Review of the latest UPC Rules released prior to public hearings, by Nicholas Fox & Scott Parker, Simmons & Simmons

On 31 October the Legal Framework Group of the Preparatory Committee issued the latest version of the draft Rules of Procedure for the Unified Patent Court in advance of a public consultation hearing being held in Trier, Germany on 26 November 2014. Subject to any further revision which occurs as a result of that public hearing, these latest rules are likely to reflect the final version of the UPC Rules of Procedure. The amendments made by the Preparatory Committee have settled a number of political issues left open by the Rules Committee which had drafted the previous versions of the rules.

As is discussed in greater detail below, the key revision to the rules concern:

• Clarifying the opt-out provisions
• Settling the language scheme for the Court
• Arrangement to reduce any “injunction gap” in bifurcated proceedings
• Emphasising judicial discretion in determining remedies
• Finalising the procedural orders appeals regime
• Balancing public access and claims for confidentiality in court documents
• Clarifying the rules for service; and
• Providing Swedish and Finnish patent jurists with a right of representation before the Court

Read the entire contribution here or if the link does not work below the break. 

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More revisions on Opt outs – Rule 5

Rule 5 which deals with opt-outs from the jurisdiction of the Court has been revised once again.
As the Rules Committee made clear when issuing the previous version of the Rules of Procedure, the intent of Rule 5 is that it should an all-in or all-out affair. The default is that all European patents in all member states and any associated SPCs are subject to the jurisdiction of the Court. However, proprietors may opt bundles of patents out from the jurisdiction of the Court. If an opt-out is filed, all the European patents based on a common European patent application and any related SPCs are then opted out from the jurisdiction of the Court for the lifetime of those patents (and SPCs) unless the opt-out is subsequently withdrawn.

The Rules also make clear that proprietors opt out at their own risk. If they fail to complete the formalities for opting out such as providing the consent of all registered proprietors or fail to pay the opt-out fee then an opt-out is ineffective and the patents in question remain subject to the jurisdiction of the Court.

The amendments to Rule 5 bring added clarity and flexibility to the opt-out procedure.
The requirement to inform the Court when an SPC on a patent is issued has been dropped as superfluous given the all-in or all-out structure of the rule.

Rule 5.5 allows an opt-out fee to be paid up to 30 days from filing an initial opt-out request. This is largely a matter of administrative convenience since an opt-out (except in the case of opt-outs filed using the “sunrise” provisions in Rule 5.13 discussed below) is only entered onto the register once the fee has been paid. But the rule does provide a backstop after which the Registry can stop monitoring for payment of fees on recently filed opt-out requests.

Rules 5.7 and 5.9 also clarify the interaction of the opt-out rules with the initiation of Court proceedings either before the Unified Patent Court or in national proceedings. If a proprietor chooses to bring an action in the Unified Patent Court, then the proprietor will lose the opportunity to opt out the patents involved in the court proceedings at any future date. Similarly if a patent has already been opted out from the jurisdiction bringing of the Unified Patent Court an action in the national courts will prevent that opt-out from being withdrawn at a later date.

The workings of the “sunrise” provisions now appear in Rule 5.13. The early registration service provided by the European Patent Office is to be a service provided by the EPO on behalf of applicants rather than the EPO being a representative of the Court with the terms of the service to be specified by the EPO. Having collected such data as is required the EPO will then transfer this information en masse to the Court for registration by the Court.

It is understood that the EPO administrative systems will not process fee payments for opt-outs. Rather, the EPO is looking merely to provide a data capture service identifying opted out patents and transferring this list to the Court where the out-opts will be automatically entered onto the official register on the date of entry into force of the Agreement. Proprietors will then have 30 days from the date of entry to pay the required opt-out fees to the Registry or else the provisional opt-outs made via the sunrise provisions will cease to be effective.

This current proposal mitigates some of the problems expected to arise from having to deal with an initial flood of opt-out registrations as it will provide a means for proprietors to have their opt-outs effective on the day the Court opens. However, it will still leave the registry with the administrative problem having to deal with large numbers of fee payments very shortly after the opening of the Court.

Finalising the language scheme for the UPC – Rule 14

The 16th version of the draft rules of Procedure deliberately left open the highly political matter of the language scheme for the UPC.

The new rules now seek to provide a fixed framework which balances the interest of litigants and the Court.

As an initial matter it is for the local or regional division to identify the languages in which the division is prepared to operate. Article 49 UPC limits the options for possible languages to either an official EU language of the Contracting Member State hosting the relevant division or alternatively or additionally one or more of the EPO official languages (ie English, French or German).

Rule 14.2(a) then provides that in general a claimant will be free to choose amongst the languages designated by the division as the language of proceedings. However Rule 14.2(b) then restricts this choice (if a choice is provided by the Court) where an action is brought against a defendant who has his domicile or place of business in a member state and the only acts of infringement which are alleged to occur are within the jurisdiction of a single local and/or regional division which includes the defendants domicile or place of business. If this is the case then proceedings are required to be conducted in the official language of that member state or in the case of a member state having multiple official languages the official language of the region where the defendant has his domicile or place of business.
The protection of small local operators is, however, not absolute. The restriction only applies where a local or regional division provides a choice of languages of proceedings. The joint proposed Baltic-Swedish regional division has indicated that it will conduct proceedings only in English. Small operators within the jurisdiction of such a regional division will not be given the opportunity to conduct proceedings in another language and orders and judgements in that division will be in English. Also, if alleged infringements extend beyond an area covered by a single local or regional or local division then the small local operator’s protection is lost and the alleged infringer may be sued in any of the languages permitted by the divisions where infringement proceedings are initiated.

As presently drafted Rule 14.2(b) does not appear to apply if more than one local division is set up in a member state as, in such cases, all of the local divisions in that state would have concurrent jurisdiction over acts of infringement occurring in that member state with no one local division having exclusive jurisdiction as is required in order for Rule 14.2(b) to apply. Given the comments of the committee about the intention of this rule this final exception may be an oversight which may be corrected prior to the rules being finalised.

If Rule 14.2(b) does not apply the interests of the “small local operator” will, however, still be protected by virtue of the provisions of Rule 271.7 which permits a defendant to refuse service of pleadings in a language which they do not understand and require a claimant to serve translations of such documents together with the provisions for simultaneous translations at hearings.

Rule 14.3(c), which currently appears in square brackets and therefore is still subject to final approval or acceptance, provides that a local or regional division may indicate that parties may use an additional language other than the official language of the Member State hosting the division for parts of proceedings.

Essentially, this Rule would permit proceedings to be conducted in two languages, the official language of the Member State hosting the division with some parts of the proceedings being conducted in an additional language which is most likely to be English. If adopted, proceedings in divisions which indicate that they are prepared to allow the use of multiple languages could then resemble what sometimes occurs in EPO opposition proceedings with one side making written and oral submissions in the local language and the other side making written and oral submissions in the additional language.
It is understood that this provision currently appears in square brackets because the majority of the Rules committee is against the provision and it is unclear whether this Rule will be included in the final version of the Rules.

Acceleration and co-ordination of bifurcated proceedings – Rules 37.5 & 40 b

The new rules include welcome provisions for co-ordinating the progress of bifurcated proceedings and minimising the duration of any “injunction gap”.

Under the UPC, if an alleged infringer counterclaims that a patent is invalid, the local or regional division hearing the infringement action has a choice. They may either choose to hear the infringement and revocation actions together, they may, if the parties agree, transfer the whole case to the Central Division or alternatively they may bifurcate the case, retaining the infringement action for themselves whilst transferring the revocation action to be decided upon by the Central division. If a local or regional division decides to bifurcate a case, the division also then has the option of either proceeding with the infringement action or staying that action pending the outcome of the revocation action and are required to stay the action if they consider that there is a high likelihood of the revocation action being successful.

There is always the potential for injustice if an injunction is issued based on a patent which later turns out to be invalid. However, equally it is desirable that a Court should avoid unnecessary stays and rule on infringement proceedings as quickly as possible.

The latest rules of procedure seek to square that circle by providing that a local or regional division which decides to bifurcate a case is required to inform the Central Division of dates set for an interim conference and oral proceedings for the infringement proceedings and that if the local or regional division does not stay the infringement proceedings, the bifurcated revocation proceedings should be accelerated by the Central Division with the Central Division endeavouring to set a date for oral proceedings on the revocation action prior to the date of the oral hearing of the infringement action.

Decision on the merits – Rule 118

Rule 118.1 has been amended so that it expressly states that orders and remedies following a decision on the merits are at the discretion of the Court. Following this amendment, Rule 118.2 whose wording is derived from Article 12 of the EU Enforcement Directive has been deleted.

Rule 118.2 which provided that in appropriate cases damages and/or compensation rather than an injunction could be ordered in lieu of an injunction where an infringer had acted unintentionally and without negligence. The Committee notes that because of the requirement that an infringer acted both unintentionally and without negligence the provision would only apply very rarely. That combined with the fact that Article 12 is an optional measure under the enforcement directive and the fact that rules make clear that the Court has a discretion regarding orders and remedies in any event has moved the Committee to delete this rule.

Appeals – Rule 220

Another matter which has previously divided the Rules Committee is the extent to which the Court of Appeal should have oversight over procedural orders issued by the Court of First Instance.
Under Article 73(1) UPC, certain orders such as orders to produce evidence and to inspect premises or orders for provisional protection may be appealed as of right. In contrast all other procedural orders may only be appealed if “the Court” grants leave to appeal. A matter which has long divided the Rules Committee is whether the leave procedure is a means for the Court of First Instance to decide upon which procedural matters it would like to receive guidance or alternatively whether it is a mechanism for the Court of Appeal to impose uniform procedures across the Court.

Revised Rule 220 attempts to seek a balance between these two views. Whether or not leave to appeal a procedural order is given is left primarily as a matter for the Court of First Instance. However, new Rule 220.2 provides that if leave for appeal is refused by the Court of First Instance, a request for discretionary review may be filed with the Court of Appeal. Such a request is initially reviewed by a single judge of the Court of Appeal who can refuse the request without giving reasons. Only if the judge considers that the matter is appropriate is the request considered by the full Court after having heard arguments from the other side and having consulted with the presiding judge or the judge-rapporteur of the panel of the Court of First Instance where this is considered helpful.

To avoid procedural appeals from being used to delay proceedings, Rule 223.5 had already provided that appeals against procedural orders under Rule 220.2 do not have any suspensive effect.

The Preamble to the Rules of Procedure already state that the Court is to endeavour to ensure consistent application and interpretation of the Rules by all first instance divisions and that due consideration is required to be given to this objective in any decision concerning leave to appeal against procedural orders. Given that this is the case it should be expected that the Court of First Instance will look to seek guidance in the early days of the Court and subsequently will grant leave for appeal if a procedural order is debatably contrary to established practice. The new rule, however, makes it possible for the Court of Appeal to intervene in borderline cases whilst at the same time providing means for the Court to manage its own docket and avoid the Court of Appeal from having to reconsider in depth every procedural order where the Court of First Instance refuses leave.

Public access to the register and confidentiality – Rule 262

The rules for public access to Court documents have been amended.

The default arrangement is for all documents lodged with or issued by the Court to be available to the public. However, any party may request that information contained in such documents should be kept confidential and provide reasons for doing so. If they do so and provide a redacted copy of such a document, then only that redacted version of the document will be made available on the public file.
If a redacted version of any document is published, any member of the public may lodge an application for an order that information excluded from the public file should be made available and following the submission of written arguments the Court will then make such information available unless legitimate reasons for confidentiality are provided which clearly outweigh the interests of the applicant to access the information.

Thus in this way the default will be for all written pleadings, evidence and decisions and orders of the Court to be made available publically. Where a party requests that certain information is kept confidential that information will be excluded from the public file. Only when an access request is made will the Court make a ruling on whether or not information which is requested to be kept confidential actually is confidential.

Clarification of rules on Service – Rule 271

Article 44 UPC provides that the Court shall make best use of electronic procedures such as the electronic filing of submissions. To implement this Rule 271 makes electronic service the default form of service under the UPC using standards which guarantee the identity of the sender, safe transmission and the possibility of an addressee to take notice of the documents. Where electronic service cannot take place, new Rule 271.4(a) now refers broadly to “any other method” of service compatible with the EU Service Regulation as being suitable alternative means of service.

The new rules also make explicit that a defendant may be served, in addition to its statutory seat, central administration or principle place of business within the Contracting Member States, at any other place within the Contracting Member States where the company or other legal person has a permanent or temporary place of business. The change allowing service at a temporary place of business has been made for the express purpose of enabling service at trade fairs.

Rule 271.5 also now clarifies the procedure to be followed if a defendant is served documents in a language that they do not understand where they would be entitled to refuse service according to Article 8 of the EU Service regulation. In such circumstances a defendant is required to inform the Registry within one week of the attempted service of a language that they do understand and time limits for response are then frozen until the Claimant provides appropriate translations of the documents into that language.

Solving the “jurist” problem – Rule 286

Article 48(1) UPC gives lawyers authorised to practise before a court of a Contracting Member State the right to represent parties before the Unified Patent Court. Rule 286 of the Rules of Procedure then defines the term “lawyer” as being someone who is authorised to pursue professional activities under a title referred to in the EU Establishment Directive 28/5/EC.

The Rules committee had noted that this definition was potentially problematic in Finland and Sweden where a number of individuals complete their education as lawyers and then practice in patent matters as “jurists” without formally being admitted to the national bar in those countries in which case they are not entitled to use any of the professional titles mentioned in the directive.

The latest version of the rules now seeks to overcome this problem. Individuals who are permitted to practice in patent infringement and invalidity litigation in national courts will be allowed to represent clients before the UPC if they have equivalent legal professional qualifications to the lawyers referred to in the Directive even if owing to national rules they are not allowed to practice using the titles referred to in the Directive.

From the explanatory remarks provided by the Committee it is apparent that the Committee intends this “jurist” exception to be construed narrowly. In the explanatory notes, the Committee emphasises that individuals admitted by virtue of the change must have “legal professional qualifications” equivalent to the lawyers referred to in the directive (emphasis in the original).

It is presumed that this is an attempt to prevent the rule from being extended to provide an automatic right of representation for patent attorneys in member states such as the UK where patent attorneys have a right to practice in patent infringement and invalidity litigation. It would appear that the committee is emphasising that in order to be caught by the rule an individual’s legal professional qualifications (as opposed to patent attorney or patent attorney litigator qualifications) need to be equivalent to the legal qualifications lawyers referred to in the Establishment Directive.

This will be the case for Swedish and Finnish jurists who will have completed the legal education required of a lawyer in their respective jurisdictions but who are solely prevented from using a national lawyer’s title by virtue of local rules relating to membership of the local bar. Presumably the rule would also apply to a UK patent attorney litigator whose rights of audience arose by virtue of being dual qualified as both a patent attorney and a solicitor or barrister even if they do not have a current practicing certificate to practice as a barrister or solicitor and only have rights of audience in patent litigation by virtue of their patent attorney litigator qualification.

However, it is arguable that the rule has been drafted to provide the Court with a means to distinguish between legal qualifications which involve completing the training in order to become qualified as a lawyer and other qualifications (such as the UK patent attorney litigator qualifications) which give rise to a right to practice in patent infringement and invalidity matters but do not generally involve completing the legal training required of a lawyer.