Survey: UPC still attractive without UK

Despite the increased probability of the UK being unable to participate in the Unified Patent Court and unitary patent project as a non-EU member, most businesses say a harmonised European patent system would still be attractive to them.

In a Patent Strategy survey, which polled more than 50 in-house counsel from different industries and jurisdictions, almost three quarters (72%) of respondents said the UPC system would still be useful to them and their businesses if it went ahead without the UK.

Patent Strategy polled more than 50 in-house counsel from industries including pharma, telecoms, manufacturing, software, banking, automotive, chemicals, aerospace, electronics and medical devices.

If we take out the respondents who said that the UPC system ‘has never been attractive to them,’ with or without the UK – companies that are only interested in filing in a few countries or in industries that have traditionally not relied on patents such as fashion – that number rises to more than three quarters (78%) of 50 survey takers.

“The world does not revolve around the UK,” says one UK-based industry respondent. “There is a much bigger continent out there across the channel, where the benefits of the UPC – which involves removing the need to litigate on a country by country basis – will still exist, notwithstanding the lack of UK participation.”

Most in-house lawyers who responded in this way worked for large, multinational companies in industries where it would be prudent to file in most European jurisdictions.

Under those same parameters, only 16% of respondents said the harmonised patent project would no longer be attractive, while a further 6% said they were unsure whether it would be attractive or not.

Inevitably, these companies had a much stronger presence and interest in the UK, or the UK and perhaps one other European market, than in other European countries.

“Patent protection in the UK and Germany is most valuable to my business,” says the head of IP at a telecoms company. “The UPC without the UK would no longer provide a cost-effective method of getting that coverage.”

These responses suggest that should the UK not be allowed to participate in the UPC project, that development would not necessarily mean the end of the proposed system altogether.

There is a strong argument that considering the time and effort that has gone into making this system, the UPC Agreement (UPCA) could be amended and the project could carry on without the UK so long as there is still interest in that version of it. And it would seem that there is.

“In the machinery industry, the validation of patents takes place in three countries on average. Due to the fee structure, we believe that it is still a good idea to get a higher coverage of IP, even if the UK has to be looked at separately”

Daniel van Geerenstein, deputy head of legal, VDMA

It has been hotly debated since the UK’s 2016 EU referendum result whether the country could participate in the UPC after it leaves the bloc. UPC proponents, such as Simmons & Simmons partner Kevin Mooney, have argued that should the system start while the UK is in the EU or in a transition period, it would be relatively straightforward to enable continued post-Brexit UK participation.

But that scenario seemed improbable when the new UK prime minister, Boris Johnson, promised to leave the EU on October 31 with or without a deal, and the UKIPO had acknowledged that the UPC cannot come into operation before that date.

There is slightly more hope for said scenario as of yesterday, when MPs voted for legislation to force Boris Johnson to seek a Brexit extension with the EU for January 2020, unless he produces a deal before then. The Brexit deadline has already been pushed forward twice, however, so that development is unlikely to give UK-UPC supporters much of a boon.

The UPC’s establishment in practice is being held up by Germany, the only country left that needs to ratify the UPCA, where a constitutional complaint on the matter is pending.

And without the UPC having already come into force with the UK as a participant, system proponents face an uphill battle for post-Brexit UPC participation. The Max Planck Institute published a paper last year outlining that continued UK participation in the UPC after it has left the bloc would amount to an erosion of EU sovereignty.

UK participation after Brexit might thus come down to whether the political will exists within the UK and the EU after Brexit, to make that happen.

When asked why the UPC would still be attractive to users if the UK was not a member, the response was essentially unanimous among those that thought it would still be useful.

Respondents from industries including banking, pharma, telecoms, automotive, software and chemicals – which tend to file in most jurisdictions – said the reduced costs and administrative streamlining of having one patent for all UPC-ratifying countries (15 excluding the UK, at the time of publication) represented an enormous improvement on the current ‘bundle system’.

Some said that the UPC would inevitably be less attractive without the UK after Brexit because of its probable importance as one of the largest European markets outside the single bloc, but noted that it would not be unattractive enough to dissuade them from using the system.

“Our estimation is that a unitary patent would be more cost-effective than a European patent for technologies that we want to file in three European countries or more,” says the senior counsel at a bank in Canada.

He adds that the UK already isn't a very favourable jurisdiction for protecting banking innovations in any case.

The chief IP counsel at an electronics manufacturer adds that a unitary patent is a good way of getting easy and cheap protection in eastern European countries, and points out that the UK can always be covered in a classical European patent application.

“Protection in all EU countries is needed since products can freely flow in the common market. Furthermore, such protection is urgently needed to protect European innovation from Asian competition.

“The UPC is admittedly less attractive without the UK; but better to have an 80% harmonised case law in patent decisions in Europe than no harmonisation at all,” they add.

Speaking to Patent Strategy on behalf of the manufacturing industry, Daniel van Geerenstein, deputy head of legal at the VDMA, notes that the fee structure offered by a UK-less UPC is still a good deal for manufacturing companies.

“In the machinery industry, the validation of patents takes place in three countries on average. Due to the fee structure, we believe that it is still a good idea to get a higher coverage of IP, even if the UK has to be looked at separately.”

Some respondents, including one from automotive, noted that a hard Brexit would also limit the relative importance of the UK economy in the UPC scheme in any case.

The reasons why some companies thought the UPC would no longer be attractive without the UK were a little more varied.

The IP director at a fintech company in the US says the advantage of the UPC to his company was to get one patent for the UK and some other European countries more cheaply than getting a bundle of European patents.

“If we now have to file separate conversions or separate UK applications, the cost calculus – unless the UPC goes down significantly on fees –  for two to three countries in the EU versus a European patent is going to be prohibitive.

“Yes, it's valuable, but less valuable at the current price model.”

Another respondent from a gaming company noted that the UK, Germany and France were the three major countries her firm was interested in and, as such, not being able to get UK coverage would severely limit the system’s usefulness.

While the UK’s participation in the UPC is getting increasingly unlikely, industry optimism is a boon the possibility of having a harmonised patent system covering all the other ratifying countries. After all, if the industry will is there, the political will will follow.