German Ruling Spells More Trouble For Europe’s New Patent System
Major Delays Or Even Abandonment Lie In Store
Executive Summary
The annulment of Germany’s ratification of the Unified Patent Court Agreement has dealt the proposed system another serious blow following the UK’s recent decision not to take part because of Brexit.
The German Federal Constitutional Court ruled on 20 March that the country’s legislation ratifying the agreement on Europe’s proposed Unified Patent Court is void because not enough members of the lower house of parliament were present when the legislation was passed in 2017.
Coming hot on the heels of the UK’s decision not to participate in the proposed patent system as a result of its departure from the EU, the German move casts yet more doubt on the viability of the whole project. Lawyers suggested that at best it could be delayed by several years, and that at worst it could be dropped altogether.
Willem Hoyng, a member of the Drafting Committee for the UPC’s Rules of Procedure, said the decision would "set back the UPC project at least five years. Also in light of Brexit, it will require participating states to renegotiate the UPC Agreement.”
The UPC Preparatory Committee said that although the judgement would result in further delay, the preparatory work would continue “while the judgement and the way forward is further analyzed.” It added that it “should be acknowledged that all colleagues working for the Preparatory Committee are facing unprecedented challenges with the COVID-19 outbreak but work will move forward using all available resources to keep the momentum."
Growing Problems
The UPC and unitary patent project has been in trouble for some time. Although the European Patent Office said in January that the new system was on course for implementation at the end of this year, uncertainty over the UK’s participation had already been casting a shadow over its prospects. (Also see "New EU Patent System On Course For End Of 2020, Says EPO" - Pink Sheet, 17 Jan, 2020.)
The odds lengthened after the UK confirmed last month that it would not be playing any role in the patent system. (Also see "‘No Unified Patent Court For Us’, Says UK Government" - Pink Sheet, 28 Feb, 2020.)
In Germany lawyers had been on tenterhooks since March 2017 when the ratification process was frozen after a German lawyer lodged a complaint that the legislation was unconstitutional on four grounds, chiefly the failure to secure a two-thirds majority in parliament.
In its 20 March ruling, the German court agreed that a two-thirds majority should have been required because ratifying the UPC Agreement involved a major amendment to the country’s constitution. "The Act of Approval to the Agreement on a Unified Patent Court... to confer sovereign powers on the Unified Patent Court is void," it declared.
Some lawyers took to Twitter to declare the project dead in the water, although others said it was likely to still go ahead at some point, albeit with major delays.
Michael Schneider of law firm Pinsent Masons said the ruling was “the latest significant blow to the prospects of a new UPC system becoming operational. There were already significant doubts about whether it would become operational in light of the UK's decision not to participate, but this judgment is a further setback, as without German and UK participation the new system is substantially less attractive for businesses.”
However, Schneider said the ruling was “not necessarily fatal to the UPC.” Based on the German ruling, the German ratification process “can be achieved by bringing fresh legislation before the parliament and achieving the necessary two-thirds majority vote.”
If there were no further complaints against three of the four grounds of the complaint that were declared inadmissible by the court, in particular regarding the UPC’s compatibility with EU law, “Germany would then be in a position to ratify," he suggested.
The ruling "means that the chances of the current UPP ever entering into force are now looking slimmer than ever" – Mike Snodin, Park Grove IP
Mike Snodin of Park Grove IP said there were “potential grounds for optimism” because the court had dismissed three of the four grounds of the complaint, which arguably made German ratification possible, but he did not hold out a great deal of hope.
Despite this “potential glimmer of hope, our view is that the FCC’s decision means that the chances of the current UPP [Unitary Patent Package) ever entering into force are now looking slimmer than ever,” he declared.
There were a number of reasons why this was so, Snodin said, including uncertainty over whether Germany’s lower house could achieve a two-thirds majority, the possibility of further complaints, and the need to renegotiate the UPCA following the UK’s withdrawal.
Lawyer Peter Huber of Juve Patent said organizing a two-thirds majority in the German parliament would be “a major challenge. A failure of the project is thus also possible.” Germany is “one of the three key member states that must ratify the Agreement in order for the UPC to go ahead,” he added. The other two are France and the UK, which have both ratified the agreement, although another member state will now have to be chosen in place of the UK.
Law firm Carpmaels & Ransford pointed out that in renegotiating the UPCA the participating EU member states would have to reallocate the responsibilities of the UK, which was due to host the life sciences section of the UPC’s central division in London.
Snodin said: “In short, our view is that the FCC’s decision will most likely lead to either: a delay of several years (perhaps up to 5 years or more) before a Unified Patent Court becomes operational; or scrapping of the entire Unitary Patent Package.”
In the meantime he advised companies to “keep a close watch for further developments that follow on from the FCC’s decision. In particular, the reaction of the German government to the FCC’s decision may help to clarify whether (and, if so, when) further steps towards ratification of the UPC Agreement will be taken. This, in turn, will help to clarify whether it now makes sense to put ‘on hold’ any preparations that you may have been making for the coming in to force of the UPP.”