Decisions, decisions, decisions.....

The UK government has many decisions ahead of it including the BIG one, of when (or whether) to trigger Article 50: and a small one, of whether to ratify the UPC.

It is near certain that consideration of whether to ratify the UPC will not factor highly in the decision of whether or not to trigger Article 50: however the decision of whether or not to trigger Article 50 will affect the outcome of ratification.

Some of the concerns about  ratification address hypothetical circumstances of any post-Brexit arrangement being found illegal, and there being no satisfactory solution. Legal certainty does not exist in a politically uncertain world, but it needs to be dealt with.

Both UK Counsel opinion referred to in this post and opinions of others, [for example the position paper  of the Deutscher Anwaltverein (DAV)], consider this legally feasible.

Politically therefore, the question may resolve to, “What decision should the UK make to maximise the chances of a good outcome from a UK perspective?”

The chart below shows a decision tree on the (seemingly reasonable) assumptions that:-

• If the UK triggers Article 50 before ratification no form of arrangement that permits continued UK participation will be developed [simply because politically that would be extremely messy and would require goodwill that may be missing – see part IV of the DAV position paper].
• If the UK ratifies before triggering Article 50 an arrangement that permits continued UK participation could be developed if desired [See UK Counsel opinion and part I of the DAV position paper].
• The decision to trigger Article 50 is independent of UK ratification of the UPC (because in the scale of things, we are small beer) so the probabilities for triggering Article 50 are identical on both sides of the chart at the value “x”.
• If Article 50 is triggered after UK ratification of the UPC, with no ongoing UK participation in the UPC post-withdrawal, the probability of no transitional provisions preserving rights is assumed to be close to 0. It is in no government’s interests for rights to be lost.

In the chart, if Article 50 is triggered, the probability of an arrangement permitting ongoing UK participation in the UPC (if wanted) is “y” and the probability of this being found legal by the CJEU is “z”.

As can be calculated the probability of a good outcome (a functioning UPC including the UK as a member) is:-

• if UK does not ratify before the decision of whether to trigger Article 50 = (1-x)
• if the UK ratifies before the decision of whether to trigger Article 50  = (1-x) +x.y.z

Regardless of the values of x, y and z (which must all be positive and less than 1) – the probability of a good outcome if the UK ratifies before triggering Article 50 is greater than if the UK does not ratify. 

If Brexit means Brexit and x=1 the difference is between having a chance and no chance.

A sheer self-interested calculation should tell the UK government to ratify now.   

Should the UK ratify UPC (yes): can it continue post-Brexit (yes)

We are in a critical position concerning the unified patent court and unitary patent.

Netherlands has deposited its instrument of ratification, and agreement to ratification has passed the  Italian Chamber of Deputies. There is thus considerable momentum towards getting the Court established, and the question that is being asked is whether the UK and Germany (necessary signatories for the agreement to come into effect) will ratify.

Even on UK departure from the EU, continued participation by the UK is both legally feasible and practically desirable provided there is good will from the rest of the EU: and this is confirmed by the recently published opinion of Richard Gordon QC and Tom Pascoe of Brick Court Chambers a copy of which is available here.

In summary, this opinion states that for the UK to continue post-Brexit a number of criteria would need to be met. None of the legal criteria are insuperable.

In summary, quoting the main conclusions:-

The UK may only continue to participate in the unitary patent by entering into an international agreement with the EU and Member States.

Such an agreement is not necessary for the UK to ratify now: only for the UK to remain a participant post-Brexit. With appropriate political will and legal care, this is feasible.

It would be constitutionally possible for the UK to continue to participate in the UPCA after ‘Brexit’, so long as it signs up to all of the provisions of the Agreement which protect EU constitutional principles.

Were the UK to enter an EEA type agreement, this would be necessary in any case. If the UK were part of an international agreement it could withdraw at any time if this posed a practical problem.

UK divisions of the UPC would have to cease operating if the UK ratified the UPCA, without amendment, and subsequently left the EU. In those circumstances, it would be necessary to adopt detailed transitional provisions in order to protect accrued rights and to regulate the position of litigants with pending proceedings.

The detail of these provisions need not be very detailed. For example, should such a withdrawal arrangement not be achievable, the UK need only provide that:-

·         no person loses patent rights in the UK through UK withdrawal (e.g. for unitary patents in force at the time of withdrawal it could be provided that a European (UK) comes into existence in its place);

·         the result of litigation concluded before the UPC will be respected;

·         litigation already underway in the UPC at time of withdrawal would be dealt with (most simply by providing that it continue before the UPC and the result be respected (including for any new European (UK) that came into existence)).

In such circumstances it cannot be doubted that the remaining member states would make similar provision to ensure that there was no loss of rights in either direction.

The opinion of course said that nothing was certain (eminent QCs do not become eminent QCs without being prepared to consider they may be wrong - even if this is a low probability); and that the CJEU has the power to find otherwise, although no reason is given why they would find otherwise. Indeed the opinion implies that if the CJEU did find otherwise, the legality of other multilateral agreements might come into doubt (e.g. European Common Aviation Area Agreement, the International Tribunal for the Law of the Sea, and the EFTA Court).

In short, UK participation post-Brexit is eminently feasible, if politically desired. The extent of political desire of course depends on political circumstances.

While the UK is in the EU and honouring its EU obligations, ratifying is both possible and desirable: but this is a dissipating opportunity. The longer the delay, the less goodwill there will be for reaching a solution that includes the UK.

If the UK government is interested in promoting UK industry as a whole, then prompt ratification makes sense, both short term and long term.

Of course, those with a vested interest in complex and expensive litigation (large companies seeking to steamroller smaller ones by pushing up cost; some lawyers who thrive in making matters difficult so as to justify high costs; those whose jobs rely on making matters more difficult than they need be) will oppose this.

Some of these opponents may argue that delay will strengthen the UK’s negotiation position post-Brexit, despite the undoubted case that the longer the delay the less goodwill will be present to reach a conclusion including the UK. This argument for delay is self-serving nonsense. and should not be allowed to impede introduction of a system that will be to the benefit of industry in the UK, Europe at large, and the World.

So yes please HMG - ratify the UPC, and ratify in 2016.

European Patent Grants - update

In a previous post I commented on the high number of patent grants at the EPO during the first 6 months of 2016.

Patent grant numbers at the EPO continue to rise, with over 9,800 granted in August alone.

On the current basis my best guess for grants during 2016 would be around 93k ± 5k.

Brexit and IP

In case you have not noticed, there has been a referendum in the UK voting to leave the EU.

This only has effect once an Article 50 TFEU notice is given. It is to be hoped that a reasonable breathing space is given before the Article 50 TFEU procedure commences.

In this respect it should be noted that the referendum is not binding, and the decision has to be made by the UK Government.

The majority for leave was slim 17,410,742 to leave, 16,141,241 to remain.

There are many reports of leave campaigners regretting their decision on the basis that "I didn't think it would happen and just wanted to kick the politicians".

There is a petition to the UK Government seeking a second referendum.

Such petitions are not binding, but it is noteworthy that, at the time of writing, there was around 2.4m signatories and the number is increasing at around 2000 signatories a minute.

On the fanciful hope that this rate of signature continued, by Friday  there would be more signatures for a second referendum than votes for leave. For the current number of signatories, look here.

Regardless of whether this figure is reached, Parliament has a difficult decision ahead of them.

As a Londoner with an internationalist outlook, all I can do is hope that Parliament remembers they are a representative body, and not a body of delegates, and that they think hard before agreeing to an Article 50 TFEU notice.

The prospect of further fissiparous fucking off as Scotland, Northern Ireland and London decide their interests are not those of their fellow countrymen is just too dispiriting.

Not a lot above about statistics (other than counting signatures) or IP (but Brexit would have an effect).

How high will the ball bounce?

The hockey stick graph is a familiar issue in climatology. A sudden step change in a measured variable indicating something happening in the background. Are we witnessing a hockey stick phenomenon at the EPO?

The graph below shows the number of B1 publications (grants) from the beginning up to 15th June of the stated years 2008-2016.  As can be seen, these have been in the region 21,000 to 30,000 from 2008-2015, but increase dramatically (to over 41,750) in 2016. This looks like a hockey stick graph to me.

Also shown is the total number of grants from 2008 to 2015, which can be seen to roughly reflect what happens in the first part of the year.

Applying some rough and ready guesswork, one can guess a total number of patents granted in 2016 as in the region 88,000 to 102,000 representing an increase of 29-49% in the number of grants over 2015.

What is  happening in the background that explains this sudden increase?

But is it appealing?

A proposal to increase the appeal fees at the EPO has received recent comment on IPKat.

It is interesting to see the effect the last big increase in appeal fees (a 50% increase as of 1st April 2014) had on appeal behaviour.

From the Annual Reports of the Boards of Appeal one can derive the following table of appeals filed:-

	Year
	2009	2010	2011	2012	2013	2014	2015
ex parte appeals filed	1226	1241	1310	1242	1200	996	864
inter partes appeals filed	1249	1301	1347	1360	1315	1357	1523

This shows that the increase in fees has dramatically affected ex parte appeals, with appeals before the increase averaging at about 1200 a year and in the first full year after the increase amounting to only 864 appeals (a 28% decrease).

The increase in fees has affected inter partes appeals less, with the number of appeals in opposition roughly tracking the number of grants (roughly 2.5% of grants end up with an appeal in opposition).

If a mere 50% increase in appeal fee has resulted in such a drastic change in applicant behaviour, what effect might the huge proposed increase have?

It is to be hoped that the Administrative Council will recognise that an effective appeal system is essential to maintaining quality at the EPO, and will not increase the appeal fee [at all].

Best year ever, concentration, and the future

It is time for EPO statistics to come out again, and for once (even without PR spin and puff) they include the slightest indication that bad times may be behind us.

Best year ever

The number of applications was the highest ever - but don't get too excited yet.

Years in which the number of applications was not the highest ever were:-

• 1991-95 [when panic led to a drastic lowering of fees  (yes, prices can go down as well as up)], 
• 2002 [when dot-com dot-bombed], 
• 2009, 
• 2011-2013.

Why not 2010? Well that was the spike in divisional applications when things went mad for a while.

In other words "best year ever" claims should be expected in a time of growth . What had impressed until recently was stagnation in applications.

Similarly grant numbers have gone up. Grants are not keeping pace with applications however.

So we have a slight kick in the number of applications, and in recent years an increase in the number of grants (when demand is static increased efficiency should translate as more grants). What happened to grants in 2000? Strikes.

The Early Certainty from Search program may have something to do with the high grant numbers. This coming year may show whether re-organising Examiner desks has resulted in higher efficiency to grant (or refusal).

Concentration

I commented in 2014 on how much of the Netherlands’ European patent applications were represented by Philips.

This year Philips account for nearly 34% of the Netherlands patent applications. Looking outside the Netherlands this year's statistics show how concentrated applications are from some countries:-

Country/ region	Total European/ Euro-PCT applications	Top 1 applicant in region		Top 2 applicants in region
		Applications	% of total	Applications	% of total
EPC	76097	2,402	3.2%	4,296	5.6%
US	46292	1,869	4.0%	3,574	7.7%
JP	21426	1,034	4.8%	1,909	8.9%
KR	6411	2,366	36.9%	4,457	69.5%
CN	4680	1,953	41.7%	2,823	60.3%

One would expect the EPC states to be less concentrated, as SMEs file predominantly in their own region rather than abroad.

What is interesting is how much of Korean and Chinese filings depend on so few companies. Korean concentration is understandable given the predominance of the chaebol, but the concentration of Chinese applicants in so few hands (and those in information and communications technology) show how little engagement Chinese industry as a whole has with the rest of the world - at present.

The future

It is still too soon to suggest that the unitary patent had any effect beyond marginal in European applications in 2015: most applicants do not look that far ahead.

However, unless Brexit spoils everything, there is a reasonable expectation that applications could soar over the next 2-3 years.

Diatribe

The following rant is a result of sheer frustration about the UK approach to implementing the UPC and UP..

What does the EPC say about patent scope and infringement?

The EPC states that infringement is determined under national law, and that (subject to specific exceptions) national and European patents shall have the same extent.

Article 2(2) EPC

(2) The European patent shall, in each of the Contracting States for which it is granted,  have the effect of and  be subject to the same conditions as a national patent granted  by  that  State, unless this Convention provides otherwise.

Article 64 EPC

1)      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 o f which it is granted, the same rights as would be conferred by  a  national patent  granted in that State.

2)      If the subject-matter of the European patent is a process, the protection conferred by the patent shall extend to the products directly obtained by  such  process.

3)      Any infringement of a European patent shall be dealt with by national law.

So the scheme of the EPC is that European patents shall have the same effect as national patents except that where national law does not provide for the direct product of a process to be infringing, an EP patent shall cover such product.

The only other discussion of infringement in the EPC appears to be Article 70(4)(b) EPC concerning what happens if there is a defective translation:-

Article 70(4) EPC

4) Any  Contracting  State  which adopts a provision under paragraph 3:

………..                                                                               

 (b) may  prescribe that any  person  who, in that State, in good faith has used or has made effective and serious preparations  for using an invention the use of  which  would  not constitute infringement of the application or  patent in the original translation, may,  after  the corrected translation takes effect, continue  such use in the course of  his business or for the  needs thereof without  payment.

Although Article 167 EPC1973 provided for reservations in certain areas, these provisions are long time-expired and were removed with EPC 2000. EPC 2000 has no provision for reservations.

How does this affect the UK?

The UK:-

·         provides that the direct product of a process infringes national law;

·         is a London Agreement country, not requiring the provision of any translation; and

·         has never declared any reservations in relation to the EPC (when such was possible);

and so there is no scope under the EPC for UK national patents and European patents to have any different effect if the UK is be compliant with the EPC. (See at the end for an alleged argument to the contrary – it deserves its place as a footnote).

Do the Unified Patent Court Agreement (UPCA) and Regulation on the unitary patent (UPR) affect this?

The unitary patent is product of a regulation that is declared to be a special agreement under the EPC

Article 1(2) UPR

2. This  Regulation  constitutes  a  special  agreement  within  the meaning of Article  142  of the Convention  on the Grant of European Patents  of  5  October  1973,  as  revised on 17 December  1991 and  on  29 November  2000 (hereinafter ‘EPC’).

and the regulation recognises that the Contracting States have obligations under the EPC

Article 9(2) UPR

2. The participating Member States shall ensure compliance with this Regulation in fulfilling their international obligations undertaken in the EPC and shall cooperate to that end.

The UPR thus imposes additional obligations on the Contracting States (to comply with the Regulation) while not relieving them of the burden of fulfilling their obligations under the EPC.

The UPCA takes as a basis that all Contracting States have ratified the EPC (3^rd recital) and includes the EPC and national law as sources of law. The UPC contains a comprehensive code for infringement of both European patents and European patents with unitary effect.

Neither the UPCA nor UPR provide any indication that a national right shall have any different scope from a European patent (unitary or otherwise).

Neither the UPCA nor UPR provide any indication that a European patent with unitary effect shall have any different scope from a "bundle" European patent.

Article 30(2) Vienna Convention on the law of treaties states:-

2. When a treaty specifies that it is subject to, or that it is not to be considered as incompatible with, an earlier or later treaty, the provisions of that other treaty prevail.

Which, given the acknowledgement of the EPC in both the UPCA and UPR, indicates that the terms of the EPC are not overruled by the UPCA or UPR.

Thus, where there is an interpretation available that is in accordance with the EPC, UPCA, and UPR it is to be preferred to one which ignores fundamental principles of the EPC.

Further, it could be argued that compliance with obligations under the EPC (where not repugnant to the UPR) will become part of EU law once the UPR is ratified.

What does the draft statutory instrument (SI) on implementing the UPCA and UPR say?

The SI does not take the approach of adopting the infringement provisions of the UPCA wholesale but instead seeks to modify (with little success) the wording of section 60 of the UK Patents Act to various extent.

·         s.2 (3) of the SI amends section 60 to add in exceptions to infringement of Articles 27(c) and 27(k) UPCA;

BUT

·         s.2 (4) says the Article 27(k) UPCA exception does not apply to national patents.

In Schedule A3 of the SI

·         s.1 and s.2 says section 60 is a “relevant statutory provision”

·         s.3 says the relevant statutory provisions apply in relation to a European patent with unitary effect in the same way as they apply in relation to a European patent (UK); but

·         s.4(10) says that for the unitary patent only, in s. 60  “references to the United Kingdom are references to the territory of a Contracting Member State in which the European patent with unitary effect has effect;”

So we have three laws of infringement (at least – see below):-

1.        National law [S.60 as amended absent the Article 27k UPC exception]
2.        European patent (UK) law [S.60 as amended, with Article 27k UPC exception, and with contributory infringement assessed on the “old” basis of both supply and use being required to be in the UK
3.        European patent with unitary effect law [S.60 as amended, with the Article 27k UPC exception, and with contributory infringement assessed on Article 26 UPCA criteria of supply and use “within the territory of the Contracting Member States in which that patent has effect” being required]

		Article 27k UPCA exception applies?
		Yes	No
Expanded territorial scope for contributory infringement?	Yes	European patent with unitary effect
	No	European patent (UK)	UK National patent

Effect of the SI

If the SI is accepted as is, the consequences are significant.

Legal advice

In assessing the legal position in the UK, three different laws of infringement will need to be considered whereas at present there is only one. Giving advice on a pending application will require two opinions, one on the basis that any patent granted goes ahead as a unitary patent, and another on the basis that it proceeds as a “bundle” patent.

Disharmonisation

Many are trying to harmonise IP provisions on a wider than European front. If the UK falls back from harmony within Europe then the scope for harmonisation and the prospect of lower costs recede into the far distance.

Distrust

If the UK cannot follow a treaty it has held to for around 40 years, how can it be trusted in anything else?

Legal action

The proposed SI introduces a law contrary to the EPC, so opening up the dispute procedure of Article 173 EPC. It is a reasonable bet that any such dispute would result in judgment against the UK.

Failure to comply with the EPC may also be failure to comply with the UPR.

Inconsistent legal decisions

It is open to question whether the UPC would decide a question of contributory infringement by a UK company of a “bundle” patent in the same way as a UK court would. The risk of different legal outcomes depending on which court was seized with a particular case would be both legally uncertain and provide scope for forum shopping.

Arguments as to why the SI is permissible

An alleged argument is that:-

Article 142 EPC states that:

(1)  Any  group of Contracting States, which has provided by  a special agreement that a European patent  granted for those States has a unitary  character throughout  their territories, may  provide that a European patent may  only be granted  jointly in respect of all those States.

(2) Where any group of Contracting States has availed itself of the authorisation given in paragraph  1, the  provisions of this Part shall apply.

“This part” being part IX of the EPC, which comprises Articles 142-149a.

Article 149a EPC states that:-

      Nothing in this Convention shall be construed  as limiting  the right of some or all of the Contracting States to conclude special agreements on any  matters concerning European patent applications or European  patents  which under this Convention are subject to and governed by  national  law…

and lists a number of administrative examples.

Infringement is a matter for national law (Article 64(3).

And so arguably it should be considered that in amending the provisions applicable before the UPCA (under Article 149a) there is no requirement to amend national provisions. As for the different territorial scope of contributory infringement for European patents and unitary patents, that reflects the difference in nature between a unitary right and a non-unitary right.

This argument:-

·         ignores the specific wording of the EPC in Articles 2 and 64 EPC;

·         interprets Article 64(3) EPC as permitting something directly inconsistent with Article 2 EPC;

·         expands Article 149a to permit changes in national law to overrule the EPC.

In short, it is nonsense. 

What can be done?

Hope that someone in the UK is listening and hope that someone sees sense. 

Otherwise, a messy situation will follow.

A dog's breakfast

In 2013 I posted a comment on the contributory infringement provisions in the UPC. 

The draft SI makes explicit the problems I saw as implicit.

Under s.60(2) Patents Act 1977, contributory infringement requires provision in the UK of means essential to exercise of the invention in the UK.

Article 26 of the UPC Agreement defines contributory infringement as:-

A patent shall confer on its proprietor the right to prevent any third party not having the

proprietor's consent from supplying or offering to supply, within the territory of the Contracting Member States in which that patent has effect, any person other than a party entitled to exploit the patented invention, with means, relating to an essential element of that invention, for putting it into effect therein, when the third party knows, or should have known, that those means are suitable and intended for putting that invention into effect.

This, on its face, is reasonably clear as applying both to unitary and bundle patents, and meaning that supply from one country into any contracting members state where the patent has effect infringes.  

So let us imagine a case of contributory infringement where a UK company has supplied in the UK “essential means” to a German company for making a product in Germany that is covered by a non-opted out bundle patent designating at least UK and Germany.

The proprietor sues before the UK Court. The UK Court looks to section 60(2) PA and sees that so far as bundle patents are concerned, nothing has changed in s.60(2) [Schedule A3 3 makes it clear that s. 60 applies, and Schedule A3 4(2) makes it clear that for unitary patents only, the references to the UK should be replaced by  references to any of the Participating Member States]. The UK Court considers this to be clear and so finds that the UK Company does not infringe since the invention was not put into effect in the United Kingdom.

However, if instead the UK Company is sued before the UPC, the language of Article 26 would indicate there is infringement since there is supply from one Contracting Member State in which the patent has effect to another Contracting Member State in which the patent has effect.  Infringement is found.

No problem given that the judgement will be enforceable in the UK according to Schedule A4?

Or would this be a big political problem? If whether you win or lose depends on the court concerned, what does this do to the idea of justice?  

Now take the same situation from the UK Company’s perspective. Receiving a letter from the patent proprietor threatening infringement they immediately launch a threats action and an action for a declaration of non-infringement and succeed, because of the argument set out above.

What will the UPC do if the proprietor launches a subsequent action before the UPC on the basis that although the same facts are concerned a different law applies?

Justice should be determined on the quality of the judges, not on the quality of the lawmakers, but the present route to implementation of the UPC and UP in the UK appears set to frustrate the aims of the whole project by setting the stage for complex and expensive disputes as to which law prevails; and as to whether the UK has met its obligations under the UPC and EP.

The urge in the UK to to re-write clear treaty provisions to further “clarify” them frequently results in total confusion. This present case meets that model by casting darkness where there was light.

UK decides on Brexit from EPC and EU

The response to consultation on amendment of UK law to comply with the UPC and UP has been published.

It appears that the UK intend, at least for a while, to have a different scope of infringement for national patents than for European patents.

This indicates that the provisions of Article 64 EPC (requiring equal scope for European and national patents) are to be ignored.

It is to be hoped that this breach of treaty obligations either:-

• does not happen; or
• is remedied as soon as possible,

since it would be inconvenient if the UK left the EPC.

The report also indicates that an "Order in Council" will apply the Unitary Patent and the UPC to the Isle of Man. This is interesting and raises the question, "Since when was the Isle of Man part of the EU"?

The UK appears set to raise many legal problems if they seek to implement in this way. Have they taken informed legal advice?

More issues may become apparent when the secondary legislation is published.

UPDATE 20.1.2016

The secondary legislation is here.

The explanatory notes to the statutory instrument indicate that the reason for disapplying Article 27k for national patents was that “The IT and telecoms sectors have expressed strong concern at the uncertainty present in this new exception and it is  not known how many patents could be affected”.

To get a rough idea of numbers I looked  to espacenet.  In 2014, in International class G06 (which covers, inter alia, computers), 1840  British patent applications were published (A or B) publications. Of these 618 had a British applicant, and the rest from abroad, IBM alone accounting for 455. Roughly, in this class, there are two patents filed by non UK applicants for every application filed by a UK applicant. It seems reasonable to assume that in this field foreign patentees holding UK national patents predominate by at least 2:1.

For telecoms class H04, similar numbers are 1463 published, 513 British, 111 IBM: still a preponderance of foreign applicants, but not quite so large.

Applying different standards to European and UK national patents would leave UK software developers free of the patent yoke with respect to European patents, so far as the acts or uses of Article 27(k) of the Agreement on a Unified Patent Court are concerned: but national patents would still be effective against such acts or uses.   This would mean that British innovators would be inhibited in their home market by a preponderance of foreign owned British patents against them, inhibiting their freedom to manufacture and sell in their home market: whereas elsewhere in Europe their competitors would be free to operate in their home market.

This will truly be a test of the effect of patents - will being in a country with patents covering the acts or uses of Article 27(k) spur innovation (to get round those patents) or hobble innovators?

Was it the UK IT industry that asked for this? If so, why don’t they want to manufacture in the UK?