Brief Comment on the European Patent Arbitration and Mediation Center

On 11 December 2012, the European Parliament adopted the proposals for the unitary patent by an overwhelming majority (471 / 160). This vote puts an end to thirty years of negotiation and offers a unitary patent to the European Union.

The relevant regulations are the following ones:

Regulation (EU) No. 1257/2012 of the European Parliament and of the Council of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection: Official Journal of the European Union, 31 December 2012, L 361/1;

Council Regulation (EU) No. 1260/2012 of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translation arrangements: Official Journal of the European Union, 31 December 2012, L 361/89.

The “European patent package” includes a sophisticated dispute resolution system — named “Unified Patent Court” — which is structured in the Agreement on a Unified Patent Court (“AUPC”) of 11 January 2013. This document is divided into five parts:

Part I — General and Institutional Provisions;

Part II — Financial Provisions;

Part III — Organisation and Procedural Provisions;

Part IV — Transitional Provisions; and

Part V — Final Provisions.

It also contains two annexes:

Annex I — Statute of the Unified Patent Court; and

Annex II — Distribution of cases within the central division.

Only Member States of the European Union may become Contracting Member States to the AUPC. Ministers from 24 European Union Member States signed the AUPC on 19 February 2013 and Bulgaria joined the group on 5 March 2013. For the agreement to enter into force — around April 2014 —, it needs to be ratified by France, Germany, the United Kingdom and 10 other Member States (Article 89(1) AUPC). The signature and ratification progress is available on the website of the European Commission.

The Court shall comprise a decentralized Court of First Instance, a Court of Appeal and a Registry (Article 6(1) AUPC). The Court of First Instance will have its seat and its central division in Paris. Two other sections shall be put in place in London and Munich. The cases before the central division shall be distributed as follows (Article 7(2) AUPC): London: human necessities (A); Paris: performing operations and transporting (B), textiles and paper (D), fixed constructions (E), physics (G), electricity (H); Munich: mechanical engineering, lighting, heating, weapons, blasting. Article 7, paras. 3 to 5 AUPC, provides that other local and regional sections can be set up upon request of the Member States. As to the Court of Appeal, it will be located in Luxembourg (Article 9(5) AUPC).

As to the competence of the court, Article 32(1) AUPC provides that it “shall have exclusive competence in respect of:

(a) actions for actual or threatened infringements of patents and supplementary protection certificates and related defences, including counterclaims concerning licences;

(b) actions for declarations of non-infringement of patents and supplementary protection certificates;

(c) actions for provisional and protective measures and injunctions;

(d) actions for revocation of patents and for declaration of invalidity of supplementary protection certificates;

(e) counterclaims for revocation of patents and for declaration of invalidity of supplementary protection certificates;

(f) actions for damages or compensation derived from the provisional protection conferred by a published European patent application;

(g) actions relating to the use of the invention prior to the granting of the patent or to the right based on prior use of the invention;

(h) actions for compensation for licences on the basis of Article 8 of Regulation (EU) No 1257/2012; and

(i) actions concerning decisions of the European Patent Office in carrying out the tasks referred to in Article 9 of Regulation (EU) No 1257/2012”.

The next paragraph states that “[t]he national courts of the Contracting Member States shall remain competent for actions relating to patents and supplementary protection certificates which do not come within the exclusive competence of the Court”.

The new dispute resolution system will also include a major legal innovation, with the establishment of a center for arbitration and mediation (Article 35 AUPC), which will be located in Ljubljana and Lisbon (Article 35(1) AUPC). The creation of the Centre reflects the current trend to promote the use of alternative dispute resolution (“ADR”) for intellectual property disputes. For example, the Presidium of the Boards of Appeal of the Office for Harmonization in the Internal Market (OAMI) has introduced a mediation service in its Decision No 2011-1 of 14 April 2011 on the amicable settlement of disputes. In terms of promoting ADR, it is interesting to observe that “the judge acting as Rapporteur […] shall, in particular, explore with the parties the possibility for a settlement, including through mediation, and/or arbitration, by using the facilities of the Centre referred to in Article 35” (Article 52(2) AUPC).

The purview of the Centre is defined with respect to the scope of the AUPC (Article 35(2) AUPC), which is defined in Article 3 AUPC, as follows:

“This Agreement shall apply to any:

(a) European patent with unitary effect;

(b) supplementary protection certificate issued for a product protected by a patent;

(c) European patent which has not yet lapsed at the date of entry into force of this Agreement or was granted after that date, without prejudice to Article 83; and

(d) European patent application which is pending at the date of entry into force of this Agreement or which is filed after that date, without prejudice to Article 83”.

The combination of these two articles can give rise to two different interpretations. According to a strict interpretation, the Centre should accept disputes involving only the rights set forth in Article 3 AUPC. Instead, a broader interpretation (probably more reasonable) would extend the jurisdiction of the Centre to disputes involving both rights set out in Article 3 and other rights (e.g., a non-European patent or a trademark right).

The powers of the parties and the arbitrators are relatively limited since it is expressly stated that “a patent may not be revoked or limited in mediation or arbitration proceedings” (Article 35(2) AUPC). With respect to arbitration, this provision is rather unfortunate. Indeed, some national laws empower arbitral tribunals to limit or revoke the patent at issue with an erga omnes effect. This is the case in the United States, Switzerland and it can be argued that it is also the case under French law. Other national laws allow arbitrators to limit the patent at issue or declare it invalid with an inter partes effect. It would have been possible and efficient to devote at least the latter solution. It is well known that the question of the validity of industrial property rights arises in many contractual disputes and in numerous infringement disputes. Refusing arbitral tribunals to rule on the validity or invalidity of a patent is likely to delay the proceedings and this would be contrary to the desired effect.

These observations also apply to mediation. The limitation of the powers of the parties is reiterated by Article 79 AUPC: “[t]he parties may, at any time in the course of proceedings, conclude their case by way of settlement, which shall be confirmed by a decision of the Court. A patent may not be revoked or limited by way of settlement”. Once again, this provision leaves too little room for litigants. Indeed, the concessions made in a settlement agreement often relate to the scope or validity of the patent. This could even be the only way to reach an agreement. In any event, the parties should be free to waive all or part of their patent in a settlement agreement. Furthermore, the procedure for the approval of settlement agreements acts as a safeguard and ensures that the stronger party has not abused its position of power to coerce the weaker party to make unacceptable concessions.

With regard to the enforcement of arbitral awards and settlement agreements, Article 35(2) AUPC provides that “Article 82 shall apply mutatis mutandis to any settlement reached through the use of the facilities of the Centre, including through mediation”. This article specifies that awards and settlement agreements shall be enforced under the same conditions as decisions and orders made by the Court. We may add, with regard to arbitral awards, that all members of the European Union are also signatories to the New York Convention of 1958, and many of them are signatories to the European Convention on International Commercial Arbitration of 1961.

The AUPC leaves some questions unanswered. For example, which court will have jurisdiction to set aside an award? The European Patent Court of First Instance, the European Patent Court of Appeal or the national Court in the country where the award was rendered? This is an unavoidable issue to which it will be necessary to provide a clear answer. Article 35(3) AUPC provides that “[t]he Centre shall establish Mediation and Arbitration Rules”. However, such a matter does not really fit into the rules but rather at the legislative level. Another important question deserves to be raised, that of the request for preliminary rulings, in accordance with Article 267 of the Treaty on the Functioning of the European Union (“TFEU”). The AUPC strongly encourages the Court to use this procedure. What about the arbitrators? Usually, arbitrators are not entitled to request a preliminary ruling from the Court of Justice of the European Union (CJEU). However, we can legitimately think that a certain number of questions relating to the interpretation of the European legislation will be raised before the arbitrators, for example in the field of antitrust law. We should expect that courts will take a stand on these issues.

The European patent arbitration and mediation rules will provide further details on the mediation process and the arbitration proceedings, such as the appointment of mediators and arbitrators. The AUPC already tells us that the Centre shall “draw up a list of mediators and arbitrators to assist the parties in the settlement of their dispute” (Article 35(4) AUPC), probably on the model of OAMI, which provides a list of mediators. This is the case Nevertheless, for obvious impartiality reasons, Article 7(2)(c) of Annex I of the AUPC states that “[j]udges may not take part in the proceedings of a case in which they have been called upon to pronounce as a member of [an] arbitration or mediation panel”. We will know more about the operation of the Centre when the rules are adopted.

Legislative Process and Official Materials

2011 02 15

EU patent: Parliament gives go-ahead for enhanced cooperation

2011 03 08

Court of Justice of the European Union (CJEU), Opinion 1/09 (Opinion delivered pursuant to Article 218(11) TFEU – Draft agreement – Creation of a unified patent litigation system – European and Community Patents Court – Compatibility of the draft agreement with the Treaties)

2011 03 10

Council authorizes enhanced cooperation on creation of unitary patent protection

2012 12 11

Parliament approves EU unitary patent rules (Plenary focus: Strasbourg plenary session 10-13 December)

2012 12 17

Regulation (EU) No. 1257/2012 of the European Parliament and of the Council of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection: Official Journal of the European Union, 31 December 2012, L 361/1

2012 12 17

Council Regulation (EU) No. 1260/2012 of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translation arrangements: Official Journal of the European Union, 31 December 2012, L 361/89

2013 01 11

Council of the European Union, Agreement on a Unified Patent Court, 11 January 2013, 16351/12

2013 01 13

Preliminary set of provisions for the Rules of procedure of the Unified Patent Court, 14th draft (renumbered), 31 January 2013