The European unitary patent: what possible advantages and disadvantages?
Until now, at the European level, patents have been governed by the Munich Convention, which provides for a single, centralized procedure for granting patents entrusted to the European Patent Office (EPO).
While the procedure is uniform in terms of the granting of the patent, the same cannot be said for its protection; the European patent granted must in fact be validated in each State party to the Convention in which protection is sought. It is commonly said that the European patent corresponds to a “bundle” of national patents: in essence, following the grant, the European patent confers on the holder the same rights as would be conferred by a national patent, and all questions concerning the validity and infringement of the patent are referred to the national courts.
This situation is about to change.
European unitary patent
As we all know, the Agreement on the Unified Patent Court will enter into force on 1 June 2023 and at that point the European unitary patent will be effective, which will confer uniform protection in all European states that have chosen to adhere to this new system.
It should be made clear that the European unitary patent will not replace the “traditional” European patent, on the contrary, it will stand alongside the latter by allowing the patent holder to choose which system to join.
As it happens with the “traditional” European patent, the EPO will still be the competent office to grant unitary patent rights; furthermore, the new system has not changed the way the patent is granted. Quite simply, at the end of the grant procedure of the European patent, the patent proprietor will have the option to request unitary effect within one month and will have to do so in the language of the proceedings.
Currently, twenty-five European states have chosen to participate in this system (the big missing country is Spain); only seventeen, however, have ratified the Agreement.
This means that when the system comes into force, uniform protection will only extend to the seventeen ratifying states. The question to be asked is therefore: what will happen next? When other states ratify the Agreement, will the uniform protection automatically extend to them?
Surprising as it may be, the answer is no.
In fact, over time several “generations” of unitary patents will be created with different territorial coverage depending on the number of states ratifying the Agreement. At least in the first instance, therefore, there will not be a truly unitary patent in all the states participating in the system.
Given that this is an alternative system, how can one choose not to join it?
It is already possible to do so. As of 1 March 2023, in fact, the so-called sunrise period began, i.e. a three-month period during which the holders of European patents already granted, holders of European patent applications and holders of supplementary protection certificates granted for a product protected by a European patent may request the exclusion of these from the system and consequently remove them from the jurisdiction of the Unified Patent Court (this is referred to as an opt-out, as provided for in Article 83 of the Agreement). The opt-out can also be exercised during the transitional period (seven years). However, it is a good idea to make this choice during these three months because, if you are involved in a court action before the Unified Court after 1 June, the opt-out will no longer be permitted. If one chooses to opt-out, is one forever excluded from the system? No, it is possible to change your mind and choose to opt-in, but this choice cannot be revoked again.
What concrete advantages will the new system bring?
There are many advantages. First of all, uniform protection will be available in all states that have ratified the Agreement and the EPO will be the only office to which applications will be submitted (not only that, but the EPO will also centrally manage the post-registration phases). In addition, holders of unitary patents will pay a single annual maintenance fee and costs related to the validation phase of the patent will obviously not be paid anymore. In addition, disputes that arise in connection with the unitary patent will be subject to the exclusive jurisdiction of the Unified Patent Court, whose decisions will have effect in all states affected by the unitary effect (this will make it easier for the patent holder to stop ongoing infringement activities in all affected states).
However, the European unitary patent also seems to have certain limitations. First, it has potentially less territorial coverage than the European patent. The new system only involves those EU states that have ratified the Agreement (unlike the EPC, which also includes non-EU states such as, for example, Switzerland and Turkey). It should be added that the new system is, in certain cases, a double-edged sword. On the one hand, uniform application of the law is provided for, but on the other hand, the patent holder may be exposed to a higher risk: if the Unified Patent Court judges a patent invalid, it would be invalid in all states affected by the unitary effect.
So, is it worth joining the new system or not?
There is no straightforward answer to it. It seems compulsory to make an assessment that takes into account the peculiarities of each individual case. For example, the patent at issue and its “strength” must first be considered. But also the procedural position one takes in a possible court action; in fact, as a plaintiff, it might be useful to obtain a single decision for all the territories adhering to the patent system with unitary effects (with obvious savings in time and costs), while as a defendant, on the other hand, it might be useful to defend oneself in different states, and therefore before different judges, thus gaining time, and avoiding that an unfavorable decision would have effect on all the territories of the UPC at the same time, thus preventing the sale of the product considered to be infringing in the 17 countries adhering to the Agreement.
It should also not be forgotten that the system is new and right holders will be “exposed” to it. The tightness and efficiency of the rules will really be put to the test once the system comes into force. Likewise, the case law of the new Court is obviously not known. It has also been pointed out by several parties that the unitary patent provides less flexibility; it will not, for example, be possible to carry out the so-called selective abandonment, which is instead feasible for the “traditional” European patent (the unitary patent will have to be maintained or abandoned in all countries). It will also not be possible to transfer the patent only in certain states.
Conclusions
In conclusion, the unitary patent presents some advantages on the one hand, but also disadvantages on the other, which must be carefully weighed up according to the specific case. In the case of the opt-out, this is the right time to start making initial assessments. For everything else, one will have to wait for the entry into force of this new system to understand its actual scope and operational efficiency.
Internet of Things and Artificial Intelligence: the end or beginning of standard essential patents?
The COVID-19 pandemic has forced everyone into quarantine which in turn also has imposed a re-organisation of personal and working life directly within our homes.
All of this has simply proven and increased our already worrying dependence from IT means and new technologies, the use of which increased exponentially in 2020 in all sectors, even in those where this would have been difficult to imagine (let us consider, for example, court hearings done remotely via audio-video link, school distance learning, etc.).
Similarly, we are also witnessing an ever increasing digital integration in objects, devices, sensors, and daily goods which now have become a part of our everyday life.
With that being said, we should ask ourselves now what impact the current technological revolutions will have within the field of intellectual property and, in particular, within the patent sector.
In our view, the current changes will certainly bring about a rejuvenation in the field of inventions; indeed, to the extent that is of interest for our purposes, it should be noted that thanks to the decisive role of artificial intelligence and the “internet of things”, we may legitimately expect an increase in the filing of so-called standard essential patents.
It is well known that standard essential patents (SEPs) are patents that protect technologies considered to be – indeed – essential for the implementation of standards which are recognised by the relevant standards setting organisations.
These patents are already present within our life more than we imagine and in fact we use them for calling others, sending messages via our smartphone, sending files via e-mail, listening to our music playlists or simply watching our favourite TV series whilst sitting on our couch at home.
Today, the most well-known standards probably would include “Bluetooth”, “WiFi” and “5G” but, as we said above, performing any of the above actions involves dozens of standards each of which is in turn protected by the aforementioned patents.
In a recent communication sent out last November to the European Parliament, the European Commission evidenced the crucial role of standard essential patents in the development of 5G technology and the Internet of Things, for example noting that just for standards of mobile connectivity the ETSI (European Telecommunications Standards Institute) has declared more than 25.000 patent families.
However, in the same communication the Commission also evidenced the difficulties that some businesses encounter in trying to reach an agreement for the grant of licenses with the holders of standard essential patents, which consequently has determined a rise in disputes between rights-holders and users.
Indeed, it’s known that a patent is defined as essential following a sort of self-declaration by its holder to the effect that the patent is necessary and essential for the application of a standard and, therefore, by means of this declaration, the holder is available to grant a license over such patent to those who intend to utilize the relevant standard under so-called “FRAND”, namely conditions that are Fair, Reasonable And Non-Discriminatory.
What occurs in practice is that the holder of the standard essential patent, having ascertained the presence within the market of a product that uses a certain standard, will turn to its producer or distributor and ask the latter to sign a license agreement containing “FRAND” conditions.
At that point the user has no other choice but to accept the license at the conditions that have been proposed by the patent holder; indeed, unlike what happens with patents that are not standard essential where the user clearly may search for alternative solutions that do not infringe the patent, this is not possible with standard essential patents given that they concern standards used for complying with technical provisions that form the basis of millions of products and therefore allow for interoperability between such products.
Moreover, investing in the development of an alternative standard is very expensive (for example, consider the development of a potential alternative to the “Bluetooth” standard), but – even if we should assume the feasibility of developing an alternative standard – consumers would then have to be persuaded to “switch” to a new standard and substitute their devices with new ones.
The risk that this kind of situation may cause distortions within the market and especially instances of abuse on part of the holders of standard essential patents is therefore very high; indeed, those holders may decide the fate of a product within a certain market because they force all operators of that same market to use the standard upon payment of a royalty.
In order to balance the interests at play, the well-known judgment of the Court of Justice in the case of “Huawei v. ZTE” (C-170/13 of 16.07.2015) had already been issued in 2015 and provided for a series of obligations upon holders of standard essential patents, namely, among other things: a) the obligation to guarantee at all times so-called FRAND conditions in favour of potential licensees; b) the obligation of the patent holder to always warn in advance the user of the protected standard by indicating the patent that has been infringed and specifying how such violation has occurred and, if the user fails to cooperate, to commence legal proceedings.
According to the Court of Justice, if these conditions are met then it cannot be held that the holder of the standard essential patent has abused its domination position within the market and therefore no sanction may lie under art. 101 of the TFUE.
However, reality is somewhat different insofar as holders of standard essential patents still have excessive negotiating power vis-a-vis the user of the protected standard. Indeed, as already noted, the essential nature or lack thereof of a patent depends on a self-declaration given by the same holder of the patent which also establishes a “de facto” presumption of “essentiality” of the patent; this further facilitates the holders in legal proceedings because the burden of proof then falls onto the alleged infringer who will have to prove non-interference or the non-essential nature of the patent.
It should also be noted that as of now there are no provisions that protect the weak party, that is the user of the standard essential patent and, indeed, for example there are no reference criteria that clearly define conditions that are fair, equal, and non-discriminatory. In other words, the user cannot verify if the conditions that are proposed by the patent holder are actually “FRAND” and so two options become possible: either accept the conditions or rebel and start proceedings against the patent holder.
Even though the matter of standard essential patents has formed the subject of several judgments and specific calls by the European Commission throughout the years, several questions have been left open and require immediate action by the legislator in order to strengthen legal certainty and reduce the rising number of disputes within this field.
In our opinion, it would be advisable for example to create and establish an independent body that could verify in advance the essential nature of a patent before it is protected as well as to create rules that are specific, effective, and fair capable of regulating the grant of licenses for standard essential patents.
Furthermore, considering the ongoing technological revolution and the consequent increase in the use of such patents, we trust that these reforms will be introduced in a timely manner.