EU Unitary Patent Has Obvious Flaws
Patent package gives technology and other sectors cause for concern
guardian.co.uk, Wednesday 19 December 2012 16.02 GMT
Proposed EU unitary patent gives companies such as Nokia and Motorola cause for concern. Photograph: Paul Hackett/Reuters
After almost 40 years of discussions, last week the EU Parliament and Council approved regulations creating a Unitary Patent – a single patent right that will take effect across the EU, except in Spain and Italy. It is intended to fill a hole in intellectual propertyprotection in the EU, however despite last week’s progress, much is still be done before the new patent package will fly.
The package encompasses a new unitary patent, with an associated language regime and a unified patent court, which will be set up to create a single enforcement forum for all European patents. This is designed to cut the cost of patent protection in the EU by up to 80%, making it competitive with the US and Japan. In addition, the Court is intended to make enforcement simpler and cheaper. This is being heralded as a breakthrough for business, but is it too early to celebrate?
Implementation will be piecemeal and nothing can come into being until the Court system has been set up. The agreement creating it is likely to be signed in February and that then needs to be ratified by thirteen contracting states (which must include the UK, France and Germany). The expectation at EU level is that this will happen by April 2014, but that is highly unlikely. The earliest the system will be in place is the end of 2014 or early 2015.
The technology sector is concerned. The new single enforcement system (which will apply to most existing patents as well as Unitary ones) may be a boon for patent trolls. Companies such as Motorola and Nokia, which has been very vocal on the subject, have been faced with multiple actions in recent years by patent holding companies seeking to monetise patent portfolios they have acquired. These patents should be licensed under the standards rules, but price can be an issue and there are thousands of them. Although they are usually held to be invalid, phone makers face pressure to settle because if they don’t they could be injuncted.
Allowing the enforcement of a patent across Europe from a single location of the holder’s choice, raises the stakes for technology and other businesses as it leaves them open to a possible EU wide attack while reducing the costs for those doing the attacking. The court system as planned also means that the one crucial weapon in defence of such an attack – a strong validity challenge – may be deferred until after a defendant has been injuncted. This is a significant and very worrying risk.
There is also concern that the patent package will not fulfil its primary objective. The 80% cost reduction figure is based on an assumption that users want pan EU protection. At the moment, that is a small minority of cases. The system is supposed to be attractive in particular to small and medium size enterprises (SMEs), but few manufacture or market products outside a handful of EU states and for them existing options could be less expensive and less risky. To say that it will provide SMEs with a much needed stimulus to innovation, as some have suggested, is based largely on supposition not evidence.
It is unclear how this new regime will be of benefit to large entities either. Organisations with high value patents, particularly pharmaceutical companies, are likely to shy away from the system in its infancy as it presents a significant risk. With centralised validity challenges, EU wide protection could be lost in one stroke. Individual pharma patents often have enormous value, so why would a major multinational with such rights risk losing them for the whole of the EU in an untried court system? Answer: they won’t.
In other areas however, there are benefits to be reaped, particularly for industries which rely on several rights – not just patents, but also trade marks and designs. For household consumer products, for example, or the automotive industry, this might be an attractive system with relatively little risk.
The patent package is a step forward but there are some obvious potential flaws. It is essential that the costs of protection and enforcement are attractive and that the risks in the enforcement system are balanced in practice. If they aren’t, and if major players opt out in the early years, there is a concern that the system will not attract the usage levels it needs to work. So every effort needs to be made by legislators, officials and users to get this right. Passing the law is just the start.