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EU – UPC drafting committee clarifies Rules

07 Mar 2014

UPC drafting committee clarifies Rules but political battles remain, by Nicholas Fox & Scott Parker, Simmons & Simmons

Following a public consultation running from June to October 2013, the UPC Drafting Committee has now published a revised draft set of Rules of the Unitary Patent Court (the 16th such draft). The Legal Working Group of UPC Preparatory Committee under Johannes Karcher will now consider the latest draft and will arrange public hearings on the draft in the course of 2014.

The latest revision of the Rules of Procedure has clarified many areas of the Rules which are to be welcomed. However, the Drafting Committee’s amendments have been technical in nature and key political issues have been left for the Preparatory Committee to deal with. Key changes and outstanding issues are discussed below.

Rules on Opt-Outs clarified
Although little of substance has changed the wording of Rule 5 on opt-outs has been heavily revised to clarify the procedures for opting out. The revised Rules make it clear that all proprietors must join in an application to opt-out a patent from the jurisdiction of the court and that any opt-out will apply to all designations where a common European patent has come into effect. Any opt-out will be effective for the entire lifetime of a patent unless the opt-out is withdrawn.

The revised Rules also clarify that if an SPC exists, the holder of the SPC is required to join the patent proprietor (if different) in the application for the opt-out. Further, the Rules provide that SPCs are automatically opted-out if they are based on a patent which is opted-out from the UPC when the SPC is granted.

The Rules still provide for a “sunrise” register operated by the EPO enabling proprietors to opt patents and patent applications out of the jurisdiction of the court before the court comes into existence and also retains provisions for the filing and withdrawal of opt-outs to be dependent upon an administrative fee (yet to be determined). The sunrise provisions still appear in square brackets indicating that they remain conditional on achieving political agreement and in particular upon the EPO accepting the proposed role.

By clarifying the scope and procedures for opt-outs the revised Rules make it easier for proprietors to prepare for the introduction of the UPC. Patent proprietors should conduct a review of all their patents and patent applications to determine which (if any) they wish to opt out of the system. This should include identifying any patents and patent applications which they own jointly with third parties. If patents are owned jointly, then a joint approach will need to be agreed between the proprietors as in the absence of an agreement patents will by default remain within the system.

Licensees should also consider how they might influence proprietors’ decisions on opt-outs. The Rules of procedure do not provide licensees with a right of opt-out., Tthe decision is for proprietors alone. However, licensees should discuss the matter of opt-outs with proprietors and where appropriate look to revise their licence agreements to provide them with a contractual right to require a proprietor to opt-out selected patents (or not, as the case may be).

Languages regime changed
The previous draft Rules contained a controversial change to the language regime in Rule 14 which threatened to undermine the possibility that much of the litigation within the UPC would be conducted in English without the need for documents to be translated into a local language.

The drafting committee has acknowledged that the previous draft was inadequate and has presented the preparatory committee with two options which the drafting committee considers might be politically and procedurally acceptable. The two options given are either that the Contracting Member State(s) hosting a local or regional division should be individually permitted to decide upon the language regime to be applied in their jurisdiction or alternatively that use of a defendant’s local language should only be obligatory if infringement is only occurring within the territory of the local or regional division in question.

In all cases, a defendant is protected by a new Rule (Rule 271.7) which provides that if a defendant is served a Statement of Claim in a language that they do not understand and would otherwise be entitled to refuse service under the EU service regulation (EC 1393/2007) then they can notify the Registry. All time limits in respect of the case are then suspended until the claimant provides the defendant with a translation into a language requested by the defendant.

Local and regional divisions offering claimants a choice of languages may not be uncommon. It is expected that divisions established in Germany and the Netherlands will give claimants the option to litigate in English as an alternative to their local languages. Belgium has announced that it is intending to permit litigation in Dutch, French, German or English and a mooted possible South-eastern regional division covering Romania, Bulgaria, Cyprus and Greece has indicated that it would permit litigation in any of the local official languages along with French or English.

If claimants are given an unfettered choice to select the language of proceedings, this would give rise to the possibility that a local infringer, restricting their activities to a single jurisdiction may be sued in a foreign language. However, as soon as restrictions are imposed, this eliminates one of the key attractive features of the proposed new court. Of the two options proposed by the Drafting Committee, the flexibility inherent in the committee’s proposal that Rules on language use should be set by the individual divisions themselves looks the most practical compromise as that would enable each division to adapt its practice to local circumstance. Either way it is to be welcomed that the committee is trying to strike a balance and has stepped back from its previous proposal which would have had the practical effect of eliminating any choice of language.

Court of Appeal’s powers over procedural appeals clarified
In the Unified Patent Court, decisions of the Court of First instance on a procedural matter can only be brought with the leave of the Court. In a highly important development Rules 220 and 221 of the Rules of Procedure have been amended to provide that if the Court of First Instance refuses to grant leave to appeal, an unsuccessful party can apply to the Court of Appeal for leave.

Whether or not the Court of Appeal is empowered to overrule a First Instance decision refusing leave to appeal in a procedural matter has long divided the Drafting Committee. Originally, the draft Rules limited applications for leave to appeal to the Court of First Instance. This was amended in the draft issued last June to permit leave to be sought “the Court” which mirrored the wording of the UPC itself but left it ambiguous whether or not “the Court” in question was the Unified Patent Court itself including the Court of Appeal or whether this was restricted to the Court actually making the procedural ruling. Now the Rules explicitly provide for a role for the Court of Appeal.

As a note included in the draft Rules makes clear, there were differing views within the Drafting Committee on whether Rules as they are now amended are entirely compatible with the wording of the UPC agreement and some of the members of the Committee remain of the view that Article 73 UPC only allows a Court of First Instance to grant leave to appeal. The Drafting Committee’s note makes clear that ultimately it will be for the Court of Appeal itself to decide whether or not the powers they have been granted are compatible with the Agreement.

The Rule change is of significant importance. The change empowers the Court of Appeal to enforce a uniform approach to procedural matters on the Courts of First instance and greatly reduces the possibility that divergent local practices will arise in the various local and regional divisions. As the Rules provide judges with significant discretion as to how they proceed this oversight by the Court of Appeal is considered to be essential and this was a point made by large numbers of the respondents to the public consultation. The fact that the Rules do now provide for a clear procedure for the Court of Appeal to grant leave should help accelerate procedural harmonisation and should be welcomed.

Committee holds firm on bifurcation, provisional measures and injunctions
The Drafting Committee rejected calls to amend the Rules to set out the discretionary considerations for making decisions on bifurcation and provisional measures. Similarly calls to introduce eBay type provisions regarding the award of final injunctions have also been resisted.

Many stake holders had lobbied for amending the Rules of Procedure to set out explicitly the relevant considerations which the Court must consider when deciding to bifurcate a case (ie a decision to hear arguments on infringement and invalidity separately) or issue provisional measures and injunctions. The Committee has rejected these calls considering that the Rules should not fetter the discretion of the Court and that matters which should be considered should develop naturally as the cases arise.

Notably the Committee has, however, made several material changes to the Rules concerning bifurcation and provisional measures. The Rules have been amended to oblige a Court to give reasons for its decision to bifurcate a case and the wording of Rule 211 has been amended to require the Court to take into account any unreasonable delay in seeking provisional measures when considering to whether or not such measures should be granted and to more closely follow the wording of Article 62(2) UPC which requires the Court to weigh up the interests of the parties and take into account the harm caused by granting or failing to grant a preliminary injunction when deciding upon an application for provisional measures.

The changes to Rule 211 bring the requirements for obtaining a preliminary injunction into line with practice in most European states where injunctions are only granted if a claimant acts promptly and can establish that urgency exists.

The obligation to give a reasoned decision on bifurcation is likely to reduce the number of cases where bifurcation occurs. As above, the Court of Appeal can overrule a refusal of the Court of First Instance to grant leave to appeal a procedural decision such as a decision to bifurcate a case. The criteria for deciding on bifurcation will almost inevitably be the subject of an appeal very early in the lifetime of the court. This, together with an obligation to give reasons means that once the Court of Appeal issues guidance on the matter, the circumstance when a case will be bifurcated are likely to be constrained.

Amicus Brief’s rejected
The Committee has rejected calls to introduce provisions for the submission of amicus briefs to the Court of Appeal in cases of public interest. The Committee received some applications arguing that the Rules should be amended to permit the filing of such briefs. However, the majority of submissions were against the allowance of amicus briefs, highlighting the likely procedural problems and in particular the potential for delay. In view of this the Drafting Committee has declined to amend the Rules to provide a mechanism for third parties to intervene.

The Rules on representation before the Court have been clarified. Article 48 UPC requires parties to be represented by lawyers or alternatively by European patent attorneys who have an additional litigation qualification such as a European Patent litigation certificate.

The previous draft Rules on representation sought to define “lawyer” to include law graduates authorised by the Swedish Patent Attorneys Board to appear before the Court along with equivalent individuals in other member states. The scope of this provision was unclear, particularly as some patent attorneys in some Contracting States (notably the UK and Germany) have some limited rights of audience to represent clients in intellectual property matters.

The latest draft Rules remove this ambiguity and instead now define “lawyer” by reference to Article 1 of the EU establishment directive 98/5EC which lists the professional titles of lawyers in all of the EU member states. This clarifies that national patent attorneys, whatever their representational rights before the local courts are not to be considered lawyers for the purpose of the UPC and that any representational rights that they have should be by virtue of their qualification as European patent attorneys together with an appropriate litigation qualification, the details of which will be set by the Administrative Committee.