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UNITARY PATENT

In 2012 Member States and the European Parliament agreed on the "patent package" - a legislative initiative consisting of two...

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UK need not necessarily exit the UPC

Primacy of EU Law

It is a tenet of the UPC Agreement that the new court must apply the law of the European Union and respect its primacy. Decisions of the Court of Justice of the EU shall be binding on the new court6. This is a stumbling block for the new UK government if it wishes to continue to be a member of the system when leaving the EU.

It will involve some political risk to agree, following Brexit, to joining a new court that is in turn bound by the CJEU, but there are reasons why that risk may be acceptable.

First, it must be remembered that the rights conferred by a unitary patent are not defined in the EU Regulations but in the UPC Agreement. It is the clear intention that these rights are not part of EU law and are not subject to the ultimate jurisdiction of the CJEU. The exception is the extent to which they may conflict with competition law and the law relating to unfair competition.

That exception requires that each government indemnifies the court against damage that may arise from failure to comply with EU law – a slightly obscure provision added following a review by the CJEU of an earlier draft. But for this safeguard, the entire project could be viewed entirely as an intergovernmental agreement – the very sort of agreement the new UK government may wish to forge to deepen its trade relations with the EU while remaining outside.

Theresa May, the new Prime Minister, has stated that “Brexit means Brexit” – a statement that is not as unequivocal as it may sound. 

She means, at least, that it will be her government’s program to implement the will of the electorate and lead the UK out of the EU, but as to timetable and tactics, there is great scope for interpretation.

Will it be politically impossible to proceed with ratification of the UPC agreement in the remaining time of the UK’s membership of the EU? The new court would allow a patent owner from, say, Germany to sue a UK company in German before a division of the Court in Germany. One can imagine the headlines in the British press, but is such a situation so far removed from the status quo by which any UK company could be sued for patent infringement in Germany based on its activities in Germany? The difference is that the court in Germany can reach out to all the damages arising from the UK company’s activities across the EU, rather than just the damages in Germany.

Such a step is minor in the context of the whole renegotiation between the UK and the EU of enforcement of judgements between respective courts. If, for example, the UK seeks (and the other EU states agree to) continuing the Brussels Regulation with appropriate modifications to provide for the UK‘s status as a third state, many of the difficulties with recognizing primacy of EU law would be directly addressed. This would be a shortcut to overcoming a number of exit issues but depends on the political appetite on both sides. It might be possible to “sell” this to the UK electorate, but the other EU states may not be minded to making exit easy by agreeing to such a special status for the UK.

Nevertheless, amending the agreement to remove the primacy of EU law would change the nature of the entire project. If that is what it takes to satisfy the UK electorate, it is better to set the project aside for another decade. The question to ask is whether the new UK government might countenance ceding jurisdiction for patent infringement (and damages and all the ancillary measures) to a new intergovernmental court that is answerable to the CJEU at least

in respect of competition law. All other questions at present merely address the interim situation pending triggering of Art.50 TFEU and pending the 2-year period for exit under that article (or longer period if agreed).

6 Arts. 20 & 21 UPC

Conclusion

The UPC project will have to be revised to the new reality of Britain being an unwilling member of the EU about to file divorce proceedings under Art. 50 TFEU.

The UPC Agreement cannot continue as it is – either Art 7(2) must be revised or some other solution must be found. London’s position as the host city for the Central Division of the Court is in grave jeopardy, but so too is the entire project. There can be no further progress until the new UK government sets the timetable. In the meantime it is folly to appoint judges or hire staff.

Germany was initially unhappy with the small part of the Central Division that was allocated to Munich, but merely allocating a bigger share of a smaller pie to Munich serves none of the stakeholders.

The UPC Agreement is open only to EU Member States. This would require amendment if the solutions discussed above were to be implemented. Clearly, negotiation of a successor to the Brussels Agreement will take time. Consequential amendment of the UPC might be simple - Art 87(2) of the UPC Agreement empowers the Administrative Committee to make the necessary amendments to bring the agreement in line with a UK exit agreement. So, if a successful end is in sight, the UK could indeed ratify the UPC Agreement while still an EU Member, as there are clear and direct benefits to the UK economy that can be presented to an electorate that is more concerned with immigration and the economy than with UK companies having to comply with relatively obscure rulings of the CJEU.

In any case, there can be no action by the other states participating in the system until negotiations under Art.50 TFEU have run their course. This is no more open for pre-emptive action than, say, opening of the channel crossing to migrants from France or closing of the UK’s borders to migrants from the EU or cessation of the UK’s payments to the EU budget. All must be negotiated or nothing can be negotiated.

Written by Hugh Dunlop, Partner



Tuesday, September 13, 2016