Max Planck Institute raises questions about the lawfulness of the Unified Patent Court

The Munich-based Max Planck Institute recently published a comprehensive report addressing the issue of whether the Unified Patent Court (UPC) would be incompatible with EU law post Brexit. The report concluded that the UK remaining in the UPC system post Brexit would be incompatible with EU law.

While the German Federal Constitutional Court (“Bundesverfassungsgericht”) has yet to decide whether the Unified Patent Court (UPC) system is compatible with the German Constitution (this lawsuit was previously discussed here), the Max Planck Institute in Munich (“Max Planck Institute for Innovation and Competition”) recently published a report addressing the issue of whether the UPC system would be compatible with EU law after UK’s secession from the European Union, which is scheduled to take effect on 29 March 2019.

The UPC and EU law

The question of whether the UPC can be established without conflicting with EU law is almost as old as the idea of the system itself. The original idea to establish a system wholly outside the EU, the so-called European Patent Litigation Agreement (EPLA), was rejected because the European Commission found that the agreement touched upon issues which only the EU could regulate, including issues regarding jurisdiction etc.

The current system was initially declared invalid by the Court of Justice of the European Union by opinion 1/09 and was subsequently redrafted, among other things to ensure that only EU member states could participate in the system. Four lawsuits have subsequently been filed with the Court of Justice of the European Union by Spain and Italy, respectively, and subsequently by Spain alone, regarding the validity of the system, all of which were decided in favour of the system.

When the UK in 2016 voted to leave the European Union, questions were raised as to whether it was still possible to implement the system in its present form. Two English barristers, Richard Gordon QC and Tom Pascoe of Brick Court Chambers, prepared an opinion stating that it would be possible to implement the UPC system on certain conditions. This opinion has previously been discussed here.

The process of implementing the system continued, and the UK has now ratified the Unified Patent Court Agreement. The ratification process is currently awaiting the above-mentioned German constitutional lawsuit, as Germany is one of the three countries required to ratify in order for the system to enter into force.

New report from the Max Planck Institute

Questions are now again being raised about the validity of the system. This time by Matthias Lamping and Hanns Ullrich of the Max Planck Institute in Munich.

Broadly speaking, their arguments are as follows: As opposed to Gordon and Pascoe, Lamping and Ullrich do not find that the fact that a number of formal requirements have been met (the possibility of referring questions to the Court of Justice of the European Union for a preliminary ruling etc. – see the link above) is sufficient to ensure the compatibility of the UPC system with EU law: The key issue is that in order to decide a question concerning EU law, a court must form an integral part of the EU legal system, as the Court of Justice of the European Union will otherwise not have jurisdiction over the UPC’s application of EU law. The national courts of the EU member states form an integral part of the EU legal system, but this will not be the case for the UPC when the UK leaves the European Union.

Lamping and Ullrich also point out, among other things, that all members of the UPC through their seats on the UPC Administrative Committee will have the option of vetoing amendments to the UPC agreement (UPCA), including amendments intended to ensure that the UPCA is compatible with EU law, including for example amendments to the EU Enforcement Directive. This would require an amendment of the UPCA through the Administrative Committee.

The authors conclude that the UPC would not be lawful if a non-EU member state participates in the system.

Plesner's view

The report from the Max Planck Institute does not indicate that the start-up of the UPC system is imminent. Also considering the German constitutional lawsuit, this will probably not take place until well into 2019.

A decision to exclude the UK entirely from the UPCA would mean that parts of the agreement would have to be renegotiated, not least the key issue of which country is to host the seat of the sub-division of the UPC’s central division which, according to the UPCA is to have its seat in London and hear cases concerning human necessities, chemistry and metallurgy – which, in practice, applies to a large part of the cases involving pharmaceuticals.

A system without the participation of the UK is not an optimum solution, however. First of all, the country is an important market, and a system without the participation of the UK would therefore be less attractive, as cases would often have to be conducted both before the UPC and before the English courts of law. This would eliminate the cost reduction potential as regards the expensive UK cases. Secondly, the English legal tradition of oral proceedings, involving e.g. cross examination of experts, would probably contribute to the requisite thorough hearing of the cases.

Whether or not you agree with Lamping and Ullrich or with Gordon and Pascoe, the discussion about the compatibility of the UPC system with EU law emphasises the continued urgency of the need to deal with the potential issues concerning the validity of the system before it enters into force.

It is essential that the users of the patent system are able to rely on the decisions of the UPC not being called into question due to ambiguity as to whether the system is compatible with EU law.

Read the report prepared by the Max Planck Institute

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