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Is the European Patent Misguided?

posted Dec 20, 2012, 12:56 PM by Julien Pillot   [ updated Dec 20, 2012, 1:05 PM ]

Approved by the European Parliament on 11 December 2012, the European Patent with unitary effect’s (EUP hereafter) shall enter into force on 2014. To say that the creation of a single European patent was eagerly awaited is to put it mildly. In a nutshell, EUP has to be seen as a bundle of nationally enforceable patents in every member state selected by the applicant (with the exception of Spain and Italy contesting the language policy). In dwindling maintenances fees (from around €36000 to €4725), sinking translation requirements (by centering on the three official languages of the EU, e.g. French, English and German) and providing for judicial procedures for a single court with effect in every member states, such regime is likely to increase the ability of the EU to be competitive vis-à-vis rest of the world (deposit a patent in the USA or in China costs respectively 2K€ and 0,6K€). Indeed, for many economists and lawyers, decreasing transaction (and administrative) costs should increase the number of applications, and consequently, improve innovation in the EU. Nevertheless, a closer regard on the upcoming system, is particularly questioning. As far as we are concerned, it is still unclear – to say the least – that the EUP is likely to match market expectations. Far from improving IP protection, the EUP might well be the anteroom of an increased legal uncertainty for innovative firms.

 The first problem lies in the coexistence of the new system and the preexisting schemes which may plant the seeds for fuzziness and further complexity. In substance, innovating firms will have to choose between applying for a EUP and depositing patents in a selected pool of countries. It is no use to be a rocket economist to imagine that undertakings will find a way to take advantage of the system, for example in protecting some technical components under the EU aegis while opting for national protections for others. Not sure that future examination of patents validity will be overly facilitated…

A second concern is about the very status of the European Patent Office (EPO) and of its European Patent Court (EPC), which is to exist outside the EU treaty framework. Indeed, and in some extent, the current agreement “bypass” the European Court of Justice in granting the EPO and a newly constituted three-headed Court (Paris, London and Munich) the duty to settle patents litigations. Although legal competencies will be divided between these three Courts depending on the industrial sector concerned by patents, to date legal uncertainty still remains in case of patent overlapping sectors covered by two different Courts.

Besides, from a formal perspective, one might ponder whether the proposal is not likely to hand control over European innovation policy to patent lawyers with vested interests rather than democratically elected deputies. From a practical perspective, it is to note that the EPO does not apply the jurisprudence of the EU but refers to the legal framework designed by the 1973 European Patent Convention of Munich… which involves a wide range of 38 sovereign countries. Due to the lack of a real unitary right, businesses cannot be certain of the applicable law in case of patent disputes. For instance, if the applicable law is the national one of the demanding company, the risk is to see forum shopping strategies being implemented by plaintiffs in order to select the most favorable legal framework.

Last but not least, the expected growth in the number of patent applications as a mechanical reaction to the sharp decrease of patenting direct and indirect costs is likely to incite trolling activities, e.g. businesses specialized in patents’ purchase (but with no intention to market the related innovation) conducting opportunistic patent litigations against alleged infringers. This risk is made even better with the lack of a sound, clear and consistent regime able to deter purely opportunistic behaviors (such as treble damages in the USA).

Finally, it is unsure that the agreement endorsed by the European Parliament is likely to encourage economic efficiencies. Now, where there is legal uncertainty, there is a risk for opportunistic legal strategies likely to hinder innovative behaviors. And legal complexity grants competitive advantages to (large) companies able to mobilize resources to clear up such intricacy. It is just a pity that, ending a 40-year-long quest to create a single European patent, the EU legislators stopped midstream, coming to a compromise rather than establishing a truly unified regime…