13 March 2020

Will the UK's withdrawal from Europe's unified patent court project kill it off?

Pic of David Sant

David Sant: 'In many ways the issues surrounding the UPC are a microcosm of the larger issues arising from Brexit'

An abrupt about-turn by Britain has sparked an existential crisis for supporters of the UPC, writes David Sant

In a reversal of the position set out by Theresa May’s government, the new UK government has announced that the UK will not participate in the future Unified Patent Court (UPC), citing as reasons for the decision the UK’s aim to be a self-governing state, as well as the role of EU law, and the CJEU, in UPC proceedings. 

The UPC forms a corner stone of reforms of the European patent system which have been under discussion since 1999. The objective of the reforms was to reduce costs for users and harmonise patent law. The need for a unified court to handle patent disputes, and eliminate forum shopping, was identified early in the negotiations and, from the outset, the UK has played a leading role. 

The Unified Patent Court Agreement was signed in 2013 as an international agreement outside EU structures and foresees a supranational court with its own governance framework independent of Brussels.

Before signing on behalf of the UK, the Cameron government secured a commitment that London would host one of the UPC’s three central divisions, to handle patent disputes in chemistry, including pharma and biotech.

The UK government subsequently acquired and fitted out premises in Aldgate to accommodate the new court.

The UK parliament ratified the UPC agreement in April 2018. In July of that year the government published a White Paper setting out the UK’s future relationship with the EU, which stated that “patents can be costly to enforce in multiple jurisdictions” and that the UPC would provide businesses “with a streamlined process for enforcing patents through a single court, rather than through multiple courts”.

Theresa May’s approach has now been abandoned and the UPC central division for chemistry will no longer be located in the UK.

About-turn

In taking this decision, the UK government’s about-turn means that costs and efficiency goals, which were so recently applauded by the British government, now take second place to the UK’s need to establish its sovereign status in a post-Brexit era.

While this approach may, given the UK’s referendum on membership of the EU, combined with the recent Johnson electoral success, appear inevitable, many in industry, which had shown widespread support for the UPC, will be disappointed by the decision.

Until the UK’s decision, the remaining hurdle to the creation of the UPC was final ratification by Germany, where a complaint against the constitutionality of the UPC is being heard before the Bundesverfassungsgericht. Despite the complaint, many expected the UPC to be operational in late 2020.

If the German court agrees with the complaint, it will difficult to see how the UPC project can survive. A decision from Germany is due shortly. 

The departure of the UK, even if the German court dismisses the complaint, is likely to be keenly felt by the other UPC participating nations: there will be questions about whether the project can advance without British participation.

Existential questions

Although it is too early to predict its effect, the British decision now raises real existential questions for the UPC: there is speculation about whether the UPC project will continue, in a modified form, without the UK, or whether the British decision will de-rail the UPC project completely. The government’s 2018 statement that “The UK will work with other contracting states to make sure the Unified Patent Court Agreement can continue on a firm legal basis” has clearly been superseded by events.  

In many ways the issues surrounding the UPC are a microcosm of the larger issues arising from Brexit. If the UPC project survives, the British decision will split the future patent jurisdictional landscape of Europe: the UK and the UPC area will be separate jurisdictions, subject to different rules and procedures, duplicating costs for those litigants who seek enforcement of their rights across Europe.

Competition

If the UPC does proceed without the UK, the two jurisdictions (the UPC area and the UK) will be quite different, the UPC jurisdiction being considerably larger than the UK in terms of population and market size, and possibly large enough to rival the USA as a forum for international patent disputes.

The UK court and the UPC may well compete with each other as dispute venues.

It is difficult to predict the outcome of any such competition, but patent litigants may choose to start proceedings in only one of these venues, without any proceedings in the other.

It is also possible that sophisticated forum shopping strategies emerge, whereby litigants seek one remedy from the UPC and simultaneously seek another remedy from the UK court.

How, in such circumstances, judgements would be enforced cross-border is uncertain at present. The UK decision, and Brexit policy in general, may have consequences for London as centre for international dispute resolution. Time will tell.

David Sant is a partner at McCarthy Denning

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