28 Aug 2020 in Newsletter
UK Announced Its Withdrawal from Unified Patent Court Agreement — What’s Next?
What are the consequences of the UK’s withdrawal from the Unified Patent Court Agreement on patent litigation across Europe? If European industry’s interests still favor establishment of a new centralized patent litigation system, and if there is still the political will to proceed by the remaining participating states, the Agreement on the UPC may still come into force.
As announced in a parliamentary written statement in the House of Commons by the Parliamentary Under Secretary of State, Minister for Science, Research and Innovation, the UK has declared its withdrawal, as of 20 July 2020, of the ratification of the Agreement on a Unified Patent Court (UPC) and the Protocol on Privileges and Immunities of the UPC as well as its consent to be bound by the Protocol to the Agreement on a UPC on a provisional basis. From a strictly formal point of view, the Agreement on a UPC is not a European Union (EU) treaty, but rather an international treaty open to EU member states only. Nevertheless, since the UPC is bound to the Court of Justice of the EU and has to respect the primacy of EU law, this UK declaration appears to be the logical consequence of the UK’s previous withdrawal from the EU. Moreover, after a series of contradictory messages and actions by the UK institutions (including the ratification of the Agreement on the UPC, which was made after the Brexit referendum), the parliamentary written statement ultimately clarifies the UK’s position in the field of patents and cross-border litigation in Europe.
According to the Preparatory Committee of the UPC, the UK also filed, in addition to the above-mentioned statement, a deposit of the withdrawal notification of ratification with the General Secretariat of the Council of the EU. The General Secretariat, however, is identified by the Agreement on the UPC as the authority with which instruments of ratification (and not those of withdrawal therefrom) have to be deposited.
It is thus debatable that this way of proceeding duly meets the withdrawal requirements, in particular because, on the one hand, the Agreement on the UPC has no provision for withdrawal and, on the other hand, the withdrawal provisions as defined in the Vienna Convention on the Law of Treaties are only applicable to withdrawal from a treaty applied provisionally or already in force, none of which is the case here, at least not yet.
At any rate, assuming that, sooner or later, an effective date of the UK’s withdrawal will be set and known, what are the consequences of the UK’s withdrawal on patent litigation across Europe? The short answer is that, if the European industry’s interests that are still favorable to the establishment of a new centralized patent litigation system in Europe prevail, and if there is still the political will to proceed by the remaining participating states, these two aspects being closely intertwined, the UK’s withdrawal does not necessarily hinder the Agreement on the UPC coming into force, eventually.
For the Agreement on the UPC to enter into force, the participating states would need to find a new way forward without the UK and, differently to the previous ratification made by Germany, a complaint-proof one. The path and timing needed to find this way and take the appropriate actions substantially depend on the strength of the relevant industry interests and political will.
As known, the UK is one of the three mandatory states in addition to France and Germany, according to the Agreement on the UPC. More particularly, the Agreement mentions the “deposit of the thirteenth instrument of ratification or accession […], 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.” Thus, according to a literal interpretation of the Agreement on the UPC, in view of the indicated point in time, these member states have to be France, Germany and the UK. However, according to a broad interpretation of the Agreement on the UPC, these member states could include the EU member state having the fourth highest number of European patents (i.e., either the Netherlands or Italy), instead of the UK, once the UK has duly withdrawn. Unfortunately, both the Protocol on Privileges and Immunities of the UPC and the Protocol to the Agreement on a UPC on provisional application do not make reference to member states as determined based on the number of European patents, but explicitly mention the UK, France and Germany as the states or among the states needed for their respective entries into force. As a consequence, the Protocols do not appear to leave room for interpreting the Agreement in a broad manner by neglecting the point in time when the number of European patents have to be considered, in order to identify the three mandatory member states. A corresponding issue arises with respect to the provision relating to the London part of the Central Division.
Moreover, while France ratified the Agreement on the UPC without delay, the path was more complicated in Germany, which has not validly finalized its ratification yet. Based on the German Justice Ministry’s declarations of the last several months and the current status of the draft bill in the German Federal Parliament, it may be reasonably assumed that Germany will adopt a new law permitting ratification approved by two-thirds of the Parliament members, the lack of the required quorum in the previous adoption having been judged unconstitutional last February.
In view of the all of this, a first scenario, closer to a literal interpretation of the Agreement on the UPC and related Protocols in terms of mandatory participation of the UK, may be envisaged. According to this possibility, the Agreement on the UPC and Protocols would have to be ratified again. The fact that no provision at all is envisaged in the Agreement on the UPC dealing with a participating state leaving the EU does not help in finding effective alternative solutions to a re-ratification based on the Agreement itself. Such re-ratification, however, would inevitably further delay the whole process to an unknown date, if any, given that the re-ratification process could open the door to discussion on amendments relating to other aspects, such as, for example, the inclusion of non-EU member states.
A second scenario could be envisaged based on the rationale followed by the German Justice Ministry in the text accompanying the draft bill proposed on 10 June 2020, in response to which interested industries, and business and legal associations and institutions as well, have provided comments during June and July. According to this rationale and corresponding scenario, the initial UK ratification would have already met the requirement on its mandatory participation as set by the Agreement on the UPC. In this case, after Germany’s ratification of the Agreement on the UPC and approval of the Protocol on Provisional Application, the UPC Administrative Council could address the withdrawal of the UK during the provisional stage of this Protocol. Again according to the German Justice Ministry, the UPC Administrative Council could also address the distribution of the litigation cases supposed to be allotted to the London part of the Central Division, either – at least initially – to the Paris and/or Munich part or to a new part still to be identified. As known, the new part of the Central Division could be in Italy or in the Netherlands, the two states which have shown the strongest interest in proposing respective local candidates for replacing the London part of the Central Division. With reference to Italy, the Italian Under Secretary of State at the Ministry of Foreign Affairs and International Cooperation declared on 15 July 2020 to the Italian Industrial Property Consultants Institute that the Italian government has not decided yet whether to propose Milan or Turin as the candidate location. In a previous statement last May, the Under Secretary declared that the Italian government intended to propose the Italian candidacy after the entry into force of the Agreement on the UPC, which might be too late.
Germany’s declared intention to proceed is supported, in the background, by the Internal Market Commissioner of the European Union, who, speaking to lawmakers in the European Parliament’s Legal Affairs committee on 25 May 2020, confirmed that creating the UPC is one of his top priorities as part of a series of post-pandemic policy priorities. However, it is difficult to foresee whether additional constitutional complaints have to be expected against any new ratification by Germany on the basis of the current text of the Agreement on the UPC and Protocols.
The current situation thus appears to be a trap: the more the strategy to go forward is tied closer to the terms of the Agreement on the UPC, relating Protocols and international treaties for their interpretation, the longer (but safer) the way to a conclusion of the saga, and vice versa. Indeed, any decision to accelerate the ratification process without amending and re-ratifying the Agreement and the Protocols would be prone to risks of further legal complaints, especially in Germany.
It may also appear that the other EU participating states may have other priorities in this troubled time of pandemic. However, if the states agree on the basic fact that centralizing patent litigation in Europe, by reducing costs and harmonizing practices, may be beneficial to business growth and may provide more legal certainty to the outcome of European patent infringement and invalidity actions, and that these effects at least indirectly promote and stimulate innovation, which in turn may contribute to the mitigation and resolution of the pandemic, it is at least possible that the entry into force of the Agreement on the UPC may be closer than expected.