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German ratification of new Unified Patent Court system in doubt following constitutional complaint

Germany's ratification of the planned new Unified Patent Court (UPC) system in Europe is in doubt after a legal challenge was raised against national legislation that would endorse the new framework.13 Jun 2017

According to media reports, Germany's Constitutional Court is considering whether legislation backed by the country's parliament, which would give recognition to the jurisdiction of the UPC in Germany, is constitutional. 

Frankfurter Allgemeine Zeitung (FAZ) reported that the Constitutional Court formally requested that German president Frank-Walter Steinmeier step back from formally signing the legislation into law while it considers the legal challenge that has been lodged. The president's office said the legal complaint filed is not a "hopeless" case, FAZ reported. 

A spokesperson for Steinmeier has confirmed that the legislation will not be signed into law until an assessment of the legal complaint has been completed, according to Reuters

In a protocol similar to Royal Assent in the UK, legislation passed by Germany's parliament must be signed by the president before it can come into force. 

Life sciences and patent law expert Marc L. Holtorf of Pinsent Masons, the law firm behind Out-Law.com, said: "This is the first case I can recall where a member of the judiciary in Germany has called on the president to delay the adoption of new legislation. Details of who has raised the complaint and what the precise grounds for it are not yet known, but it is likely to relate to the fact that the legislation provides for transfer of judicial power away from courts in Germany to a supra-national organisation – the UPC." 

"In Germany anyone can file a constitutional complaint. Every year there are thousands of these complaints that the courts have to deal with, but the vast majority – probably more than 90% - are dismissed at the first-stage of proceedings. The fact that this case has been deemed worthy of further consideration is therefore noteworthy," Holtorf said. 

Patent litigation expert Michael Schneider, also of Pinsent Masons, said a number of constitutional questions have previously been raised in Germany against the existing system in place at the European Patent Office (EPO) for consideration of disputes relating to European patents. 

"In essence, those complaints call into question whether it is right that the Boards of Appeal at the EPO, without ultimate review by national courts in certain settings, are an appropriate judicial forum for settling those disputes," Schneider said. "It may be that the new constitutional complaint raised against the UPC system is taking this argument further and calling into question whether the UPC system provides for appropriate judicial review."

Both Holtorf and Schneider said that, even if the case before the Constitutional Court is fast-tracked, a ruling on whether the German legislation for ratifying the UPC system could take approximately a year to be issued.

"Everything has been set up in Germany for the process towards ratification of the UPC Agreement to be completed prior to the forthcoming elections in September," Schneider said. "The ratifying legislation has been passed by parliament and was ready for signature by the president. While the legal instrument could still be withheld to delay formal ratification following the president's signature, the formal process would otherwise be completed. However, this legal challenge is now set to cause delay to Germany's ratification and, therefore, the operation of the UPC." 

The UPC, when established, will serve as a new judicial enforcement framework to underpin a new unitary patent system. Businesses will be able to apply to the EPO for unitary patents which, if granted, would automatically confer on them patent protection for their inventions which will apply across every country that gives recognition to the unitary patent regime, which at the moment looks set to be 25 of the 28 existing EU countries. 

For the new UPC system to take effect, at least 13 EU countries, including the three with the most European patents in effect in 2012 – Germany, France and the UK, must pass national legislation to ratify the UPC Agreement that the countries behind the new system finalised in 2013. 

Last week, prior to news of the German legal challenge breaking, the body tasked with laying the foundations for the new judicial system to take effect, the UPC Preparatory Committee, said that its previous target date for the UPC to become operational, of December 2017, "cannot be maintained". The Committee blamed delays to the ratification of the UPC Agreement by some countries.  

Following the UK's vote to leave the EU last summer, UK ratification of the UPC Agreement has also been in question. While the UK government has carried out some work to create the legislation necessary to implement the UPC Agreement in the UK, the Intellectual Property Office (IPO) confirmed to Out-Law.com in April that the recent general election in the country would delay the UK's ratification

There remains a question over whether the UK, should it ratify the UPC Agreement prior to Brexit, would be able to continue participating under the new system when it formally leaves the EU. The UPC Agreement currently requires countries participating in the new unitary patent and UPC system to be EU members. 

Schneider said: "German ratification of the UPC Agreement would have increased the pressure on the UK government to ratify the Agreement itself and therefore enable the operation of the new unitary patent and UPC framework to commence. However, the delay to, and uncertainty over, Germany's ratification may result in the UK further postponing its ratification. The recent result from the UK general election has created political uncertainty which is unlikely to speed up ratification in the UK, and makes it more likely that its ratification becomes part of broader negotiations with the EU over the terms of Brexit." 

"It now looks increasingly likely that the earliest that the unitary patent and UPC framework could become operational will be towards the end of 2018 or into 2019," he said. 

Holtorf said that businesses in Germany have, generally, been positively anticipating the new framework. 

"Manufacturers, such as automotive businesses, are among those that see potential in the new system of unitary patents and UPC to reduce the costs and administrative burdens in filing for Europe-wide patent protection," Holtorf said. "In some other industries, however, such as pharmaceuticals, there is much more reluctance to subject 'blockbuster' patents to a new, untested, system where there is a risk that a single legal challenge before the UPC could knock-out those patent rights across every participating country."