Client Alert

Hard Knocks Keep Coming for Europe’s Unified Patent Court

24 Mar 2020

With brexited UK announcing that it will not join Europe’s long-awaited Unified Patent Court (UPC), the establishment of an efficient pan-European patent litigation system faces ever‑mounting challenges. Last Friday, the German Federal Constitutional Court declared that the German Act of Approval of the UPC Agreement void due to violations of the principle of due process and the rule of law (English summary). Under the multinational UPC Agreement and related acts, the participation of both countries, in addition to France, is mandatory for the UPC to come into existence. As the hotspots of European patent litigation, these recent actions by the UK and Germany raise doubts whether the UPC will ever successfully launch.  

On Germany

The German Approval Act was originally passed in 2017 unanimously by the Second Chamber of the German Parliament (Bundestag) when only about 35 out of the, then, 631 members were present. The constitutional complaint, which put on hold the ratification of legislation relating to the UPC (reported here), was lodged, in part, based on the contention that a two-thirds majority of the Bundestag would have been required to pass the act.

In the decision handed down last Friday, the German Federal Constitutional Court (Bundesverfassungsgericht) (FCC) confirmed this view, finding that the UPCA amends the German Constitution (Grundgesetz), in substantive ways. In particular, under the Constitution, judicial power is exercised by the FCC, the federal courts, and the courts of the states (Länder), and “any conferral of judicial functions on international courts modifies this comprehensive allocation of jurisdiction.” Due to its far‑reaching effects, the Court held that the German Approval Act must be adopted by both the Bundestag and the German Federal Council (Bundesrat) with a two-thirds majority (according to Article 79 (2) of the Constitution). In regards to the Bundestag, however, this requirement was not fulfilled.

The FCC did not decide on other constitutional concerns brought forward in the complaint, for instance the selection and appointment of the judges of the UPC and their allegedly insufficient legal status requirements under the rule of law, as it found the complaint inadmissible in this respect. Therefore, the Court solely tackled the formal legality of the German Approval Act based on due process. Nevertheless, the decision puts Germany’s ratification of the UPC on further hold because, according to the press release: “An act of approval to an international treaty that has been adopted in violation thereof cannot provide democratic legitimation for the exercise of public authority by the EU or any other international institution supplementary to or otherwise closely tie to the EU.

To remedy this “flaw” and to bring the UPC back on track, the Bundestag can try to pass the German Approval Act again, this time with the required two-thirds majority. Whether and when this may happen remains to be seen.

As one of the most pro-EU countries and one of the EU Member States intended to host one Central and four Local Divisions, Germany has a keen interest in ratifying the UPCA and implementing the UPC Package sooner rather than later. Yet, with the global COVID-19 coronavirus crisis, the Bundestag’s attention is currently on more pressing matters. In addition, given the imminent risk that the UK may no longer participate and the theoretical risk that other German constitutional issues with the UPC may arise, members of the Bundestag may decide to walk away from the UPC as well.

On the UK

Meanwhile, if the UK delivers on its declaration not to participate in the UPC, there will be no way around amending the UPC Agreement. As currently written, the UK is to host a Central Division in London. To change that, the remaining UPC states would have to agree on where the Central Divisions would be located. The UPC Agreement requires the UPC states, as well as the non-participating states of Spain and Poland, to renegotiate that treaty. If the current unfortunate tendency of political disintegration in the EU continues, this could take years. 

Time will tell if the UK’s announcement turns out to be a bluff in order to press through other demands in the negotiations of its post-Brexit trade deal with the EU.

Conclusion

Supporters of the UPC remain optimistic that the system will come into existence, albeit with some further—potentially substantial—delay, even without the UK participating. One thing, however, is to bring the system into legal existence. The other is to provide a system that is attractive to the industry to litigate their patents efficiently. It remains to be seen whether this can be the case if the UK, one of the key patent litigation jurisdictions in Europe, does not participate. 

Meanwhile, patent litigants in the EU and UK must continue to navigate through a fragmented patent landscape, often involving multiple concurrent lawsuits in countries with different legal systems and traditions.

Morrison & Foerster Trainee Solicitor Kevin Dollerschell contributed to the writing of this alert.

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