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New European Patent System: A Long Way To The Unitary Patent by. Prof. Dr. iur. Alexander J. Bělohlávek. President, World Jurist Association. Attorney, Law ...
lnternational Perspectives on lntellectual

Property Protection

Shanghai, China

November 2-4,2014

WORKPAPER

New European Patent System: A Long Way To The Unitary Patent by

Prof. Dr. iur. Alexander J.

Bělohlávek

President, World Jurist Association

Attorney, Law Offices of Bělohlávek

CZECH REPUBLIC

This is an informational and/or educational report published by the World Jurist Association for the International Perspectives on Intellectual Property Protection Conference, held in collaboration with the Supreme People's Court ofChina from November 2-4,2014 in Shanghai, China. The Association assumes no responsibility for the policies or positions presented in the report or for the presentation of its contents. The Association's positíon on this topie may be established at the China 2014 IP Law Conference if this report is adopted, with or without amendments. The Associatíon weJcomes information, comments or reactions on this report. The Association invites judges, lawyers, law professors, other legal professionals and interested person s of all nations to participate in the China 20 I4 IP Law Conference and the work of the Association. Comments or requests for information should be sent to: The World Jurist Association

7910 Woodmont Avenue; Suite 1440

Bethesda, Maryland 20814; USA

Phone: (202)466-5428

Fax: (202) 452-8540

E-Mail: [email protected]

Internet: www.worldjurist.org

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New European Patent System: A Long Way To The Unitary Patent Alexander J. BĚLOHLÁVEK

Univ. Prof., Prof. Z\'V., dr. iur. et mgr., DI/MB (oec), dr.h.c.

• Professor, Dept. of Law, Faculty of Economics, Technical University Ostrava (Czech Republic) • Prof. zw. -Department of Internationa\ Law and International Relations, Faculty of Law and Administration, WSM Warsaw (Poland) • Visiting Univ. Professor, ĎepL of International Law, Faculty of Law, Masaryk University Brno (Czech Republic) • Attorney-at-Law in Prague (Czech Republic)

branch office in NJ. (USA)

• Member of the ICC International Court of Arbitration, lnternational Chamber of Commerce, Paris (France) • Head ofthe Commission on Arbitration, ICC National Committee Czech Republic • President ofWJA - the World Jurist Association (Washington D.C./ USA) • Arbitrator in Prague (Czech Republic), Vienna (Austria), Kiev (Ukraine), Moscow (Russia), Almaty (Kazakhstan), Vilnius (Lithuania), Chisinau (Moldova), Ljubljana (Slovenia), Warsaw (Poland), Sofia (Bulgaria), Arbitrator pursuant to UNCITRAL Rules • Member of the ABA (American Bar Association), ASA (Swiss Arbitration Association), ASIL (American Society (Deutsches Institut

fůr



International Law), CAK (Czech Bar Association) DIS

Schiedsgerichtsbarkeit), ArbAut (Austrian Arbitration Association),

IBA (lnternational Bar Association), lCC (lnternational Chamber of Commerce), ILA (International Law Association - headquarters branch London), Assocíated Member



the

Law Society of England and Wales, etc.

ANNOTATION /SUMMARY Businesses throughout Europe have long called for the introduction of a patent system suitable for their needs, with the existing arrangements under the EPC being both costly (an annual maintenance fee must be paid in every participating state where protection is sought) and ineffective in terms of administrative requirements. Among the criticized features is the need to validate it through national oftices together with the requirement of providing translations of the patent. Various proposals have been presented on the EU platform over the last 4 decades but none was adopted. The question of the language for the unitary patent, which of course is closely connected to the issue of costs as well as the procedure for dispute resolutions, quickly became a point of dispute. The initial idea of granting the authority to hear and decide patent disputes to the designated courts of the member states was rejected. In 2012, a package consisting of two Regulations and an intemational agreement on the page 2 out of 22

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establishment of the Unitary Patent Court was approved under an enhanced cooperation procedure. However it is not c1~ar when it will come into effect as it is dependent on the ratification process of the agreement which is moving slower than expected. An action brought by Spain which claims that the package is contrary to EU law, is still pending before the CJEU. The system is opened to EU member states only (with the CJEU rejecting the idea of making it available to other countries interested in joining). The unitary patent is based on the existing European patent and will be administered by the EPO. The main objectives described above were addressed. The need for translations was significantly reduced; however, the amount of the fees has not been set. Furthermore, the po siti on of the patent court towards the CJEU remains unclear and will be subject to further interpretation. KEYWORDS Court of Justice of the European Union, EU Law, European Patent, European Patent Office, harmonization, Intellectual Property, IP Law, Meroni doctrine, patent application, place of business, unitary patent, TFEU

1. For many years, entrepreneurs (both individuals and companies) have protected their investments in new innovative products and services through the use of patents which enable them to develop and produce such products and / or services without being forced to battle competition that tried to take advantage of the invention without actually making investments. 1 Considering the importance of patent protection for businesses, it is hardly a surprise that the changes in the European patent law has drawn significant attention. 2. Since protection granted to IP rights is based on a territorial level and while intemational trade becomes more and more global, it has become increasingly imperative for businesses to gain protection in all countries. The need for a more flexible system became even more apparent with the introduction oť the single market and the use of new technologies (which again opened new territories for entrepreneurs). As a result, ongoing discussions on the political and economic levels entertain the idea of creating a unitary patent system that would enable inventors to have their patents protected throughout Europe without having to apply for protection individually in each country.2 These I Which in some fields such as pharmacology may be sky high with some studies estimating them within the billion dollar range - see for example http://www.outsourcing-pharma.com/Preclinical-Research/Drug­ development-costs-hit-1.7-billion [although this is U.S. research, the same conclusion can be reached with respect to other regions - Asia qperiencíng the probably biggest increase in patent applications ­ http://www.transpacificip.com/assets/pdf/patentfundA VCJsept.pdf - and certainly applies to Europe as well, hence the importance ofthe patent system and the changes madel. 2 Based on the needs of the individual, the parties Ímerested in applying for a patent can chose between the intemational route currently govemed by the Patent Cooperation Treaty signed in Washington on June 19, 1970, in the wordíng of íts amendment from September 28, 1979 and modítications from February 3, 1984, as well as October 3, 200 I [hereinafter referred to as the pen - which enables the applicant to seek protection simultaneously in 148 countries throughout the world or iť the invention should only be used (and hence protected) within Europe the applícable procedure is set by the Convention on the Grant of European Patents~­ the European Patent Convention rrom October 5, 1973 [hereinafter reťerred to as the EPC]. The introduction of the European unitary patent system however needs to be seen as a new addition to the a1ready existing systems

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discussions were inspired by the introduction of a similar system in the 1990s3 with respect to trademarks. 4 As much as this statement is correct (i.e., the community trademark has often been cited as an example of how the unitary European patent should work), it shouldn't be interpreted to suggest that these discussions were solely initiated as a result of the introduction of the community trademark. 3. In fact, nothing could be further from truth. The first attempts to overcome the limits and disadvantages of the territorial scope 01' nationallegislation date back to the 1960s. 5 More recent efforts include the Cdmmunity Patent Convention, also known as the Luxembourg Convention, signed in Luxembourg on December 15, 1975 6 and the subsequent Agreement related to the community patent (signed on December 15, 1989 in Luxembourg).7 At that time however, the agreement did not secure aH of the necessary ratifications and never came into force. The idea was to create a unitary and autonomous effect for European patents granted in respect of the territories of the member states under the EPC. 8 It did not go as far as to create a separate judicial system in relation to the (which widens the options available for businesses) and not as their replacement, as they will remain fully functionjng. 3 The initial Council Regulation (EC) No 40/94 on the Community trade mark was adopted on December 20, 1993 and entered into force on March 15, 1994 (pursuant to Article 143(1) hereof, the Regulation entered jnto force on the 60 th day following the date of its publication in the Officia/ Journa/ oj the European Communities Le., L 1I trom January 14, 1994) until il was replaced by Council Regulation No 207/2009 on the Community trade mark trom February 26, 2009 which was published in the Officia/ Journa/ oj the European Communities on March 24, 2009 and gained its legal force on April 12, 2009 (pursuant to Article 167( I) of the Regulation, it gained its legal force on the 20th day following íts publícation as described above). However, it should be pointed out that the latter document does not contain any substantíal changes with respect to the unitary trademark system and was only adopted due to several amendments to the original legal text; thus more than anything else, Regulation No 207/2009 should be seen as a codified versi on rather than a creation of a new system. 4 The reasoning behind the introduction of the community trademark was that for the single market to function properly, it was not sufficient enough to provide rules that would ensure that there were no barriers to the tree movement of goods and services and undisturbed competition throughout the entire Community; it was also necessary to create a legal tramework that would enable businesses to adapt their activities so that they can be pursued throughout the Community. It was argued that for businesses to fully enjoy the possibilities of exercising their actívities, their goods and services had to be equally distinguished, recognized and protected in the member states. Having recognized this need, a unitary trademark system was set up in the early nineties under Article 308 of the Treaty establishing the European Community [which reads as follows: Jf action by the Community should prove necessary to atlain, in the course oj the operation oj the common market, one oj the objectives oj the Community, and this Treaty has not provided the necessary powers, the Counci/ shall, acting unanimously on a proposal from the Commission and after consulting the European Par/lament, take the appropriate measures.]. Whereas a trademark exists as an indicator which helps the consumer distinguish between products of certain origin, the argumentation also applies to patents. It is essential for the undertakings to be able to obtain (uniform) protection wíthout having to go through the national procedure in each member state. 5 See the official website created by the Commission, dedicated to the single market problematic: http://ec.europa.eulinternalmarket/indprop/patent/faqsiindexen.htm 6 It was envisioned that the convention would lead to the creation of a single stage procedure of grantíng a patent that would be common to all member states. However this aspíration never materialized as the only member states that actually ratified the convention were France, Germany, Greece, Denmark, Luxembourg, the United Kingdom and the Netherlands. 7 89/695/EEC - OJ L 40 I trom December 30, J 989, p. 1-27. 8 the agreement was supposed to constitute a special agreement within the meaning of Article 142 ofthe EPC, a regional patent treaty within the meaning of Article 45 (I) of the PCT, and a special agreement within the

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issues arising from the patent system introduced by the agreement, 9 but due to the necessity of the uniform application of the law on the Community patent, it envisioned the creation of yet another judiciary body - the Common Appeals Court with the authority to (i) hear referrals on questions of the infringement and validity of the Community patents from the designated national courts, and (ii) decide on appeals from the Revocation Divisions and the Patent Administration Division of the European Patent Office. 10/ 11 Despite the large authority confemed upon the Common Appeals Court, it was not to function autonomously and independently of the (then) Court of Justice of the European Communities. 12 It was bound to request a preliminary ruling of the court in the event that there was a risk that the Agreement related to the community patent might be interpreted contrary to the founding treaties. 13 Furthermore, a proceeding before the court meaning of Article 19 of the Convention for the Protection of Industrial Property, signed in Paris on March 20, 1883 as subsequently amended. 9 Questions related to infringement and the validity ofthe patents granted under the agreement were primarily to be decided by specialized courts designated by the individual member states. 10 Meaning that the Revocation Boards provided for in the EPC were herewith replaced. II At first, an impression may arise that the system which was proposed by the agreement corresponds with the arrangements introduced later with respect to the trademarks (Council Regulation (EC) No 40/94 on the Community trade mark dated December 20, 1993, OJ LIliI) or plant variety rights (Council Regulation (EC) No 2100/94 on Community plant variety rights dated July 27,1994, OJ L 227/1). But looking doser, there are significant dífferences as these two regulations created specialized Boards of Appeal within the respective offices, i.e., the Office for Harmonization in the Internal Market (OHIM) and the Community Plant Variety Office (with the possibility of appeal to the Court of Justice ofthe European Communities / now cmu), whereas the agreement envisioned the creation of the Common Appeals Court as an independent judicial body, where the point of concern was its position vis-a-vis the CJEU. Obviously, the same question arose in connection with the Agreement on a Unified Patent Court and the establishment of the court. In fact, it can be said that this was one of the main reasons for the long and difficult negotiations with respect to any proposal under which a unified patent was to be introduced. A major point of dispute was also the right granted under the "Luxembourg proposals" to the judiciary of the member states, i.e., to invalidate the European / community patent with effect for the territory of all member states. Some of the member states saw this as another intrusion into their sovereignty and at the same time considered it to be a contributing factor to the erosion of the principle of legal certainty. Although the conclusion that this problem was now completely removed by the introduction of the Unified Patent Court certainly cannot ,be reached, many of the objections originally raised were if not solved then lessened by the creation of a single jurisdiction for all unitary patent related matters and disputes. Apart from that, a point of dispute has always been the requirement for the translation of the patents and the costs connected therewith. Although this requirement has not been waived entirely in the new system, the member states were able to reach an agreement under which the duty to provide translations was significantly reduced and at the same time, certain subjects such as natural persons, non-profit organizations, universities etc. residing or having their princi pal place of business within the territory of one of the member states may be entitled to compensation for costs related to the required translations (this compensation will be capped by a specific amount). It deserves mentioning that the translation issue is simultaneously being tackled within the European Patent Office [hereinafter referred to as the EPO] which is in the process of making available a high-quality machine translatíon system which give's anyone a chance to become familiar with existing patent documents in their own language, even in cases where the patent was not valídated in the relevant country (a search can be made through the database Espacenet which is adminístered by the EPO). This provídes the users with the general idea of the existing patent information. At the moment, the emphasis ís on improving the service as the originaJ target - i.e., providing translation of patent documents for the 28 officíal languages of the EPO's 38 member states, plus Chinese (introduced in December 2012), Japanese, Korean and Russian. This goal was reached by the end of 20 13, a year ahead of the original schedule. Apart from Englísh, there is a possibility of making translations from and into French and German for the other 27 languages. 12 Now referred to as the Court of Justice ofthe European Union [hereinafter referred to as the CJEU]. IJ At the tjme of the introduction 0[. the agreement, the decisive act that was referred to was the Treaty establishing the European Community (specifically its Article 177 I Article 234 in the wording of further amendments); nowadays, the correct reference would be to Article 267 of the Treaty on the Functioning of the

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could have been initiated ,by a member state or the commlSSlOn if it came to the conclusion that the final decision of the Common Appeals Court did not comply with the aforementioned principle (Le., that the interpretation and application ofthe agreement did not conform with acquis communautaire. The authority to rule on questions regarding jurisdiction in matters related to the community patent brought before the national courts designated by the member states also rested with the (now) CJEU. As can be seen, the establishment of the Unified Patent Court within the current European unitary patent system was not the first call for the creation of yet another judicial body and the strengthening of the position of the EU organs compared to the organs of the individual member states. 14 4. In 2000, the Commission once more proposed the introduction of a unified European patent that would provide protection throughout the member statesY The proposal was the logical result of the ongoing negotiations and work done in the meantime. 16 This especially applied to the (i) First Action PIan for lnnovation in Europe, 17 which resulted in the adoption oť the (ii) the Commission's Green Paper on the Community patent and the European patent system. 18 In general, the proposal attempted to deal with the main obstacles described above which prevented the earlier proposals from being adopted (especially the calls ťor the reduction oť the translation costs and the creation oť a European Union [hereinafter referred to as the TFEU] : The Courl ojJustice oJthe European Union shall have jurisdiction to give preliminary rulings concerning: (a) the interpretation oj the Treaties; (b) the validity and interpretation ojacts ojthe instÍfufions, bodies, offices or agencies ojthe Union. Where such a questíon is raised beJore any court or tribuna/ oja Member State, lhat cour! or tribuna/ may, if il considers tha! a decision on the question is necessary to enable it to give judgment, request lhe Court to gíve a ruling thereon. Where any such question is raised in a case pending beJore a courl or tribunal oj a Member State against whose decisions lhere is no judicial remedy under nationa/ /aw, lhal court or tribuna/ shall bring the matter beJore the Courl. !f sl/ch a question is raised in a case pending beJore a COl/rl or tribunal oj a Member State wilh regard to a person in custody, the Cour! ojJustice ojthe European Union shall acl wilh the minimum ojde/ay. 14 The requirement for granting unified protection and application of the provisions related to the community patent is certainly understandable, especíally from the perspective of legal certainty. On the other hand, the question of giving up areas which until now fell within the sovereign authority of the member states is exactly the issue which makes some ofthe member states reluctant to participate in an otherwise laudable effort that may enhance the development and cooperation ofthe member states. 15 Proposal for a Counci! Regulation on a Community Patent COM (2000) 412 final OJ C337E from November 28,2000. 16 i.e., between the lapse ofthe proposed Luxembourg system and the draft ofthis new proposaL 17 COM(96) 589 final, of20 November 1996. 18 COM(97) 314 final, of 24 June 1997. The pllblication of the proposal reslIlted in a large number of comments from parties concerned, among others also from the European Parliament (OJ C 379, 7.12.1998, p. 268) and the Economic and Social Committee (OJ 'c 129,27.4.1998, p. 8). In addition, various meetings were held, from Pllblic hearings which took place on November 25, and November 26, 1997 and were opened to anyone using the patent system, to experts consultations conducted on January 26, 1998. As a result of these discussions and additional ideas, the Commission came up with a Communication on the follow-lIp to the Green Paper on the Community patent and the patent system in Europe (this document is dated February 5, 1999 and can be found under COM( 1999) 42 finaJ) where the intentions and plans of the Commission with respect to the unitary patent system were introduced (whereas these ideas were later transferred in the official proposal from November 28, 2000 (this initial / first legislative proposal was officially presented on July 5, 2000 by the then Commissioner for the Internal Market, Frits Bolkestein based on the recommendations made at the Lisbon European Council and was forwarded to the CounciI on August 1,2000). In addition, the idea ofthe unitary patent system was also endorsed by the heads of states and governments of the member states during the meeting of the European Council in Lisbon on March 23 and March 24, 2000.

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centralized judiciary body \vith the authority to decide on disputes arising with respect to the validity of unified patents as well as infringements of the relevant patent rights). It dec1ared that the creation of a unified patent was essential in order to boost research together with scientific and technological development. These aspirations were and continue to be seen as necessary in order to establish Europe as a knowledge-based economy that is able to compete on the global market. 5. From the political point of ~iew, during the meeting of the European Counci! in Lisbon on March 23-24, 2000, it was recommended that the unified European patent should be available by the end of 2001. Once more, this goal was not reached. The member states recognized the urgent need for action, but as was the case from the very beginning of the discussion, there was a mutual understanding with respect to the general framework but the member states failed to agree on the operational details (which as will be demonstrated, has remaine~ a point of dispute). Typical examples are the questions related to the arrangements for translations of the patent c1aims and the connected costs and the manner in which disputes arising from the European patents should be resolved. 19 Even today, when the legislation packet creating the unitary patent system was successfully passed, there are still risks of further delays?O 6. The Commission stated that the following conditions had to be met in order for the system to be embraced by the member states and in order for it to fulfil the expectations and function properly:

y the European patent should be of a unified and autonomous nature, so that any legal acts undertaken with respect to the patent are valid and effective throughout the entire territory of all member states, without any need for further steps on the nationallevel; y although there is no intention to derive from the elementary rules and principles

already inc1uded in the substantive law of the member states, it is important to emphasize that the European patent is govemed by, needs to be interpreted in accordance with and forrns a part of acquis communautaire. Paradoxically, this may limit the undisputed advantages connected with the unitary system. Since the legal provisions will be strictly vested in the EU legal system, the European unitary patent system can only be accessible to the member states. 2I If a resident of a member state is 19 Admittedly, the latter cannot be attributed exclusively to the patent discussions, but rather it is a part ofa much larger problem of the institutional set up throughout the EU and the creation of borders between the competencíes of national authorities and EU institutions. 20 Pursuant to the implementing regulations (which are already in force), the system should have been applied either rrom January 1, 2014 or rrom the day when the Agreement on a Unified Patent Court enters into force. We are nearing the end of 2014 and there is no sign of the ratification process being finíshed in the new future. Similarly, there is no agreement on the amount of the fees to be paid for the European patent with the second quarter of 20 15 being the anticipated d~te for any decision. 21 When using the term member states in connection with the new unitary patent system, it is to be understood as a reference to the participating members, as some of the member states decided not to join (to name the most prominent one, Spaín).

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interested in obtaining protection in additional states, it will have to be obtained either by fil ing a national appHcation in such states or by means available under the EPC. 22 The creation of measures and legal instruments on the EU level should not be understood as the creation of new substantive rules goveming patents. It was recognized that due to the impacts of the EPC, the national legislation of the member states has been largely harmonized and the differences lay mostly in the procedural field. Therefore, no changes are to be expected when it comes to issues of patentability, etc. Since it was clear from the beginning that the European system could not function independently and fully replace the already existing EPC regime, the aim was always the creation of a system that could function next to the intemational instruments already in force. ~

the European patent should have appropriate language arrangements and meet infomlation requirements. After the failure to secure sufficient support for the proposed Luxembourg Convention and the Luxembourg agreement, the political representation was weB aware of the fact that in order for the unitary patent to fulfil its main function and attract businesses to use it, the system needed to offer incentives

22 This may not become a problem in 'cases where addítional protection will be sought in a limited number of non-EU states and the inventor would primarily be looking to carry out its business activities within the EU territory. However, the sítuation seems to be completely dífferent ťrom the perspective of SMEs interested in having theír inventions protected in only a limited number of EU member states but seeking protection in other countries (parties to the EPC). While the publíc announcements regarding the fees sound very promising - for example, the EPO President Benoit Battistelli was quoted at the end of 2012 statíng that the new system wíI\ eventually bring savings for the applicants of up to 70 % of the costs. Some of the forecasts are even more optimistic puning the savings up to 80 % (see the EU Parliament background paper dated Oecember 6, 20 II which sets this as a goal). The problem is that the savings will only reach this amount if the calculation is based on the presumption that the app\icant would have applied for the patent to be protected in aU EU member states. This is hardly usual in practice. Many applicants are (sometimes also bccause of the related costs) protected in no more than 5 eountríes. Thís of course puts the figures somewhere else and eoncems have already been raised as to the affordabilíty of the unitary patent. As a result, the issue of costs became highly politica!. ft necds to be remembered that with the introduction of the unitary patent, the national patent offices are going to lose their current íncome generated in the ťorm of annual maintenance fees which will be paid to the EPO. Apart rrom setting the amount of the annuitíes and possible other fees (although, as everything indicates that no additional ťees which - equívalent to the current validation fees would be eharges, it looks like the overall costs will mainly compríse the annuities and translation costs), another point oť discussion will definite!y be the possible distribution of the annuities I the partieipation of the national patent oťfiees in this ineome (as some of the national offices feel they should partidpate in the profits). Some kind of compromise will have to be reached as on one hand, the objective is for the system to be fully self-finaneing (i.e., the eolleeted fees are supposed to cover all costs and expenses connected therewith) but at the same time, it is cIear that especially the SMEs won't be prepared to pay more than they already do now - meaning that there is the risk that if the fees are set too high, the smaller businesses won 't use the opportunity to obtain a unitary patent which will grant them protection throughout the member states and will continue with the current practice of validating the patent in a ťew chosen countries. The fees will therefore have to be well balanced, as the suecess of the unitary patent system is directly dependent on businesses using ít. This is probably one ofthe most ímportant diťferences between the patent and trade mark system. Because the costs in eonnection with obtaining and maintaining a trade mark are generally much lower, the businesses were ready to accept the increased costs (eompared to the fees for natíonal the applications) whieh were outweighed by the increased scope of protection (sometimes even rapidly applicant only selected a ťew eruda! states where the protection was sought). The patent costs are however incomparably higher and may signíficant!y affect the budget available to the individual companies.

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that would make it aUractíve and more affordable in comparison to the patents granted under the EPC treaty. 23 'Ji- it was acknowledged that the unitary patent would on ly be attractive if it guaranteed a sufficient level of legal certainty, and that this could only be achieved by creating a centralized EU judicial body that would be able to provide a uniform interpretation of the corresponding legal t~xts and consistent case law. It was anticipated that thís newly created judicial body would be authorized to resolve both disputes between prívate subjects (Le., litigation regarding the infringement of patent rights) as well as appeals against administrative decisions related to the unified European patent. This conclusion is disputable. It is obvious that the Commission did not want to repeat the situation and fall into the same trap which effectively prevented the ratification of the Luxembourg Agreement, where representatives of various member states were reluctant to provide the judiciary of other member states with the power to hear and resolve disputes regarding patent infringement, especially with the authority to invalidate the unitary patents. Whereas the arguments and concems raised are definitely valid, no general conc1usion can be drawn to the effect that only a centralized authority would be able to interpret the legal texts correctly and render rulings corresponding with such interpretation. 24

23 The proposal of the Commission provided a calculation in this respect, according to which the costs for an average European patent amounts to EUR 30,000 which - according to the proposal, is three to five times higher than that the costs for Japanese and US patents. Of course, this caIculation needs to be taken as a mere estimate as the costs may vary. The amount of space dedicated to this issue nevertheless highlights thc scriousness with which the matter is handled. The Commission was also aware ofthc ťact that the ťees itsclfreprcsent on ly part of the overall costs and that the need for translations ťorms an egually significant part oť the expenses. The proposal contains the ťollowing cxplanation in this respect (which still appJies): The cos! oftranslating the paten! into alf the officiallanguages ofthe Community would entail a risk ofthe entire Community patent projectfoundering, placing as il would too heavy a burden on inventors, above alf small and medium-sized enterprises. Such a burden would discourage them from using lhe Community patent and give them an incentive to seek protection only in cerlain European countries. Wilh the enlargement of the Union, compulsory translation into alf the ojjiciallanguages wou/d have even more negative effects in terms of cosI. Moreover, it was rightly pointed out that the mere obligation to arrange for translations into alI oťficiallanguages oťthc mcmber statc is nothing more than that, Le., a provision which makes sure that such translation exists but does not providc any guarantees that they will ťulfil the primary ťunction which is to providc access to patent inťormation to the general public (which may be very useťul to enterprises when making sure that the technologica! solution they intcnd to usc won't infringe on any oť the existing rights, etc.). It was correctly pointed out that this goal can casíly be achieved by other means such as creating an indcpcndent inťormation systcm where the patent document would be available without putting an additional burdcn on the applicant by requiring that they themselves provide for all oť the translations. Such database was indecd introduced by the EPO in the form oťEspacenet. 24 lťthis were true, the national courts wouldn't be able to hear any disputes where the subject matter ís governed by any pícce oť EU legislation. Rather than havíng a proper academic debate, the issue evolvcd into res politica. Examples, showing that the national courts are capable oť handling inťringement cases can be found even within the field of IP rights. Typically, the Regulatíon on Communíty trade mark authorizes designated national courts to handle these disputes. The elementary difference ís that this ríght does not go as ťar as to enablc the national courts to pronounce the invalidity oť the Community trade marko Corresponding procecdings are to be held bcťore the OHIM with the possibility oť appeal to the specialized senates oť the CJEU. ft is thereťorc questionable whether it was really nec@ssary to strip the national courts oť any powers in relation to the unified European patent. Having said thc above and taking into account the overall political situation, the solution which was in thc end adopted (in line with the initial proposal madc by the Commission) can be considered a perťectly valid and legitimate compromise that helped to remove the biggest objections oťthe member states.

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the unitary patent system is not created as a replacement for the existing instruments but as a coexisting partner with them. This means that the final decísion regarding the most suitable way of obtaíning protection for a specific new technical solution is left up to the inventor. The use of the unitary patent system is by no means compulsory and the applicants will still be able to opt for the current European patent granted pursuant to the EPC, seek protection through national applications in the chosen countries or pursue the PCT route.

7. It was believed that the proposal complied with both requirements of proportionality and subsidiarity. The argument is that since the creation of the unitary patent aims at improving the functioning of the internal market and promoting growth and innovation throughout the EU, such objectíon could not be achieved by the member states acting independently or collectively. The cross~border implications are such that action on the EU level is called for. At the same time, the (then) ECJ came to the conclusion that it was not possible to introduce intellectual property rights with unitary effect throughout the Community (now the EU) simply by harmonizing the national legislation. As the requirement is for such rights to be construed and interpreted identically, the ECJ held25 that the implementation of such rights could not be left to the individual member states. As a result, the instrument proposed by the Commission as suitable for the creation of the unitary patent - a regulation.- was thus considered to be confined to the minimum needed fór the attainment oj these objectives and does not exceed what is necessary Jor that purpose. 26 8. Despite the ťact that the proposed Regulation was to be adopted and implemented in the shortest possible time, the individual member states were not able to reach agreement regarding certain aspects of the unitary patent system (such as the translation arrangements) and hence the discussions continued. 27 N egotiatíons were renewed in

See opinion 1/94 ofthe Court of Justice dated November 15, 1994. The reasoning ofthe court is stilI valid with respect to the Regulations adopted in 2012. After the institutional changes that happened in the meantime, the legal basis for the creation of the unitary patent system lies in Article 118 of TF EU [( I) ln the context oj the establishment and Junctioning oj the internal market, the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, shall establish measures Jor the creation oj European' intellectual property rights to provide uniform protection oj intellectual property rights throughout the Union and Jor the setting up oj centra/ised Union-wide authorization, coordination and supervision arrangements. (2) The Council, acting in accordance with a spec/al legistative procedure, shall by means oj regulations establish language arrangements Jor the European intellectual properly rights. The Counci/ shall act unanimously after consulting the European Par/lament.]. It is not an area included in the list of the exclusive competencies of the EU set forth in Article 3( I) TFEU ). Pursuant to Article 4 of the TFEU, the establishment and functioning of the internal market is one of the "shared competencíes" of the EU. th 27 See for example following documents: (i) press release of the 2389 meeting of the Council - "Internal rd Market, Consumer Affairs and Tourism", 14400/01 /Tom November 26, 2001; (ii) press release of the 2403 meeting ofthe Council- "Internal Market, Consumer Affairs and Tourism", 15489/01 /Tom December 20, 200 I; (Hi) press release of the 2547 th meeting of the Council - "Competitiveness (Internal Market, Industry and Research)", 15141/03 ITom November 26 and 27, 2003; (iv) press re1ease of the 2570to meeting ofthe Council "Competitiveness (lnternal Market, lndustry and Research)", 6648/04 ITom March JI, 2004. 25

26

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2007. 28 Consequently, a revised proposal was introduced on May 23, 2008 29 where the procedure for the translations was further simplified. The main change was the possibility of filing the application for the unitary patent in any officíal language of the EU, whereas the applicant could seek reimbursement for the costs of the required translation into the language used by the EPO?O Based on the new consultations, the Council adopted conclusions with respect to the Enhanced patent system for Europe 31 and a general approach on the proposal fot the Regulation of the unitary patent. 32 9. Paradoxically, these conclusions could not address the main point of dispute, Le., the language / translation issues - due to the adoption of the Lisbon Treaty which changed the legal basis for the measures that would introduce the unitary patent. Whereas the first paragraph of Article 118 TFEU enables the establishment of a unitary intellectual property titIe in accordance with the ordinary legislative procedure, a special legislative procedure (i.e., requiring unanimous approval in the Council) is required if the member states wish to adopt a legal text that would set forth language rules applicable to the unified intellectual property titIe. 33 As a result, the Commission adopted a proposal for the regulation of the translation arrangements for the unitary patent. 34 10. It soon became clear that some of the member states continued to have major objections and concerns, and as a resuIt, they were not prepared to support the proposal. The position of Spain and Italy35 was so strong that they refused any further cooperation on the proposal. The deadIock was such that the other member states began discussing the possibility of using a procedure which is not very common and is seen as rather exceptionaI enhanced cooperation. 36 The procedure of enhanced cooperation is based on Article 20 of the Treaty on the European Union [hereinafter referred to as TEUJ37 and Communication from the Commission to the European Parliament and the Council - Enhancing the Patent

System in Europe - COM/2007/0165 Final (dated Apríl 3,2007).

29 Council document 9465/08.

30 English, Gennan and French

31 Council document 17229/09 dated December 7.2009.

32 Council document 16113/09 Add J dated Nove~ber 27,2009.

33 This is also the reason why two separate regulations needed to be adopted in the end.

34 Proposal for a Council Regulation on the translation arrangements for the European Union patent ­ COM(2010) 350 from June 30, 2010.

35 Which - counting themselves among the largest EU economies - strictly opposed the idea that the official

languages for the European unified patent be limited to the EPO Ianguages.

36 It is questionable whether this definition stili applies because due to the growing number of member states, it

is accompanied by increasing tension and disagreement among the member states as to the future of the EU.

Based on the aforesaid, it can be expected that enhanced cooperation will be used more regularly.

37 J. Member Stales which wish to establish enhanced cooperation between themselves within the framel1!ork oj the Union's non-exclusive competences may make use oj its institutions and exercise those competences by applying the relevanl provisions oj the Trealies, subjecl to lhe limits and in accordance with the detai!ed arrangements laid down in this Article and in Arlicles 326 to 334 oj the Treaty on the Functioníng oj the European Union. Enhanced cooperation shall aim to Jurther the objeclives ojthe Union, protec! Us interests and reinJorce Us integration process. Suqh coopera/ion shall be open at any time to all Member States, in accordance with Article 328 oj the Treaty on the Functioning oj the European Union. 2. The decision authorizing enhanced coopera/ion shall be adopted by the Council as a last resort, when it has estab!ished lhal the objectives oj such cooperation cannot be attained within a reasonable period by the Union as a whole, and provided that at least nine Member States participate in il. The Counci! shall act in accordance with the 28

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Articles 326 - 334 ofthe TFUE. In this case, the proposa1 38 is based on Article 329(1) of the TFEU 39 • It was concluded that the conditions for the initialization of enhanced cooperation 40 are fulfilled. 41 The non-participating states respected the decision on enhanced cooperation and used all means avai1able to stop further progress of the preparation work on the Regulations. ll. A complaint was submitted to the CJEU by which the annulment of the decision on the enhanced cooperation was sought (on the grounds that the enhanced procedure was discriminatory and thus in breach of EU law). The court (Grand Chamber) ruled on these allegations on Apríl 16,2013.42 It was held that the enhanced cooperation was possible because the competences conferred by Article JJ8 TFEU fal! within an are a of shared competences for the purpose of Arlicle 4(2) TFEU and are, in consequence, non­ exclusive for the purpose of the first paragraph of Article 20(1) TEU. The court also concluded that the conditions for requesting enhanced cooperation were given considering that when the requests for enhanced cooperation were made, and when the proposal for authorization was sent by the Commission to the Council, and at the date on which the contested decision was adopted, there was stil! insufficient support for any of the proposed Ol' possible language arrangements. Further, Spain's assertion was rejected (on the grounds that Spain did not present any evidence supporting the claim that such proeedure lald down in Article 329 ojthe Treaty on the Funetioning ojthe European Vnion. 3. All members oj the Couneil may partíeipate in ils delíberalions, bu! only members oj the Couneil representíng the J'Yfember States partieipating in enhaneed cooperation shall take part in the vote. The voling rules are sel out in Artlele 330 oj the Treaty on the Funetioning oj Ihe European Vnion. 4. ACls adopted in the Jramework of enhaneed eooperation sha" bind only participating Member States. They shall not be regarded as parl ojthe acquis which has to be accepted by eandidate Sta/esJor aecession to the Vnion. 38 Proposal for a Council decision authorizing enhanced cooperation in the area of the creation of unitary patent protection - COM(20 I O) 790 linal, dated December 14,2010. Approval for enhanced cooperation was sought by the following 12 member states: Denmark, Estonia, Finland, France, Germany, Lithuania, Luxembourg, the Netherlands, Poland, Slovenia, Sweden and the UK (with all other member states apart from Italy and Spain joining shortly. 39 Member S/ates whieh wish to establish enhaneed eooperation between themselves in one ojthe areas eovered by the Treaties, with Ihe exception oJfields ojexc/usive eompetence and the eommonJorelgn and seeurity policy, shalt address a request to the Commission, specifying the scope and objeetives oj the enhanced cooperation proposed. The Commission may submit a proposa! to the Council to tha! effect. ln the event oj the Commission not submitting a proposal. it shall in/orm /he Member S/a/es concerned oj the reasons Jor not doing so. Authorization to proceed with the enhanced coopera/ion reJerred to in the first subparagraph shall be granted by the Counci/, on a proposalJrom the Commission and after obtaining the consenl oJthe European Par/lament. 40 i.e., it is fully compatible with both the Treaties as weJl as EU law, At the same time, it does not undermine the internal market or economic, social and territorial cohesion [see Article 326 of the TFEU] but it respects the competences, rights and obligations of those Member States which do not participate [see Article 327 of the TFEU]. Finally, the possibility to join the system at a later stage remains open for all non-participating member states [see Article 328 of the TFEU]. At the moment, there are indications that Italy may be thinking about shifting its position and eventually participating (despite opting out of the system, Italy signed the Agreement on the Unified Patent Court. 41 See Enhanced Cooperation in the area of the creation of unitary patent protection: European Parliament legislative resolution of 15 February 2011 on the draft Council decision authorizing enhanced cooperation in the area of the creation of unitary patent protection OJ C 188E dated June 28, 2012, pp. 76-79 but foremost the Council decísion authorizing enhanced cooperation in the area of the creation of unitary patent protection (2011l167/EU) dated March 10,2011. 42 loined Cases C-274/I I and C-295/ II, Kingdom oj Spain and Italian Republie v Couneíl oj the European Vnion.

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action would be contrary to Article 20 of the TE U) that the creation of the unitary patent system should not be considered a part of the EU legislation but rather an action pursuant to Article 142 ofthe EPC 43 by which the member states wished to authorize the creation of a specific category of European patent under the EPc. 44 Finally, the CJEU had to deal with the question of whether any action taken pursuant Article 118 of the TFEU needed to be unilateral and agreed by aH member states. This argument was also rejected due to the reasoning that with regard to the expressions 'throughout the Union' and 'Unton­ wide' used in Artfele 118 TFEU, ft must be held lhal tt ts inherenl in the jact lhal the competence conjerred by lhal al'liele is, in this instance, exercised within the ambit oj enhanced cooperation thal the European intellectual property right so created, the uniform protection glven by it and lhe arrangements attaching to lt will be in jorce, not in the Union in Us entlrety, bul only in the territory ojthe participating lvlember States. Far from amounting 10 injringement oj Artiele 118 TFEV, lhal consequence necessarily jollows fl'om Arttele 20(4) TEV, which states: 'Ac/s adopted in the framework oj enhanced cooperation shall bind only participating Member ,')rates. 12. Italy accepted the judgment, but Spain did not give up and filed further cornplaints. 45 It asked the CJEU to annul the parts of the unitary patent package that had already gained legal force. 46 The hearing !ook place in July 2014 and the opinion of the Advocate­ general is about to be published. A decision could be rendered by the end of this year. The CJEU is left in a very difficult position because this tirne Spain' s action is more elaborate and challenges sorne of the established legal princip les applied by the CJEU. If the CJEU finds some rnerits in the argurnentation used by Spain, it will be faced with a choice between departing frorn its longstanding position and returning the entire process ofthe creation ofthe unit ary patent to square one. 47

(1) Any group of Contracting States that due to a special agreement that a European patent granted for those States has a unitary character throughout their territories, may provide that a European patent may only be granted jointly in respect of all those States. (2) Where any group of Contracting States has avaí1ed itself of the authorization given in paragraph 1, the provisions ofthis Part shal1 apply. 44 The ClEU concluded in this respect that (quote): Given lhal every Member Stale ofthe Vnion is a Contracting State of the EPC. the introduction of a European patent with unitary effect between the Member Sta/es of the Vnion, as envisaged by the contes/ed decision, ma}'. as the Kingdom ofSpain maintains, be ejJecled by 'a special agreemenť within the meaning ofArtiele 142 EPC Nevertheless, contrary to what is claimed by that Member State, il does not follow from that circumstance that the power provided for in Article 20 TEV is used for ends other than /hose for which ít was conferred when Member Sta/es of the Vnion es/ablish such a patent by a measure adopted under enhanced cooperation instead of concluding an international agreement. The fact that the system was indeed created as a special agreement is specifical1y confirmed in Article 1(2) of the Regulation No 1257/2012. 45 See the cases C-146/13 Kingdom ofSpain v European Parliament and Council ofthe European Vnion and C­ 147113 Kingdom of Spain v Council of the European Vnion with both actions being brought before ClEU on March 2013. 46 Le., Councíl Regulation (EU) No 1257/2012 implementing enhanced cooperation in the area ofthe creation of unitary patent protection from December 17, 2012 and Council Regulation (EU) No 1260/2012 implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the appIicable translation arrangements from December 17,2012. 47 With a very real risk that being forced to reopen the negotiations, aH the compromises which were reached with extreme difficulty may fall apart and the project may be buried for years to come, ifnot decades. 43

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13. The first complaints challenged the use of the enhanced cooperation procedure, but this time the entire legal basis for the unÍtary patent is challenged. Whereas working drafts contained specific provisions dealing with the scope of protection granted by the unitary patent, it was argued that the intention was to create a system with a specialized patent court. In order to understand the problem properly, it needs to be reiterated that the authority of the CJEU is limited to questions of EU law. Therefore, ifthe issues related to the scope of the protec tion / infringement of the rights connected with the unitary patent fonu a part ofthe legal system ofthe EU,48 the CJEU would be the judicial body with the authority to interpret the EU law, including the provisions on inťringement (as is the case with trademarks where the relevant rules are contained in the Regulation on the community trademark and as such are subject to the jurisdiction of the CJEU).49 Based on the objections mentioned above, the wording ofRegulation No 1257/2012 was altered. 50 14. Due to the changes, EU law does not strictly contain direct provisions dealing with the scope oť protection and infringements of the unitary patent. Spain thus argues that the Regulation in fact does not hanuonize the existing laws ofthe member states or provide a guarantee for the uni fonu protection envisaged in Artic1e 118 of the TFEU. 51 The participating states base their deťense on the assumption that hanuonization is achieved through Articles 25 - 27 of the Agreement on a Unified Patent Court which indeed contain specific, universally binding rules. On the contrary, it can be argued that the indirect reference to Article 5 of Regulation No 1257/2012 is sufficient enough in order to make the matter in question subject to EU law and the hanuonization required by Article 118 of the TFEU. 52

For example, by being included in the Regulation as was originally foreseen. This according to the critics would undermine the role ofthe role ofthe specialized patent court. 50 Pursuant to Article 5(3) of the regulation, the acts against which the patent provides protection and the applicable Iimitations shall be those defined by the law applied to European patents with unitary effect in the participating Member State whose national law is applicable to the European patent with unitary effect as an object of property in accordance with Article 7 of the Regulation (i.e., the state, in which the applicant had his residence or principal place ofbusiness on the date offiling ofthe application for the European patent; or where the criterion above cannot be applied, the state where the applicant had a place of business on the date of filing of the application for the European patent. If neither of the above applies, the decisive law would be that of Germany, as the state where the EPO has its headquarters (compare Article 6(1) ofthe EPe - The Organization shall have its headquarters in Munich. Furthermore, the íssue í8 also dealt with in the Agreement on a Vnified Patent eourt (compare Articles 25 through 27). 51 Which would (should the emu accept the argument) - as has been already mentioned - effectively undermine the legal grounds for the adoption ofth~ Regulatíon. 52 This interpretation would be rather paradoxical, considering the reasons for the exclusion of the infringement issues from the ReguIation - i.e., not to make this matter a part ofthe EU law and hence avoid the position ofthe emu as a judicial body with the final and decisive say. Should the C JEV find that Article 5 indeed links the scope of the patent protection to EV law, the conclusion that the emu has the necessary jurisdiction in order to rule on this matter would be inevitable. 48

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15. Secondly, the noncompliance with Article 291(2) of the TFEU 53 and the breach of the Meroni doctrine. 54 According to Spain' S opi ni on, the aforementioned principles were breached by the following rule s I delegation of power: regulation of the system for setting renewal fees and for determining the 'share of distribution' ofthose fees; )i;> delegation to the European Patent Offiee of eertain administrative tasks related to the European patent with unitary effeet; );- delegating the administration of the compensation seheme (Article 555 ) and the publieation ofthe translations (Article 6(2)56) to the European Patent Offiee. )i;>

16. The eounterargument claimed that the patent package did not provide for the delegation of power from an EU institution to a third subjeet, because the member states participating in the system do so as eontracting states ofthe EPc. 57 i

53 Where uniform conditions for ímplementing lega/ly binding Vnion acts are needed, those acts shall confer implementing powers on the Commission, ar, in duly justified specific cases and in the cases provided for in Articles 24 and 26 ofthe Treaty on European Vnion, on the Council. 54 See the judgment of the Court frorrl June 13, 1958. - Meroni & Co., Industrie Metallurgiche, SpA v High Authority of the European Coal and Steel Community - Case 9-56. To put it simply, the principle forbids European authorities to delegate powers where the final decision and responsibility would as a result rest entirely with the body to which the powers were delegated and where the decision would be entirely within the discretionary powers of this body [The consequences resulting from a delegation oj powers are very different depending on whether it involves clearly defined executive powers the exercise oj which can, therejore, be subject to strict review in the light of objec/ive criteria determlned by /he delegating authority, or whether It involves a discretionary power, implying a wide margin of discretion which may, according to the use which is made oj it, make possible the execution of actual economic policy. A delegation of the first kind cannot appreciably alter the consequences involved in the exercise oj the powers concerned, whereas a delegation of the second klnd, since It replaces the choices of the delegator by the choices of the de/egate, brlngs about an actua/ transjer of responsibi/íty. J. Furthermore, the principle requires that where the powers are delegated, guarantees of a judicial review are put in place at the same time [such delegation ojpowers, however, can only re/ate to clearly defined executive powers, the use ojwhich must be entire~y subject to the supervision ofthe high authority]. 55 Of Regulation No 1260/2012 which reads as follows: (I) Given the fact lhal European patent applications may be fi/ed in any language under Article 14(2) of the EPC, the participating Member States shall in accordance with Article 9 ofRegulation (EV) No 1257/2012, give, within the meaning ojArticle 143 oj the EPC, the EPO the task ofadminislering a compensation scheme jor the reimbursement of all trans/ation costs up to a ceiling, jor applicants filíng patent applícations at the EPO in one ofthe officiallanguages ofthe Vnion lhal is not an official language oj the EPO, (2) The compensation scheme referred to in paragraph / shall be funded through the fees referred to in Article 1/ oj Regulation (EV) No 1257/20/2 and shall be available only jor SAIEs, natural persons, non-profit organizations, universities and public research organizations having their residence or principal place ofbusiness within a Member Stale. 56 Of Regulatíon No 1260/2012 which reads as follows: In accordance with Article 9 of Regulation (EV) No /257/20/2, lhe participating Member States shafl give, within the meaning of Article /43 of the EPC, the EPO the task ofpublíshing the translations rejerred to in paragraph / ojthis Artide as soon as possible after the date ojthe submission oja requestjor unitary effect as referred to in Article 9 ofRegulation (EV) No 1257/20/2. The text ojsuch trans/ations shall have no legal effect and shall be for information purposes on/y. 57 This argument is either dangerous because it ultímately strengthens Spain's position on the legality of the Regu1ations. On the other hand, the Meroni doctrine should not be appJied without giving consideration to the wíder circumstances, the reasons which led to the delegatíon and the effects it is going to have on the internal market. At the same time, it can be hardly said that (despite having quite wide discretion) the EPO wouldn't be bound by any principles when exercising the powers granted to it under the package.

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17. Further, Spain insisted that the language arrangements introduced within the Regulation breached the principle of non-discriminatíon and were to the detriment of persons whose mother tongue was not English, French or German. The entíre scheme has been branded as disproportionate to the objective pursued. Since it is clear that Spain is not prepared to compromise with respect to .the language arrangements and hopes to overtum the current situation, it is not likely that it will reach the inclusion of Spanish as yet another official language for the unitary patent. The decision to stick with thc official languages used by the EP0 58 seems reasonable. In any case, Spain's negotiating position would havc been much stronger if it had made an effort to promote Spanish on the EPO platform during the latest revision of the EPc. 59 It would hardly be acceptable to increase the number of official languages, as part of the unitary patent package is promoted as decreasing the administrativc burden imposed on the applicants. 18. On thc other hand, some serious considerations were not discussed properly and in fact raised questions. Article 7 of Regulation No 1257/2012 is construed in a manner that may be discriminatory towards applicants from non-participating states. When determining the governing law, the criterion of residence / place of business on ly applies as long as it Hes within the territory of a participating member state. For applicants from non-participating states, German law will automatically take precedencc based on Article 7(3) - Le., they will be subject to a foreign substantive law which in some cases may cause problems and may even prevent some smaller businesses from pursuing the unitary patent because of the potential legal costs. It can therefore be concluded that despite the Regulations being in force, there are stili challenges and risks to the entire package. Whereas it was initially anticipated that the system could be implemented by the beginning of 2014, the most optimistic forecasts today expect it to become effective in the second half of 2015 while other predictions put the launch of the system in 2016 or beyond. 19. Despite aU of the obstac1es described above, enhanced cooperation eventuaUy brought results, and on April 14, 2011, proposals for the Regulation of the European Parliament and of the Council implementing cnhanced cooperation in the creation of unitary patent protectíon60 and the Regulation ofthc CounciI implementing cnhanced cooperation in the creation of unitary patent protec ti on with regard to the applicable translation 61 62 arrangements were introdu~ed. Both were adopted on December 17,2012.

58 See Article 14(1) of the EPC: The official languages of the European Patent Office shal1 be English, French and German. 59 the Act revising the EPC dated November 29, 2000 note that the new text of the EPC as adopted by the Administrative Council of the EPO by the decision dated June 28, 2001 (see OJ EPO 2001, Specia\ edition No. 4, p. 55) has become an integral part of the Revision Act of November 29, 2000 under Article 3(2), second sentence, of that Act. 60 COM(20 ll) 215 final. 61 COM(20 ll) 216 final. 62 They gained legal force on the twentieth day following the date of its publication in the Official Joumal of the European Union, i.e., lanuary 20, 2013 (both Regulations were published in the Officia\ Joumal on December 31,2012.

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20. As already indicated, while having legal force, the Regulations are still not effective. The pIan for them is to take effect at exactly the same moment as the remaining third part of the package, the Agreement on a Unifled Patent Court [hereinafter referred to as the Agreement].63 The Agreement was signed in Brussels on February 19,2013. 64 Pursuant to its Article 89, it shall enter iuto force on the latest ofthe following dates:

>-

>-

the first day of the fourth month after the deposit of the thirteenth instrument of ratification or accession in accordance with Artic1e 84, inc1uding the three Member States in which the highest number of European patents had effect in the year preceding the year in which the signature of the Agreement took place 65 on January 1, 2014; or on the first day of the fourth month after the date of entry into force of the amendments to Regulation (EU) No 1215/2012 66 concerning its relationship with the Agreement67

21. Article 89 further stipulated that if the conditions as described above were complied with before January 1, 2014, the Agreement would take effect on this date. The ratification process has been slower than expected, as only 5 member states have proceeded with ratification so far. 68 It should be noted that not only is the ratification process detrimental to the entry into effect of the unitary patent system, but it will also have major practical consequences for the scope of the unitary protection. Pursuant to Article 18(2) of the regulation, a European patent for which unitary effect is registered shall have unitary effect only in those participating member states in which the Unified Patent Court has exclusive jurisdiction with regard to European patent s with unitary effect at the date of its registration. In practice, it means that the patent will only have a unitary effect in those

63 Pursuant to the transitional provisions ofthe Regulations, they shall app\y from January I, 2014 or the date of entry into force ofthe Agreement on a Unified Patent Court, whichever ls the later. 64 The Agreement was not signed by Spaln, Croatia (the member states that also opted not to participate in the enhanced cooperation) and Poland (which on the other hand joined the enhanced cooperation). Italy - being the remaining state not joining the preparation of the Regulations, signed the Agreement which can be seen as another indication that its position may change and lt will eventually enter the system. 65 Meaning that France, Germany and the United Kingdom must be among the states ratif)dng the Agreement 66 Le., Regulation of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters from December 12, 2012 (the Brussels Ibis Regulatlon). 67 This condition is already fulfilled as the corresponding legal text was pas sed on May \5, 2014 see Regulation (EU) No 542/2014 of the European Parliament and of the Council amending Regulation (EU) No 1215/2012 as regards the rules to be applied with respect to the Unified Patent Court and the Benelux Court of Justice. It was published in the Officia\ Joumal on May 29, 2014 and entered into force the following day (pursuant to Article 2 ofthe Regulation). lt shall be applicable from January 15,2015. Basically, the aim ofthe amendment is to make sure that the Unified Patent Court established by the Agreement and the Benelux Court of Justice established by the Treaty from March 31, 1965 (together referred to as common courts) are to be deemed courts of a member state for the purposes of the Brussels Ibis Regulation, where the courts of a member state would have otherwise jurisdiction in matters fal1ing within the scope of the legal instrument under which the common court was established. 68 The first one to do 50 was AU5tria which ratified the Agreement on August 6, 2013, followed by France (March 14, 2014), Sweden (June 5, 2014), Belgium (June 6, 2014) and Denmark (June 20, 2014). http://ec.europa.eulintemal_market/indprop/patentlratification/index_ en. htm.

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states which at the moment of its registration had ratified the Agreement. Potential applicants should be aware of the fact that the scope of the unitary protection will not be automatically extended with each consequent ratification (i.e., before all participating member states69 ratify the Agreement, the scope of the unified affect enjoyed by individual patents will actually vary, depending on the exact time oftheir registration). 22. The scope of the unitary effect was a point of dispute from the very beginning. As mentioned above, initial proposals intended to open the unitary system to non-member states. There is no doubt that it that would add to the attractiveness of the system as the applicant would most certainly be happy to avoid the need to go through national validation in states that participate in the EPC but are not members of the European Union. However, this idea'was strictly rejected by the CJEU. 70 It was held that the envisioned patent court lies outside the institutional and judicial framework of the EU and does not form part ofthe judicial system provided for in Artic1e 19(1) TEU. 7J While the CJEU did not dispute that it was generally possible to adopt an intemational agreement providing for the creation of a court responsible for the interpretation of its provisions, according to the CJEU, such arrangement would not, in principle, be incompatible with EU law. It was noted that the competence of the EU in the field oť intemational relations and its capacity to conc1ude intemational agreements necessarily entailed the power to submit itselťto the decisions oť a court that was created or designated by such agreements as regards the interpretation and application of their provisions. This was all under the condition that iť such intemational agreement afIected the powers oť the CJEU, it could only do so as long as the indispensable conditions for safeguarding the essential character of those powers were satisfied and there was no adherent effect on the autonomy oť the

For the purposes of the system, a participating member state is defined as a member state participating in enhanced cooperation in the area of the creation of unitary patent protection by virtue of Decision 201 111 67/EU (Le., all member states apart from Spain, Italy and Croatia), or by virtue of a decision adopted in accordance with the second or third subparagraph of Article 331(1) ofthe TFEU [The Commi.l.lion .lhali, withinJour month.l oj the date oj receipt ojthe notification, confirm the participation ojthe Member State concerned. II .lhali note where necessary that the conditions oj participation have been Julfilled and shall adopt any tran.litional mea.lures necessary with regard to the application ojthe acts already adopted within the Jramework ojenhanced cooperation. However, if the Commission considers lhal the conditions ojparticipation have not been Julfilled, it shall indicate the arrangements to be adopted to Julfil those condilions and shall set a deadline Jor re-examining the request. On the expiry ojlhat deadline, it shall re-examine lhe request, in accordance with the procedure set out in the .lecond subparagraph. If the Commission considers lhat the condition.l ojparticipation have still not been met, the Member State coneerned mtry reJer the matter to the Counci/, which sha/l deeide on the request. The CouncU .lhali aet in aceordanee with Artic/e 330. It mtry a/so adopt the transitional mea.lures reJerred to in the second subparagraph on a proposal from the Commis.lion.], at the time the request for unitary effect is made 70 See the opinion 1/09 of the CJEU (full court) dated March 8, 20 II delivered pursuant to Article 218( ll) TFEU - a provision which enables theo EU institutions (European Par\iament, the Council, the Commission) as well as the member states to seek the opinion ofthe CJEU with respect to the compatibility of an agreement (the adoption of which is planned) with the treaties. 71 The Court of Justice of the European Union shall include the Court of Justice, the General Court and specialized courts. lt shall ensure that in the interpretation and application of the Treaties the law is observed. Member States shall provide remedies sufficient to ensure effective legal protection in the fields covered by Union law. 69

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EU legal system. However, the CJEU did not think that the conditions were satisfied in this particular case. 72 23. The CJEU referred to the 9bligations arising for the member states from Article 4(3) TEU, specifically to ensure (as part of the principle of sincere cooperation as defined in the aforementioned provision) the application of and respect for the EU legal order. At the same time, the provision requires that the member states take appropriate measures in order to ensure that the obligations arising from the Treaties (or acts of EU institutions) are complied with. Having taken the above into account, the CJEU came to the conclusion that it was up to the judicial bodies of the member states together with the CJEU to ensure that the EU legislation was fully applied and that the rights granted to individuals under EU law were sufficiently protected by the judicial bodies. The CJEU expressed the opinion that the member states would not be able to comply with these obligations if some of the powers were delegated to a judicial body established outside the EU institutional framework. 24. Another question inevitably arising in connection with the creation of a specialized patent court is whether the court may exist for less than aU member states. This issue was not addressed directly, but it can be construed from the statements made by the CJEU in the opinion that the court would not object to such arrangement. 73 Based on the conclusions by the CJEU, the draft of the agreement underwent significant changes, the most important being the exclusion of the participation of any non-member state. It is to be expected that as soon as the system is put in place, competence disputes will be very likely since the division ofpowers and the mutual relationship between the Unified Patent Court and the CJEU is not entirely clear. 25. The main features of the unitary European patent are specified in Regulation No 1257/2012. The instrument is being vested into the existing system created under the In this respect, the following was held: HowG'ver, the judieial systems under eonsideration in the abovementioned Opinions were designed, in essenee, to resolve disputes on the interpretation or applieation of the aetual provisions of the international agreements eoneerned Further. while providing partieu/ar powers to the eourts ofthírd eountries to refer edses to the Court for a preliminary ruling, those systems did not affeet the powers of the eourts and tribunals of Member States in relation to the interpretation and applieation of European Union law, nor the power, or indeed the obligation. of those eourts and tribunals to request a preliminary ruling from the Court ofJustice and the power of the Court to reply. By eontrasl, the internattonal eourt envisaged in this draft agreement is to be ealled upon to interpret and apply not only the provisions oflhat agreement but also the future regulation on the Community patent and other instruments of European Union law, in partieular regulations and direetives in eonjunetion with whieh that regulation would, when neeessary, have to be read, namely provisions relating to other bodies of rules on intelleetual property, and rules of the FEU Treaty eoneerning the internal market and eompetition law. Likewise, the PC may be ealled upon to determine a dispute pending before it in the light of the fundamental rights and geneml principles of European Union law, or even to examine the validity ofan aet ofthe European Union. 73 It was stated in this respect that the proposal differs from the position of the Benelux Court of Justice, which was described as a court common to a number of Member States, situated, consequently, within the judicial system of the European Union, whose decisions are subject to mechanisms capable of ensuring the full effectiveness ofthe rules ofthe European Union. A conclusion can thus be drawn that a court for only a group of member states is generally admissíble and what is important is the posíti on of the court within the legal framework (both national and that ofthe EU). 72

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EPC. Despite being eriticized from a legal point of view, the delegation of some powers to the EPO can be seen positively. The use of the existing strueture represents signifieant savings, as there is no need for the establishment of eompletely new body. Moreover, eonsidering that the unitary patent is basically a European patent within the meaning of the EPC with the possibility for the applieant to request the unitary efIect by the proprietor of sueh patent, both the EPO staff and the applicant are already familiar with the procedure whieh can help with the smooth launeh and transition of the system. 26. The designation of the unitary effeet should be made no later than one month after the notifieation of the grant is published in the European Patent Bulletin (see Article 9(1 )(g) of Regulation No 125712017). Apart from processing the application, administering the patent register (including the receipt and publication of lieense agreements, translations) and so on, the EPO has been entrusted with various other tasks,14 especially in eonnection with the setting and collection of fees. Apart from the fees for the application, the renewal fees and late payment fees will also be payable directly to the EPO. The fees shall be due for the years following the year in which the notification of the grant of the European patent which benefits from unitary effect is published in the European Patent Bulletin. 75 The failure to pay the fees on dme may result in the lapse of the European patent with unitary effect. 76 The fees will be reduced for applicants who show their preparedness (by filing a declaration to the effect under Article 8(1) of Regulation No 125712012) to let third subjects use their patents as licensees. 77 27. The exact level of the fees has not been determined; Regulation No 1257/2012 only provides guidance in the form of general principles to be observed when specifying the fees. 78 The determination ·of the fees will be made by a special Se1ect Committee established pursuant to Article 8(2) of the Regulation. The committee is comprised of the representatives of the participating member states and a representative of the Commission as an observer. Another tas k for the committee will be the distribution of the fees. In accordance with Article 13(1) of the Regulation, the EPO shall keep 50 % of the collected renewal fees with the second half being distributed among the participating member states. The quoted provision only provides limited guidance in the form of See Article 9 ofRegulation No 1257/2012. Article 11(1) ofRegulation No 1257/2012. 76 Article II (2) of Regulation No 1257/2012. 77 Article J 1(3) ofRegulation No 125712012. 78 These are contained in Article 12 of Regulation No 1257/2012. In accordance with current practice, the fees shall be progressive throughout the tenn oť the unitary patent protection and high enough to cover all costs associated with the grant of the patent and the consequent administration of the unitary patent protection. They should also be sufficient to províde fC!r the EPO' s balanced budget. On the other hand, specíal consideration should be given to subjects such as SMEs, with the aim of (i) facilitating innovation and fostering the competitiveness oť European businesses, (ji) retlecting the size of the market covered by the patent, Oii) being similar to the level ofthe nationaI renewal fees ťor an average European patent tak ing effect in the participating Member States at the time the level of the renewal fees is first set. In order to achieve these objectives, the following criteria should be observed: (i) the amount oť the fees should be equivalent to the leve! of the renewal fee to be paid for the average geographical coverage of current European patents, (H) they should retlect the renewal rate of current European patents, and (jH) they should retlect the number ofrequests for unitary efťect. 74

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general principles which should be applied when making a decision on the distribution.

The following should be taken into account when making a consideration with respect to

an individual member state:

y the number ofpatent applications (from said member state);

).> the size of the market (in'that member state), while ensuring a minimum amount to be

distributed to each participating Member State; and ).> compensation to the participating Member States which have (i) an official language other than one of the official languages of the EPO; (ii) a disproportionately low level ofpatenting activity; and/or (iii) acquired EPO membership relatively recently. It is expected that the select committee will announce the fees next year. 28. lt was emphasized several times in this paper that one of the crucial issues which has repeatedly led to the failure to secure the support necessary for the adoption of the various proposals presented over the years with respect to the unitary patent were the language arrangements. They are now governed by a separate instrument, Regulation No 1260/2012. It is envisioned that in the future, high-tech translation machines will be used in order to handle all of the applications and their translations (meaning that no translation will have to be p,rovided together with the application79 ). Because the current system used by the EPO cannot be considered to be fit for the purpose (at the moment, potential applicants are advised to use it as a first step in the patent search, as the translation should give them a general idea about the existing patents while also providing sufficient information to allow potential applicants to decide on whether or not they need an official/ more sophisticated translation). 29. Until a fuHy reliable and fUIlctioning high quality translation machine will be available, a transitional period of 12 years from the date of the beginning of the application of the Regulation No 1260/2012 has been established (the Commission may propose the termination of the transitional period, if it is no longer required).80 During this period, the following arrangements apply: (i) where the language of the proceedings 81 is French or German, a full translation oť the specification of the European patent into English shall be presented together with the request for unitary effect, (ii) where the language of the proceedings is English, a full translation of the specification of the European patent into any other officiallanguage of the EU shall be presented. 82

79 As long as the specification ofthe patent will be published according to Artic\e 14(6) ofthe EPC, which reads as follows: specifications of European !patents shall be published in the language of the proceedings and shall include a translation ofthe claims in (he other two officiallanguages ofthe European Patent Office. 80 Article 6(1)(5) ofRegulation No 1260/2012 81 Pursuant to Artic\e 14(3) ofthe EPC, the officiallanguage ofthe EPO (í.e., English, German or French) in which the European patent application is filed or into which it is translated shall be used as the language of the rroceedings in alJ proceedings before the EPO, unless the lmplementing Regulations provide otherwise. 2 Artic\e 6(1) ofRegulation No 1260/2012

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30. Regular evaluations will be earried out by independent experts 83 (the first being held 6 years after the date the Regulation becomes applieable and consequently every seeond year hereafter). The aim of the evaluation will be to deterrnine whether the development of the translation machine h~s reached a stage where it can be put to regular use. 84 31. The only exeeption to the no trans/ation necessary rule will be the duty to present translations in the case of a dispute with respeet to the unitary patent. In the event of an infringement dispute, the alleged infringer may request that the patent proprietor present a translation either in the official language of the member state in which the alleged infringement took plaee or in the offi ci al language of the member state in whieh the alleged infringer is domicile,d. At the same time, the court eompetent in the participating member states for disputes eoneerning European patents with unitary effeet may also order the patent proprietor to present a full translation of the patent into the language of the proceedings. The eosts eonnected with the translations as deseribed above are to be borne by the patent proprietor. If the patent proprietor requests damages as a result of the alleged infringement, the eourt hearing the dispute shall always take into eonsideration (espeeially where the alleged infringer is a subject that deserves speeial proteetion - such as an SME, natural person or a non-profit organization, a university or a publie research organization), whether the alleged infringer acted without knowing or without reasonable grounds for knowing that il was infringing on the unitary patent - before having been provided with its translation as stated above. 85 32. Finally, the promise to reduee the translation costs to a minImum was upheld, as Regulation No 1260/2012 introduees a eompensation scheme for SMEs, natural persons, non-profit organizations, universities and publie research organizations whose residence or prineipal plaee of business is within a member state. lbese subjeets will be able to daim eompensation for aH translation eosts up to a cemng, if they filed a patent application at the EPO in one of the offieial languages of the EU that is not an offieial language of the EPO. These reimbursements will be funded from the proeeeds from the renewal fees.

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85

Article 6(3)(4) of Regulation No 1260/2012 As a result oť which, the transitional period becomes obsolete with the possibility oť its termination. Article 4 oťRegulation No 1260/2012

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