Thursday, May 6, 2010

Long and winding road to single EU patent and patent court system

Last night I returned from the KnowRi§ht conference in Vienna, Austria, where I was invited on ultrashort notice to give a speech on "Software Patents, Standards & Competition".

By far and away the biggest controversy at that conference related to the future of the European patent (and patent court) system. This morning the European Voice, a Brussels-based weekly, reported that the EU internal market commissioner, Michel Barnier, is now considered likely to put his initiative for a single EU patent and European patent court system on hold.

Controversial aspects of European patent reform include software patentability

According to the European Commission and other proponents of the initiative, it's an overall patent reform and unification/harmonization effort that has nothing to do with software patentability. They say they want a Europe-wide patent and patent litigation system with uniform standards and lower costs for patent applicants and parties to patent lawsuits.

According to critics such as the FFII, the reform that the EU is now looking at is undesirable for a number of reasons, including general/structural concerns and a different perspective on costs as well as the fear that the reform is part of a fallback strategy to elevate the legal status of software patents in Europe. Especially for the latter reason, the FFII believes the move is backed by certain proponents of software patents: SAP, IBM, Microsoft, and Philips (listed by the FFII in that order).

Yesterday's presentations at the aforementioned KnowRi§ht conference included two speeches by Dr. Jens Gaster, a European Commission official who drives the patent reform effort, as well as one presentation by Benjamin Henrion, president of the FFII, who criticized the Commission's approach in no uncertain terms.

I will now make an effort to reflect accurately (and to the extent possible: impartially) the positions and claims of both sides of the debate.

[Update] The FFII has meanwhile made its presentation available online and is working on its own report on the KnowRi$ht conference.

Dr. Gaster spoke as lecturer, not as Commission official

Before I get into details of Dr. Gaster's comments on patent reform, I have to mention that he pointed out at the beginning of his speech that he was not acting as a spokesman of the institution that employs him but instead in a personal capacity as a lecturer. It was an academic conference and Dr. Gaster continues to pursue an academic career in addition to his work for the Commission.

Nevertheless, those who know the Commission's official statements and communications on the subject found his comments to be materially consistent with, if not identical to, those expressed by the Commission.

Dr. Gaster's first speech was an overview of all of the "knowledge rights" issues that are currently on the EU agenda. I have previously summarized the key points of that speech. His second speech then zoomed in on patent reform, which he labeled his "favorite topic".

Previously failed attempts to create a single European patent procedure

Dr. Gaster started his presentation on patent reform with an overview of different attempts at EU patent reform, with the objective to create a unified European patent procedure, that have failed. In the Q&A after the presentation, one conference attendee asked why the EU reintroduces essentially the same patent reform concept "with a different name every year." Dr. Gaster attributed those name changes to political circumstances.

The current patent reform effort is called the United Patent Litigation System (UPLS).

The proponents of reform, of whom Dr. Gaster is a particularly proactive one, argue that the current European patent litigation system has major weaknesses. As of now there is no such thing as a single European patent. While there is a European Patent Office, which by the way is not an EU institution but an international organization in its own right, it can only perform a centralized examination (and potential reexamination) of patent applications but the patents that are actually granted are country-specific. They must be translated into each country's official language(s) and a patent holder cannot litigate in a central court if there's a Europe-wide infringement. Those cases are put before national courts, each of which can only take a decision for its own jurisdiction.

According to Dr. Gaster, this "fragmentation" results in "multiforum litigation" (parallel litigation in multiple courts). He said this results in higher costs to the parties and that those national tribunals have "different levels of expertise and specialization." Patents are not only a legal but very much a technical matter, and in some countries the courts deciding on patents do have technical judges, while in others they don't.

The current reform process: an all-or-nothing "package deal"

The current reform process has five components, all of which are interdependent, meaning that if any one of them fails to go through, the reform package as a whole is blocked. Dr. Gaster said repeatedly that "it's a package deal", meaning it's an all-or-nothing proposition.

The two key components of that process are the creation of an EU-wide patent, previously called the "Community patent", and the installation of the United Patent Litigation System, a highly complex construct that would result in a new centralized "European and EU Patents Court" (EEUPC) with regional and local divisions in addition to a central court of appeals.

At first sight it may appear confusing that its name begins with "European and EU" but that's because the European Patent Office (EPO) is not an EU institution. There are non-EU countries in Europe, such as Turkey, Switzerland and Iceland, who are nont EU members (at least now now) but are involved with the EPO. That combined "European and EU" court would then be able to rule on matters related to the kinds of patents that are granted in Europe now as well as on future EU patents.

Several procedural steps ahead, 15 years to be fully operational

While Dr. Gaster repeatedly said he's "optimistic" about the outcome (before today's rumor reported by the European Voice and mentioned close to the beginning of this post), he didn't deny that the process is complicated and time-consuming.

Currently, politicians are awaiting an opinion formally requested from the European Court of Justice and expected to be handed in the second half of this year. The ECJ will then tell politicians whether the construct they have in mind is compatible with EU law. If it is (Dr. Gaster is convinced of it while some critics are not), then the political process can continue with international negotiations. Once entering into force and effect, there will be a transitional period of up to five years during which a patent holder can still decide to litigate under the old system. Non-EU countries will be able to accede only after the transitional period.

At some stages of the process, the European Parliament will become involved. For the creation of a single EU patent, there will be a so-called codecision procedure, meaning the European Parliament can influence and potentially even reject the proposal. A first official communication was sent to the Parliament in December. For the accession of the EU to the UPLS treaty, the Parliament's assent (by a qualified majority of its members) will be required.

Among the bloc's member states, Dr. Gaster said only Spain opposes the proposal because of the language regime, which would make English (as the predominant lingua franca), French and German the three working languages of the patent (and patent court) system, with other languages such as Spanish only being used for limited purposes, such as local infringement disputes. Dr. Gaster believes Spain will at some point give up its resistance.

All in all, Dr. Gaster estimated it would take approximately 15 years for the new system to be "fully operational". That estimate was apparently based on the assumption that there wouldn't be any major political roadblocks along the way.

Disagreement on cost implications

One contentious issue is whether the unified litigation system would actually save costs as compared to the status quo.

The proponents of the reform package compare the costs of litigation under the envisioned system to the cost of parallel litigation in multiple European countries. In some of those countries, patent litigation is extremely expensive: in the UK, it can cost millions of euros. Theoretically, if a patent holder wanted to achieve a Europe-wide injunction against an infringer, lawsuits would have to be started in different countries, with a high total cost (and taking very long in some places). Dr. Gaster asked a rhetorical question: "What about access to justice?"

Critics such as the FFII argue that parallel litigation is rare, with 90% of all patent litigation being limited to one country. Interestingly, 50% of all European patent litigation takes place in a single city: in Düsseldorf, a German city that patent holders often choose as their preferred European forum. If parallel litigation happens, it's usually limited to a few countries because infringers will normally give up if they lose in the first country (or two or three).

Democratic control and structural concerns

The FFII criticizes that an incredibly powerful, international patent and patent court system would then be able to take controversial decisions while there wouldn't be a single powerful and democratically elected legislator that could correct undesirable developments through new and better laws.

The FFII doesn't mean that the judges themselves should be under democratic control (judges should always be as independent from political bodies as possible) but that there should be a lawmaking body that can pass new legislation related to all aspects of patent law. Even the European Parliament wouldn't be able to do so. It has to share legislative powers in the EU with the national governments of the Member States, and the geographic scope of the UPLS would go beyond the borders of the EU itself.

Critics of the UPLS also have structural concerns, such as over what would happen if such a relatively autonomous court system exclusively specialized on patents and detached from the general judicial framework had to rule on a case in which a party claims fundamental rights under its country's constitution.

Software patents

The claim that the new patent reform package has nothing to do with software patents is similar to what the Commission said years ago about its "computer-implemented inventions" directive (mentioned in my initial post on this blog). Unfortunately for all who said so, SAP then published an advertisement in the European Voice before the European Parliament's decisive vote in which the software maker (which produces nothing other than software) said it needed the directive to protect investments in innovation. since SAP doesn't produce anything other than software, it was clear that the directive was indeed (also) about computer programs and not just about computer-controlled washing machines and other devices.

But there can be no doubt that the current patent reform effort is a hugely more comprehensive one than the "CII" directive was. It relates to everything concerning the examination of patents, post-grant (in)validation, and enforcement.

Still, the FFII and other critics are very concerned about what the effect on software patents may be. The European Patent Office grants them in large quantities. National courts sometimes uphold them (I recently commented on a German court decision to declare one of Microsoft's FAT patents valid).

What proponents and critics of the UPLS agree on is that the new unified system would result in an approximation of case law. The FFII quotes from one of the official documents: "The purpose of the unified Patent Court is inter alia to reduce the variety of interpretations of patent scope and claim interpretation in Europe [...]"

But there are different views concerning on what basis that approximation/harmonization would take place.

The theory of a "captive" court system

A few years back, when a similar reform proposal was on the table, the FFII made a submission in which it said that "the idea to establish a single European patent court is a trap because the patent movement will make sure that only judges will get appointed who intend to rubberstamp EPO case law and thus software patents."

Going back one more year, the FFII recalls that EICTA (meanwhile renamed to Digital Europe), a high-tech industry association in favor of software patents, reacted to the European Parliament's rejection of a proposed European software patent law with a statement that expressed hopes "to find broader improvements of the European patent system."

Benjamin Henrion said that the proposed court system is "framed to be controlled by the patent profession" (which generally favors a broad scope of patentable subject matter) and pointed to critics in the US of the country's highest-level patent court (CAFC) being "captive", which he said was even stated by a Supreme Court judge.

According to Benjamin Henrion's presentation, the UPLS proposal is particularly popular among proponents of software patents: "SAP, IBM, Microsoft, Philips are pushing for such [a] court", he wrote in the presentation he made yesterday.

For the event that the European Court of Justices "gives some green light" for the reform initiative, Benjamin Henrion predicts "huge lobbying."

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