Nascent patents

Changes are afoot in the process for settling patent disputes across Europe, with two new models battling it out for supremacy. But don’t hold your breath, say Nick Gardner and Sebastian Moore

On 12 July 2006 a public hearing was held in Brussels as part of the European Commission’s consultation on the future of the patent system in Europe. The Commission had launched the consultation in response to the public perception that the current system has failed patent holders and is affecting the EU’s competitiveness. In particular, the costs and complexity of obtaining and enforcing a patent throughout Europe are widely regarded as excessive.

The consultation concerns a number of proposals, principally competing proposals for a new unitary Community patent, or alternatively an enhancement to the existing national systems, known as the European patent litigation agreement. Either proposal, if adopted, would change significantly the patent regime in Europe. Prior to the launch of the consultation, the Commission backed the former proposal and was hostile to the latter. The Commission’s position, however, appears to have shifted significantly on the direction that the reforms should take.

The background
Currently, patents in Europe are only national monopoly rights. It is not possible to obtain a single patent with effect across the EU. A single European application and examination procedure is available at the European Patent Office (EPO) for obtaining patents in designated European Patent Convention states. On grant, however, the single application becomes a bundle of national patents, which can be enforced only on a state-by-state basis. Enforcement of these rights, therefore, often results in numerous parallel patent actions throughout Europe, with a concomitant increase in expense and risk of inconsistent judgments in the different jurisdictions. It can also lead to forum shopping, with litigants taking the initiative in jurisdictions they perceive to be more favourable to their case.

Historically, certain national courts (notably in the Netherlands) have, in certain limited circumstances, provided a de facto single forum in which to hear infringement actions by assuming jurisdiction in respect of all equivalent European patents. In the light of two recent European Court of Justice (ECJ) judgments (C-539/03 and C-4/03, both dated 13 July 2006), this practice is effectively no longer possible.

The proposals for reform
The Commission and the EPO have put forward two different proposals, which aim to produce a ‘one-stop shop’ for patent disputes in Europe. The EPO is not an EU organisation, but was created by a separate treaty (the European Patent Convention), whose signatories include non-EU states such as Switzerland.

Community Patent
Since 1997 the Commission has been championing the adoption of a Community Patent Regulation, which would create a single patent right valid across the EU. This Community Patent (ComPat) would be litigated in the Community Patent Court, to be based in Luxembourg. Any decision of this court would be effective throughout the EU.

Thus, an alleged infringement of a ComPat in both Greece and the UK could be determined in the same proceedings as though such activities were taking place in a single country.

Language issues are a significant problem. The Commission has estimated that the cost of obtaining a ComPat will be approximately the same as the cost of obtaining a patent in five European states. The proposals, however, contain a requirement to translate the claims (the formal statement of the monopoly of patent cases) of the ComPat into all official EU languages.

Concerns about the effectiveness of a single central court, and issues surrounding translations, led to widespread disagreement between EU member states, which failed to reach agreement, and in 2004 negotiations reached a deadlock.

The European Patent Litigation Agreement
As a result of the difficulties in the ComPat negotiations, a working group of the EPO adopted an alternative approach and proposed a new intergovernmental agreement, the European Patent Litigation Agreement (EPLA), which would commit its signatory states to an integrated judicial system (known as the European Patent Court) dealing centrally with the enforcement and revocation of patents obtained by application to the EPO.

Any judgment by that court would have effect in the territories of all contracting states in which such patents were in force.

Any number of states may accede to this proposed agreement, meaning that it could be adopted immediately by willing member states. Unlike the ComPat, the EPLA would apply to existing patents in signatory states and have an immediate effect on patent litigation in Europe.

These proposals recently received a boost when senior patent judges from across Europe backed a resolution to convene a diplomatic conference “with a view to implementing proposals broadly along the lines of those of [the EPLA] as soon as practicable”.

Preliminary findings from the consultation
It would appear that the widespread support for proposals broadly along the lines of the EPLA led the Commission to the current consultation process with a view to seeing whether there was any hope for the ComPat. The consultation process has been of great interest to industry and patent practitioners alike. This is reflected in the volume of written feedback – more than 2,000 submissions – which forced the original date for the public hearing back by a month.

Although there is widespread support for the concept of a unitary European patent, the current ComPat proposals have been unequivocally rejected. The key reasons given for the rejection are the translation requirements as well as the lack of regional divisions of the Community Patent Court. An absence of detailed procedural rules for the court, as well as a lack of assurances as to the quality and experience of its judges, have increased industry’s uncertainty about the proposals.

The feedback on the EPLA is more favourable and there is a feeling that the current proposals could form the way forward. The Commission has in the past appeared to be hostile to the EPLA, ostensibly because it might be inconsistent with existing EU legislation on jurisdiction. Now, however, the Commission appears to be considering the possibility of the EPLA as a stop-gap measure, or even in parallel to the ComPat.

As with the ComPat, however, it is clear that unqualified support from industry will not be forthcoming until it is shown that the EPLA will deliver a high-quality and cost-effective means of enforcing patents.

Without doubt, industry would welcome a reduction in the costs and complexity of obtaining and enforcing patents throughout Europe. In theory, proposals along the lines of the ComPat or the EPLA should achieve this. However, detailed problems with language issues and a suitable central forum mean this is far from straightforward.

Although the Commission remains committed to the ComPat, the consultation feedback now makes it unlikely that this proposal will be adopted in the near future. Instead, the EPLA has emerged as the most favoured proposal, with some commentators anticipating the European Patent Court being set up in the next few years. Such a timescale, however, seems optimistic, particularly if the EU seeks a role in developing the proposal, as it has indicated it might.

It is also clear from the feedback that reform should not come at any price. Unless the proposals are shown to be capable of delivering fast, consistent and well-reasoned judgments, they will be greeted with some caution. In particular, research-based industries, whose patents provide protection for their high-risk investments, may be reluctant to gamble their most significant assets in an untested enforcement system.

A report detailing the outcome of the consultation and containing recommendations is due to be published by the Commission in autumn 2006. It remains to be seen whether there will now be a move towards adoption of the EPLA and whether the Commission will support it. –
Nick Gardner is head of IP and Sebastian Moore is an associate at Herbert Smith