LTEC lecture on new level playing field for patent litigation in Europe

Help or hindrance for start-up companies?

During the journey towards patent harmonisation in Europe, it is important that the patent system’s regulatory framework addresses the needs of the different market players, including start-ups. Their protection has been designated as one of the main policy objectives of establishing the Unified Patent Court (UPC). Nevertheless, it is not yet clear to what extent the UPC establishment can influence the innovation of start-ups.

To answer this open question, it is necessary to analyse in-depth some features of the UPC design, which can be particularly relevant for start-ups and which may create certain asymmetries, thereby bringing strong and established businesses in a more advantaged position than financially constrained ones.

One of the main features worth analysing, is the proximity to the venue of litigation. Indeed, litigating in a more distant forum would represent a clear burden for a small business. Does the new patent litigation system envisage rules that imply that companies will have to litigate more often far from their place of domicile than what occurs under the current system?

The jurisdiction rules for patent matters are currently regulated by the Brussels Ibis Reg. (EU) No. 1215/2012 (BR). Only two relevant ones are presented hereinafter.

Pursuant to Article 4(1) BR, persons domiciled in an EU Member State can be sued before the courts of that Member State. The provision, therefore, expresses the basic principle that defendants must be sued where they are domiciled. In general terms, the rationale of this principle is to protect the defendant. Moreover, one of the most relevant grounds of special jurisdiction is the place where the harmful event occurred (Article 7(2) BR). The forum delicti rule is a special jurisdiction rule which supplements Article 4 BR, and thus the plaintiff can choose between the two. Yet, in comparison to Article 4 BR, which protects more the defendant, Article 7(2) BR tries to balance the parties’ interests. Furthermore, in Folien Fischer, the CJEU held that Article 7(2) BR is also applicable to actions for declaration of non-infringement, with the result that the plaintiff can choose between different forums when bringing an action for declaration of non-infringement.

When it comes to the Unified Patent Court Agreement (UPCA), the rules on the internal distribution of competences are regulated by Art 32 and 33 UPCA. However, to what extent are they aligned with the principles of the BR?

Articles 32 and 33 UPCA attempt to strike a proper balance between patentees and third parties’ interests regarding legal certainty and litigating before a most convenient forum. Nevertheless, under certain circumstances, these UPCA provisions depart from the BR’s principles, thereby creating certain imbalances, which in turn may have several implications for start-ups during litigation. This may occur, for example, in cases in which the defendant does not have a place of business in the Contracting Member States (CMS) or when the CMS concerned does not have a local division.

When it comes to the first example, in the cases in which the defendant does not have his residence, principal place of business or place of business within the territory of the CMSs, the plaintiff has the option to bring an action also before the central division (Article 33(1)(3) UPCA). This rule is also not justified on the basis of Article 4 BR, considering that none of the central division seats’ (Paris, Munich or London) is close to a defendant who is outside of the CMSs. Thus, the more appropriate criterion which the UPCA could have followed would have been the allocation of the case before the division of the place of infringement, following the model of Article 7(2) BR, which would guarantee the proximity of the litigation at least to the defendant’s activities. In this context, for the start-up as a plaintiff, the situation will not particularly change in comparison to the current framework. However, from the defendant perspective, such departure from the Brussels framework is more detrimental to the extent that it forces the start-up in such a position to litigate before the central division.

Similarly, Article 33(1)(4) provides that if the CMS does not host a local division or does not participate in a regional one, the central division has exclusive competence for both infringements in that state and patent revocation as a counterclaim. Also, this provision departs from the principles of the BR. Indeed, for the cases in which the states of the central division do not host a local division, the central division is deemed to be competent, although the defendant does neither have his seat in the state of the central division nor the infringing acts have been committed in that state. It is, therefore, evident that the state of the seat of the central division will be different from the state(s) of the courts with jurisdiction under Articles 4 BR and Article 7(2) BR. Consequently, such provision does not imply a particular change for start-ups in plaintiffs’ position. Yet, it is more disadvantageous for start-ups as defendants in comparison to the current framework.

Overall, in several cases, the rules on the allocation of competence within the UPC do not follow the BR’s principles with potentially harmful consequences for both plaintiffs (patentees) and defendants (non-patentees), depending on the situation taken into consideration. In this context, the most financially constrained parties, including start-ups, are the ones who will suffer more from the changes in the patent litigation landscape. Although only a redesign of the system can tackle all issues more comprehensively, the suggested amendments to the specific provisions are a first step towards levelling the European patent litigation playing field!

Letizia Tomada is a Marie Skłodowska-Curie Research Fellow within the EIPIN – Innovation Society European Joint Doctorate and PhD. Candidate at Max-Planck Institute for Innovation and Competition in Munich. Previously, she gained professional experience in international law firms specialized in European patent and trademark law.