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Recent UPC Developments

The Unitary Patent (UP) and Unified Patents Court (UPC) have been topics of discussion within Europe for decades. Now, the UP and UPC system finally looks set to come into effect by mid-2017, bringing with it a major shift in the patent landscape in the EU. In this article we explore some of the recent UPC milestones that have been reached and consider what more remains to be done.

Progress towards the UPC

The UPC Agreement, which will establish the UP and the UPC, must be ratified by 13 contracting member states, including Germany, France and the UK before coming into effect. Bulgaria is expected to become the 10th member state to ratify imminently, but of the three 'required' states only France has ratified and Germany is not expected to do so until late 2016. In the UK, although the Intellectual Property Office had previously suggested that the UK's referendum on EU membership should not delay ratification, at the time of writing the referendum is only three weeks away and the UK has yet to ratify, although the implementing legislation has been approved. If the result of the referendum is to 'opt out' from the EU then the UK would not be able to participate in the UPC. Earlier this year Italy announced it would accept the UP, ending several years of uncertainty surrounding one of the EU's larger markets. In the event of "Brexit", Italy would become the third state "required" to ratify before the UPC system could come into effect, based upon the number of patent applications filed by country.

Costs

The UPC preparatory committee launched a consultation in 2015 on the subject of court fees and costs recovery. In February 2016, a final proposal on costs in the UPC was published. One development welcomed by many was the announcement that there would be no fee to opt out 'classical' European patents from the new system.

Court fees

There are to be two aspects to UPC court fees – a fixed fee and a value based fee. The total fee will be based on the type of case (for example infringement, revocation), for which there is a fixed fee tariff and, in addition, a value based fee, which corresponds to the case value. The fee is not dependent on the number of parties or patents in suit.

The fixed fee for commencing proceedings will be €11,000 for infringement actions and €20,000 for revocation actions. In addition, counterclaims of either type attract a fixed €11,000 fee. Tiered, value based fees will apply to cases valued at over €500,000. For example, a case valued at €1m will incur an extra fee of €4,000, rising to €325,000 for cases valued at over €50m.

The value of the case will be determined by the Court at an interim case hearing, but the current recommendation is that the claimant pays the value based fee on commencing proceedings according to its own determination of the case value (most likely on a reasonable licence-based calculation). Any fee adjustment can occur, if necessary, when the Court makes its own assessment at the interim case hearing.

The Court fees can be lowered or partially refunded in certain circumstances, for example, small and micro enterprises will receive a 40% reduction in fees, and partial refunds are available if a case is withdrawn or settles (depending on the stage in proceedings).

Recoverable costs

The general rule will be that a successful party in UPC proceedings can recover 'reasonable and proportionate' legal costs and expenses. However, there is to be a cap on recovery depending on the value of the case. For example, fee recovery will be capped at €112,000 for cases worth €1m, and will rise to €2m for cases worth over €50m. In particularly complex cases, there will be the possibility of seeking to increase the cap to account for this (potentially by 25%).

Judges

Judges will come from the wide range of contracting member states, and the preparatory committee reported that over 1,000 'expressions of interest' were previously received. The UPC will have two kinds of Judges – those who are legally qualified and those who are technically qualified. All cases will involve legally qualified Judges, and technically qualified Judges can be appointed to any case where needed (e.g. a complex revocation action) and will sit by default in the Central Division and Court of Appeal.

A UPC training centre for Judges was established in Budapest in 2014. Since many potential Judges, whilst experienced in their own Courts, have limited experience of patent matters programmes for training in patent law have taken place. The Rules of Procedure of the UPC will obviously be new to all Judges, and it is hoped that the use of mock trials and seminars, which are being delivered by experienced patent practitioners, will assist the Judges in getting to grips with the Rules in preparation for the first wave of UPC cases.

Given their diverse backgrounds, Judges will be encouraged to harmonise their decisions, though it will take some time to establish a proper body of case law, and with it more certainty and trust in the UPC system. The quality of early UPC decisions is likely to be a critical factor in shaping perceptions of the new system for years to come.

Code of Conduct

In May 2016 a draft of the UPC's Code of Conduct was published. Amongst other things, the Code of Conduct will govern the professional standards that legal practitioners must adhere to and covers, for example integrity, confidentiality, and privilege. The Code of Conduct will be critical to ensure a robust UPC system, but is an area that is still under development. Questions such as how the UPC's Code of Conduct will interact with the national regulatory rules (which will continue to apply to legal professionals), and how the code will be enforced are important questions still to be clarified.

Preparing for the UPC

The UPC will present the possibility of the quick enforcement, or revocation, of patents across Europe. This promises to be faster than most existing national courts or opposition proceedings before the European Patent Office.

The transitional 'sunrise' period during which patents can be opted out of the UPC regime before it comes into effect is likely to commence later this year. Therefore a crucial consideration for patentees is whether to opt out of the system – once litigation is commenced with respect to a patent, the chance to opt out has been lost, so patentees need to consider these issues now. Existing and future licences (especially exclusive licences) also need to be considered, to provide clarity on which party controls whether or not the licenced patent is opted out.

In the meantime, the process of appointing the first wave of UPC judges has begun, with the publication of vacancy notices and with applications due by 4 July 2016, with actual appointments expected in early 2017.