Top 4 facts life science companies need to know about the UPC treaty

A PATENT PROTECTION AT THE EUROPEAN LEVEL

“Life sciences companies and all patent holders will enjoy patent protection in European territories that did not offer adequate patent protection before,” says Dr Zigann. These countries will enjoy the expertise of well-trained patent judges serving in one court, competent for whole of Europe. “This will totally change the game” adds Dr Zigann. At the moment, there is no real unified approach to patent protection, apart from Art. 69 that has to be recognised by the different national courts. But the remedies and the exemptions to patent protection are not provided for by the EPC. The EU needs both a unified patent and a unified approach to patent protection and that is where the UPC and the patent regulation come into play.

STAYING AHEAD OF THE COMPETITION

Currently, there is no unified approach to the extension of patent protection, especially for life sciences companies. The research exemptions as laid down in national laws provide different ranges of accepted actions. While some jurisdictions might be strict, others are liberal. The European patent with unitary effect and the material law as laid down in the UPC agreement and applicable to (classic) European Patents will harmonise the possibilities for a pharmaceutical company to prepare a (generic) medicament before the end of their competitor’s end of the patent term. The patent holders however will have multiple choices to pick the right patent according to their needs and the competitive situation.

With the UPC, companies will be able to invoke a one-step-only invalidation of their competitor’s patent and if they succeed, it will be the end of it. Currently, the bundle patent has to be overturned in each national jurisdiction independently, which has both advantages and shortcomings. It is a costly and lengthy process for the competitor, but on the other hand, exemptions might profit them.

WHAT ABOUT INNOVATION?

“I think maybe protection will be more impacted,” says Dr. Zigann. It is true that the UPC will trigger more money going into research, at least filing, in nations where patents are currently not protected very well. “Countries with a lot of consumers and a lot of money, such as France and Germany, already have good patent protection so I’m not quite sure it will have any influence on innovation there.

HIGH COSTS MEAN SMALLER COMPANIES MAY NOT WANT TO FILE EUROPEAN PATENTS

It is expensive for small and medium companies to litigate in front of the UPC, even though they are eligible for a rebate. But this applies to the court fees only, not the recoverable costs in case of losing. That would be an incentive for these companies to file at the national level and not the European one. After the transitional period, all European patents will have to go to the UPC and Dr Zigann believes that the UPC’s cost structure will be too high for SMEs. Smaller companies should have a rebate on both the court fees and the rebuttable costs.

BREXIT MIGHT NOT HAVE THAT MUCH OF AN IMPACT ON THE UPC

Great Britain has issued a positive statement regarding the ratification of the UPC, which means they will be part of it.

However, Dr Zigann points out that “we see they are making efforts to be involved, but you never know if they will actually do it in the future, if a new political leader changes their mind.” The UK Government announced in November that they would ratify, despite Brexit. So what impact would that withdrawal have if they did change their mind? It would not be a big one. The UPC agreement states that the three most prominent countries in terms of patent applications will have to ratify. At this point in time, these are Germany, France and the UK. However, “if Great Britain steps out, Italy will step in as it is the fourth major country in patent applications” argues Dr Zigann. The only real problem would concern the statutes that are part of the agreement, which clearly state that London will host the life sciences division of the central division of the court. If the UK dropped out, remaining participating member states would need to replace London by another city through an amendment of the statutes. He believes that even if the UK is out of the EU, as long as they ratified beforehand, follow the agreement, recognise the primacy of the European laws and be fine if the UPC judges refer questions to the Court of Justice of the European Union, there should not be any problem. “My understanding is that Brexit will not have an effect on the UPC, other than some delay in the agreement coming into force” adds Dr Zigann.

IN-HOUSE COUNSEL DEPARTMENTS OF LIFE SCIENCE COMPANIES NEED TO PREPARE NOW

Because the patent package will come into force next year, or at the latest the following year, all in-house counsel can currently, do is watching out in naming the applicants and lining them up when filing new applications, if there are several. The new patent regulation for European Patents with a unitary effect make the material law of the first-named European applicant’s country applicable to the patent. If no patent owner is situated in a participating member state, the applicable law will be the German law, as Germany is the seat of the EPO. A few challenges arise for companies which decide to opt their patent out of the UPC, i.e. if a company has a patent due to lapse after the UPC agreement becomes effective, or if it is undergoing an application process now. For the former, companies need to know who the material the patent holder is and if there are several, there needs to be a unanimous decision on opting out or staying in.

The same is true for licensees. Companies with pending applications may want to prolong the examination procedure to make it fit to apply for unitary effect. They can only apply for it within one month after the patent is granted and if it is granted before the UPC agreement comes into force, they will lose the ability to ask for it. Planning is key.

THE NEXT SEVEN YEARS WILL BE CRITICAL TO THE SUCCESS OR FAILURE OF THE UPC TREATY

Even though there is a possibility to prolong the seven years transitional period up to 14 years after the implementation of the UPC treaty, “I do not think we will take this opportunity. There will be a decision after seven years on whether it is a success” says Dr. Zigann. He believes the UPC will not be terminated, because that is what Europe has wanted for the past 40 years. “We have been trying to implement a unified patent court for a very long time and we are now one step away from getting it. I am sure it will be a great success as soon as it starts.” Countries need to make sure they will appoint the right judges to bring life to the UPC agreement, render good decisions and unify Europe’s patent landscape.

That same landscape will have totally changed in a number of years, because national courts will have lost competence in the classical bundle, European patents and more national judges will have moved to the UPC. There is also a financial incentive for national judges to move to the UPC and make it a success, especially for German judges, as they will be paid twice as much as on the national level.

Even in the case of a failure of the UPC, the UPC case law will still live on in the national courts as the national courts will have adopted the UPC case law.