UPC to come into effect in 2017

UPC to come into effect in 2017

28 November 2016

The announcement today that the UK will ratify the UPC Agreement is a major surprise because most observers had considered the prospects of the UK accepting the supremacy of EU law (albeit over a limited range of specific issues) and the role of the CJEU in a new legal environment to be politically unlikely following the 23 June referendum.  UK Minister of State for Intellectual Property, Baroness Neville Rolfe, said today:


“The new system will provide an option for businesses that need to protect their inventions across Europe.  The UK has been working with partners in Europe to develop this option.”

“As the Prime Minister has said, for as long as we are members of the EU, the UK will continue to play a full and active role.  We will seek the best deal possible as we negotiate a new agreement with the European Union.  We want that deal to reflect the kind of mature, cooperative relationship that close friends and allies enjoy.  We want to involve free trade, in goods and services.  We want it to give British companies the maximum freedom to trade with and operate in the Single Market – and let European businesses do the same in the UK.”

It appears, therefore, that the Government has decided that as EU members for the time being, the right course is to honour its treaty obligations and in that sense continue with the status quo.  It is also a decision which keeps open the UK’s options for long term participation in the UPC.  Clearly there is potential for Parliamentary scrutiny of the decision, but it is to be assumed that the Government believes it can deliver on its promise to ratify in short order.  Today’s announcement leaves unanswered the important question of what will happen on Brexit?  Perhaps in line with wider Government policy, Baroness Neville-Rolfe added that “… the decision to proceed with ratification should not be seen as pre-empting the UK’s objectives or position in the forthcoming negotiations with the EU.”

It can only be assumed that the Government will deal with the future of the UPC (and unitary patents) as part of the wider Brexit negotiations.  This is not the position for which UK industry had lobbied.  It had wanted as a pre-condition of ratification, that there would be relative certainty as to the future.  Ideally it wanted the UK to have negotiated a clear mechanism by which the UK could continue UPC membership post-Brexit, and a “plan B” whereby the UK could exit the UPC agreement if necessary – there are no exit provisions in the agreement as currently drafted.  These pleas, however, have been ignored in favour of what may be regarded (depending on one’s point of view) as a courageous and optimistic approach or a risky one.
 
Next steps

What, then, can we expect next?  First, the UK Government will have to put through Parliament the necessary instruments to complete the ratification process started before 23 June.  This could take perhaps three to four months.  Germany also has to ratify, but will now presumably do so early next year – although it may possibly hold back from depositing its instrument of ratification until the UK process is complete.  The UPC can then (practical issues such as the IT system permitting) start in as early as July 2017.  Allowing for some further slippage, October might be a more realistic target starting date.
Assuming (as we now must) that the UK follows through with this announcement and the system comes into being with the UK as a member, cases will be started in the UPC, unitary patents will be granted, the central division of the Court will have a base in London and doubtless British judges will be appointed as UPC judges – exactly as envisaged previously.  But what of the longer term?

After Brexit?

The question of whether the UK will be able to continue to participate from the political and legal perspectives is hard to assess.  If it is impossible for either reason for the UK to remain in the UPC, a further complex series of legal issues will need unwinding.  But of more potential concern is the prospect of the UK continuing in the UPC post-Brexit without certainty that the CJEU would find this lawful.  Many commentators were previously of the view that the UPC is an EU-only club: certainly this was the contemporaneous interpretation of the CJEU’s decision in Opinion 1/09 – not least the conclusion of the EU Commission’s legal service.  One scenario, therefore is a finding that the UK cannot remain within the UPC post-Brexit, with unclear consequences for patent owners.  Fortunately, even though the UK has not sought to attach any strings to its announcement, there is time, once the Brexit negotiations start, for the UK to work with its partner countries on a long-term arrangement whereby the UK could continue to participate in the new system post-Brexit,; and an alternative to that in the form of a UPC exit strategy: in other words exactly what UK industry had lobbied for to happen prior to or as a strict condition of ratification.

There is no doubt (setting aside the politics) that from many perspectives, the system would be better with long term UK participation, and it could even potentially open the way for further expansion to include other non-EU states such as Switzerland.  This a difficult and controversial subject, however, with differing views as to what would be required to create a solid legal basis for the UK to continue participation as a non-EU state.  Work therefore needs to be started as soon as possible.
 
User preparations for the UPC

Finally, it is likely that many users will have put on hold their preparations for the UPC following the result of the UK’s referendum.  Those preparations now need to be resumed as a matter of urgency.  Not only does it seem inevitable that the UPC will start, and unitary patents be available within a year, but users must grapple with the added complication that it is highly unlikely that anyone will know whether the UK will be a short-term or long-term participant before users’ future patenting and opt-out strategies need to be decided.  This is the first topic to which users should now turn their attention, especially given that the provisional phase when opt-outs can be registered will likely commence within a few months – possibly by about April.  Probably a greater number of users – at least those for whom the UK  is an important market – will be more cautious than they may have been about committing their patent portfolios to the UPC with a lack of clarity on future membership of the UK; and still more will be cautious about seeking unitary patent protection.  These are complex matters to consider, and suddenly time is short.

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