Fate of UPC after UK referendum

Patents Unitary Patent

Written by Paul Clarkson and Rolf Suurmond

Now that the votes have been counted, it is clear that the UK electorate has voted to leave the EU. The referendum result is not legally binding, but there is no serious doubt that the UK government will follow the result and within some months start the procedure to leave the EU, and that the UK Parliament will not block an EU exit.

No matter how the exit procedure goes, the situation will have major negative impact on the realization of the European patent package. Firstly, once the UK is no longer an EU member state, it cannot take part in the unitary patent and Unified Patent Court (UPC). Secondly, the start of the patent package may be delayed.

Unitary effect

As you may remember, the unitary patent package consists of a new type of European patent and a Unified Patent Court. The new patent will (if it comes into existence) have unitary effect throughout the participating EU member states, and the Unified Patent Court will, eventually, replace the national courts when it comes to litigation of all European patents, with or without unitary effect.

Currently, the unitary patent package is in the process of being ratified by the individual EU member states, and as soon as 13 EU member states, including the three economies having the highest number of patents of the EU, have ratified, the package will come into effect. Since the patent package will have a tremendous effect on the patent landscape, professionals with an interest in IP are cautiously following the progress. Ten states have already ratified the UPC Agreement and sufficient states are expected to ratify in the second half of 2016 to enable the European patent package to become operational in first half of 2017.

Now, in the harsh light of a Brexit, the situation is completely different. Since the UK is one of the three largest economies of the EU, the UPC cannot become operational before the UK either ratifies the UPC Agreement or leaves the EU.

Ratification or not

Theoretically, the UPC could still start in 2017 if the UK ratifies – and the UK Parliament has actually already agreed to ratification of the UPC Agreement. The UPC Agreement is strictly limited to EU member states. If the UK were to ratify the UPC Agreement and then leave the EU, they would be a participant of the UPC Agreement only for a short period of time, which could lead to many complications and additional transition costs for the UK.

If the UK does not ratify the UPC Agreement at all, then the situation really becomes uncertain. Since the UPC cannot start without the UK, as long as it is an EU member, there would not be a UPC or unitary patent any time soon. Only after the UK has formally left the EU, Italy would replace the UK in the top three of the EU and must therefore ratify the UPC agreement. In this scenario, it may take years until the UPC and unitary patents can become operational.

Also, a new location may have to be agreed to replace London as a seat of the Central Division of the UPC. This could give an opportunity for other countries, such as The Netherlands or Italy, to claim this seat.

In the coming months, many issues will have to be dealt with between the UK and the EU and the UPC is only one of them. At present the future of the unitary patent and UPC is highly unclear. NLO has always been closely involved in this process and closely monitors developments to keep its clients informed. Where necessary, NLO will provide guidance to adapt strategic choices to the changing circumstances.

The other EU countries

Meanwhile, in the other European countries, the ratification process has been proceeding steadily. Ten EU member states have ratified, the latest instrument having been deposited by Bulgaria on June 3rd. While Belgium ratified already two years ago, progress has recently been made in The Netherlands too: the House of Representatives passed the law authorizing ratification on June 16th. Now, the case lies before the Senate, which has scheduled to pass the law on June 28th. No further hurdles are expected to prevent ratification in the Netherlands.

In Germany, the first hearing on the UPC Agreement was held on the evening of 23rd June 2016 in the German House of Representatives – at the very moment that the UK referendum was being held. This first hearing is to be followed by second and third hearings, in which the matter is to be debated in substance. After that, the Senate has to vote on the matter. In theory, the matter could pass both the House of Representatives and the Senate before the summer recess.

Next steps

Too much effort and investment has been made to set up the system already. To make a success of the unitary patent, it may be necessary to lower the level of the renewal fees, taking into account the reduced territory where the unitary patent has effect. Nevertheless, the stakeholders of the patent system (patent owners, licensees, third parties, SME’s as well as large corporations) would still benefit strongly from a unitary patent and a Unified Patent Court that can decide patent disputes for a large number of ‘continental’ EU member states. This would still mean reduced litigation costs and more harmonized decisions throughout the (remaining part of the) internal EU market.

NLO is a committed European player, with partners and staff from many European countries. We hope and truly believe that the European patent package will be realized eventually – with or without the UK.