UPC signed - but Commission mindful of the challenges ahead

UPC signed - but Commission mindful of the challenges ahead

19 February 2013

On 19 February, the agreement to create the Unified Patent Court was finally signed by 24 of the current 27 states - all except Spain, Poland and Bulgaria, and with Bulgaria expected to follow relatively soon.
 
At a Commission-organised conference in Brussels the previous day, a succession of speakers, whilst celebrating the milestone, warned that much needs still to be done. In addition to the small matter of ratification of the Agreement by 13 countries, the negotiations which lie ahead and the work now required at a practical level were both sharply in focus. Some matters such as the rules of procedure are well advanced. The EPO has also started looking at its new administrative role. However, three difficult political issues remain, each involving the thorny matter of money.
 
The first is financing of the Court in its pre-launch period and early years when little is predicted to be generated in court fees. It was acknowledged that many litigants will wait to see if it is preferable to use the UPC instead of national courts during the transitional period when the systems run in parallel. As Kirstin Jorna put it somewhat graphically: "you cannot milk the cow when it is a calf". Hence it needs to be subsidised in its start-up period. Given Commission clarification (see item below - 18 February) that for "classical" European patents, the transitional period enables owners to opt their patents out for their full life, this start-up period could last into the 2040s or beyond. The fee structure also requires subsidies for SMEs, universities etc. What is not clear is whether the intention is to set the fees by reference to a scale which is objectively reasonable, and force payment of subsidies accordingly; or whether fees will be driven by distinctly limited subsidisation.
 
Second, is the level of renewal fees for the new Unitary Patents. As Thierry Sueur of Business Europe said: set them too high and the Unitary Patent "is dead". With this in mind, what was said on this subject by Margot Fröhlinger (now with a leading role at the EPO on this dossier) was surprising. She observed that the average number of designations by patentees among participating states is just four. She then posed a rhetorical question:  how much would users be prepared to pay for coverage in 25 states? She asked whether this would be the equivalent of designating EPs in 8, 10 or 12 states?  It is, of course, true that by electing for a Unitary Patent there are cost savings initially by reducing translation and other fees on grant, but knowing that one would then have to pay renewal fees equivalent to 8-12 states rather than 4 or possibly 5, would severely reduce the popularity of Unitary Patents. On this one must bear especially in mind that, unlike "classical" EPs, with a Unitary Patent one will not be able to decide to drop patent coverage in less important states later in its life: the only cost-saving option will be complete abandonment. That the EPO is thinking in these terms is not encouraging for those who would wish to obtain a Unitary Patent.
 
Third is the question of sharing the renewal fees. The basic structure is a 50:50 split between the EPO and participating states. But the 50% going to states must somehow be split by political agreement. Since this money will to some extent be used to pay to rear Kirstin Jorna's metaphorical calf, it will be surprising if a deal is easy to reach.
 
To state the obvious, much negotiation and practical work lies ahead. That work begins at the first post-signature meeting of the "Friends of the Presidency", scheduled for 27 February.
 
The ratification process also begins. Some countries are predicted to be slow to ratify, but one important country at least seems intent on doing so swiftly, namely France. At the conference it was announced that ratification legislation would be presented to the National Assembly within a matter of days following the signing ceremony, with a view to completing the process before the end of the year. We await with interest how quickly other states follow.
 
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