As has already been widely reported, on Friday 29 June 2012 the European Council agreed on what has been presented as the final step on the long road to the Unitary EU Patent and a Unified European Patent Court. It did so in the following terms:

"Heads of State or Government of the participating Member States agreed on the solution for the last outstanding issue of the patents package, namely the seat of the Central Division of the Court of First Instance of the Unified Patent Court (UPC). That seat, along with the office of the President of the Court of First Instance, will be located in Paris. The first President of the Court of First Instance should come from the Member State hosting the central division.

"Given the highly specialised nature of patent litigation and the need to maintain high quality standards, thematic clusters will be created in two sections of the Central Division, one in London (chemistry, including pharmaceuticals, classification C, human necessities, classification A), the other in Munich (mechanical engineering, classification F).

"Concerning actions to be brought to the central division, it was agreed that parties will have the choice to bring an infringement action before the central division if the defendant is domiciled outside the European Union. Furthermore if a revocation action is already pending before the central division the patent holder should have the possibility to bring an infringement action to the central division. There will be no possibility for the defendant to request a transfer of an infringement case from a local division to the central division if the defendant is domiciled within the European Union.

"We suggest that Articles 6 to 8 of the Regulation implementing enhanced cooperation in the area of the creation of unitary patent protection to be adopted by the Council and the European Parliament be deleted."

Although this agreement without doubt brings us the closest that we have yet come in the 40 year history of negotiations for this measure to a Unitary EU Patent and a Unified Patent Court, the lessons of history are that this will not be the final stage in the process. Several hurdles remain still to be overcome before the new system is up and running.

Before outlining these hurdles it may be helpful, given the twists and turns that the "patents package" has undertaken over the years, to outline what currently is proposed. One aspect of the package, reflected in the draft "Regulation implementing enhanced cooperation in the area of the creation of unitary patent protection" ("the Regulation") together with an associated Regulation concerning translation arrangements, would establish the option, for patents prosecuted via the European Patent Office (EPO) of designating the whole of the EU instead of selected countries only, and thereby securing a unitary EU patent having effect throughout all of the EU (except Italy and Spain). The other aspect of the package would not, despite having EU support, be an EU measure, but would instead be an intergovernmental agreement in the nature of an international treaty ("the Intergovernmental Agreement") establishing a single court, the Unified Patent Court (UPC). The UPC would have a central division (now itself to be split by subject matter into three chambers in accordance with the 29 June agreement) and local divisions, or multi-country regional divisions. The UPC would have mandatory jurisdiction over the new unitary EU patents established under the Regulation and, subject to transitional provisions, over all other EP patents in so far as they designate EU member states. It would have no jurisdiction over national patents or national utility models. The jurisdiction of the local and regional divisions of the UPC will be more limited than that of the central division, which for example would have exclusive jurisdiction over declarations of non-infringement and revocation actions other than as counterclaims to infringement actions. Local and regional divisions will only have jurisdiction over infringement actions (and if they so choose, counterclaims for revocation) where the actual or threatened infringement takes place in or where the defendant or one of the defendants has its residence or principal place of business in such country or countries. Local or regional divisions will, unless the parties agree otherwise, use a local language whereas the central division will use English, French or German, depending on the language in which the patent was granted.

But as observed above much still needs to happen before the "patents package" can be brought into force. Thus the legality of using the mechanism of "enhanced cooperation" to sidestep the requirement of unanimity under the EU Treaties for measures concerning languages still remains under challenge at the Court of Justice of the EU (CJEU) by Italy and Spain, which countries are not participating in the proposed measure because of its language regime. Moreover the current draft of the Intergovernmental Agreement has still to be approved by the CJEU, which rejected an earlier version, largely because of its application to non-EU countries over which the CJEU lacked control. Although this particular concern has now been addressed by restricting the Intergovernmental Agreement to EU countries (with the exception of Italy and Spain) only, and not the non-EU countries of the European Patent Convention, the support of the CJEU cannot be taken for granted. This is particularly the case if Articles 6 to 8 of the current draft of the Regulation are to be deleted as is "suggested" in the 29 June agreement. This is because it is these provisions which would establish EU competence in substantive patent law for the unitary EU patent and thereby greatly increase the scope for references from the UPC to the CJEU, with the consequential risk of delay and uncertainty. In that in this and certain other respects the 29 June agreement envisages reopening the Intergovernmental Agreement will this provide scope for yet further amendments to it? Even assuming it survives all of this however, the Intergovernmental Agreement, not being an EU measure, has also to be ratified and acceded to by those countries that still wish to participate in it. Another critical issue that will need resolution before this happens is that of the financial contributions of the countries participating in the UPC and the level and type of court fees. As the UPC will not be an EU body there will be no central funding, and yet it cannot be self funding and at the same time preserve access to justice.

It is not only Articles 6 to 8 of the Intergovernmental Agreement that have been criticized, both by industry and practitioners, and for example another aspect that many regard as unsatisfactory, namely the incentive that its jurisdictional asymmetry gives to local and regional divisions of the UPC to bifurcate proceedings as between infringement and validity, remains. We wait however to see whether, and if so to what extent, the detailed rules of procedure which are also at present being drafted for the UPC, and which will apply to all its divisions, will address any of the various concerns that have been raised.

The UPC rules of procedure will be important for users of the patent system considering how the patent package, if it comes into force (which will not be before 2014) will impact them, and deciding whether or not to seek unitary EU patents, or indeed whether to continue to seek patents designating EU countries via the EPO (as opposed to national) route, as these will also be subject to the jurisdiction of the UPC. Such users will however also be watching matters such as the fee arrangements for the new unitary EU patent, the calibre of judges that are appointed to the UPC, and what local and/or regional divisions of the UPC are established (hosting the central division does not preclude also hosting a local division). Not only do patentees need to be thinking about their future patenting strategy for Europe, but they need also need to be thinking about what to do about patents granted or applications filed via the EPO route before the patents package enters into force. This is because the current draft of the Intergovernmental Agreement will subject such patents to the jurisdiction of the UPC unless the patentee opts out during a transitional period (currently proposed to be seven years) after such entry into force.  Any patentee deciding to opt out should do so sooner rather later, as during such period the UPC will share jurisdiction with national courts, with the result that if for example a revocation action is started in the UPC it will stay there.

This newsflash was written by Trevor Cook, Partner, Bird & Bird UK.

For further information please contact Katie Blampied.

About Bird & Bird

Bird & Bird has established an international reputation for its intellectual property expertise and we are consistently rated by the major legal directories, as the leading law firm for IP. We were recently recognised as the 'Patent Firm of the Year - Europe' for the fourth consecutive year from Managing IP.

We have 23 offices in key business centres across Europe the Middle East and Asia, including in Abu Dabi, Beijing, Bratislava, Brussels, Budapest, Düsseldorf, The Hague, Helsinki, Frankfurt, Hamburg, Hong Kong, London, Lyon, Madrid, Milan, Munich, Paris, Prague, Rome, Shanghai, Singapore, Stockholm and Warsaw. For more information please visit our website.