Once more unto the UPC, dear friends?

Published on 5th Jul 2017

Henry V’s “band of brothers” ultimately succeeded against enormous odds in capturing Harfleur.  But the chances of the UPC becoming a reality in the face of continuous set-backs remain uncertain despite the phenomenal persistence its promoters have displayed over more than a decade of challenges.

The latest upheaval is a challenge, brought by a German individual, to the compatibility of the UPC system with Germany’s constitution. This challenge has suspended the German government’s progress towards ratification.  The UPC cannot come into operation until this is resolved, since Germany is one of the three states required to ratify before the system can come into effect (the UK being one of the others). And even if that is resolved, and the further short delay to UK ratification caused by the general election overlooked, the Brexit issue remains opaque: if the UPC comes into operation, but the UK then leaves the European Union, is it possible for the system to continue?

The simple, and unhelpful, answer is that no one knows.  There is nothing in the UPC Agreement addressing the (at the time) un-thought of question of how to handle a Member State’s departure. Legally, the opinion has been expressed that the CJEU’s constitutional objections can be overcome provided that certain safeguards for the supremacy of EU law are put in place. Superficially, therefore, it seems the system can continue.  But politically, the UK’s continued participation is problematic since the UPC Agreement specifically includes ultimate jurisdiction of the Court of Justice of the European Union (CJEU) on a range of issues.  Can the UK government be seen to remain subject to the CJEU, even in such arcane matters as patent disputes?

How extensive is the CJEU’s engagement with the UPC likely to be?

This apparently simple question needs to be handled with care.  There are two logically separate questions, which tend (in the heated discussions generated by any Brexit-related issue) to get conflated.  First, does the CJEU have jurisdiction to determine questions of law through the UPC system?  And second, how significant are the questions the CJEU will have to determine?  This second question can also be subdivided: how legally significant, and how likely to occur in daily practice are those questions?

At first glance, it appears that the CJEU’s role is a fundamental one.  The UPC Agreement opens with a series of recitals spelling out the importance of EU law and the CJEU’s role in maintaining it.  This presentation of EU law as central to, and with primacy over, the Agreement arises from the CJEU’s rejection of a previous form of agreement on the grounds that it was incompatible with EU law because of the absence of any guarantee for EU law’s primacy.  The re-drafted version accordingly takes pains not to be struck down for the same reasons.

The answer to the first question therefore is yes, the CJEU does have jurisdiction over questions of law and, if the UK continued to participate in the UPC post-Brexit, the CJEU’s rulings on such matters would have effect in the UK.

How significant will the CJEU’s rulings be?

Many of the CJEU’s areas of competence within the UPC are of relatively limited significance for most patent disputes.  Neither of the core issues, of patent validity and infringement, involves on its face any question of EU law.  Instead, the CJEU is charged broadly with ensuring the uniformity of the EU legal order and the primacy of EU law, including the judicial protection of an individual’s rights under EU law.  In order to do so, it has the power to give rulings on the correct interpretation of EU law in response to requests by the UPC.  This could include questions touching procedure, such as the right to a fair trial.

The CJEU may also be invoked if a party to a dispute before the UPC disagrees with the UPC’s analysis as to which national law shall be applied to a question, since the choice of national law is to be determined by EU law, based on private international law rules.

Likewise, any infringements of EU law by the UPC can in theory be the subject of an action for damages or infringement proceedings against a Contracting Member State, since the UPC’s actions are directly attributable to the Contracting Member States – liability is joint, but actions are to be brought in the CJEU against the Member State where the claimant in the action has its residence or place of business.

But these issues are unlikely to come up in a typical patent dispute.  Accordingly, the majority of cases likely to be heard by the UPC are very unlikely to raise any issue within the competence of the CJEU.

Furthermore, in practical terms, referring questions to the CJEU is unlikely to be a significant component of the UPC’s activities for its first few years.  The UPC Agreement sets out new law on what acts constitute infringement of a patent. Disputes as to how precisely that is interpreted will be frequent in the early days, probably arising in parallel in numerous disputes, until the Court of Appeal has given sufficient rulings for consensus to begin to emerge.  Similarly, the Rules of Procedure are a unique system for litigation, drawing upon but not precisely the same as any of the Contracting Member States’ systems.  There are likely to be many appeals over points of procedure in the early years of the court’s operation.

Which areas will be most affected?

EU law is most closely engaged in specific issues, such as the patentability of biotechnology, defences to infringement for pharmaceutical research purposes and patent term extension through Supplementary Protection Certificates (SPCs).

These issues affect only two industry sectors, pharmaceuticals and agrichemicals, but those are the sectors that have been responsible for a significant proportion of patent disputes in Europe over the last 20 years.  However, although the Biotechnology Directive was controversial at its introduction, it has not been the subject of any dispute over its operation. Ultimately, given that biotechnology patents will continue to be granted for the territory of the UK by the European Patent Office (EPO), the CJEU’s hypothetical future interpretations of the Biotech Directive will have effect in the UK.  But from a political standpoint, in any given case it would be the EPO’s, rather than the CJEU’s, decision which would be the immediate source of any controversy.

In contrast, the extent of the pharmaceutical research exemption – the so-called Bolar exemption – has already been challenged in references to the CJEU from Poland and Germany.  Indirectly, a CJEU opinion on whether or not an activity falls within this exemption could additionally address whether or not the accused actions infringe in the first place.  And the SPC Regulation has caused numerous references to the CJEU from many Member States, and continues to raise questions.  It is arguable that once the UK has left the EU, any marketing authorisation and consequent SPC will both be creations purely of national law, such that any dispute would be subject only to UK courts.  Nevertheless, the argument could be made that both authorisation and certification for existing (pre-Brexit) SPCs were originally granted under EU law and should be adjudicated under it.

EU law may also be relevant in any infringement dispute where a patent licence has been raised as a defence, since the impact of any such agreement on competition in the market could be material to its effectiveness.   Even an agreement purportedly relating only to the territory of the UK could, in theory, affect market conditions in the EU and therefore be affected by decisions of the CJEU.  Further, even though patent licences in general are subject exclusively to national laws, the appropriate consideration for any licences of right under the unified patent system (a unilateral offer by the owner of a unitary patent to grant licences on fair terms to all-comers) is a question of EU law.

All of these are issues which can, in a particular dispute, be critical.  The UPC will, inevitably, in due course refer questions of law to the CJEU for clarification.  Since the Central Division with responsibility for chemicals and life sciences will be based in London, those references are most likely to be made by a court sitting in London.  Thus, if the UK ratifies the Agreement in its current form, its submission to the CJEU court on particular patent matters will be highly visible to Britain’s Eurosceptics.  Tactically, a party wanting to prolong any determination of a dispute might be tempted to find an argument on which the CJEU’s ruling is required.  This approach could both postpone the theoretical one year timetable of a UPC action from start to trial, since the CJEU frequently takes 3-5 years to deliver its ruling, and potentially raise political leverage as to the enforceability in the UK of any ultimate ruling.

Is the CJEU’s involvement fatal to the UK’s on-going participation in the UPC?

The CJEU’s role in the UPC system is complex, and the circumstances where it may actually become involved restricted to very specific issues.  If the political dialogue moves beyond the most simplistic of terms, and political will is available on both sides, it should not be beyond the wit of the current Contracting Member States to agree modifications to the Agreement and Rules which would enable the UK to continue to participate without in any way compromising the uniformity or primacy (within the agreed limits) of EU law.  Whether or not that will happen, it is far too early to tell.

 

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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