A non-statistical digression

In a recent article  it has been commented that there is an “unforeseen advantage” to the unitary patent (or to non-opted out European patents) – namely the extension of the scope of contributory infringement from a national level to a (nearly) Europe-wide level.

I don’t think this advantage was unforeseen, I think it was intended: however matters may not be so simple as appears.

Article 26 of the Agreement is not solely applicable to unitary patents as the UPC is not solely applicable to unitary patents (Article 1) and wherever “patent” is referred to both ordinary (“bundle”) and unitary  patents are meant (Article 2(g)).

The effect of the Agreement thus appears to be to broaden national infringement law and expand the scope of contributory infringement - for both unitary patents and “bundle” patent litigated before the UPC  – to cover supply or offer to supply an “essential element” anywhere among the Contracting States where the European patent has effect.

While I think that is a good thing, I am not sure that all of the consequences have been thought through.

EPC Article 64 states that:-

“A European patent shall, subject to the provisions of paragraph 2, confer on its proprietor from the date on which the mention of its grant is published in the European Patent Bulletin, in each Contracting State in respect of which it is granted, the same rights as would be conferred by a national patent granted in that State”.

and

“Any infringement of a European patent shall be dealt with by national law.”

However, a national patent only gives rights in respect of that state and, for example, a UK national patent is not necessarily infringed by supply or offer to supply an essential element in the UK, where the directly infringing act is intended to take place in, say, Germany - even if a national German patent exists.

On a more general level, Article 5 of the Regulation on the unitary patent states that:-

“The acts against which the patent provides protection referred to in paragraph 1 and the applicable limitations shall be those defined by the law applied to European patents with unitary effect in the participating Member State whose national law is applicable to the European patent with unitary effect as an object of property in accordance with Article 7.”

This means that the acts constituting infringement of a unitary patent where the applicable law is that of Germany will be considered under German law even though the effect is throughout the participating states. For another participating state (e.g. UK) the unitary patent (or a European patent litigated through the UPC) will thus not grant the same rights as a national patent (or a European patent litigated through the national courts) and will not be assessed by national law.

This appears contrary to the provisions of Article 64 EPC.

This, to my simplistic mind, means that to provide the breadth of scope for contributory infringement that is envisaged by the UPC, it is necessary to provide identical breadth of scope to national patents, for example, in the UK, by amending Article 60(2) Patents Act to read:-

Subject to the following provisions of this  section, a person (other than the proprietor of the patent) also infringes a patent for an invention if, while the patent is in force and without the consent of the proprietor, he supplies or offers to supply in the United Kingdom a person other than a licensee or other person entitled to work the invention with any of the means, relating to an essential element of the invention, for putting the invention into effect when he knows, or it is obvious to a reasonable person in the circumstances, that those means are suitable for putting, and are intended to put, the invention into effect in the United Kingdom or any country participating in the Agreement of the Unified Patent Court where an equivalent national or European patent is in force .

I dislike using colloquialisms when discussing European matters, but this whole project is a dog’s breakfast that may become proverbial.

Unitary patent renewal fees

What is a “fair” renewal fee for a unitary patent?

Council working document 13752/08 and 13752/08 Cor 1 in October 2008 published eight scenarios for possible renewal fees, these scenarios ranging from lifetime renewal fees amounting to €36152 to €89902 for the (then) 27 potential countries. 

Even the lowest hypothesis is 50% more than the accumulated lifetime fees for DE, FR and GB.  A 50% increase in fees for a 90% increase in covered population and 66% increase in covered GDP does not sound a bad bargain.

The average of the eight scenarios had lifetime renewal fees amounting to €60735, a 153% increase in fees. Not so good a bargain. Anything above that average would be extortionate and probably guarantee a low take up for the unitary patent.

However the proposed methods for the calculation of renewal fees do not take into account the significantly different value for money of national renewal fees.  As can be seen from the following chart, there is an extremely good fit between value for money and population.

Looking in more detail, the following table shows a distinct difference in value for money between the larger EPC countries [Germany, Turkey, France, United Kingdom, Italy, Spain and Poland – only three of which might (must) participate in the unitary patent] and the rest. The graph shows both cost per million population and cost per billion GDP [pre-crash figures I fear - and I have left out Monaco because that is ridiculously poor value].

So far as the applicant is concerned,  value for money would best be represented by fees giving roughly the same cost per million population as the cost for Germany, France and  United Kingdom (or even less as Germany has very high fees at the end of patent term). 

The average for Germany, France and  United Kingdom  works out at about €115 per million population. With a total potential population of about 360m for those countries that might yet sign up for a unitary patent, this gives total lifetime renewal fees of about €41,000, around the lower end of the Council estimates. 

What is fair for participating states?

One’s first thought would be that the distribution key for renewal fee income should be simply based on population. However the gross overcharging of many countries would make that a significant drop in per patent fees. 

But what do not appear factored into the Council working documents are the difference in validation and maintenance rates from country to country. Not surprisingly, those countries where patents are not good value have lower validation and maintenance rates than those where patents are good value. 

Roughly, the smaller the country, the lower the validation rate and the earlier patents are abandoned. 

Applicants are not stupid and value for money is a major factor in deciding whether to validate or maintain a patent. A common strategy is to reduce the number of validations towards the end of patent life.  So getting a small slice on a lot of unitary patents may be of better value to some countries than getting a big slice on a few bundle patents. 

Of course politics intervenes, and it will be interesting to see what is eventually decided.

Let's get real

The EPO have published more self-justificatory statistics.

The press release here states “Europe consolidates its position as strong technology region” and justifies this in part with a statement “36.5% of all filings came from the 38 EPO member states (2011: 37.5%)”.  So the percentage filed by Europeans drops and this is “consolidation”?

The press release also states “The number of patent filings at the EPO originating from the 38 EPO member states reached a new peak in 2012, beating the previous record set in 2008.”. A 1.4% increase by European applicants is compared with a 6.6% increase by no-Europeans and indicated as a success. 

As mentioned in the post of 24th January, the number claimed by the EPO as the number of applications received by them appears to be the sum of Euro-direct and PCT filings, regardless of where filed.

To consider how Europe is doing it makes more sense to look to who shows real interest in Europe, those who file direct Europeans or Euro-PCT applications. The table below shows the annual total of these filings with the number of grants. Filings up to about 2008 were growing roughly linearly. Since 2008 there has been stagnation. 2012’s filings are not the highest ever. The blue-grey wedge shows the difference between the pre-2008 trendline and current filings. 

European patent filings are stagnating.  Given economic circumstances this is not surprising, but what are not helpful are panglossian press releases 

Success?

Following last month’s post I thought it worth putting the EPO’s filing and grant numbers into perspective. The graph shows filing numbers and grant numbers since 1995. Does this look like success?

Is it bigger or is it smaller?

The EPO have announced that they have had a bumper year indicating an "All-time high for activities of the European Patent Office in 2012" and stating that "In 2012, the European Patent Office (EPO) received 258 000 patent applications. This represents a 5.7% increase over 2011 (244 000) and sets a new record."

Leaving aside the point that nearly every year is a new record, these figures demand close attention. However detailed numbers will not be available until mid-March and so I look to 2011 instead.

The EPO also claimed a bumper year in 2011 [see here] so what does a bumper year look like?

The number claimed by the EPO as the number of applications received by them appears to be the sum of Euro-direct and PCT filings, regardless of where filed. A PCT application filed in China or the USA does not appear, to my mind, to represent "activity" by the EPO.

The EPO's activity instead could be considered to comprise the number of Euro-direct applications, plus the number of PCT applications for which the EPO acts as ISA, plus the number of PCT applications reaching the regional phase. These numbers are tabulated below:-

	2011	2010	Growth  2010-2011
a) Euro-direct	62557	71398	-12.4%
b) PCT International	181964	164170	10.8%
c) Of which, the number using EP as ISA	71627	68938	3.9%
d) Euro-PCT	80286	79405	1.1%
Total "activity" by EPO [a+c+d]	214470	219741	-2.4%
Total claimed by EPO [a+b]	244521	235568	3.8%

It is hard to see how a 12.4% decline in Euro-direct filings, near stagnation in Euro-PCT filings, and a 2.4% decline in business overall could be claimed as an increase, but that is what happened in relation to the 2011 figures.

It will be interesting to see how the 2012 figures look when published.

Bifurcation – opposition

Recent discussions on the Unitary Patent and the Unified Patent Court have mentioned the issue of “bifurcation” and the effect that this may have on litigation.  

What is not generally appreciated is the effect that bifurcation has on the mechanics of getting patents, on opposition rates, and the cost to business. 

 

From figures obtained from the European Patent Bulletin [up to 2012/28] it appears that about 60% of all EP patents ever opposed have at least one opposition from a German opponent.  Table 1 shows the top 13  opponent countries ranked by number of patents opposed, and also shows the number of oppositions filed per million of population.  

Table 1 – Country of opponent and propensity to oppose
Opponent country	Number of patents opposed	% of all patents opposed	Patents opposed per million population
All opponents	66915
DE	40958	61.2%	502.6
US	7687	11.5%	24.5
NL	4656	7.0%	277.1
FR	3799	5.7%	58.2
GB	3784	5.7%	60.4
CH	3664	5.5%	475.8
SE	2614	3.9%	287.3
JP	1571	2.3%	12.3
AT	1510	2.3%	184.1
IT	1401	2.1%	23.0
DK	1246	1.9%	226.5
BE	1228	1.8%	118.1
FI	839	1.3%	158.3

It can be seen that German has a dramatically higher number of oppositions per million population than the UK and France and I suggest that a factor in this is the presence of the bifurcated system in Germany.  It should be noted that the only other country that comes anywhere near Germany for number of oppositions filed per head of population is Switzerland, which if course trades heavily with Germany.   Bifurcation need not necessarily result in high numbers of oppositions (see Austria) but it is clearly of relevance.

Bifurcation also has a disproportionate effect on German patentees. Table 2 compares the opposition rate experienced by German patentees with that experienced by other patentees.

Table 2 – Opposition rates and neighbourliness
	European patents granted	Patent opposed	% opposed	Opposed by home country  opponent	Fraternal opposition rate %
All countries	1146320	66915	5.8%
DE	263781	19705	7.5%	14250	72%
US	273629	15176	5.5%	2760	18%
IT	39163	2075	5.3%	368	18%
NL	41690	3286	7.9%	582	18%
DK	8290	968	11.7%	134	14%
GB	53915	4132	7.7%	500	12%
CH	47911	3518	7.3%	418	12%
FI	10957	682	6.2%	78	11%
ES	5310	248	4.7%	27	11%
SE	25802	1614	6.3%	159	10%
AT	13857	1162	8.4%	104	9%
IL	3666	186	5.1%	16	9%
FR	99380	5172	5.2%	438	8%
JP	215840	7974	3.7%	512	6%
BE	11417	807	7.1%	49	6%
KR	10416	154	1.5%	8	5%
CA	12111	482	4.0%	12	2%

It can be seen that  for German industry most European oppositions could be considered to represent “friendly fire”.

The high opposition rate experienced by German patentees represents a high cost to German industry, both in filing and defending patent oppositions.

Some have commented that the effect of the UPC will be a reduction in opposition rates as centralised attack will be possible at any time for non-opted out European patents. Bifurcation may however result in an increase in opposition rates as others learn Germanic habits.