Update UPC: Further De­lays and Obstacles

More than 18 months after the UK voted for BREXIT, the start of the UPC system has now been severely affected by those further delays that most commentators had already expected shortly after the vote (see, for example, the B&B Bulletin special edition “the BREXIT and its consequences for IP rights“). In addition, Germany has now joined the UK in being the last and, possibly, final bottleneck for the UPC, as caused by some again quite surprising developments: time for a short update.

As a quick reminder, the coming into force of the Unitary Patent Court (UPC) system still requires ratification of the various international treaties (which, together, form the UPC system) by both the UK and Germany. As of today, while the system was supposed to finally enter into force in April 2017, both of these ratifications are still outstanding, and there is no clear indication as to when they will (and can) be provided. Let’s have a look at the different reasons:

Situation in the United Kingdom

Shortly after the BREXIT vote, many commentators expected the UK to entirely step away from the UPC system or, at least, to make it a substantial part of its negotiations with the EU. However, in the weeks and months following BREXIT, the UPC system found sufficient support on a political level (while, apparently, not being perceived as an EU institution), and the UK government seemed increasingly committed towards putting the system into force even prior to the UK leaving the EU. Thus, the UK proceeded with the ratification process, while still leaving some important details, including the supremacy of the European Court of Justice (ECJ), to its future negotiations with the EU.

In mid-2017, however, this process was again taken over by political developments. The start of the BREXIT negotiations, which many considered rather chaotic, the increasing time pressure and constraints created by the negotiations, and, in particular, the re-election process in the UK created additional obstacles, which have prevented the ratification process from being completed until today. As of now, there are still some formal acts that need to be processed by the newly formed parliaments in the United Kingdom, until the ratification can be considered finalized. It is currently being expected that this process will only be completed by mid 2018.

Situation in Germany

Immediately after the BREXIT vote, Germany, while continuing to be in firm support of the UPC system, suspended its ratification process, in order to duly evaluate the situation and not to pass on the task of finally putting the UPC system into force entirely to the UK. After the UK’s continued commitment towards the UPC system, however, the parliamentary process of ratification was resumed in Germany and was completed in due course before Germany’s general election in October 2017. The only missing piece for final ratification by Germany was (and currently still is) the formal signature under the treaties by Germany’s President. While the signature was already being prepared, however, yet another development took place which nobody had anticipated: A German individual, who turned out to be a Dusseldorf based patent lawyer, filed a constitutional complaint against Germany’s participation in the UPC system with the German Federal Constitutional Court (FCC). The FCC then asked the President to suspend the signing process, pending its review and decision on this complaint.

The complaint, which in the meantime has been made available for review to some selected organizations, is mainly based on an asserted violation of the constitutional principal of democracy, both in relation to the parliamentary process, and in relation to several material aspects of the UPC system:

• In relation to the parliamentary process, the complaint refers to the circumstances surrounding the parliamentary vote and, in particular, the number of parliamentarians being present during the vote. Most commentators who have reviewed the complaint do not consider this issue as crucial, in particular as, from a practical point of view, the vote (which was unanimous) could be repeated at any time, as there seems to be a continued political will in Germany to put the UPC system into force.

• As regards the material aspects of the UPC system, however, commentators see more reason to be concerned. Here, the complaint points to issues as regards the democratic legitimization of several of the UPC institutions, as well as the alleged lack of independence of the UPC judges. These issues have been discussed already during the preparations of the UPC system, and do in fact give rise to some legal debate.

• In addition, the complaint alleges a non-compliance of the UPC system with European Union Law, which could lead the FCC to consider a referral to the ECJ. If such referral was being made, the expected delay would be even more significant.

The FCC has not yet provided any further indication on how and when they will progress in relation to this complaint. After receiving comments from legal organizations, they will need to decide whether to accept the complaint and open further proceedings, or to reject it. If the latter were the case, the ratification process in Germany could be resumed and completed rather swiftly. If the FCC, however, accepted the complaint and opened formal proceedings, the further process would again be severely delayed. In particular, if the FCC considered a referral to the ECJ, the delay is expected to extend beyond the end of the BREXIT negotiations, i.e. to after the UK leaving the EU. In this case, however, the original idea of the system being put into force prior to the UK leaving the EU would not be a possibility anymore and, most likely, there would be a need for further international treaties.

Conclusion

The long anticipated start of the UPC system has again taken some surprising turns, and is currently facing further delays and obstacles. Much depends now on the highest court in Germany, and the question how serious it will take the constitutional complaint. A significant further delay could in fact turn out to be more than just that, and could lead to the need for a further political process, the outcome of which would be impossible to foresee. On the other hand, and on a more optimistic note, if the complaint should be dismissed rather sooner than later, the political will, both in the UK and Germany, to put the UPC system into force still exists, and the preparations could be resumed at any time – with a starting date of the UPC system “sometime” in 2018.

We will of course provide a further update on these exciting developments in due course.