the competence of the UPC.

– Unitary patents will result in an extreme increase in the number of patents of advanced foreign (mostly non-EU member) countries in smaller member states. Those who have enforced their patents only in major member states so far will now be given patents in the smaller countries as well, as a “gift”. The inventors and developers in smaller countries may be unprepared for such a situation where they have to face an army of Unitary patents. For example in Hungary about 4 thousand European patents are validated yearly but 50-60 thousand Unitary patents are expected for the same period of time. This is unfavourable for member states with less technological innovative power. The greatly increased number of foreign patents is expected to prevent national technical development.

Closing thoughts

As we can see, mostly the bigger corporations will benefit from the Unitary Patent system; however, it will undoubtedly simplify obtaining a valid European patent in most European countries. Smaller developers will have to exercise increased caution not to infringe any patent rights valid in their countries because of a registered Unitary Patent. This will lead to the increased importance of professional and very thorough prior art search which can help determine if an invention is worth further development or which direction shall it be further developed in.