Prime Minister David Cameron, as part of the Conservative manifesto, promised an in/out referendum on the UK’s continued membership of the European Union by 2017. There is obviously a whole raft of ramifications which could reasonably be regarded by even those within the IP world as more important than its impact on the future of the UPC. Nonetheless, it is worth pausing for thought as to what those consequences are, since following the ruling of the CJEU in March 2011, only EU Member States can participate in the UPC. Would, therefore, a UK exit mean the end of the UPC? In any event, will the entry into force of the UPC effectively be put on hold whilst the UK decides?
No UK, no UPC?
Ever since the signature of the UPC Agreement in February 2013, it has been assumed that Germany, France and the UK must ratify the UPC in order for it to come into force. However, a closer inspection of the Agreement reveals that this is not correct. The relevant article is Article 89 (entry into force) which states that:
“This Agreement shall enter into force … on the first day of the fourth month after the deposit of the thirteenth instrument of ratification or accession in accordance with Article 84, including the three Member States in which the highest number of European patents had effect in the year preceding the year in which the signature of the Agreement takes place …”.
In turn a “Member State” is defined in Article 2(b) as “a Member State of the European Union”. Hence, if the UK leaves the European Union, that is not the end of the UPC. Instead, the place of the UK will be taken by the Netherlands as the third mandatory ratification country. Given that recently the Netherlands has begun steps toward ratification, it should bear in mind that if it deposits its instrument of ratification, and the UK were to leave the EU, this would leave Germany in the position of the last of the mandatory ratification countries, and the timing of the commencement of the UPC would depend upon the date of its deposit of its instrument of ratification assuming by then 10 other countries had ratified already.
Of course, in practical terms, there would be significant consequences for the UK’s departure from the EU. The UK has conduct of various responsibilities within the preparatory committee, including notably the IT system. This could, of course, be taken over by another country. A more difficult issue is the location of the London branch of the central division. It might appear to make no sense for the UK to host a section of the central division if it were not participating at all. However, an amendment to the UPC Agreement would be required to move the London branch elsewhere, since Article 7(2) specifies that “The central division shall have its seat in Paris, with sections in London and Munich …” with Annex II to the Agreement specifying the work share of the London branch. A simple answer, therefore, of moving the location to Paris, Munich or, perhaps, to The Hague, is not so easy. There would first be a political fight over the substitute location, and second the whole process of ratification would presumably have to be repeated by those countries which have already gone through the process. Were the remaining countries therefore willing to proceed with the UPC without the UK, it may be easier to leave the London section of the UPC central division in London, since there appears, strictly speaking, to be no legal prohibition within the UPC Agreement that requires the Court to be physically located within the EU. Hence, although somewhat bizarre, it is possible that London could maintain its position as the location of a branch of the central division.
In similar fashion, the provisions of the UPC Agreement requiring central division proceedings to be in the language of the patent would still remain, even after a UK exit meaning that about 70% of cases in the central division (whether in Paris, Munich or London) would be in English. What there could not be, however, would be British judges or lawyers representing clients – although British European Patent Attorneys would still have a right of representation if qualified under Article 48(2).
There is, therefore, in summary at a theoretical level at least, no reason that the UPC could not march on unaffected by the UK’s exit from the EU. Indeed, the only truly significant change would be the scope of the protection of unitary patents, which would then exclude the UK, and hence become markedly less attractive to industry since UK national protection would have to be obtained via UK national patents or by continued designation of “classical” EP(UK)s.
Whether there would be an appetite for a UPC and unitary patent system without the UK is another matter, of course. However, on that topic it may be recalled that other states were prepared to go forward without the UK at the beginning of the Enhanced Cooperation process, and during negotiations of the terms of the UPC Agreement. It is therefore far from fanciful to suggest that a UK exit would spell the end of the UPC.
Will UPC implementation be put on hold?
Under the last government, UPC ratification was not seen as a political issue. The plan had been originally to ratify before the general election, but for practical reasons (finalisation of the secondary legislation) this was not possible. However, it was still planned that the UK should ratify by the end of this calendar year, albeit holding back deposit of its instrument of ratification for practical reasons, to ensure that the courts, judges, IT system etc were all in place. However, will the new Government proceed to the point of actually depositing the instrument of ratification with the risk that the UK might exit from the EU should a referendum result in an “out” vote? Perhaps not, and in practice a convenient solution would be to slow down progress toward the start of the UPC. After all, in any event the timetable which suggests entry into force of the UPC Agreement in 2016 remains ambitious. Hence no more than a gentle slowing down of the process would be required, and which might in any event have happened. It would be very easy, therefore, to ensure that the entry into force is delayed until after the UK’s continued membership of the EU is assured. As stated above, the Conservative Party’s promise is for an in-out referendum “by 2017”, and hence the overall slippage in the timetable need not be that great.
Whilst the wider consequences of a potential UK exit from the EU are indeed far more significant and serious in other areas, in the world of IP it makes for fascinating times.