Be careful what you wish for

A functioning patent system at reasonable cost, including ready access to patent enforcement, is vital for the promotion of research and development in innovative industries such as the chemical industry. The present European patent system falls far short of this, however, particularly because of the cost associated with patent litigation.

Strength in unity

Currently, although there is a central patent application system in Europe, the ‘European patent’ splits into a separate patent right in each chosen European country. Therefore, if a patent is infringed throughout Europe, the patentee is faced with the prospect of multiple litigation in multiple countries, each with their own court system, in assorted different languages. This is a significant deterrent to patent enforcement, particularly for SMEs and universities, and tends to favour larger companies with deeper pockets.
There is, accordingly, a need for a unitary European patent, that is, a single patent right covering all of Europe, litigated in one court in a single set of proceedings. A single procedure should benefit both patentees and those accused of patent infringement. Such a patent system would further assist the efficient transfer of innovations to the marketplace and allow industry and academia alike to protect and capitalise upon their intellectual property using simpler and less costly legal processes.

This situation has been desired for some time, with the first attempt being made in 1975. Since then, there have been a number of drives at EU level to achieve a unitary patent for the member states, but most have foundered on the same issues: language (is the patent translated? who pays for translation?); cost and renewal fees (what will these be and who gets the money?); and enforcement (the patent litigation system).

Spain and Italy have always insisted that any patent right valid in their territory would need to be translated into their language. The cost of this was unacceptable to other member states and so, in March 2011, the Council of the EU gave permission for the other 25 EU member states to negotiate an agreement without Spain and Italy. This finally presented a realistic opportunity to establish the unitary European patent, at least in some form.

Potential disaster

In December 2011, it seemed that nearly all substantive points within this agreement had been successfully negotiated and the only issue preventing the agreement from being signed was the location of the central court. London, Munich and Paris all wanted it, but no country was willing to capitulate on the matter. This led to a stalemate and the Polish EU presidency was unable to enact the legislation.

However, far from being viewed as a failure, this should be seen as an 11th hour reprieve as the agreement that was about to be reached was potentially disastrous in key aspects:

1. The agreement would have given the Court of Justice of the European Union (CJEU) jurisdiction over the law of patent infringement, increasing the number of referrals to the CJEU, and the consequent costs and timescales of litigation. The CJEU has no experience of patent matters and is not suited to deciding patent infringement law, while a CJEU referral can take several years.

2. The litigation system would, after a transitional period of five years, have become compulsory for all European patents, whether it was working satisfactorily or not. National litigation would not be available. The UK has streamlined the procedure at the Patents County Court so that low-value cases can be heard in a cost effective and efficient way, and so it is essential that the option of national litigation is maintained. Otherwise, a purely national dispute would be forced to use the unitary litigation system, which would be needlessly expensive.

3. The new system would have enshrined the German practice of ‘bifurcation’, wherein infringement and validity of patents are considered in separate court proceedings, increasing the length and complexity of litigation. Bifurcation tends to favour holders of weak or invalid patents, who can wreak havoc despite the poor quality of their rights. 
Industry, the patent profession and the European Scrutiny Committee of the House of Commons have all expressed their concerns on these points and the UK government is now negotiating to amend the draft agreement. It is important that this resolve does not falter.

It seems unlikely that the deadline set by the current Danish presidency to resolve these issues will be met and some may fear that we are jeopardising this historical opportunity. However, now is the time to keep up pressure to provide a system that will perform as it should - despite the advantages of a unitary patent, it would still be better to have no agreement than the wrong one.

Darren Smyth is a UK and European patent attorney and a partner at EIP