The entry into force of the UPC Agreement is contingent on the amendment of the Brussels 1 Regulation (recast)1, referred to in this Article simply as the Brussels 1 Regulation.  A previous article here discusses some potential issues with the legislative process for amendment and the difficult task of making the Brussels 1 Regulation consistent with the UPC Agreement.  On 26 July 2013, the European Commission published its proposal for a regulation amending the Brussels 1 Regulation, here.  This article reviews the proposed amendments and comments on whether they are consistent with the UPC Agreement and, in particular, whether the European Commission has taken the opportunity to clarify the scope and application of the transitional provisions and opt out regime in the UPC Agreement which create some subtle and complex problems.

Before we look at the substantive proposals themselves, it is the European Commission’s intention that the proposed amendments will not delay the start of the UPC regime and should, therefore, apply simultaneously with the application of the Brussels 1 Regulation, i.e. from 10 January 2015.  The amendments will be made in accordance with the EU’s “ordinary” legislative procedure.  This procedure was discussed in our previous article and the comments there would appear to continue to apply to these proposed amendments.  In particular, it might be possible for a few Member States acting together to block the implementation of the proposed amendments, albeit that the only countries at present likely to attempt to block the process, Spain and Poland, would have difficulties blocking the process alone.  The unique position of Denmark, outside of the Brussels 1 Regulation directly, may also delay its participation in the UPC regime, but this would not affect any other countries’ participation in the project.

The proposed amendments

The proposed amendments address the interaction of the UPC Agreement with the Brussels 1 Regulation².  The proposed amendments are, broadly, two fold.  First, there are provisions intended to address the relationship between the UPC Agreement and the Brussels 1 Regulation.  Second, there are provisions intended to ensure uniform rules of jurisdiction in relation to non-EU states in disputes brought before the Unified Patent Court and in matters covered by the UPC Agreement.  The proposed amendments are self-contained in four new provisions: Article 71(a) to 71(d).

Article 71(a) – As expected, Article 71(a) explicitly identifies the Unified Patent Court as a “court” within the meaning of the Brussels 1 Regulation³.  The Commission considers that the proposed amendments will “ensure that the international jurisdiction of [the Unified Patent Court] will be determined by the Brussels 1 Regulation.”  This would appear potentially to be at odds with the UPC Agreement which also contains provisions determining the jurisdiction of the Unified Patent Court.  Interestingly, the Commission’s proposal also considers that the proposed amendments will provide a shared jurisdiction between national courts and the Unified Patent Court.  It states “it will be ensured that defendants which [sic] would expect to be sued in a specific Member State on the basis of the rules of the Brussels 1 Regulation may be sued before the Unified Patent Court […] than the national courts designated on the basis of the Brussels 1 Regulation.”  To the extent that this provides for shared jurisdiction between the UPC and national courts, this gives rise to a potential issue where either the Brussels 1 Regulation or the UPC Agreement gives either a national court or the Unified Patent Court exclusive jurisdiction.

Article 71(b) – The second amendment, set out in Article 71(b), is intended to prescribe how the jurisdiction rules of the Brussels 1 Regulation are applied to the Unified Patent Court.  The proposed rule reads:
“1. The common Court shall have jurisdiction where, under this regulation, the Courts of the Member State party to an agreement establishing a common court have a jurisdiction in a matter governed by that agreement.”
According to the Commission’s proposal, this new rule provides that the Unified Patent Court will have jurisdiction any time when a national court of a UPC contracting state has jurisdiction based on the rule of the Brussels 1 Regulation.  Note again, however, that this appears to provide for shared jurisdiction between a national court and the Unified Patent Court.

New Article 71(b) also includes a provision which extends the Brussels 1 Regulation’s jurisdiction rules to disputes involving defendants domiciled outside the EU.  It provides that
“3. Where the defendant is not domiciled in a Member State and no court of a Member State has jurisdiction under this Regulation, the defendant may be sued in the common court if:
a) property belonging to the defendant is located in a Member State party to the agreement establishing the common court;
b) the value of the property is not insignificant compared to the value of the claim;
c) the dispute has a sufficient connection with any Member State party to the agreement establishing the common court.”
The circumstances under which this asset-based jurisdiction provision may bite are unclear as we consider in more detail below.

Article 71(c) – The amendments proposed in Article 71(c) relate to the interaction of the rules on lis pendens to, on the one hand, actions before the Unified Patent Court and, on the other, actions before courts of non-UPC Agreement contracting Member States (Article 71(c)(1)).  They also (in Article 71(c)(2))  deal with the operation of the rules on lis pendens during the transitional period provided by Article 83(1) UPC Agreement.   The amendments are straightforward in principle, but their application, as we discuss below, is anything but straightforward.

Article 71(d) – Finally, by new Article 71(d), the Commission proposes amendments to allow the recognition and enforcement of judgments given by the Unified Patent Court.  This provision, at least,  appears clear-cut.

Are the amendments consistent and clear?

The first point to note is that there is no proposed amendment to Article 24(4)⁴ of the Brussels 1 Regulation.  It gives national courts of Member States exclusive jurisdiction over disputes relating to the validity of patents.  As discussed above, proposed Article 71(b) appears to provide shared jurisdiction between national courts of contracting Member States and the Unified Patent Court where jurisdiction is conferred on a national court by the Brussels 1 Regulation.  However, the terms of Article 24(4) are clear; the national court of the Member State shall have exclusive jurisdiction.  The transitional provisions in the UPC Agreement provide for shared competence between the courts of contracting states on the one hand and the Unified Patent Court on the other.  On the face of it, therefore, Article 24(4) is in direct conflict with the UPC Agreement.  In order to resolve this conflict one must necessarily read Article 71(b) as proposed to give national courts shared competence with the Unified Patent Court, even for those matters on which Article 24(4) gives exclusive jurisdiction to national courts.  In this light, Article 71(b) as proposed is in internal conflict with Article 24(4) of the Brussels 1 Regulation.  Shared competence must be the sensible way to read the proposed amendments to the Brussels 1 Regulation, and this ambiguity could easily be resolved had the Commission proposed an amendment to Article 24(4) to clarify that in respect of the validity of European patents, the national court and the UPC would have shared jurisdiction.

As stated above, the circumstances under which Article 71(b)(3) may bite are unclear.  The Commission provides an example.  The Unified Patent Court would, according to the Commission, have jurisdiction under Article 71(b)(3) (asset based jurisdiction) vis-à-vis a Turkish defendant infringing a European patent covering several Member States and Turkey where the Turkish defendant had assets in a particular state.  The puzzle arises from the introductory wording that the provision applies when “no court of a Member State has jurisdiction under this Regulation.” Under ordinary Brussels 1 Regulation principles, however, the laws of each Member State determine jurisdiction over a party not domiciled in a Member State⁵, which, in the case of patent infringement, means a party may be sued in the Member State where the infringing act takes place.  Hence it is difficult to see how, where a non-EU defendant is responsible for infringing acts in a UPC contracting state, there will be a situation where there is not a court which has jurisdiction under the Brussels 1 Regulation. Therefore this provision will never apply and will never confer jurisdiction on the UPC.  If there is another interpretation, it is not clear.

In any event, the UPC Agreement would appear to provide a complete solution for conferring jurisdiction on non-EU defendants. The regime of Article 33(1) of the UPC Agreement is as follows:

• Article 33(1)(a) gives local and regional divisions of the UPC jurisdiction when the act of infringement takes place in the country or countries served by those divisions;
• Article 33(1)(b) provides, in the alternative, that local and regional divisions of the UPC have jurisdiction when a defendant has a residence, principal place of business, or place of business in a contracting state served by that division; and
• if the defendant does not have a residence, principal place of business, or place of business in a contracting state served by a local or regional division, then the action may be brought under Article 33(1)(a) or in the Central Division.

It will be noted that having assets is quite different from having a residence, principal place of business, or place of business.  Hence, to take the Commission’s example of a Turkish defendant, it could have assets in the UK in the form of cash in the bank, which would not amount to a place of business.  In this circumstance, Article 71(b) of the Brussels 1 Regulation would suggest that the UPC has jurisdiction.  However, this is already conferred by Article 33(1).  In short, the point is this:  either the Article 71(b)(3) provision is superfluous because it never bites, or its meaning and effect is unknown and potentially conflicts with Article 33(1) of the UPC Agreement.

The final two points relate to the operation of the lis pendens rules and the UPC Agreement.  The first potential issue is that proposed Article 71(c)(2) provides that the lis pendens rules apply between proceedings before the UPC and a national court during the transitional period referred to in Article 83(1) of the UPC Agreement.  On the face of it, this seems relatively straightforward.  Article 71(c)(2) simply prevents parallel proceedings concerning the same subject matter. So if the UPC is seized of subject matter, the same subject matter cannot proceed before a national court and vice versa.  However, when one considers designations of European patents which may or may not have been opted-out pursuant to Article 83(3) of the UPC Agreement, there are potential difficulties.

First, under Article 83(1) of the UPC Agreement, even when a patentee chooses not to opt out its European patent, such that in principle one would have thought that only the UPC would have jurisdiction, Article 83(1) provides that certain actions can still be bought at  the national level.  In these circumstances, there is the potential for a series of national actions (as at present), a single UPC action, or (and this is where the difficulty arises) a mixture of the two.  The difficulty can be illustrated by an example.  Suppose that a potential defendant brings a national revocation action in one Member State (the UK for example) during the transitional period provided in Article 83(1) of the UPC Agreement.  There seems no reason under the ordinary lis pendens rules why the patentee may not respond with a central UPC infringement action against that applicant for revocation: the subject matter of the two actions is not the same.  This UPC action will have effect in a number of Member States including the UK.  In these circumstances, the UK court will be seized of the action relating to the revocation of the UK designation of the European patent.  Accordingly, the proposed amendments to the Brussels 1 Regulation would appear to prevent the UPC action defendant counterclaiming for revocation of at least the UK designation of the European patent in the UPC action unless it first withdraws its UK revocation action.  In principle, the defendant would only be able to counterclaim in respect of those designations not seized by the UK court.  This does not appear to make sense from the perspective of efficient litigation.  Further, it does not appear to be consistent with Article 34 of the UPC Agreement which states that decisions of the UPC shall have effect in all states in which the European patent is designated.

This is a complicated point and it is not clear if there is an easy solution, whether by way of amendment to the proposed amendment to the Brussels 1 Regulation or otherwise.  The only amendment which we believe may give clarity would be one which stipulated that in the case of European patents not opted out under Article 83(3) UPC, once any national court or the UPC was first seized, it would not be possible to bring any action in respect of a patent in the other court.  Hence, a national revocation action in just one country would prevent central enforcement in the UPC for the remainder of the transitional period.  Further, were such an action brought in a slow-moving national court this would stymie UPC actions for effectively the whole of the transitional period – in effect a UPC torpedo.  Naturally, this may be considered highly undesirable.

The second lis pendens point arises out of the fact that Article 71(c)(2) applies only during the transitional period.  Once again, take the case of a patentee choosing not to opt out its European patent.  It is clear that the UPC has exclusive jurisdiction after the expiry of the transitional period.  However, Article 83(2) makes it clear that national actions (possible under Article 83(1)) which are pending at the end of the transitional period are unaffected and may continue. Therefore under these proposed amendments to the Brussels 1 Regulation, in respect of European patents without unitary effect, parallel actions before the national court and the UPC are possible after the expiry of the transitional period.  It would be possible for an applicant for revocation to start a series of national revocation actions before the end of the transitional period and a UPC revocation action immediately after the expiry of the transitional period.  This is perhaps a somewhat mischievous point, but one that needs to be considered nevertheless since, in valuable cases, potential defendants will readily take any opportunity to have two bites of the cherry.

In conclusion one can see that, on the face of it, the amendments proposed are straightforward and logical.  However, the UPC regime is complex and the scope and application of the terms of the UPC Agreement is in many respects ambiguous.  Many of the uncertainties in relation to the scope and application of the UPC Agreement might have been clarified by these proposed amendments to the Brussels 1 Regulation.  Unfortunately there remain a number of areas where the simple amendments tabled introduce more uncertainty instead of clarifying matters.  It is to be hoped that these issues may be addressed before the amendments are finalised.