The Unified Patent Court: Post Brexit
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The Unified Patent Court: Post Brexit 2016 NAPABA Convention San Diego, CA ‒ November 4, 2016 Regina Sam Penti Ropes & Gray Boston, London [email protected] 1 The UPC: Post Brexit . The Unified Patent Court . The UPC: Post-Brexit 2 The Unified Patent Court Difference Current System Validate Enforce Outcome Country A Court A Outcome A Country B Court B Outcome B Country C Court C Outcome C Country D Court D Outcome D Unified System Validate Enforce Outcome EU Unitary Unitary Single Patent Patent Court Outcome 3 Patents Needed Today for World Markets Countries by share of world GDP (World Bank 2013) US patent Rest of world (125 countries) Patents in 28 EU states Chinese patent 4 Patents Needed with UPC U.S. Patent Rest of world (125 countries) 1 EU Patent* 1 Chinese Patent *Except Poland 5 The Patent with Unitary Effect . One patent, litigated before one tribunal, rendering one judgment . The judgment will have force across the European Union – a body with a $17 Trillion market by GDP and 500 million citizens 6 This Will Probably Adjust Your Filing Strategy . Easier overall global coverage 3 patents 55% of world 2 patents 40% market of world market . Common market patent challenges the value of other patents: . Japan, Korea, Australia, Canada, Brazil, etc. 7 A Tectonic and Intentional Shift . An intentional change to European patent litigation . A globally competitive use of the common market . Benefits EU companies, and . Takes market share from U.S. courts . Exclusive jurisdiction over all EPO patents . EPO patents retroactively under UPC unless affirmatively opted out Primary Outcome: Injunctions across the EU 8 Process to Obtain a Patent with Unitary Effect Current System EP Patent . Bundle of rights that must be: . Validated PCT . Translated Application . Enforced on country-by-country basis EP Patent New Unitary Effect . EU Unitary Patent System . Single EPO validation . Limited translations . EU wide enforcement (Poland is out) 9 Compared to the U.S. system • Almost always a jury • Non-technical judge • Expert driven • Little ability to get an injunction • Damages based on smallest infringing unit U.S. Federal • As likely to lose on appeal as to win Court System • Very high standard of obviousness and patentable matter • Very hard to enforce against joint infringers • Extensive discovery • Millions of dollars to reach verdict • Moving to loser pays • No jury • Specialty patent judges, technical judges available • Some expert testimony • Injunctions likely upon a credible showing of infringement Unified Patent • Unknown laws on establishing infringement • Unknown rate of overturn at second instance Court • Much less Expensive than U.S. • But front-end loaded (official fees can be $200k, and full case needs to be presented at the outset) • Loser pays 10 The Challenges for U.S. Companies The UPC rules level the field between large and small . US companies are often the larger company in European disputes . Large companies may not benefit as much from strong patent rights . Patents often viewed as a stumbling block to their marketing efforts The UPC favors . Applicants who follow European Patent laws and rules . Minimal discovery always favors the plaintiff suing in their local market . Case must be prepared upfront . No one cares about your skill in front of a jury 11 Operational Challenges Facing US IP Counsel • Existing U.S. patent staff lack skill set to • Draft applications meeting U.S. and UPC standards Lack of trained • Do FTO analysis and due diligence in Europe • Assess opposition/litigation risk/outcome staff • European Patent Attorney ranks are not large (Especially true for English speaking hires) • No regular training programs in the US • A lot of misinformation lingers Lack of good • Very few channels of information for US attorneys information • Junior attorneys guessing their way through 12 UPC Revocation Proceedings Will Resemble EPO Oppositions/Appeals and PTAB Trials Complex and dynamic . Combative interrogation of the patent specification . Amendments 3-Judge panels selected from central pool . Technical Judges asking technical questions . Extensive discretion – e.g., bifurcation; discovery; interim measures . Appeals to Luxembourg will set precedent Principally written arguments . Concise one-day oral hearing . Limited discovery (e.g., Seize, discretionary) . Case must be ready upfront 13 But this is New for All Practitioners Different from German litigation . UPC tribunal handles all validity and infringement . Language of the claims will principally be English . Extensive discretion of the UPC . Some discovery and use of experts Different from UK litigation . UPC has 3/4-Judge panels - Not a single Judge . Technical Judges making technical assessments . Reduced importance of experts and precedent – no cross-examinations of experts Not EPO opposition . Some discovery (e.g., Seize) and handling of evidence . Issues of infringement and damages . Unlikely to see UPC use PSA 14 Practical Impact on Global Patent Strategy Increased Relevance of EP Increased Scrutiny of EP Portfolios Portfolios . They protect the EU common market . Increases value of strong EP patents . Higher portion of company budget . Weak EP patents more vulnerable . Possibly more anti-trust scrutiny . Opt-out decision will be important . License agreements – e.g., prosecution and potentially complex and enforcement rights . Oppositions will remain available at . Acquisitions may increase low cost Greater need to coordinate global litigations . UPC lower cost, faster litigation . More EU litigations likely, more will interrelate with U.S. Potentially the best venue for patent owners 15 Impact (cont.) FTO risk assessments and transaction diligence . Diligence of EP portfolio complex - portfolio must be right at the outset . Small entity EU portfolios likely to be more important . Infringement risks . More detailed assessment will be needed in many industries, more important in Europe for product launch and investments 16 Retroactivity and “opt-out” UPC is retroactive for all pending and granted EP patents . Judgment enforceable in all MS where EP rights are validated RETROACTIVE IN UNLESS OPT-OUT “opt-out” is done on a Can opt back in during the 7 Year transition period patent-by-patent basis 7-year period . Committee may extend . By affirmative filing with . But not if your opted out transition time the EPO patent reverts patent is challenged in a to national court national court jurisdiction 17 During Transitional Period: National Courts Still Available (Brussels regulation) . If you don’t opt out, you can enforce EP patents in the UPC and national courts . Enforcement options . UPC for COA #1/Party #1 . National court for COA#2/Party #1 or #2 18 Opt-out Strategies Strategies: may vary by Concerns expressed by Key consideration for non- industry sector opponents pharma/biotech: costs . Pharma/Biotech . Risk of “key” patents . Caterpillar strategy . Tech/Med Tech invalidated/unenforceable . EPO adopted the true top . NPEs across Europe 4 – effectively same as . Fear of entrusting valuable costs for UK, DE, FR and assets to untried system NL . Risk having “rules of engagement’ set by other industries . By affirmative filing with the EPO patent reverts to national court jurisdiction 19 The UPC: Post Brexit . The Unified Patent Court . The UPC: Post-Brexit 20 Brexit--June 23, 2016 On June 23, 2016, the United Kingdom European Union membership referendum resulted in an overall vote for the UK to leave the European Union. • When will UK leave the UPC? • How will UK leave the UPC? • What will change for the UPC? “When”: The Timeline . The Court of Justice of the European Union has in effect decided that only EU member states can be a member of the UPC. Jun 23, 2018 May, 2017 Two years after Brexit UPC Start Date Oct 2016 Next Preparatory committee meeting of the UPC. Aug 2, 2016 UK IPO Publishes Guide. Despite the “Brexit” vote to Jun 30, 2016 leave, the UK will still Preparatory committee remain in the EU for at meeting of the UPC. least two years after notice Jun 23, 2016 of intention to leave is Brexit. given Jun Jul Aug Sep Oct … Jan Feb Mar Apr May Jun 2016 2018 “How”: Negotiations? Ratification? . Other states cannot proceed without UK - Under the present UPC Agreement, UK is one of three countries that must ratify the Agreement to enable it to come into effect. The anticipated UPC start date of May 2017 may likely be postponed, depending on the progress of UK ratification of the UPC Agreement by the end of 2016. “What”: Future of UPC . Scenario 1: UK ratifies the UPC Agreement to let UPC start – politically unlikely - UPC Agreement includes a provision accepting the primacy of EU law - after Brexit and under current domestic political climate, UK has no motivation to ratify such provision. “What”: Future of UPC . Scenario 2: Amend the UPC agreement so that UPC can proceed without UK’s ratification— political issues, tedious process - Too much amendments: first to remove the need for the UK to ratify, and second to re-distribute the UK's part of the central division - A new agreement between members is needed to validate the revised agreement so as not to breach UK’s rights, likely causing further delay to the UPC start date - A new system without UK’s participation is less attractive “What”: Future of UPC . Scenario 3: A modified UPC system that UK can participate in the long term – appealing but difficult - The arrangement need to be both politically acceptable to the UK (and other UPC states) and legally acceptable to the CJEU which has already held that only EU members can join UPC - Starting the modified UPC without CJEU approval as a second opinion could be risky for the furture - A period of negotiations can be foreseen and most likely the issue will be referred back to CJEU, which will incur further delay. “What”: Future of UPC . Scenario 4: negotiating with UK to “partially” ratify in the short term to allow the UPC to start as planned– the most popular - all parties can negotiate on what is politically and legally possible - the future of the UPC and unitary patent project is still very much in the balance Implication to Patent Practitioners .