News on the Unitary Patent

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In our Bulletin, we report regularly (most recently on the renewal fees in the December 2015 issue) on the route to a unitary European patent system. The recent progress comprises in particular the surprising decision of Italy to participate, the enactment of the procedural regulations for the Unitary Patent Court, and the abandonment of the opt-out fees.

The unitary European patent (sometimes also referred to as Community Patent) shall for the first time create a unitary patent protection for the European Union including a new judicial system which allows to enforce patents or declare them invalid on a pan-European basis.

For a long time, Italy was very critical of the plans for a unitary patent. The Italians were particularly bothered by the fact that Italian will not be an official language of the new patent system, and since 2011 had even been trying, together with Spain, to stop the unitary patent before the European Court of Justice. But Italy stayed absent from Spain’s second lawsuit, which failed in 2015. Now, Italy has finally completed the U-turn and joined the unitary patent system as the 26th member state on 30 September 2015. This is great progress for the unitary patent and its acceptance, as Italy represents an economic heavyweight which lies in fourth place in the list of patent validations Europe-wide (behind Germany, Great Britain and France). Spain and Croatia are now the only EU states which are still missing.

The establishment of the unitary patent system and new judicial system have also progressed considerably. The eighteenth draft of the code of procedure for the Unified Patent Court was accepted in October as the final draft. In December and February, a series of agreements relating to the court fees, the budgetary and financial rules and the distribution of the renewal fees between the EPO and the participating member states have been passed. As part of these agreements, it was decided to suppress the opt-out fee. This fee – formerly proposed at Eur. 80 per patent – would have become due during a transitory period for opting out of the new system in favour of the established national courts, or to opt-in again. The abolishment of these fees, which could have added up substantially for large patent portfolios, will allow patent holders a free and unrestricted choice between the established and the new system, and hence is a welcome development.

Some court buildings have already been designated across Europe. Work on the sophisticated IT infrastructure of the new court is progressing. The recruitment of the legally and technically qualified judges has meanwhile begun as well.

In order that the agreement on the Unitary Patent and the Unitary Patent Court can finally come into force, the ratification by 13 member states is required. Up to now, nine states have ratified, most recently Finland in January 2016. While the threat of a Brexit might conceivably result in further delays, currently we assume that the Unitary Patent will become reality in 2017 – almost fifty years after the first initiatives!

Uniform protection for trade secrets in the EU is in the offing

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The upcoming EU directive on trade secrets will provide enhanced protection for trade secrets almost on a par with intellectual property rights.

For some three years now there has been discussion among the parties affected of a proposed EU Commission directive concerning the protection of confidential know-how and confidential business information (trade secrets) against unlawful acquisition, use and disclosure (COM (2013) 813 final dated 28 November 2013). In December 2015 the EU Council, together with representatives from the EU Parliament, came to a provisional agreement on this Directive. On 14 April 2016 the EU Parliament returned the Directive to the trilogue process with only minor changes so that its adoption may be anticipated shortly. It is likely to be implemented in national law within two years at the most.

    1. German law has long recognized the protection of trade secrets in civil law. While the relevant standards in the Act Against Unfair Competition (Secs. 17, 18) are criminal law standards, it has long been acknowledged that violations of these standards may also be subject to civil law action. However, this protection under civil law contains some gaps and is not easy to enforce. In addition to these unfair competition law provisions, there are also the usual non-disclosure agreements / confidentiality agreements customary in international dealings, which can also be enforced under civil law in the event of violations, even if violations are often difficult to prove.
    2. The concept of the EU directive extends far beyond this; it places trade secrets and their protection on the same level as intellectual property rights and their enforcement. This is not without problems, since trade secrets are even less tangible than intellectual property rights, and often there is inadequate definition of the scope of protection, which may be unclear to the infringer. It remains to be seen how the lawmakers in the European countries will implement the corresponding standards of the directive. For instance, it is not clear whether the German lawmaker will pursue the path of a separate complex of standards, since as criminal standards, Secs. 17, 18 of the Act against Unfair Competition are not covered by Reason 9c of the directive.The definition of infringing acts goes significantly beyond the existing scope of Secs. 17, 18 and encompasses the illegal acquisition, use and disclosure of business secrets, including the infringement of a confidentiality agreement.
    3. First, the definition of a business secret (Art. 2 I of the Directive) is important. It must be information that is confidential in that it is not known or easily accessible, in whole or in its exact structure, to persons that usually handle this type of information. Furthermore, the information must have a commercial value and be subject to appropriate confidentiality measures.The other feature, known from the Technology Transfer Group Exemption Regulation, i.e. that the information can be identified, for example, that they are set forth in an Annex, is not required at first sight. However, for proof of any infringement it is advisable, that written identification be undertaken. Finally, it is noteworthy that the Directive (as opposed to existing German law) does not require an explicit wish for secrecy; however, the requirement for confidentiality measures should ultimately be attainable easier than before.
    4. The Directive contains several restrictions to protection, of which only an overview can be presented here. As long as the business secrets were acquired in a way that is “consistent with good business practice,” there will be no infringement. Also, the customary regulations known from confidentiality agreements, such as disclosure without infringement, disclosure for legitimate interest, as well as for media interest or to cope with labour law requirements, are excluded. It is interesting that the exception for reverse engineering, for example the disclosure of a single product design, which the previous draft version did not contain, has been deleted. That is appropriate, for it is possible to have contractual obligations that preclude reverse engineering. However, they have no absolute effect, which means that in the chain of agreements and when products are passed on, the party that is not contractually bound to these restrictions does not have to comply with this regulation.Other exceptions are provided to protect the freedom of the press, the mobility of workers, and whistle blowers.
    5. Along with the usual claims in the event of infringement (cease-and-desist), the Directive also contains further regulations that will impact products and compensation provisions.
    6. In practice it will be important to examine existing contractual regulations not only in confidentiality agreements, but also especially in know-how agreements, as to whether they still comply with the Directive’s requirements, especially with regard to the definition of what is a business secret and how its existence can be proven in a given case. Only then will it be possible to pursue infringement also with the help of the Directive and the requirements contained therein.

Reform of the Community Trademark Regulation

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The long debated reform of the European Union Trademark System has finally led to a new Regulation on the Community Trademark as well as new Directive for the EU member states concerning the national trademarks. Whereas the member states have basically three years to implement the Directive into their national trademark law, most of the provisions of the new Regulation on European Union Trademark will enter into force on March 23, 2016. From a practical point of view, the following changes of the Regulation are most relevant.

1. New terminology

The current Community Trademark (CTM) will be renamed as “European Union Trademark” (EUTM). The name “Office for Harmonization in the Internal Market” (OHIM) will be replaced by “European Union Intellectual Property Office” (EUIPO).

2. New fee structure

A “pay-per-class” system will provide for a new structure for the application fees: Today, an applicant pays a flat fee for covering up to three classes. Under the amended Regulation, one fee per class will apply. While this will make single-class applications more cost-efficient, the fees for applications covering more than two classes will increase.

In regard to renewal fees, the very same fee-per-class system will be introduced which means a significant reduction of fees for the trademark owners compared to the current fees regime. The new, lower renewal fees will apply to any EUTMs due to expire on or after March 23, 2016. The office will refund any excess fees already paid.

3. Clarification of specification of “old” CTMs

Prior to the IP Translator decision of the ECJ in the year 2012, it had been the practice of OHIM to interpret the claim of all class headings of the Nice Classification as covering all goods or services listed in the alphabetic list of the Nice Classification for such respective class (“catch-all”). IP Translator ended such practice by underlining that specifications must be sufficiently clear and precise to enable the public to determine the extent of the protection (“means what it says”). If an applicant seeks to cover goods or services beyond the literal meaning of the class headings, he must therefore specify whether its application covers all or any specific goods or services included in the alphabetical list of that class.

Against this background, the amended Regulation, codifying the ruling of IP Translator, provides for a transitional period ending on September 24, 2016, during which owners of EU trade marks filed before 22 June 2012 (the date of the IP Translator decision), and still registered in respect of the entire heading, may declare that their intention on the date of filing had been to seek protection in respect of goods and services beyond those covered by the literal meaning of that heading (e.g. “vehicle tires” are not covered by the literal meaning of the class headings in class 12 “vehicles; apparatus for locomotion by land, air or water”), provided that such goods or services are contained in the alphabetical list of the Nice classification for the relevant class which was valid at the date of filing. Such declaration shall indicate clearly and precisely the goods and services, other than those covered by the literal meaning of the class headings, originally covered by the owners intentions. After September 24, 2016, all trademarks containing class headings will be interpreted according to their literal meaning.

4. Counterfeit goods in transit

Under the current regime, counterfeit goods in transit which are destined for countries outside of the EU, may not infringe EU trademarks. The amended Regulation will drastically change this concept: It is now considered an infringement where goods in transit bear a mark that is either identical or “cannot be distinguished in its essential aspects” from the respective EUTM, unless evidence is provided by the importer of the goods that the owner of the EUTM is not entitled to prohibit the placing of the goods on the market in the final destination. Overall, this amendment has strengthened the position of trademark holders to prevent – by means of customs enforcement – accordingly labeled goods from passing through the EU.

5. Further changes

Concerning the registration procedure, the requirement of graphic representation is removed. The EUTM will have to have a representation on the Register in a manner which enables to determine the clear and precise subject matter of the protection sought. This might open the registry to more non-traditional trademarks, i.e. signs that cannot be seen (such as sounds or smells).

The opposition period for EU designations of International Registrations will – instead of currently six months – already start one month after publication.

As clarification, the scope of protection of an EUTM will extend to trade names or company names. The “own name” defense is explicitly restricted to the honest use of a natural person’s name and not any longer for the use of a company name.