February 13, 2015

Unified Patent Court a mistake of historic dimensions?

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The EU wants to create a Unified Patent Court (UPC). I will discuss some aspects of the UPC and make two more general remarks on (adjudicative) system design.

The UPC proposal has a twist; it tries to minimise the role of the EU Court of Justice (CJEU). This may lead to an expansionist interpretation of patent law. According to Josef Drexl, director of the Max Planck Institute for Innovation and Competition, this could easily amount to a mistake of historic dimensions:

“The policy argument behind this is to concentrate patent law cases before highly specialized patent courts and to prevent, as far as possible, any general law court from controlling the specialized court. Yet, whether such a judicial system would make sense in the first place was never seriously or intensively discussed. The experience in the US, where the centralization of appeals in patent cases before the Court of Appeals for the Federal Circuit prompted an expansionist interpretation and application of the US Patent Act, which finally caused the Supreme Court to intervene and oppose a series of judgments of the Federal Circuit, advocates against such a judicial system. This is not to deny that there are past judgments of the CJEU in which even this court took the protection of intellectual property rights too far. It is also true that patent law presents particular challenges of understanding to general law courts. Yet, specialized patent law courts may be equally weak in taking into account the broader societal implications of patent protection and therefore be more likely to develop a pro-patent bias. This is ofparticular concern in the case of the Unified Patent Court, which will have to convince patent applicants and patent owners to opt into the new system especially during the first years of its existence. In the light of such risks, and especially in the light of the need to guarantee full respect of the fundamental rights, to prevent the CJEU frominterpreting the rules of the UPC Agreement could easily amount to a mistake of historic dimensions.”

Case against the UPC

Spain started a case against the creation of the Unified Patent Court. Advocate General Bot refutes the Spanish claims. Drexl’s article is a reaction on Advocate General Bot’s opinion.

Undo the twist?

The EU member states want to minimise the role of the CJEU by moving substantive patent law provisions from an EU regulation to an international agreement – the UPC Agreement.

Drexl argues that the CJEU should conclude that the UPC Agreement falls fully within the jurisdiction of the CJEU. This would give the CJEU the final say:

“This approach would save the project of a unitary patent system and simultaneously inform the Unified Patent Court that it has to refer questions regarding the interpretation of the UPC Agreement to the CJEU.”

This would certainly be an essential improvement. I will note two issues.

1 Legislative feedback loop

The EU has a legislative feedback loop; we can change our laws that do not work out well.

Lord Steyn explained (regarding the UK): “in striking the balance the courts may arrive at a result unacceptable to Parliament. In such cases Parliament can act with great speed to reverse the effect of a decision. It has done so in the past. That is in the spirit of our constitution, and is wholly in accord with the democratic ideal.”

The EU Parliament can not reverse court decisions, they can change laws for the future.

It is harder to change an international agreement than an EU regulation. The EU member states moved the substantive patent law provisions from a regulation to an international agreement. Does this undermine the legislative feedback loop? If so, the EU would undermine our democratic principle, and undermine our ability to act against patent trolls, and redesign access to medicine issues. The court should then reject the UPC.

Or doesn’t this matter, as the EU can make a regulation on substantive patent law anyway and force the UPC to work with it (once the UPC Agreement falls fully within the jurisdiction of the CJEU, as Drexl suggests)? The CJEU should be explicit on this.

2 Economic development

An article by Dimitris Xenos suggests that the UPC may not be beneficial for most EU countries.

The community / union worked on a patent court for decades. It seems the commission never properly did their homework.

Poland, that played such an important role in the debates on the software patents directive proposal and ACTA, opted out at the last moment. A wake up call?

I will make two more general remarks on system design.

General supreme court and legislative feedback loop

Adjudicative systems need a general supreme court on top to integrate the various law systems and correct bias in a specialised court. A legislative feedback loop complements this.

Fora without a general supreme court and legislative feedback loop, creating a risk on undemocratic expansionist interpretation, are the European Patent Office Boards of Appeal, the WTO panels and investor to state dispute settlement tribunals. An international investment court, as proposed by UNCTAD, would be another example.

EU and system design

The EU seems to have an inherent problem with system and institutional design.

Politicians make compromises. Compromises may not work well in system and institutional design; they can easily lead to compromised systems. Finding good solutions may be hard enough within a state. The EU has a much more complicated structure than a state; designing systems often goes wrong. Examples are the euro and the UPC; investor to state dispute settlement (ISDS) may be a next example. Broken systems are unstable, easily lead to severe problems later on.

And due to the EU’s complicated structure, systemic issues are hard to solve.

Art restorers try to only use reversible steps. Deeper system scrutiny, a modular approach, and workable exit options may be a good approach for the EU.

Take for instance investor-to-state dispute settlement. The member states concluded stand-alone agreements from which it is possible to withdraw. The commission now wants to include this corrupt system in trade agreements from which it is hardly possible to withdraw. Superficial system scrutiny, not modular, no workable exit option: a recipe for disaster.

Further reading

Ingve Björn Stjerna, unitary-patent.eu/, Glyn Moody, Kluwer blog, Techrights.org

FFII 2012a, FFII 2012b, FFII 2013

FFII work on predecessors of the UPC: epla.ffii.org/, eupat.ffii.org/