Why the European Council has killed any workable EU patent

On Friday June 29th 2012, the European Council has reached an agreement between heads of State and government over a unitary patent and a flanking unified patent court. But, under the pressure of British government, such a deal was done at the expense of removing any overview from the Court of Justice of the European Union over patent law, through the deletion of provisions in the regulation on the unitary patent. But the Union law does not allow for such a move. Therefore the agreement reached by the European Council is doomed to be nullified.

The European Union is entitled to set up a unitary patent by article 118.1 of the Treaty on the Functioning of the European Union (TFEU), which reads as follows:

In the context of the establishment and functioning of the internal market, the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, shall establish measures for the creation of European intellectual property rights to provide uniform protection of intellectual property rights throughout the Union and for the setting up of centralised Union-wide authorisation, coordination and supervision arrangements.

In the proposal for a regulation on the unitary patent, article 6 defines what constitutes a direct infringement to a unitary patent, article 7 defines what constitutes a indirect infringement to a unitary patent, article 8 defines limitations to rights conferred by a unitary patent, and article 9 defines the exhaustion of the rights conferred by a unitary patent. These articles define a minimal subset of substantive patent law. Removing them from the regulation, amounts to leave any substantive grounds for a unitary patent. This would clearly move the regulation out of the legal basis of article 118.1 TFUE.

Such a view was shared by the chairman of the Legal Committee (JURI) of the European Parliament, the German conservative Klaus-Heiner Lehne, who has rejected a proposal to removes articles 6-9 from the regulation during the JURI meeting of November 21st 20111:

And the Commissions was pretty clear, its legal service was pretty clear and this also seems to be the majority view in Council: there is a bit of a risk if we take these articles out, we won't really have a decent legal basis. Because the [legal basis is aimed at intellectual property, and if nothing is said on intellectual property, the legal basis would] shift out of intellectual property. Then you could end up in a situation where you could have read between the lines of the [Court] report that basically they wanted to retain their prerogatives. It's sure they will look at the paper very carefully. [there are different interests at stake.] There's the interest of those who want something practical, something usable, in patent law, and they don't really want the Court of Justice, because they find it bothersome [since it does not understand very well]. And [there are] those people who are [experts in European Union law], who say “well, in that case, [if it is Union law, then] it is the Court that is the final instance for interpretation. [Therefore the Court of justice has to be involved in all this procedure]“. And these two groups have some sort of a collision. I see that Mister Rapkay is nodding. I tend to look at things from the viewpoint of reducing legal risk, and more or less, to keep things as they are. That means we have things done in the regulation and [in the text for] the Court. But as I've put it out, the discussion was still run. [I don't know if] Mister Rapkay wants to contribute to the statement, [because things seems to me to be already pretty clear].

The German socialist rapporteur for this regulation, Bernhard Rapkay, has pushed this opinion in the same meeting2:

Well, one problem. Now, there was another proposal on jurisdiction. In fact, Council asked the Court of Justice to drop an expert report on how this could be compatible with EU law. And the Court identified inputs that are not compatible with EU law and that these need to be [changed], one of these was the proceedings [for referrals]. Now, I accept that basically you give them even more to do to control things are compatible with European legislation. And if we want to do things settled otherwise, then more remain about the situation where it's not compatible with Union law, and there will be a real pick-up. Furthermore, I'm concerned that we couldn't probably save us out of the troubles if we take all the material elements out. There will be many gaps we leave to others. But I'm not in favour of doing something which is a sort of content free. I mean the articles themselves specify what it is about. Furthermore, I think this could be problematic [to remove them].

Experts seem to be unanimous. But here, allow me to assess that in a political way. I could probably find a unanimous agreement of experts of a different view. This impression that experts are all singing from the same hymn sheet and that they want this, I think I have to say that's not an impression I’ve gained. I’ve talked to experts, I am not suggesting that they are saying the complete opposite, but those I have asked have said "No, it does not make any sense to get rid of that." There are many who believe that they want this in the Regulation. Please, let's not generate the impression [that all experts agree]. Well, Mrs Wikström said: “let's not go counter to the unanimous view of experts”. Well, non: it's the unanimous view of some experts. There are always interests at play. I have received letters from the German association of translators saying “Well what you are doing is terrible. This question of three languages. No, no, we need all languages”. One can understand where they are coming from. I mean, what we are not doing is guaranteeing the future of German translators. Everyone has got their interests. Now, I have a vague idea of what interests are at play. I know what one interest group is about and what the other interest group is about and at the end of the day we have got to arbitrate a decision. I think we should not tinker with the structure too much. Now in terms of the implication with the jurisdiction, here Mr Lehne has to come up with some ideas. You know I am something of a legal layman, I am happy to listen to legal experts, but the point is that there are all sorts of differing legal viewpoints but at the end of the day our job is to take a political decision.

Both Members of the European Parliament have referred to an opinion of the legal service of the Commission, stating:

Article 118(1) TFEU is the legal basis for "measures for the creation of European Union intellectual property rights to provide uniform protection of intellectual property rights throughout the Union".

Without Articles 6-8 of the UPP Regulation Proposal the UPP Regulation would not establish an intellectual property right providing uniform protection as it would be entirely left to the Member States to determine the rights of a proprietor of a European patent with unitary effect: Any question of what a patent proprietor could do with the patent would need to be determined by national law.

As the Court has held in C-350/92, a new IP right created by the Union, such as the Community Trade Mark, is "superimposed on national rights" and not a mere harmonization of national laws. In the absence of Articles 6-8, no right would be superimposed on national rights (nor would anything be harmonized for that matter).

Moreover, according to the case law of the Court, when the Union has regulated a subject matter the Member States have lost the power to regulate on the same subject matter unless to supplement the Union Regulation on subordinate points or to executed it. As said before, the matters regulated in Articles 6-8 of the UPP Regulation constitute the core of the patent protection and therefore cannot be regarded as subordinate matters. Thus, the Member States are no longer competent to regulate. Indeed, if Member States would have the power to determine the extent of the patent protection, the unitary effect of that protection could be endangered as each Member States could give a different content to that protection. When Member States cannot regulate individually, it is established case law that they cannot do so together outside the Union framework either.

The exclusive and uniform character of a Union regulation constitutes the essence of the Union legal order.

Moreover, all independent academic studies have confirmed that moving article 6-8 out of the regulation on the unitary patent is a legal dead end.

Hanns Ullrich, from the Max Plank Institute, has explained why such a move has rightfully been rejected by the Committee on Legal Affairs of the European Parliament:

Note, that such substance and uniformity may not be maintained by transposing Art. 6 – 9 of the Proposal of a [Unitary Patent] Regulation to the draft Agreement on a Unified Patent Court, as proposed by a resolution of 28/29 October 2011 of the “Intellectual Property Judges Association“ under the strongly voiced presidency of R. Jacob , and supported by an opinion given by Kraßer for the European Patent Lawyers Association (all available at http://www.eplawpatentblog.com/). This lobby initiative has been carried to the EP Legal Committee by MEP Wikström (see EP Legal Committee, Draft Report Rapkay, EP Doc. 2011/0093 (COD) of 27 October 2011, Amendment 65 – 67), but for good reason has not been retained. Not only does this proposal empty Art. 118 para.1 TFEU of its substance and carry the unitary patent out of the Council’s authorization of enhanced cooperation, since this agreement is to be concluded between the Member States alone as an international convention outside the framework of the EU. Rather, it also means that all the substance of the unitary patent will be derived from public international law, and, thus, although part of the framework regulation of the Internal Market, will be outside the reach of the EU as regards any future amendments as well as beyond the reach and oversight of the ECJ. The latter, of course, is precisely the objective of the judges’ move, the reasons given being fears of delays in infringement proceedings, and, indeed, that “the rulings of the non-specialist CJEU would (not)be clear”, and that “the whole point of creating a specialist patent court for Europe would be lost” (Jacob, ibid.). This shows that every possible attempt is made to escape EU law. However, the purpose of Art. 118 TFEU precisely is to confer upon the EU the power to establish an intellectual property system and a policy of its own. The provision has not been introduced to enable the EU to delegate that policy to Member States. In this respect, enhanced cooperation does not make a difference. Rather, it must be implemented in the same EU-perspective, since its objective is to intensify market integration with a view to expand it to the entire EU.

And Thomas Jaeger, also from the Max Plank Institute, has gone a step further, describing this attempt as almost schizophrenic, and bound to fail, no matter how provisions of substantive patent law are detailed in the regulation on the unitary patent:

While the patent judges’ move can hardly achieve the desired effect since the ECJ will necessarily be competent to adjudicate on the scope and effects of an EU law-based right in final instance irrespective of the level of detail to which those effects are laid out in the corresponding regulation, it is nonetheless evidence the somewhat contradictory and almost schizophrenic attempt to, on the one hand, ground the unitary effect in EU law by virtue of the legal basis afforded by Art. 118 TFEU while, on the other hand, trying to dissociate the patent as far as possible from the nature and institutions of the EU legal order.

Even if such an obviously illegal move has been pushed by the British delegation, the United-Kingdom European Scrutiny Committee has however concluded:

There is, however, in our opinion an inevitability to their inclusion. Whilst the arguments of Professors Kraßer and Jacob strike us as right as a matter of patent law, the counter-arguments of the Commission on what is required to implement Article 118 TFEU seem to reflect the firm views of the EU institutions, including the Court of Justice, as a matter of EU law. This calls into question whether incorporating a unitary patent regime within the EU will ever be practicable.

On the bottom line, with regard to all theses opinions, the decision of the European Council appears to be no more than a media hype. Would the unitary patent project comply with this decision, the regulation would never be able to come to life within the EU Law.

• 1. Original translation has been made by the linguistic service of the European Parliament. In the transcription, we have corrected some imprecisions with the help of the French translation.
• 2. Original translation has been made by the linguistic service of the European Parliament. In the transcription, we have corrected some imprecisions with the help of the French translation.