Spain v Parliament & Council (C-146/13) – a giant step towards (dis)integration of the European patent system

Aurora Plomer

The green light for the introduction of a European unitary patent and a centralized patent court (UPC) was finally given by the CJEU in Spain v Parliament and Council (Case-146-3). This marks the end of longstanding but frustrated  efforts by the European Union to introduce a uniform patent system in Europe. Like its forerunners, the aim of the latest initiative in the form of the EU ‘patent package’,  is to create the legal conditions for a more secure, less complex  and less costly system for industry and investors to foster scientific and technological advances in the Union.  But whilst driven by the European Union,   the ‘patent package’   is a   mix of EU Regulations and an international Treaty  signed by twenty five out of the existing twenty eight Member States. The  ‘unitary patent’  or European patent with uniform effect (EPUE) across the twenty five signatories, has been created by means of Regulation (EU) No 1257/2012 of the European Parliament and of the Council of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection (OJ 2012 L 361, p. 1).  By contrast,  the centralized  ‘unified patent court’ (UPC),  with exclusive jurisdiction to enforce and revoke the EPUE,  is the product of an international treaty (the Agreement on a Unified Patent Court, signed at Brussels on 19 February 2013 (OJ 2013 C 175, p. 1.)  The  legal architecture of the patent package  is therefore complex  and raises important constitutional questions regarding the legal basis of the patent package under EU law, the delegation of powers to the European Patent Organization and the principles of autonomy and uniform application of EU law. These questions were raised by Spain in an application for annulment of the legal instruments creating unitary patent protection. The Grand Chamber’s decision of 5 May 2015, rejecting Spain’s application,  has removed the last legal objection to the implementation of the ‘patent package’.  Spain raised seven pleas, all rejected by the court, in a laconic judgment which leaves many questions open. Some of the most salient issues left open by the judgment are discussed below.

By way of background to the Court’s ruling, it is important to note that patents have historically been territorial in nature so their enforcement and validity is determined by national laws (Article 3 TRIPS).  Since the adoption of the European Patent Convention (EPC) in 1973, applicants have been able to obtain a European-wide patent granted by the European Patent Office (EPO) covering any designated Member State of the European Patent Convention (currently thirty eight). The EPC preserves the principle of territoriality, so the legal effect of a European Patent granted by the EPO is the same as if the patent had been granted by the national patent office of a Member State. The grant of a European Patent thus results in a ‘bundle’ of national patents whose validity and revocation post-grant stands to be determined under the national laws of each designated Member State. A large scale study of  9,000 patent suits from seven of the largest countries in the European Union during 2000-2010 shows that judicial outcomes of revocation and infringement proceedings post-grant diverge radically across the different countries and types of patented technologies in Europe, making for a complex, uncertain and costly legal environment.  In this light,  the creation of a centralized judicial system  with exclusive jurisdiction on enforcement  of the unitary patent (UPC) has undoubtedly, in theory, many attractions from an applicant’s perspective.  Whether the legal creature created by the EU will meet applicants expectations is less clear.

Under the patent package,  applications for a unitary patent will be processed and administered by the EPO (Article 9 of the Regulation) under the rules and procedures of the EPC (Article 2(a) of the Regulation). Once granted, the European patent with uniform effect (EPUE) shall have unitary effect amongst the participating Member States (Article 2(b)). Of the seven pleas raised by Spain and dismissed by the Court, three stand out.

Spain argued that the contested regulation should be annulled as contrary to the rule of law  in Article 2 TEU because the administrative procedure for the grant of the unitary patent has been delegated to  the EPO (under Article 142 of the EPC)  but the decisions of the EPO boards are not subject to any form of judicial review to ensure the correct and uniform application of EU law and the protection of fundamental rights. The Court’s dismissal of Spain’s argument simply reiterates AG Bot’s technical answer (18th November 2014) that the contested regulation in no way delimits the condition for the grant of European patents which are exclusively governed by the EPC and not EU law. Yet, the Court’s reasoning, whilst formally correct,  represents the EPO’s intervention as an ‘accessory’ administrative act of registering a European patent granted under EPC rules as a European Patent with Unitary Effect.   In so doing, the answer evades the critical point raised by Spain that the decisions of the  EPO boards,  at the grant stage of the European patent and its ‘accessory’ registration as a EPUE – are not subject to judicial scrutiny under EU law or indeed any other form of judicial scrutiny.  Neither is the point of purely academic interest as underscored by the case  Virgin Atlantic Airway Ltd v Zodiac Seats UK Ltd [2013] UKSC 46. As the result of an administrative error by the  EPO examiners, the applicant was exposed to a claim worth £49 million  in infringement proceedings in the UK. The UK Court held that the error could not be rectified at the post-grant stage unless the EPO corrected the error. The applicant’s request to the EPO to correct the error was originally refused prompting further appeals at the EPO and in the UK courts highlighting the shortcomings of the EPO tribunal system (the case has been extensively discussed in IP blogs; for example IP Copy). By contrast, in legal proceedings in national courts or administrative bodies where EU law is engaged, an applicant in similar circumstances could invoke Article 41 of the EU Charter. Not so with the EPUE and the EPO boards.  The recent dismissal of one of the EPO officials has further fuelled concerns about  the independence and fairness of the EPO tribunals, prompting an unprecedented intervention by Sir Robin Jacob (see letter and EPO response). Also, for a discussion of parallel proceedings in German Courts Dr. Stjerna’s article on the topic is available in PDF here.

Spain also  objected that the contested regulation lacks a legal basis, is devoid of substantive content and does not establish uniform protection of intellectual property rights across the Union contrary to Article 118 TFEU which is cited as the legal basis in the preamble of the regulation. Spain noted that the contested regulation refers to the UPC Agreement (an international treaty) and national laws  instead of harmonised EU laws. Dismissing Spain’s objections, the Court referred back to its earlier judgment in Spain and Italy v Council, C-274/11 and C-295/11, paragraphs 67 and 68 holding that Article 118 TFEU did not preclude the use of enhanced cooperation and that the uniform protection given need not be in force in the Union in its entirety but only in the territory of the participating Member States (para. 41). Furthermore, uniformity, the Court said, is ensured by Article 7 which requires the EPUE, as an object of property, to be treated as a national patent of the participating Member State, in accordance with the applicable national law as defined in Article 5(3) (para. 47) which will have equal effect across all the participating Member States. The Court’s reasoning here does little more than restate the provisions of the contested regulation and does not dispel the concerns raised by Spain (and others) about the legal uncertainty surrounding the applicable material laws. The unclarity is further reinforced by Article 24 of the UPC Agreement which lists the sources of law to be applied by the Court including alongside Union law, the EPC (Article 24(1)(c) and national law (Article 24(1)(c).  It has been anticipated that in 80% of cases German law will apply but there remains considerable uncertainty.

A  related objection raised by Spain concerned the lack of integration of the unified patent court within the institutional and judicial system of the Union. Spain alleged that the UPC does not preserve the autonomy of the EU legal order and the essential character of the powers of the EU as required by the EU and FEU Treaties and Opinion 1/09 which held the previous version of the Community Patent Court to be incompatible with the Treaties (para 91).  The Court’s answer here is singularly disappointing in avoiding the substance of the point. The Court’s dismissal of the objection simply invokes and restates Article 263 TFEU and asserts that the court does not have jurisdiction to rule on the lawfulness of an international agreement concluded by Member States (para 101).

Some practitioners are reassured by the Court’s answer. But the  paradox is that a court created under the auspices of the EU and whose jurisdiction is required under Article 31 of the UPC Agreement to be established in accordance with Regulation (EU) no. 1215/2012 lies outwith the judicial systems of Member States and the EU whilst being vested with  exclusive competence over actions for infringement and revocation (Article 32 UPC). Notwithstanding the definition of the Unified Patent Court in Article 1 of the UPC Agreement as a “court common to the Contracting Member States and thus subject to the same obligations under Union law as any national court of the Contracting Member States” the Unified Patent Court is not integrated into either national courts or the Union courts. Neither does its status correspond to that of traditional courts as  public bodies. Instead, extending legal concepts normally applied in the private sphere, the court is mandated under Article 4 of the UPC to have “legal personality in each Contracting Member State and shall enjoy the most extensive legal capacity accorded to legal persons under the national law of that State.” The court’s liability is defined as contractual (Article 5) crossing traditional legal boundaries and defying established concepts of the powers, obligations and liabilities of tribunals and courts.

The EU patent package is taking the EU and the twenty five participating Member States into unchartered legal territory.  Resolution of the legal uncertainty relating to the substantive applicable laws and the discharge of the court’s functions  are bound to keep constitutional and IP  scholars occupied for many years to come and are likely to deter all but the most powerful companies to enforce their intellectual property rights through the Unified Patent Court. The EU Court’s dismissal of Spain’s objections does little to assuage these concerns.

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