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22 August 2018

Is your business ready? The UK government is proceeding with preparations to ratify the Unified Patent Court Agreement. Our team of experts, joined by Tim Frain Director, IP Regulatory at Nokia, talk you through the views of industry organisations and strategic issues to consider.

Deborah Bould : Ladies and Gentleman thank you for standing by and welcome to the Unitary Patent Brexit Update Web Seminar. Before we begin I must advise you that this conference is being recorded and that all lines are currently in a listen only mode. If you experience any technical difficulties during today’s web seminar please press *0 on your telephone keypad or send a chat message to web support and participants can ask questions via the Q&A panel WebEx throughout. My name is Deborah Bould and I am a partner in the Pinsent Masons Patent Litigation team in London and I am here as the Moderator today to introduce you to our solicitors and what will I am sure be a very topical webinar with an update following our summer webinar on the impact of Brexit on the UPC project. Many of you will of course have heard the news from two weeks ago now that the UK government is planning to ratify the UPC Agreement which of course has had a great field of interest and excitement amongst the IP community and there is an awful lot to say about it which we will cover in the webinar today. So, I would like to introduce you to our speakers and our first speaker is Tim Frain who will be providing an industry’s perspective. Many of you will know him and he is a Director of IP Regulatory at Nokia and we are absolutely delighted that he is joining us today. Thank you Tim. From the Pinsent Masons team we have three speakers. We have Chris Sharp who is a Senior Associate in Pinsent Masons London office who will be dealing with the Life Sciences aspect and then we will have Emmanuel Gougé from our Paris office who will cover the French perspective and finally Mark Holtorf from our Munich office who will give the German perspective.

I’ll hand over now to, sorry I should have said that feel free to type up any questions throughout on the WebEx but we will have an open-floor for questions later and I’ll pick any questions that are coming up through at the end of the webinar. We should take about 30 minutes from now for this Webinar and then we will have plenty of time at the end. Thanks.

Tim Frain: Thank you Deborah and thanks to Pinsent Masons for inviting me to give this presentation today. It is a very timely occasion as Deborah already pointed out. Let me start by explaining the industry position contextually because for a long time industry has been calling for a European patent package which would be accessible, cost-competitive and provide legal certainty so minimum legal risks but the problem was that after the Brexit referendum that caused the fate of the UPC project and became very unclear. Remember that the UK is on one of the required countries to ratify in order for the UPC to happen and so immediately after the referendum result we were hearing many calls for urgent ratification including from consent of European Industry. However it could be said that the UK stakeholders were asking for a slightly more measured approach. They were asking for ratification yes, subject to knowing what would happen if or when the UK leaves the UPC so not hoping that the UK would lead the UPC at all but in the event that the UK would leave or would have to leave what would happen. We were concerned about avoiding what has become to be known in domestic politics now as a cliff-edge. A sudden change in what would happen from a legal perspective and recognising that this cliff-edge would potentially affect all users not just UK users so as Deborah mentioned and as we all know very well I am sure on the 28th November in the competiveness council and we understand with approval from the very highest levels in the UK government there was an announcement by the IP Minister that the preparations for ratifying the UPC in the UK would continue so that raises the question whether now the fate of the UPC is any clearer and in the immediate aftermath of that announcement it was of course welcomed and particularly by continental stakeholders for the reasons that I said but a little bit less there was more measured approach by UK stakeholders because there is still this concern actually in a way a new concern that going into the UPC without knowing what the exit plans would be actually creates the cliff-edge which doesn’t exist today. Having said all of that it now looks provided that the UK can put one missing piece of domestic legislation into place that the UPC will start in the second half of next year and this really is a wake-up call for us users who were beginning already to make our plans strategising for how we would use the new system that we tended to put those folders back on the shelves but now I think we need to revive our plans and get those folders back down from the shelves.:

One question is whether the UK can remain in the UPC after exiting the EU both from a legal and political dimension and the political dimension is rather important because it may be that the UK depending on the domestic politics at the time they actually wish to withdraw voluntarily from the UPC post-Brexit and indeed this may and there are hints that it will become part of the Brexit negotiation package. From a legal perspective there are various opinions whether the UK can stay in or not. Whether legal underpinning is needed by way of some side agreement or not but let’s remember they are just that. They are opinions there can be no legal certainty that the UK can stay in the long run but even if it is assumed that the UK can stay in there is a question about how long? Would it need instant departure on the moment of Brexit or could there be some transitional period which itself raises some interesting questions but more optimistically if the UK can stay in does this open the door for other non-EU member states to join the UPC because that will be rather an interesting outcome, potentially all the European Patent Convention countries or at least the EFTA states could eventually join into the UPC Agreement. Now this next slide I am not going to talk in detail. It is a flowchart showing the possible options and including the situation before we have heard the UK government’s announcement and the outcomes along the bottom row, the more green it is, the better outcome it would seem to be for users. The more red it is the more dangers or risks there are potentially for users and the grey part running through the middle is showing the most likely part but assuming and this may be wrong of course and let’s hope it is that the UK may wish to or have to leave the UPC eventually creating what I call the cliff-edge legacy issues. If we just look in a little bit more detail at the UPC Agreement itself one of the slightly curious things about it is that it contained inherently no withdrawal or transitional provisions and the question arises what if other states apart from the UK wanted to or had to leave the UPC in future and again not being pessimistic but it may be that we are looking at 10, 20 years for the terms in connection with out patents that other member states may even leave the EU. As I say I don’t want to be pessimistic but that’s a reality that users have to see. :

Now the Brexit situation has actually shone a spotlight on this lacuna in the agreement although the original architects of the agreement would say it is not a lacuna, it was never intended that member states would envisage leaving the UPC. But I would raise the question now whether it is still politically viable for a sovereign state to enter an agreement which cedes its national jurisdiction exclusively to a supranational court when there is no way out. Notwithstanding generic provisions in the Vienna convention which I’ll come back to mention in a moment. So the argument is that this current political situation actually underscores the need for some generic withdrawal and transitional provisions to be appended to the agreement, for example, giving a notice period where the 12 months is enough. Very importantly for users an obligation on an exiting space to provide continuity of rights nationally in a seamless and commensurate way. Other issues that arise for example are how would you deal with the black hole created in the interim with EU rights if you’ll expel or chose to leave the agreement after you had left the EU because there is like I say an interim black hole period there. What do you do with pending litigation and how do you treat existing decisions and orders at the courts for example injunctions. So the proposal is that perhaps a protocol is needed to prevent this kind of cliff-edge scenario that we have been talking about and in fact that kind of approach seems to be a win-win solution because it would actually go a long way to de-politicising the issue away from the current requisite and the emotions around that. On the one hand it would provide the safety net that the UK stakeholders are looking for and on the other hand it would provide a general future proofing giving all users the longer term assurance that they need to use the UPC and in respectable participating states and lets remember that going for obtaining unitary patent is optional not mandatory and also your existing European patent so the EPUK part of your patent can be opted out from the UPC jurisdiction and there is a risk that if users don’t have that kind of assurance about the continuity of rights in a post Brexit era, then there would be less take-up of unitary patents and more opt out and that would not be a desirable outcome. So I talked about the court but let me talk specifically for a few moments about the unitary patents. Recognising the debate on the UPC tends to focus on the court itself, on the court, the rules, the procedure, where the local divisions are going to be located, the judges, how they are going to be trained and appointed and rightly so. But the real goal of course for industry is the unitary patent itself, it will give wide territorial coverage, it will hopefully be cost-competitive and it will use very familiar procedures for those who are traditionally obtaining patents through the European Patent Office. Ideally, all participating states will ratify, we currently have 11 ratifications with Germany and the UK, it will be 13 which will be sufficient to trigger but we hope the remaining member states would ratify as well to give the widest coverage and possibly all EU member states are joining eventually recognising that Spain and Poland are currently outside of the arrangements. Let me spend a couple of moments asking what Brexit means to the unitary patent as such. Let’s assume that the UK can remain in the UPC agreement the question arises then whether the UK can then still remain part of the Unitary Patents, we have to remember that patent itself unlike the agreement which is an international treaty if established by EU regulation under the so called enhanced co-operation procedure but even if the UK can’t stay part of the EU regulations and part of the unitary patent post Brexit my thesis is that it maybe doesn’t matter. There are two options that I see, one is the UK does nothing and bearing in mind now that all of our European patent’s which designate the UK will to all intents and purposes eventually become indistinguishable from unitary patents. They will be exclusively within the UPC jurisdiction after the transition period, they will within the transition period if not opted out. So in that sense, they will be indistinguishable from unitary patents except that they would still be subject to separate renewal fees payable to the UK IPO so it has a cost implication and it may be worth bearing in mind that originally Italy signed up to the UPC but not to the enhanced cooperation and not to the patent so there is a precedence of this and some are calling this the Italian solution. :

The second option is that the two regulations that we talked about or least one of them anyway actually invokes article 140 of the European Patent Convention in order to confer unitary character on patents and it’s that indication of the EPC which is really at the heart of the unitary patent itself. So the question arises whether the UK could join a unitary patent even up to leaving the EU simply by invoking Article 142, of course the UK are already members of the European Patent Convention so they would need to make an agreement with the EU participating states within the UPC or the regulation in order to join and treat patents granted through the EPO with the unitary effects and once again this potentially opens the door for other non-EU UPC contracting states to join but of course they would need to sign up to the UPC pay as well and whether that’s possible or not currently remains an open question but nevertheless, this extension or expansion possibility is a very exciting opportunity or possibility and at that point, let me just go off into the realms of fantasy perhaps and talk through some steps that would eventually lead to a nirvana or dream outcome and I say these steps with a caveat some of these aspects may not be possible from whether a political or a legal prospective right now but there is nothing to stop it eventually if this is what we would want to make happen. So the first step would be that this protocol on generic withdrawal and transition provisions is concluded and to provide a safety net for users as I’ve been proposing, the UK would ratify the UPC and its confirmed in whatever way that the UK can stay in. Of course, we still need Germany to ratify and then the UPC can start in 2017 next year then perhaps Article 142 UPC could be invoked so the UK can remain part of the unitary patent even after exiting the EU and as suggested hopefully all participating states would eventually ratify and potentially all EU member states would join the UPC and the unitary patent. And then going even a little bit further, perhaps even other non-EU European Patent Convention Countries would be entitled to join the UPC. They would all eventually sign up and ratify and then Article 142 is again invoked and those other non-EU EPC states join the unitary patent as well and the outcome would be that both the UPC and the unitary patents would extend to all EPC or at least EFTA the contracting states. Well that was going off into the realms of fantasy but let me before I conclude come back to reality and remind ourselves that nevertheless the UPC and unitary patents are more likely than not now to start in the second half of 2017 but that sunrise period or pre-registering opt-outs could open as the early summer of 2017 and in some optimistic discussions I have been having recently, it sounds like this could be the very early summer of next year. But anyway, the message is that users it really is the time to revive our strategy planning and I think in relation to different categories of rights we have let me throw out some ideas at least. So for our existing European patents we need to be determining what would be the opt-in or the opt-out criteria. Do we want them in UPC’s? Do we want them outside of the jurisdiction? And let’s remember by the first half of next year the register may be open for us to provisionally register these opt-outs so if we don’t want our competitors to cease jurisdiction then we need to be opting out early. In relation to our pending European application, this is something which many people have failed to recognise, there are things that we can be doing already now to prepare for next year so, for example, we could intentionally delay grant of our pending European application to open up the possibility that we elect unitary patent protection at the grant phase. We could for example, as an alterative, validate our European patent in more countries than we would otherwise in order to benefit from the enhanced cross-border effect that the UPC will bring even for existing European applications or we could do something like filing divisionals and in that way we could benefit from both systems. In relation to our future filings in Europe those who would want to shout for their patents entirely from the UPC jurisdiction if that’s something they would want to do would need to think about filing nationals rather than European applications in future. Again, something that our strategists need to be looking at right now. And then perhaps a little bit more of a sinister overtone not only our patents but third party patents as well because we could be looking at the possibility of revoking competitor’s patents, those existing European patents that have not been opted out the system with a view to ceasing the UPC jurisdiction before the patent owners themselves had had a chance to opt them out and of course in the new system you then basically have a central revocation system so there are some benefits to be had and considered there. And with that I’ll end. I would like to thank Pinsent Masons once again for the opportunity to present and I would be happy to answer questions later but in the meantime, let me handover directly to Chris.

Chris Sharp: Thank you Tim. I’m just going to spend a couple of minutes making some comments about the Life Science prospect in particular. I think going back to when the UPC Agreement was agreed, one of the major bonuses of the agreement for the UK was that the central division would be split amongst three seats and one of those seats would be London and it was London that would take on the Life Science cases. This was great for the profession and for industry in the UK. Now I think the prospect of the UK joining the UPC and then potentially leaving raises a big question mark over what happens to the London Central Division. So we have got a nice shiny floor in this nice shiny tower in Aldgate. It may get used for two years maybe then what happens when we leave? We have some major question marks there, in particular, where would it go? Certainly a few odd countries have been vying for taking on this particular seat, Netherlands and Italy in particular and what will happen to the cases that are currently pending there. I mean so it goes back to the transition provisions point. So that is sort of a practical point. I think the other thing that is quite interesting to consider is what the views have been of the Life Sciences industry. So we have got the ABPI and the BIA previously been in favour of the UTC package and following the announcement on the 28th of November the BIA came out very quickly with their own press release. I guess its tempered positivity I think is the right percept. They welcomed the announcement and the ratification which was good. I think they have maybe made the same points that we all have made in the past few weeks about great, this is nice that we are ratifying but what’s happening on Brexit and there’s some major question marks there. So we have got the BIA saying its imperative that the government works swiftly above a signatories agreement to ensure the UK can remain part of the UPC after it leaves EU and avoid these many complexities arising. If this isn’t achieved appropriate transitional provisions will be essential to address unitary patents covering the UK and on-going litigation covering the UK. I think personally this is the right view and is a sensible position to take. We have got the ABPI making pretty similar points, again remaining slightly concerned about what happens on Brexit and then finally just considering the generic sector view. At the moment there has been no reaction at all from the Generics Association in the UK and in Europe as far as we are aware. I think certainly from this side of the aisle there has been long-standing concerns about some of the measures in the UPC – those don’t go away but time will tell to see what happens in the next few months and see whether there are some announcements.

Deborah Bould: And we will handover now to Emmanuel to give us the French perspective. Thanks Emanuel.

Emmanuel Gougé: Thank you Deborah.
As you probably know France ratified already in March 2014. Now the French industry and the French stakeholders were not really expecting the UK decision with this announcement as to the upcoming ratification by the UK. What we can say is probably that the French industry sees this decision announcement as a very positive step forward as the French industry and stakeholders have always expressed their willingness and interest in having the UK being front of the Unified Patent Package. Obviously the Brexit decision or vote on the 23rd June had the effect of putting everything on hold more or less at Lisbon or on site of the industry.:

So now if we go to the second slide. The issue is what will be the next steps and what will be the questions for the industry and how they will prepare in France. I think that for the time-being not only the concerns but questions around what will be the effective UK’s participation in the system and as we have seen from Tim’s presentation there is still a lot of questions which remain without clear answer. Time will tell. Obviously one of the issue for the patent industry is not only to see the UK join and ratify but also to stay within the system so that will be obviously one of their main concerns before entering into the system. As to a practical point which is the seat of the court we discussed this already in the past webinar and it has not been officially confirmed but it looks like the seat will be hosted by the current courthouse which is the courthouse located in the centre of the city in Paris. A new courthouse will be and is in the course of being built in Paris. So that for some practical perspective on the French industry and the French judiciary and I think it is probably time to handover to my colleague Mark Holtorf in Germany.

Mark Holtorf: Thank you very much Emmanuel.
Welcome ladies and gentleman to the brief German part of our webinar today. Emmanuel just indicated my name is Mark Haultof and I am responsible for the German IP team. What I want to talk about today in the next couple of minutes are two things.
Firstly, the ratification process regarding the UPC Agreement in Germany and secondly, the view of the German Industry with regard to the Unitary Patent Package so let’s get started with the first point – the ratification process.
In fact, in Germany in order to implement the Unitary Patent Package, Germany needs to enact two different bills. One bill is viewed with the changes of the national German law which become necessary due to the Unitary Patent Package. The second law in Germany needs to be enacted in order to actually ratify the UPC Agreement and we will call this in the following now UPC Agreement ratified. So this is the law actually ratifying the UPC Agreement. Germany wanted to do specifically well and even after the Brexit vote wanted to use the fast-track proceeding to enact the UPC Agreement ratification bill. This fast-track proceeding would have limited the rights of the German Federal Council in connection with the ratification process. The Federal Council in Germany is the upper house of the parliament and represents the German’s 16 federal states. In the meanwhile however it turned out that the fast-track proceeding initially to be wanted to be used by the German government cannot be used if sovereign rights or powers are transferred to international institutions so in fact it turns out now that the Federal Council even has a longer period to assess and consider the draft bills than it would have with regards to a national normal regular German law. So the consequence of this is now that the entire legislative process which had been initiated already prior to the Brexit vote has to start from scratch again. Of course, the bills have been drafted but the process needs to be started again and in fact it will start exactly this week so what we know now is when the process will begin the crucial question of course for all the participants is when will the process come to an end. For the reasons just mentioned the Government is now cautious to predict the end of the legislation process, however, according to official sources the envisaged state for entering into force of the UPC Agreement Ratification Bill is Spring time 2017 so we would expect that this means that the UPC Agreement Ratification Bill can enter into force around end of the first quarter 2017. The same will actually apply with regards to the second bill I mentioned before which will deal with the changes of the patent system as it currently is, it will exactly be treated in parallel to the ratification bill. Now, very briefly to the second point the view of the German Industry. Obviously, it is not easy to summarise the view for the German Industry nevertheless it is fair to say that the predominant view with regard to the unitary patent system is that the German Industry highly appreciates the system especially because of the German exporting businesses that will probably benefit from the system. The Federal Association of the German Industry in an earlier statement even said the introduction of the unitary patent package is overdue and I would say that this view remains unchanged. There are of course some uncertainties as we heard before to date and the German Industry is also aware of these uncertainties however we do feel confident that ways will be found to deal with such challenges and I would say after the recent decision of the UK to become part of the system as the industry in Germany is also quite confident that these challenges can be overcome. That’s it for the moment from the German perspective and I am happy to handover to my partner Deborah Bould again.

Deborah Bould: Thank you so much Mark and thank you to all of our speakers, that’s been absolutely fascinating. If anybody would like to ask a question now, please do type it up in the WebEx Q&A box and we will put that to our speakers – in the meanwhile I guess the most obvious question coming up from all of the discussion but probably focussed more on Tim and Emmanuel and Mark is just what the impact of the delayed German ratification might have on the sunrise period and whether we are still thinking, do we think it’s realistic that the sunrise period will start in early summer bearing that in mind or do we think it might be a little later possibly. I think Emmanuel might have mentioned, not in this webinar but separately to me that the French CBI had suggested that sunrise period might start around September this year oh sorry 2017 rather. Tim Frain: It’s Tim speaking. The latest information that I heard from yesterday is that there is motivation within the UPC Preparatory Committee so as the organisers of the whole thing that the sunrise period could open as early as early summer next year as I mentioned in my presentation. Irrespective of any delays in the legislation passing in Germany and in the UK, don’t forget we have one missing piece of legislation here in the UK as well so the thinking is and I think this links exactly with the timetable for German legislation that Mark is indicating to us that the remaining two instruments of ratification from UK and Germany could happen towards the end of the first half of next year but nevertheless the sunrise period could start before that and bear in mind that the UPC entry into force arrangement are that you have three months after the thirteenth instrument has been deposited and so we’re looking at the UPC coming into effect and of course opening its doors in the autumn of next year.

Deborah Bould: Thank you Tim. That is very helpful and Emmanuel and Mark do you have anything to add to that?

Emmanuel Gougé: From the French perspective you mentioned what we heard from the industry, from the profession. Now what I heard but it is more for Mark probably but I heard some German voice saying that possibly and they were possibly pessimistic in there that the Germans would possibly not ratify before the British Parliament votes for Brexit and following that before the end of the negotiation period. In which case that would delay possibly until 2018 or even 2019 but I think that’s probably a kind of worse scenario.

Deborah Bould: Thanks Emmanuel.

Tim Frain: Would you like me to comment on that?

Deborah Bould: Yes, please. Thank you

Tim Frain: Because I think that even then there’s no huge problem so the UK has most of the legislation in place, we have one remaining piece which is potentially a pitfall but that draft legislation is already in place, it was drafted some time ago. It’s on the protocol and privileges and immunities and the only reason it wasn’t laid before our parliament is because it wasn’t agreed or ready in the preparatory committee which is very unfortunate because otherwise it would have already passed, it would have been adopted prior to the Brexit referendum so that draft legislation is there ready and waiting to go and the information that we have from the British Government is that it proposes to certainly lay it well before Article 50 is triggered but there is a risk because this has to do with European implications of course and therefore it, well it has to be debated in both houses of parliament and there’s a risk that it could be treated as a mini pre-Brexit negotiation debate in parliament and the government of course absolutely does not want that to happen. Their current position is they’re quite cool about it and they see this more as a rubber stamping exercise and just going back to the timeline if all goes well that should be, well we expect it to be laid in the very early part of next year and so could be adopted by the spring.

Deborah Bould: Thank you Tim. That’s very helpful. We are looking at other questions that are coming in on the WebEx and we’ve had a question about the announcement around the UPC which I think is the first positive thing that we’ve heard about Europe since, in the UK anyway, since the Brexit vote that’s come out from the government. We’ve been asked whether we think it might make sense for the UK to also stay in the European trade mark and design systems and maybe I could have a go at that.
The UPC will be an international court and it is being set up under a separate treaty and so that is a separate system whereas the EU trade marks and designs are dealt with by national court subject to appeal to a court of justice of the European Union and so they are different systems. I think realistically where we’ll wind up with both EU trade marks and designs is that the UK government will try to give to businesses by ensuring that there are national rights granted as an equivalent but I can’t realistically see us unfortunately being able to stay in those regimes. The UPC is a very separate project and lets hope that we can still get that through. Please do ask any further questions that you want, in the meanwhile
I had one final question for me anyway. Tim talks about, he went off into the realms of fantasy and to maybe a little nirvana which I actually find very appealing, about the suggestion that we might be able to extend the whole project to EPC member states or at least maybe S&M states. How realistic do you think it is Tim that this might come about, is it your fantasy or do you think its worthwhile for industry associations and businesses to try to lobby for this situation, not just in the UK but in other countries as well?

Tim Frain: I think it’s more, this is the interesting thing about Brexit that it’s more likely now then it would have been without the Brexit referendum because it’s made us analyse much more carefully the building blocks as to the UPC system and also go back and review the courts of justice’ opinion when the draft UPC agreement was first proposed and everyone had thought prior to the Brexit referendum that the UPC was only open to European member states and now there are different views on that but it does seem that even for a former, at least a former European member state (cough) excuse me, they could remain in the UPCA although it may need some legal underpinning as well. So for the first time the Brexit situation I think made us recognise that the UPC agreement is capable of opening its doors to non-EU member states. Now both legally and politically how far that can go certainly under the current instruments is very debatable but I think in principle there’s no reason why it should not be extended to certainly all active states would be more legally possible than all EPC contracting states. Even then if the will was there it’s taken us the best part of 40 years to get the UPC agreement negotiated and if we look 40 years ahead maybe in that kind of timescale.

Deborah Bould: Okay, thank you Tim. Does anybody have anything else? Emmanuel or Mark?

Emmanuel Gougé: No.

Deborah Bould: I don’t think we’ve got any further questions unless anybody types them very quickly, now I’ll think we’ll draw the webinar to a close and it just remains for me to thank our excellent speakers. It’s been fascinating to have the updates from everybody today. Thank you all very much indeed for your contributions and thank you everyone for joining us and for your time today.




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