The second Spanish challenge to the UPC system – will the CJEU follow the AG’s Opinion? - 27 November 2014

The second Spanish challenge to the UPC system – will the CJEU follow the AG’s Opinion? - 27 November 2014

27 November 2014

Alan Johnson, Ignacio Gonzalez Royo

UPC 2 – 0 Spain

(but it’s only halftime)

Now that the Opinion of the Advocate General on the second Spanish challenge has been published, and is positive for proponents of the unitary patent and Unitary Patent Court (UPC) system, the question on everyone’s lips is whether the CJEU will follow the Opinion.  In this context, we should also have in mind the first challenge, because some of the arguments raised in the second challenge had, in fact, already been argued (unsuccessfully) in the first challenge (decision, 16 April 2013).  That decision was issued by the CJEU’s Grand Chamber, and it seems almost inevitable that the Grand Chamber would also decide the second challenge, and come to the same conclusions on the same arguments.

The CJEU seems to have accepted in the first challenge the idea that the unitary patent concept is compatible with Article 118 TFEU.  Consequently, it seems unlikely that the arguments in the second challenge based on lack of legal basis and the misuse of powers (second and third arguments) would succeed.

Regarding the other arguments, the first (infringement of the rule of law for not providing judicial review) is unlikely to succeed because accepting it would mean accepting that the whole system is illegal.  It will be very easy for the CJEU – as the AG has done – to say simply that this argument does not challenge the contested Regulation (creating a European patent with unitary effect) but the whole European patent system, i.e. the EPC itself. The fourth and fifth arguments (breach of the Meroni principles against unsuitable delegation of powers) are arguably not well-founded because EU law does not exclude any possible delegation, but only delegation of the essential elements of the exclusive powers of the Union.  It is, of course, arguable the other way because important powers are delegated to the EPO, and the position might have been considerably more difficult if the EPO had been delegated with the power to issue unitary SPCs, and there were no possibility to refer cases from the EPO to the CJEU.  However, as matters presently stand (the current system seems to envisage unitary patents giving rise merely to purely national SPCs), on balance this argument should fail.  Nevertheless, even if Spain won its argument in relation to fee delegation, it is logically only this element of the new system which would need adaptation:  the system as a whole would not collapse, but would be able to proceed with some modification.

The remaining arguments (regarding the UPC and the obligation to ratify the UPC Agreement) are less straightforward to assess.  Spain does not say that a court of this nature cannot be created, but (i) that the Member States could prevent it from entering into force by not ratifying it (which would render it useless) and (ii) that the UPC exercises the Union’s powers without respecting the limitations established by the CJEU regarding the creation of new courts (for example, in the Opinion 1/09).  In that Opinion, the CJEU ruled in 2011 against a potential agreement conferring on an international court which is outside the institutional and judicial framework of the European Union an exclusive jurisdiction/power to hear a significant number of actions brought by individuals in the field of the Community patent and to interpret and apply EU  law in that field.  However, if we look at Article 32 of the UPC Agreement, the jurisdiction is still exclusive. This takes us to the following obvious question: Is the UPC Agreement contrary to Opinion 1/09 of the CJEU?  Will the CJEU rule against this exclusive jurisdiction/power?

These matters were not raised in the first challenge and are less easy to assess based on the AG’s Opinion.  In essence, the AG “escapes” this question by taking the view that the UPC Agreement and the Regulations creating the unitary patent are two different things without sufficient connection, and relying on the fact that, technically speaking, the UPC Agreement is not an act of the Union which the CJEU could review.  However, if the CJEU found enough connection between the UPC Agreement and the Regulations, it might not agree with the AG and thus look for a way to contest the Regulations, and also somehow force Member States to change the UPC Agreement with the ultimate purpose of removing the “exclusive” jurisdiction and so avoid losing its jurisdiction. 

We should not forget that in the past the CJEU has ruled against Member States creating new courts.  The CJEU has been worried for years about the potential loss of its jurisdiction and sovereignty (for example, it recently raised this concern in Opinion 1/13).  However, if that were a concern in relation to the UPC system it is unlikely that the CJEU would have allowed the enhanced cooperation procedure (objected to in the first challenge) to proceed, because it was entirely obvious that the system would have its own courts.  Further, the real objection to the UPC system as envisaged in 2011 was the inclusion of non-EU states.  This was remedied in the new system by making EU membership a necessary condition of participation.  Further, the UPC Agreement itself seeks to meet these concerns.  Article 1 makes the UPC subject to the same obligations as a national court.  Article 20 requires the UPC to apply EU law in its entirety and to respect its primacy.  Article 24, reciting the requirement of full compliance with Article 20, ranks EU law as the first in a list of sources of law.  Hence it is difficult to see the CJEU considering that the UPC was in any different position than any purely national court.  One would hope, therefore, that the CJEU would not consider it necessary to issue a decision which required further clarification or limited the power of the UPC (for example, by seeking Member States to remove the “exclusivity” characteristic in the UPC Agreement).

Finally, we should also look at the challenge to the legality of the Language Regulation based on discrimination on the basis of language.  On this, the economic arguments are likely to prevail, these being that (a) having less languages decreases costs and (b) avoiding multiple authentic translations increases legal uncertainty.  It would not be the first time that the CJEU has ruled in favour of businesses and cost-efficiency.

Overall, the chances are good that the second challenge will be dismissed in its entirety.  If so, we then wait to see if Spain might follow Italy and reverse its position and seek to join the new system.

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