With the UPC now firmly on the horizon, would be participants and their advisers are starting to scrutinise the provisions of the UPC Agreement (UPCA) in much greater detail, raising many interesting questions concerning the operation of the new system.

Clarity

One aspect of the system which is particularly important is the law to be applied in deciding any given issue which the UPC is asked to rule upon. In some cases, this is expected to be relatively straightforward. For example, questions concerning the validity of a patent will be decided by reference to the relevant provisions of the European Patent Convention (EPC) (art 65(2) UPCA) and one would expect the significant body of EPO case law accumulated over the years to be highly persuasive in their interpretation.

Questions concerning whether an alleged infringer who used or possessed an invention before the priority date (sometimes referred to as honest prior use) is permitted to continue using the invention after the priority date will be determined in accordance with national law (art 28 UPCA).

For certain disputes relating to unitary patents falling outside the exclusive competence of the UPC such as contractual licence disputes (apart from those raised as a defence to infringement), entitlement disputes and employees’ invention remuneration, the applicable law will be determined in accordance with the rules which apply to unitary patents as an object of property as set out in article 7 of Regulation EU No. 1257/2012 (UP Regulation).

A lack of clarity?

In other cases, however, the position appears more complex.

One interesting aspect of the provisions on infringement, which highlights the potential complexities in the new system, is how the Court will interpret the scope and limitations upon the prohibited acts of infringement specified in articles 25 and 26 of the UPCA. For example, article 25(a) which contains the provisions relating to direct infringement states:

“A patent shall confer on its proprietor the right to prevent any third party not having the proprietor’s consent from the following:

1. making, offering, placing on the market or using a product which is the subject matter of the patent, or importing or storing the product for those purposes;…”

The UPCA provides no further guidance on what constitutes “making” or “offering” a patented article. The UK and many European countries have similar national provisions as they are ultimately derived from the same source, namely the Community Patent Convention. But these provisions have been interpreted quite differently in different countries. For example, in Germany, offering something purely for export outside of Germany can constitute “offering” under German law, whereas making an offer to export outside of the UK is unlikely to constitute “offering” under UK law. What approach should the UPC take? Will the position vary nationally depending upon where the infringement is said to be taking place or will be the position be uniform for all UPC territories? These are examples of the challenging questions which the early adopters of the new system will have to grapple with.

The starting point for determining the applicable law in respect of any issue to be decided by the UPC is articles 20 and 24 of the UPCA. Article 20 of the UPCA requires the UPC to respect the primacy of EU law and article 24(1) lists the various sources of law which the UPC must base its decisions on:

1. Union law, including the UP Regulation and Regulation EU No. 1260/20121 (UP Translation Regulation);
2. the UPCA;
3. the EPC;
4. other international agreements applicable to patents and binding on all the Contracting Member States; and
5. national law.

The prevailing view amongst practitioners is that the list in article 24(1) represents a hierarchy (starting with Union law), with each subsequent level in the hierarchy to be applied if the preceding source of law does not provide an answer to the legal question to be resolved.

Exactly how these different sources of law are called into play, however, is dealt with less prescriptively in the new Court rules, particularly where it comes to the role of national laws.

Harmonised patent law or national patent law?

Returning to the issue of what constitutes an act of infringement for the purposes of article 25(a) of the UPCA, article 3(2) of the UP Regulation states that a unitary patent shall provide “uniform protection” and shall “have equal effect in all the participating Member States”. Article 5(2) of the UP Regulation further states “The scope of that right [being the right to prevent a third party from committing acts of patent infringement in UPC territories] and its limitations shall be uniform in all participating Member States in which the patent has unitary effect”. On their face these provisions seems to clearly indicate an intention to harmonise protection across the UPC territories.

It is, however, at least arguable from articles 5(1) and 5(3) of the UP Regulation that there are certain exceptions to uniform protection. Article 5(3) states:

“The acts against which the patent provides protection referred to in paragraph 1 and the applicable limitations shall be those defined by the law applied to European patents with unitary effect in the participating Member State whose national law is applicable to the European patent with unitary effect as an object of property in accordance with Article 7.”

This provision clearly seems to say that national laws have some role to play in determining what constitutes an act of infringement, and that which national law is relevant is to be determined in accordance with article 7 of the UP Regulation. Article 7 determines the law applicable to unitary patents as an object of property. Under article 7, which national law applies is determined by the participating member state in which, according to the European Patent Register, the (first) applicant had their residence or principal place of business on the date of filing the patent application, or if neither are applicable, a place of business on the date of filing the application. If the applicant had no residence, principal place of business, or place of business in a participating member state at the time of filing, then the law of the state where the EPO has its headquarters (i.e. Germany) applies.

Some have interpreted article 5(3) as simply signposting back to the UPCA (effectively leaving it entirely up to the UPC to decide the scope of ‘offering’ or ‘making’ without any formal reference to existing national law) on the basis that the only ‘national’ law which can apply to unitary patents (which never previously existed and are not within the jurisdiction of national courts) can only be the UPCA itself. This, however, would appear to indicate a remarkably strange drafting decision on the part of the legislator; if articles 25 and 26 of the UPCA were the only touchstone then why require some consideration of which national law is applicable under article 7 if the answer will always be that this doesn’t matter as all national laws must lead back to the UPCA itself. Some contracting member states have passed local legislation expressly saying that the local law applicable to unitary patents is that contained in the UPCA. Others, though, have not and it raises the interesting question of what would happen if one or more contracting member states were to legislate to the effect that certain local jurisprudence will remain relevant for the new unitary patents.

If the first “local” interpretation of article 5(3) of the UP Regulation is adopted, the potential consequence is that what constitutes “offering” or “making” across all of the UPC territories could well be dictated by what “offering” or “making” means in the domicile/place of business of the applicant, or under German law if they are based outside the participating member states. The result would be that the scope of a unitary patent may differ depending on the domicile of the applicant. Furthermore, the meaning of those terms could keep evolving as the respective national laws change, meaning there may never be a definitive definition of what constitutes “making” or “offering” in the new system.

Obviously even if the second interpretation is ultimately preferred (and that would make much more sense in terms of the overall goal of achieving a harmonised system), the new UPC judges – many of whom will be sitting only part-time in the UPC alongside their national ‘day jobs’ – will inevitably have come from and will continue to be influenced by their own national traditions and perspectives. Knowledge of a wide range of national law approaches will, therefore, likely be an important part of practising and appearing before the new court.

The interpretation as to what the words in articles 25 and 26 mean in practice will initially fall to the UPC first instance and Court of Appeal judges – although, of course, what article 5(3) means is ultimately a question for the CJEU and given the complexity and uncertainty of the new system it seems reasonably likely that referrals to the latter may come sooner rather than later. All in all therefore, we may have to wait a number of years before this issue is resolved.

There are, of course, many other complex and interesting questions concerning applicable law at the UPC. At Bristows, we are here to help with any and all such queries.