Assessing the Unitary Patent and the Unified Patent Court

Suppose that you are a British firm deciding whether, and how, to patent a new technology across Europe. Similar firms, operating in sectors reliant on intellectual property rights, add 4.7 trillion Euros to the European economy annually (http://europa.eu/rapid/press-release_IP-13-889_en.htm). Research has also shown that obtaining a patent is associated with significant growth and productivity improvements on average (Balasubramanian and Sivadasan, 2011). Currently, you have only one option when it comes to patenting across Europe -- the misleadingly named European Patent. This is based on a single patent application, but only takes effect through a `bundle' of national patents in different European countries. This means that you have to pay additional translation and validation fees in each country in which you need protection. Also, you can only defend your patent, or challenge other companies' patents, country by country.

Soon, you will have a new option: a European Union unitary patent (UP), overseen by a Unified Patent Court (UPC), parts of which will be located in London. Agreement on this unitary patent was only reached after late-night discussions between European Union heads of government, including David Cameron. The agreement has support from the UK's government because the potential economic benefits are large. The European Commission has estimated the cost savings alone at 193 million Euros per year; the knock-on effects due to higher rates of innovation and growth thanks to simpler patenting are potentially larger still.

These potential benefits are uncertain, not least because many decisions about the new patent system must still be taken. Decisions about patent fees, the rules followed by the UPC, and the quality of the judges deciding patent cases, will affect the attractiveness of the UP and UPC. The new patent system is also being grafted on to an existing European patent system, which may mean the system ends up being more, not less complicated. Current holders of European Patents will have to choose whether to enforce their patents in national courts, or in the UPC.

Our project therefore looks at the likely benefits of the UP and the UPC -- no easy task, given the complexity of the proposed system, the pre-existing European Patent system, and the patent systems in different European Union member states, and the possible changes in behaviour that result from a new institution. The project brings together researchers from the University of East Anglia with economists and managers at the Intellectual Property Office and specialists at the Max Planck Institute for Intellectual Property and Competition Law (MPI IC) and the Centre for European Economic Research (ZEW) to work on research into the existing European patent system.

We will work on three main areas: the Unitary Patent itself (demand for the patent compared to other alternatives, and opportunities for gaming the system); the Unified Patent Court (the quality of judges on the court, the incentives to litigate, and the volume of litigation); and the ties between small and medium enterprises and national patent offices (in particular, the routes to greater cost-effectiveness for SMEs interested in patenting).

The questions we ask are informed by our conversations with practitioners at a number of recent events, including a large workshop at the European Patent Office in Munich. Those conversations revealed that substantive knowledge gaps remain about how patenting costs and inefficiencies in existing patent litigation systems affect patent applicants. Many workshop participants expressed fear that large patent active firms would misuse the new patent system to obtain advantages over their rivals. Our project will show whether these fears are well-founded or not, and also establishes an invaluable baseline of patenting activity and patent litigation at the beginning of this new intellectual property regime.

In December 2012 the European Parliament and the Council of the European Union adopted two regulations (Regulations (EU) No 1257/2012 and (EU) No 1260/2012) establishing a Unitary Patent (UP) for the EU. In February of 2013 representatives of 25 EU member states signed an Agreement on a Unified Patent Court (UPC). This agreement will enter into force once it is ratified by 13 member states including France, Germany and the UK. These measures represent the most ambitious reform of the European patent regime for at least a generation, affecting innovators, firms, consumers, national courts and national patent offices. The reform has the potential to reinvigorate innovation and growth in the EU. The reform should lower the costs and complexity of patenting in Europe to achieve these aims. The effectiveness of the new patent regime will depend on key parameters such as the costs of renewing a UP, the salaries of the UPC's judges and the procedural rules of the UPC. Research into how users are likely to react to levels of these parameters currently proposed will be highly relevant to the process of completing the reforms.

The proposed project consists of three work packages. These will focus on: i) the UP, ii) the UPC and iii) the role of national patent offices and their interactions with SMEs. Results from research we propose will deliver answers to questions about the way in which the currently on-going reform of the European patent regime is likely to affect i) patent applicants, ii) firms litigating patents and iii) national patent offices and SMEs throughout Europe. These answers will help policy makers and national and EU civil servants in implementing and overseeing this patent reform.

The most direct impact of the project will be on the Intellectual Property Office of the UK (IPO) as a partner in this project. We have planned three internal knowledge exchange workshops at IPO to transfer methods, information about data and results to the economists working at IPO. IPO are tasked with the evaluation of the European patent reform for the UK government, once the reform has been fully implemented. Much of the work to be undertaken in this project is relevant to laying the academic and practical foundations for this future task. Results from the evaluation will feed back into the process of governance for the new patent regime.

Both the IPO and the Max Planck Institute for Innovation and Competition (MPI IC) have strong reputations for policy relevant research and advisory work. Both organisations have connections to the Economic and Scientific Advisory Board (ESAB) of the European Patent Office (EPO), which regularly provides a forum for users of the European patent system to discuss pressing policy questions. Results from our work will be communicated to this forum quickly. In addition, we will directly interact with policy makers and representatives of the EPO and the UPC through presentations at the workshop planned for the end of the project and at conferences such as the annual European Policy for Intellectual Property (EPIP) conference. We will contribute to specialised blogs such as IPKat and VoxEU that are widely read by policy makers, patent attorneys and judges.

Finally, the project aims to benefit patenting firms in Europe. This has two dimensions. First, research on strategic behaviour within the European patent system is designed to identify patenting behaviour that may reduce the efficiency of the new patent regime and ways to mitigate such behaviour. Second, it is highly likely that in future national patent offices like IPO will focus on interactions with SMEs. Due to SME's lack of resources such interactions are currently inefficient. The project will deliver new methods to improve the effectiveness of the IPO's interactions with SMEs. This work has potential to be replicated at other national patent offices. In these ways the project will also support European industry.