The Unified Patent Court (UPC) is the result of an agreement between 27 European countries to create a single patent for Europe (the ‘Unitary Patent’), with a single court (the UPC) to handle validity and enforcement matters.
Its creation has elicited a great deal of debate and many have questioned whether it will be beneficial or damaging to patent holders.
Of particular concern has been the UPC courts’ location, and the approach to be adopted, which will ‘split’ infringement actions from validity actions into separate proceedings. This is known as ‘bifurcation’ and is the system that has been operating in Germany for many years. In effect, a different court will decide if you infringe a patent from the court determining if the patent is valid. This approach is not one familiar to users of the US and English patent courts. The risk is that a company could be injuncted from selling a product found to infringe, only for the patent some time later to be held invalid (and by a different court).
To some extent this split system could be potentially advantageous to the pharmaceuticals industry in its battle with generic manufacturers: the point being that injunctions may be granted quickly, whereas the validity proceedings could (in a number of instances) drag on for some time.
In order to appreciate better whether this system is going to be beneficial for the UK pharma industry, it is important to understand the structure of the UPC. The court will be comprised of different divisions, each of which will have its own judges and territorial coverage, and the local/regional divisions will serve different functions from the Central Division.
The Central Division will have exclusive jurisdiction to determine issues of validity for Unitary Patents, which presents significant challenges for patent owners. The Central Division will hear cases from three locations: London will deal with pharmaceuticals and chemicals; Munich will deal with mechanical engineering; and Paris will be responsible for the remaining sectors, including electronics. Parties commencing proceedings in the UPC will need to consider the court structure, as well as the location of the defendant, which may have a consequence as to the language used in the case. Another consideration is the timeline for proceedings; the time from commencement of proceedings in the Central, Regional or Local division, to an appeal to the Court of Appeal (in Luxembourg), together with the possibility of one or more references to the Court of Justice of the European Union, could mean the better part of a decade from start to finish.
The ‘Split Proceedings’ issue
The serious risk of an injunction being granted on an invalid patent arises because of the fact that the Central Division of the UPC will be able to determine questions of validity in respect of Unitary Patents. The court dealing with infringement may well deal with the matter at a far quicker pace than the Central Division (whether sitting in London, Munich or Paris) which will proceed at its own pace. This has been the source of considerable concern for patent owners in the past.
That is unlikely to be of concern to generic manufacturers, which are largely based outside the EU. However, a system in which the issue of validity could well take many years to resolve, with the attendant appeals, may well have a serious impact on their approach in seeking to launch just prior to the end of the patent’s life, while challenging validity. The prospect of an EU-wide injunction, preventing all sales in Europe, requires a significant tactical switch in when and how to clear the way for launch.
The system that has been agreed upon for the UPC is not one that has been created by the users and their advisers, for the users. Sadly, politics has interfered with sense. As one in-house lawyer expressed it; “[A] politically acceptable UPC arrangement is not the same as a better system.” This is simply the price we pay for political compromise being required before the differing countries of Europe could decide on the new regime. And in such situations it is not surprising that those negotiating may not fully understand patents and the economic impact of an injunction.
The devil is in the detail
Despite the threat of the UPC being up and running in 2015, there is still much more information that all industry needs, before deciding whether to lump its lot into the UPC system, or remain outside it. Knowledge of the renewal fee structure (according to the European Patent Office, which will set it, the fees will be “higher than now, but not as bad as you think it might be” – hardly a source of comfort!), as well as the quality of the judges involved, are likely to cause industry to adopt a cautious approach.
Yet avoiding litigating in lots of different EU jurisdictions, achieving swift injunctive relief while potentially delaying a decision on validity, has got to have pharma seriously considering wholeheartedly adopting the UPC system. So, for those of you looking over your shoulder at the generic manufacturers eyeing up your patents, you just might want to test the system to see if it does benefit you.