Brexit negotiations: Starting with the UPC Agreement

This article was published prior to the publication of the post-Brexit agreement between the UK and EU which covers the relationship between the UK and EU following the end of the implementation period (commonly referred to as the “transition period”) created by the European Union (Withdrawal Agreement) Act 2020, and should be read in that context. For up-to-date commentary and information on our services, please see our Beyond Brexit page.

This article was first published by The Global Legal Post and the original article can be found online here.

On 28 November 2016, the UK government confirmed "it is proceeding with preparations to ratify the Unified Patent Court Agreement".  This should be encouraging to proponents of the Unified Patent Court ("UPC"), especially as the terms of the Agreement have been only recently agreed after decades of negotiations between EU member states.  Ratification by the UK is one of the very last hurdles. However, Brexit has made that last hurdle more difficult to overcome.

The UPC promises a new streamlined way for businesses to establish and enforce their patent rights across Europe - with a single patent and through a single patent court. Presently, the only way to establish patent rights across the whole of Europe is to apply for (or validate) in each and every country individually.  Similarly, enforcement is conducted piecemeal, with each national court deciding on matters of infringement and validity independently. The current patent system is fragmented, increasing enforcement costs for patent holders. Accordingly, many exercise their patent rights in only a select few European territories.  As the name suggests, the  UPC would decide matters concerning European patent litigation in a unified manner, resulting in procedural efficiencies that can reduce cost and complexity. 

As well as benefiting individual businesses, the UK as a whole may profit. London was agreed to be the location of one of the sections of the Central Division of the UPC.  This section would specialise in hearing patent cases in the chemical and life sciences sectors.  This could represent a significant influx of patent court activity into the UK. 

These benefits have driven the formation of the UPC, and were previously expected to lead to the operation of the UPC by early 2017. Expectations have changed since the Brexit referendum result.

Parties to the UPC Agreement are exclusively EU territories. Thus, if the UK leaves the EU, it will also no longer be a party to the UPC Agreement and its associated benefits. Thus, it is likely that the UK will postpone ratification until amendments are made that will allow the UK to continue to participate in the UPC Agreement, even if it ceases to be an EU member. 

This position is hinted at by the recent official government statement. The UK Minister of State for Intellectual Property, Baroness Neville-Rolfe, included a caution that "…the decision to proceed with ratification should not be seen as pre-empting the UK’s objectives or position in the forthcoming negotiations with the EU."

This reflects the interests of many stakeholders in the UK including the Chartered Institute of Patent Attorneys who have been working towards a system favourable to the UK and business, and who have voiced "…a strong preference for the UK to participate…if a solid legal basis for this can be agreed". Similarly, TechUK, which represents the interests of many technology companies in the UK, have prescribed that the UK ought to ratify the UPC Agreement "…subject to assurances that the UK will remain a member of the UPC once it is no longer an EU member state". 

The most straightforward legal amendment to a modified UPC Agreement would simply enable participation of non-EU member states.  But this is not the most straightforward politically. 

In this scenario, it is likely that the UK would need to accept the supremacy and uniformity of EU law for patent disputes handled by the UPC. In practice, questions of EU law will rarely arise in patent litigation but the apparent granting of supremacy over one's laws to another country is likely to be decried by the more zealous of the 52% of the British electorate who voted to leave theEU. Nonetheless, such a straightforward legal amendment to the UPC Agreement is the most likely to lead to it being ratified with the UK as a benefitting participant. 

Alternative approaches are less likely to meet this objective. If the UK ratifies without amendment to the Agreement, its bargaining position to secure an amendment will be weakened, and it faces ousting from the UPC upon exiting the EU.  Conversely, seeking an amendment that undermines the unitary nature of the agreement is liable to reopen substantive negotiations and stall the progress of the UPC indefinitely. The expertise and expediency of the UK's national patent system makes it a worthy participant of the UPC system, but the UK's continental counterparts won't have boundless reserves of patience and, if negotiations do not go smoothly, could move to exclude the UK from the UPC Agreement. Sending signals of intention to ratify is important for heading off such an eventually, but can only do so for a limited period.

It seems appropriate, therefore, for the UK to seek a straightforward amendment to the UPC Agreement. Moreover, it is politically justifiable.

Aside from highlighting the benefits of the UPC, it is worth pointing out that control is not necessarily being handed away from the UK. National patent courts will be able to continue as normal and in parallel with the UPC. Those patent applicants that are uncomfortable with what the UPC offers can simply choose to opt-out.  Many will do so anyway for strategic reasons; for all of its benefits, the UPC presents the risk to patentees of losing all their European patent rights in a single revocation decision. 

Additionally, although the UPC is exclusively available to EU member states, it is not an EU institution. It is a court founded by international treaty. Some EU member states, notably Spain, have chosen not to participate in the UPC. This distances the UPC from the EU, and so makes it easier to rebut sentiments that the government isn't going through with its commitments to leave the European Union.

Further, decisions of the UPC aren't likely to be a significant departure from those of national patent courts. European patent law is already relatively well harmonised under the European Patent Convention ("EPC") which provides a unified patent granting system for countries in and around Europe. Whilst only novelty is enshrined in the EPC, it is often considered that infringement and novelty are two sides of the same coin.

In many ways, the EPC is a source of hope and inspiration for the UPC, and the UK's place within it.  After more than 20 years of negotiations, 16 countries signed the EPC. This occurred in 1973 - over forty years ago.  Since then, the number of parties to the EPC has burgeoned from 16 to 38 countries, some of which are distinctly outside the EU.  Like the UPC, the EPC is a multi-lateral agreement and so if the UK exits the EU, there is no question that the UK will remain a member of the EPC.  There are good reasons why the same should apply for the UPC.

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