Germany's freeze of the Unified Patent Court
The European Single Market is intended to guarantee the free movement of goods, capital, services, and labour within the European Union. Single market rules require the free movement from one EU member country to another of these so-called “four freedoms.” Those market rules take two forms: First, they remove barriers to trade. Second, they harmonise and unify national rules at EU level.
For innovative industries, patents are important business tools to regulate access to the market. Patents provide a market monopoly to their holders giving them the right to hinder other market participants’ entrance to the market with the patented good or service. Thus, in a European single market it would seem to make sense to have a single unified court that rules on both the enforcement of European patents and proceedings that challenge and invalidate European patents.
Reasons to implement the UPC
Up-to-date European patents may be granted at the European Patent Office (EPO) in a single procedure. After a European patent is granted, however, the patent is ultimately divided into individual national patents. These national patents have to be challenged and enforced before the respective national courts in Europe. It seems logical to create a unified court that would rule on a European patent that shall no longer be divided into national parts. It also seems logical that a European single market needs a single European patent court. A single European court would rule on the entire European patent and secure a unified case law in patent matters throughout the European market.
Advocates for the Unified Patent Court hope to create more predictable court decisions throughout the European market. As the United Kingdom, Germany, and France are all strong members of both the European Union and the new Unified Patent Court (UPC), it is hoped that the new unified European Patent Law will become a melange of the best of common law (UK) and civil law (DE, FR, NL). Judges can be selected out of a larger pool consisting of the “best brains” throughout Europe. It is thus hoped that the UPC will allow a better use of resources. Harmonisation of jurisprudence throughout Europe can be more easily achieved when efforts are taken in this direction as demonstrated at large European judges conferences, such as the conference recently held in Venice. Furthermore, it is hoped that the European jurisdiction will be more of a “heavy weight” player in comparison to the US and Chinese jurisdiction, as the European market is more important than just the German market alone. Supporters have always argued that the UPC may reduce costs to obtain a patent that is effective throughout the European Union. A main theme of European patent reform has been to allow patents to be obtained and enforced at lower costs compared to the traditional system.
Criticism towards the UPC
Opponents of the UPC have strongly disputed the alleged cost reduction. Furthermore, they raised concerns about the inability to predict how new case law will evolve within the new body of the UPC. Concerns were also raised about the qualifications of the new EPC judges. Experienced judges can be found in countries that have a considerable amount of patent litigation, particularly Germany, Great Britain, France, and The Netherlands. The new UPC, however, will consist of judges from all European countries, including those with no or limited cases of litigation. How can the quality of decisions be ensured if the UPC consists of less experienced judges?
The consitutional complaint vs UPC ratification in Germany
Despite those concerns, it seemed that the UPC had reached the finishing straight. Now, the constitutional complaint filed in Germany has frozen the implementation of the UPC system. What is behind this complaint and on which allegations is this complaint based?
The plaintiff asserts a breach of the limits to surrender sovereignty derived from the right to democracy (Art. 38 (1), clause 1, Basic Law). The following four violations are cited:
- The first point basically claims that the Parliament did not have the necessary two-thirds majority to decide upon the ratification of the UPC. The plaintiff explains in one of his publications: “The Parliamentary proceedings on the ratification of the Agreement on a Unified Patent Court (UPCA) in Germany have revealed a state of political affairs which should cause concern to each citizen. It shows the practice of so-called ‘second-class adoptions’ in which legislative decisions are made by a materially inquorate Parliament, because nobody raises the objection necessary for the annulment of the session. It was in this manner that the legislative acts on the UPCA (UPC agreement) were unanimously adopted by 35 cheerful Members of Parliament (MPs) in the second and third reading in the early morning hours on 10/03/2017. ... A report on German law-making in the year 2017, in which the institutions involved could not care less about the German Constitution.“ The plaintiff argues that such a law had to be decided by at least two-thirds of the Members of the Bundestag. If plaintiff is successful on this point, the German Bundestag must repeat the legislation process and that would cost several more months.
- The second point of the complaint is based on alleged democratic deficits and deficits in rule of law with regard to the regulatory power of the organs of the UPC, which are allegedly too far-reaching.
- The third point of the compliant is related to the lack of an independent judiciary under the UPC.
- Last but not least, the fourth point is based on the allegation the UPC violates the EU Law – breach of the principle of openness towards European law. The latter question could be referred to the CJEU and that would at least cost additional time before the UPC may come into force.
What is behind this legalistic hair-splitting?
Is it a realistic possibility that the UPC may be blocked completely? Is it more realistic that the complaint will simply lead to a prolonged period of legal uncertainty before the UPC will become reality? What is the motivation behind the complaint? In one of his publications the plaintiff alleges that the new system “entails advantages only for a selected few, while it may even be detrimental to the majority of those affected, so that, had these consequences been disclosed from the outset, such project would not have stood any realistic chance to ever become law.“ He is of the opinion that “the political operators had always declared it to be a main theme of the European patent reform that it would allow for obtaining and enforcing patent protection at lower costs compared to the traditional system.“ The plaintiff claims, however, “that neither the subsequently determined renewal fees for unitary patent protection nor the level of reimbursable representation costs at the Unified Patent Court fulfill these promises.“
Thus, the new system would come at the expense of the SMEs that are more cost adverse than big pharma.
The motives of the plaintiff are unknown. Regardless of his motives, the next months will mean legal uncertainty for users. In all cases, it is recommended to be well-prepared for the new UPC system. SMEs, in particular, should prepare well in advance, so they do find themselves hampered by unexpected costs.
(First published in European Biotechnology, Autumn Edition 2017)