A dispute over the location of the central division of the proposed unified patent court has delayed agreement on the creation of a pan-European patent litigation system. According to a report on the EU Observer website, Paris was suggested as the venue, but neither the UK nor Germany would agree to that. As a result, no deal was possible.

A general press release issued late last night on the outcome of the meeting of the EU Competitiveness Council held yesterday had this to say about the patent negotiations:

Ministers in charge of intellectual property files held a policy debate on the creation of a unified patent litigation court, as a part of a package aimed at establishing a patent system with unitary effect that ensure uniform protection for inventions across Europe, together with the corresponding translation arrangements.

The debate took place on the basis of a compromise package drawn up by the Presidency.

The compromise was broadly accepted in substance, but the debate showed that further work is still needed. The Polish Presidency is committed to take the work forward with a view to reaching agreement on the creation of a unified patent court before end 2011.

The essential elements of the compromise include:

1. The seats of the Central Division of the Court of 1st Instance, the Court of Appeal and the Patent Arbitration Centre

Several proposals have been made by member states interested in hosting the seats.

2. The financial contribution of the member states hosting a local division, a regional division, the Central Division or the Court of Appeal

The host member state would provide for the necessary facilities, equipment and, for the initial period, the management of the administrative staff.

3. Other financial contributions of the member states

While the objective should be that the Unified Patent Court becomes self financing over time, financial contributions will be required in the setting up phase based of a balanced and transparent formula.

4. Language of proceedings

While the principal should be maintained that the language of proceedings of a local division can be changed only with the agreement of both parties, a party could address a request to the President of the Court in order to change the language of proceedings for reasons of convenience and fairness.

5. Actions to be brought to the central division

The possibility to enhance the role of the central division and give parties the choice to bring actions from infringements concerning a number of member states before the central division instead of bringing them before a local or regional division. Under the compromise the parties would have the choice to bring an infringement action before the central division if the defendant is domiciled outside the EU.

6. Number of ratifications required for the entry into force

There is general consensus that the Unified Patent Court should enter into force once a minimum number of member states have ratified the Agreement.

7. Transitional period

A transitional period will be fixed for "classical" European patents without unitary effect during which actions can still be brought before the national court.

8. Revision clause

A range of provisions would have to be reviewed by the administrative committee in order to improve the functioning, efficiency and cost effectiveness of the Unified Patent Court and the quality of its judgements.

The debate follows discussions engaged at the ministerial meeting of 29 September 2011 (see press release 14691/11, page 9), on the basis of the draft agreement for creating a common patent court that would ensure compliance with the EU treaties. Previously, on 30 May 2011, a large majority of member states endorsed the setting up of a unified patent court by means of an agreement to be concluded between the member states outside the EU institutional framework.

During the last weeks, EU preparatory bodies have carried out intensive work on the other parts that configure the package: two draft regulations implementing enhanced cooperation in the area of unitary patent protection (see press release 11831/11). Following negotiations with the European Parliament, a provisional agreement has been achieved between the Council and the Parliament, which includes additional provisions for the benefit of the small and medium-sized enterprises (SMEs) in the future use of unitary patent protection.

The European Parliament is expected to vote on the two draft regulations for the creation of unitary patent protection and the applicable translation arrangements early in 2012.

More revealing, however, are the comments – helpfully transcribed on the IP Kat blog - made on the discussions by EU commissioner Michel Barnier and Polish deputy Prime Minister Waldemar Pawlak at a press conference after the meeting.

“Ladies and gentleman, we have achieved an agreement regarding the substantive issues. The Polish Presidency presented a compromised position – a balanced position - which I believe has been accepted on substance. We discussed the fees, the language of the Court, and the transitional period as well as the Revision clause. We also have in the proposal the structure of the institution. So, basically almost everything has been accepted with one exception, however, which is the seat of the Central Court. On this issue, I believe, a compromise will still be possible and the Polish Presidency has reserved the Royal Castle in Warsaw for the initialing of the agreement,” said Pawlak.

For his part, Barnier stated: “Of course countries which still have reservations today – very large European countries with millions of business – I would find it very difficult that these two large countries won’t be able to support the measure because it is so important for the single market and they are of course the first ones to defend the single market for our businesses and the competitiveness of Europe so I am sure that they will make the final effort to cross the finishing line and the Vice Prime Minister and his team will be able to achieve this agreement.”

Reading between the lines, it seems as if everyone agrees on everything, save that Germany and the UK refuse to accept Paris as the venue of the court and will not sign off unless they get their way, which, presumably, is that the court either goes to a German or British location instead. As we have seen, a number of highly-qualified people have expressed real doubts about the viability of the present plans for the court and patent, none of which have cut much ice with those doing the negotiating. What looks to be of much greater import – to the extent that it has held everything up and could conceivably scupper the whole plan – is which city will get to host parties litigating issues connected to the new patent right. The host city will, of course, reap considerable returns in terms of employment opportunities, office space rentals and the like. So much for being focused on the needs of hard-pressed SMEs then!

There are four scenarios that I can see panning out from here on in: (1) the two recalcitrant nations blink and allow Paris to house the court; (2) some kind of compromise involving France, the UK and Germany getting something will be agreed; (3) one or more of the three countries walks away from the negotiations and refuses to sign up; (4) the whole process collapses. But which of the four actually happens is anyone’s guess. The fact that the two countries have not been officially identified does make it possible that point (1) could yet be the outcome. However, if previous experience is anything to go by, point (2) is also quite possible – though how splitting the court in some way helps reduce costs for SMEs is anyone’s guess. Point (3) would be politically difficult if one party were to walk away, while if more than one did we would end up at point (4), something which would make a mockery of everyone who has been involved.

As I said yesterday, putting the court in Germany makes the most sense. The Germans file more national and EPO patent applications than the citizens of any other EU member state, while the country’s courts currently deal with way more patent litigation than anywhere else. On that basis it is reasonable to assume that Germans will be the biggest European users of the European court and patent, so why shouldn’t they have everything as close to home as possible if the idea is to make things cheaper for SMEs? And it’s not as if Germany is hard to get to from elsewhere; while by and large it is a cheaper country than the UK (or London to be more precise) in which to engage legal advice and to subsist. Germany has also been a driving force behind the negotiations.

France has been another driving force and may expect something in return, as it was President Sarkozy who arguably unblocked the logjam when he ended France's veto of the London Agreement. But being rewarded for doing something that was always in the interests of French industry is really not a good enough reason to get the court, surely.

There are concerns about bifurcation becoming an entrenched part of the new European system if the court did end up in Germany, but I am not sure that makes much sense. Just because the court is in Germany does not mean all the judges will be German, while if bifurcation really were a major issue surely it should have been dealt with properly before now. It’s a bit rich for countries that have waved things through over recent rounds of talks now to raise doubts just because they want the benefits that housing the court will bring.

In the UK, people were talking about bifurcation red lines more than three years ago – but clearly no-one in government was listening very hard; perhaps because lobbying was ineffective and/or because government did not see it as a big deal. Indeed, the UK seems to have been happy to sit on the sidelines and let others do the heavy lifting during the whole negotiation process. Wading in now to demand the court – if that is what has happened – is surely leaving things way too late. And can you really have a major patent court, the centre-piece of an initiative designed to make the patent system cheaper for SMEs, in a country where the Euro is not the national currency? It may suit British litigants and their advisers, but I am not sure who else would benefit that much. 

This is one of the longest blog posting ever on here, so thanks for sticking with it. Let’s finish off with a summary: there is a very real risk that all of this ends up becoming yet another mess. No-one who has observed the tortured route negotiations around the creation of a European patent right and court have so far taken will be surprised in the slightest. But that won’t stop them being rather depressed this morning. As someone once said: “It’s deja-vu all over again!”

Sectors

IP politics, IP litigation, Patents