New financial support scheme to fund IP Audits for UK SMEs
15th August 2024
Patent partner Stephen Waller addresses the UKIPO's new financial support scheme.
The unitary patent system and the Unified Patent Court (UPC), launched on the 1 of June 2023. This has marked a significant milestone in European patent law, offering a streamlined and cost-effective approach to patent protection and litigation across participating EU member states. By June 2024, the European Patent Office (EPO) had registered over 27,000 Unitary Patents (UP), and more than 370 cases had been initiated before the UPC. This means that almost one in four granted European patents has been converted into a Unitary Patent. Despite some initial hesitance and strategic opt-outs by patentees, the uptake of Unitary Patents has been promising, with significant cost savings and enhanced legal certainty being key benefits.
The Unitary Patent aims to play a crucial role in completing Europe's Single Market for patents and has become a game changer for the EU's innovation and competitiveness. The system makes it easier for companies to protect their innovations, providing a one-stop shop for obtaining and enforcing patents in Europe. This allows companies to save costs as well as reduce paperwork and administrative burden.
Currently 17 EU member states participate in the Unitary Patent system, representing about three quarters of the EU's GDP. The system is also open to other member states. On 1 September 2024, Romania will join the system, bringing the number of participating member states to 18. This means that Unitary Patents for which unitary effect is registered after 1 September 2024 will automatically cover 18 countries, including Romania. Unitary Patents will thus cover markets which are home to well over 300 million people.
As expected, in the first year of operation, entities from European countries represented the largest share of applicants seeking Unitary Patents across the 17 EU member states that have ratified the Unitary Patent Agreement. A total of 64.2% of issued Unitary Patents were granted to applicants located within the 39 contracting states of the European Patent Office (EPO). While these Unitary Patents are currently not enforceable in all EPO member countries, EPO President António Campinos has indicated efforts are underway to expand the Unitary Patent system across all EU member states in the future.
The EPO’s press release to mark the one year anniversary of the Unitary Patent program emphasized that 35.5% of all Unitary Patents registered by European entities in the program’s first year were obtained by small- and medium-sized enterprises (SMEs) as of the end of 2023. Although large European enterprises accounted for 56.9% of Unitary Patent registrations by the end of last year, the significant percentage issued to SMEs demonstrates the value of this new patent right in securing venture capital for small businesses and startups operating in Europe. Following large enterprises and SMEs, universities and public research organizations were responsible for 7.6% of Unitary Patents registered to EU entities in the program's inaugural year.
After Europe, patentees from the United States represented the second largest portion of Unitary Patent registrations, accounting for 16.1% of all Unitary Patents registered by the EPO in the first year. Following the EU and U.S. were three Asian nations: China at 6% of registrations, Japan at 3.8%, and the Republic of Korea at 3.3% of registrations.
The most popular translation language for Unitary Patents is Spanish. This trend is particularly notable for patents where the procedural language is English. Approximately 40.7% of all requests for unitary effect (UP requests) for patents with English as the procedural language are accompanied by a Spanish translation. This popularity is largely due to cost-saving tactics, as Spain is not a member of the UPC, and obtaining patent protection in Spain requires a full translation of the specification into Spanish. Therefore, patentees can use the same translation for both the UP and the Spanish national patent. Even if a patentee is not validating in Spain, a Spanish language translation is usually the cheapest option compared to German or French.
A request for unitary effect does not preclude the patentee from validating the European Patent in member states which have not ratified the UPC agreement, and thus are not part of the UP system. As the UP package is exclusive for EU member states, the Unitary Patent does not prevent a European patent proprietor from using the classical validation scheme in the countries outside of the UP system. It is also important to note that if other member states join the unitary patent system after a Unitary Patent has been granted, the existing Unitary Patent will not automatically extend to cover those new member states.
Furthermore, it should be born in mind that while the Unitary Patent can be cost effective for broad coverage, it lacks flexibility in terms of reducing coverage later. With national validations, patent holders can choose to let patents lapse in certain countries to reduce costs over time. This option is not available with a Unitary Patent, as it's an all-or-nothing approach for the participating countries.
For European patent proprietors, the Unitary Patent system offers several significant advantages. Patent holders should carefully evaluate both the UP system and the classical validation approach when their European patent is granted, especially if they desire protection across multiple European countries. The key benefits of the UP system include:
Nevertheless, patent proprietors should conduct a thorough cost-benefit analysis before deciding. While the UP system often offers lower upfront costs, the long-term expenses, particularly renewal fees, may be higher compared to selective traditional validation in specific countries. To make an informed decision, patent holders should:
By carefully weighing these factors, patent proprietors can determine whether the UP system aligns with their intellectual property strategy and business objectives in Europe. The decision should balance immediate cost savings against long-term strategic considerations and the specific needs of their patent portfolio.
According to the official case load update from the UPC, in the first year of operation the Court received 373 cases at first instance. For comparison, the UK High Court received 46 new patent actions across 2023. Furthermore, the seven German courts specializing in patents recorded 601 new patent lawsuits in 2023 — a decline of 23.6% compared to the previous year. Even though patent lawsuits filed at German patent courts have been declining for years, there has not previously been such a sharp drop. It is undoubtedly no coincidence that this development coincides with the year in which the UPC launched.
As for the character and effect of the Court, it is still too early to draw any firm conclusions. While numerous cases have been filed, there are relatively few decisions, and of the decisions issued some have been overturned on appeal. Nevertheless, looking back on the first year of the UPC reveals some interesting features and trends of the new unitary patent system that are beginning to emerge.
Locations
Since the UPC began operations on 1 June 2023, the German local divisions have been the most popular for infringement actions. Specifically, the Munich local division has handled 54 cases, including 23 infringement actions, 24 counterclaims for revocations, and 7 applications for provisional measures. Overall the suits filed at the German divisions are particularly high. According to UPC statistics, of the 373 claims filed with the new court by the end of May 2024, 260 were filed at the four German divisions in Düsseldorf, Hamburg, Mannheim and Munich. This means that over 69.7% of UPC claims are pending at the German UPC divisions (infringement, revocation, application for PI as well as counterclaims of revocation).
Other countries like France and Italy also play important roles in the UPC system, but Germany's multiple divisions and high case volume set it apart. France hosts the central division in Paris and a local division, while Italy will host a section of the central division in Milan starting June 2024. Nevertheless, it appears that Germany will remain the venue of choice for UPC proceedings.
Judges
Given that proceedings have so far focused on the German local divisions in particular, two additional legally qualified judges were appointed in spring 2024, one to the local division in Mannheim and another to the local division in Munich. In addition, the Munich local division was expanded to include a second panel of judges. Furthermore, in view of the opening of the 2nd section of the central division in Milan in June 2024, three new judges were appointed.
This means that there are currently 111 judges working at the UPC, 43 of whom are legally qualified and 68 of whom are technically qualified. With 37 judges, Germany accounts for the largest proportion of the judges, followed by France (17), Italy (13), the Netherlands (10) and Sweden (7).
Languages
In the early stages of the Unified Patent Court (UPC) proceedings, German was the dominant language used in first-instance cases. This prevalence can be attributed to two main factors: a high volume of cases were filed in the German local divisions, and there was initial uncertainty regarding whether English would be accepted as the language of proceedings across all participating countries. However, a significant shift occurred in April 2024 when English emerged as the predominant language of proceedings for the first time. Currently, English is used in 50% of all UPC cases. This trend towards English usage is expected to continue and potentially increase in the future. The growing preference for English in UPC proceedings can be attributed to several factors:
Furthermore, recent decisions by the UPC Court of Appeal have provided additional support for the use of English in proceedings. For instance, in April 2024, the Court of Appeal issued an order allowing a switch of the language of proceedings from German to English, overturning a previous decision by the President of the Court of First Instance. This ruling, along with other similar decisions, has established precedent favoring the use of English in UPC proceedings. As this trend continues, it is likely that English will become increasingly prevalent in UPC cases, potentially surpassing its current 50% usage rate in the near future.
Traditionally, European patent proprietors have tended to primarily use German national courts for patent litigation in Europe. The choice between the UPC and a German national court depends on the specific needs and circumstances of the patent holder. However, it is predicted that the UPC will become the preferred option for patent litigation in Europe, rather than the German national courts for a number of reasons:
If broad, cost-effective enforcement across multiple EU countries is a priority, the UPC offers significant advantages. However, for those seeking the stability and predictability of an established legal system with specialized expertise, at least in the medium term, the German national courts may be preferable. Additionally, the risk of centralized revocation at the UPC should be carefully considered. Nevertheless, as the advantages of centralized protection and litigation become more apparent, the UPC is poised to become an increasingly attractive option for companies seeking to protect their innovations in the European market.
