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The UPC post-Brexit: unified, “emmental-ed”, or dead?

17 October 16

Does Brexit mean the end of the UK's involvement in the Unified Patent Court? Not necessarily, whatever the outcome of the wider negotiations

by Alan Johnson, Fiona Nicolson

The idea of creating a pan-European patents court has been around for longer than most readers of this article have been alive – since 1959 at least, and arguably longer. The latest attempt to create a system started in 1999 and has resulted in what we now call the unitary patent and Unified Patent Court system.

Back in 1999, only half a dozen countries including the UK and Switzerland, but interestingly neither France nor Germany, were really interested in what was at that time called the European Patent Litigation Protocol. Very quickly, however, the EU became involved, but worked together with Switzerland to design the system, until in March 2011, the CJEU issued its opinion 1/09 which declared the then proposed incarnation of the agreement unlawful.

The Commission considered this decision and in May 2011 issued a “non-paper” annexed to Council note 10630/11 which stated: “As a result of opinion 1/09 of the CJEU, it appears that the participation of third countries [i.e. non-EU states] must be excluded.” That initial view was confirmed and expanded on in a Council Legal Services’ opinion (paper 15856/11) prepared in October 2011 (but only released for publication in 2015). As a result, the present system was designed and Switzerland was ejected from it as part of the process of making the new agreement lawful.

Now, five years later, the UK has voted to leave the EU, which one might think would lead to the inevitable conclusion that like Switzerland, another “founding father” of the present initiative, we will have to be ejected from the system. Of course, in theory there is no reason why the UK should not join the system pro tem and leave when Brexit actually happens – whenever that might be. But that seems an unpalatable prospect to most. Why would the UK Government want an additional series of complications to untangle, and why would British industry want additional uncertainties relating to important rights: just what would happen to unitary patents on Brexit, what would happen to pending UPC litigation, and what would the status be of judgments already obtained?

End of story?

Hence one might think that there was no prospect at all of the UK ratifying the UPC Agreement, and since the UK is one of the three mandatory ratifying countries, this would mean that the UPC could not possibly start in May 2017 as had been anticipated before 23 June. Certainly that was the immediate reaction of many, not just in the UK, but abroad. However, the mood has changed in these last three months, and in the run-up to the Competitiveness Council meeting on 29 September, a number of organisations called on the UK to ratify this year as previously planned. At the same time, it has been said that the views of the Commission in its “non-paper” and the Council Legal Services in its opinion were wrong, and actually there is no reason why the UK cannot continue to be a part of the UPC, which logically must surely mean that we might, after all, be able to include the likes of Switzerland and Norway too in the system. Hence the message is now: UK, please ratify and we will amend the agreements so you can continue to participate post-Brexit. But is this realistic?

Plainly, the main question surrounding any immediate ratification is political. The UPC Agreement expressly requires ratifying states to accept the primacy of EU law, which means that the Government in Westminster would have to put forward a proposal to set up a new system giving new powers to the EU over what may broadly be termed innovation policy, and new powers to the CJEU to rule on these issues. The fine legal distinction that the UPC Agreement is an international treaty and not an EU instrument, is not one which is likely to cut any ice in Parliament or the country at large. The Government has not announced any formal decision as yet, but it seems unthinkable in the present political climate (especially since the Prime Minister’s speech at the Conservative Party Conference on 2 October) that it could be seen to be recommending acceptance of the supremacy of EU law to Parliament. Hence, it is not really at all realistic for our EU partners to call for early ratification by the UK: it is asking the almost impossible.

But the position could change in time. It may not be compatible with a “hard” Brexit, but even if that were the route the UK follows, it is still entirely possible that in a post-Brexit era of cooperation with the EU, patents could be portrayed as a special case where international cooperation including some degree of acceptance of EU law and CJEU supervision would be a reasonable price to pay; and a fortiori if Brexit were “softer”.

Those who call for early UK ratification are saying that after the UK has ratified the present UPC Agreement, a modified arrangement can be agreed. Hence, a very sensible reaction from the UK would be to say that it is politically difficult to ratify now, but to ask its EU partners to be a little patient, and to ask them to work with us toward a new solution which can include the UK. By the time that is done, the climate may well be different, and even accepting supremacy of EU law (if really required) may be possible. Put simply, what is wrong with the UK saying: “You are asking us to join in now with the promise that you will fix things so we can stay, but we would rather we all fixed it first, and then we joined”?

But what are the alternatives? There are only two. The first is that the project dies a death; the second is that the other states go on without us. Whilst there are some who would not mourn the death of the UPC, not least in Spain and Poland, this is very much a minority view. The number of players who would want to go ahead without the UK, as opposed to giving the UK some slack and waiting, is more difficult to judge. This is mainly because almost everyone would prefer the UK to be in the system, and we are still at the stage where the majority are prepared to wait for the UK to make some announcement. But if, in two months’ time, the UK has said it cannot ratify soon, but wants everyone to delay so as to join a modified, non-EU state friendly system, what will other states do?

Slow dance

One factor in answering this is timings of the “drop the UK” alternative. The UPC Agreement would have to be amended in two respects before the other states could go ahead without the UK. The first is to remove the UK as a mandatory ratifying country. The second is to deal with the location of the Life Sciences branch of the UPC Central Division in London. This second issue requires a political discussion involving at least France and Germany, probably Italy and perhaps the Netherlands, all of which are likely to have something to say. Such a discussion might well have to be at a high political level, and not easy to resolve. A new version of the Agreement would then have to be prepared, and it is generally recognised that in practice a new Treaty would have to be entered into and ratified afresh.

The process of ratification of the existing agreement has taken three and a half years so far (and is not, of course, complete), but it is said that a fresh round of ratifications would be quicker, for example because in Denmark a new referendum would not be needed. Nonetheless, it seems fairly unlikely that the process of political renegotiation, re-drafting and re-ratification would see the UPC start before perhaps early 2018, and very probably rather later. Hence, the route of going ahead without the UK is hardly a speedy solution.

There may be other, unspoken, issues. Many countries regard the UK as a counterbalance to German (or Franco-German) dominance in Europe. Others see the role which could be played by English judges as important. And then there is the obvious question of how far this “emmental” (as it was once called) approach to a European solution can really go. From an initial proposal in 1999 to include all (40 or so) EPC countries, we have, in stages lost all non-EU countries, Spain, Poland and now the UK. And that is ignoring the fact that of the remaining EU countries, Croatia has not actually signed up, and over a dozen others who have signed, have not yet ratified, and may never do so. Is this patchwork solution something really better than what we have now?

In that context, perhaps if the UK will give positive signals that it would like its EU partners to be patient, and holds out real hope that it could yet be a part of a new system, and that this system could be made better by the inclusion also of Switzerland and the likes of Norway, potentially this may win the day. As ever on matters European, the view of Germany appears key: so far the German Government has been distinctly quiet, and is showing no signs of proceeding with its own ratification. Hence, we wait not only for the UK to signal its intentions, but Germany too. But in conclusion, perhaps on this topic it really is the case that Brexit provides an opportunity to improve what is on offer right now. A truly unified system sounds so much more attractive than emmental or death.

Alan Johnson and Fiona Nicolson are partners with Bristows LLP, London

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