Patents

The Community Patent: Does Anyone Still want It? The Commission Green Paper on the Community Patent

Jane Lambert

Oct 1997
Last updated 15 Nov 2005

This article formerly appeared on the Lancaster Buildings website

In most countries of Europe, patents can be obtained for inventions either from national patent offices or from the European Patent Office ("the EPO") in Munich. A patent from a national patent office takes effect only in that country's territory. By contrast, a patent from the EPO takes effect in the territories of all or any one or more of the parties to the European Patent Convention ("the EPC"). Although all the member states of the European Union adhere to the EPC, the EPO is quite separate from and independent of the European Union. It is supervised by an Administrative Council composed of representatives of the contracting states. Art 142 of the EPC envisaged "special agreements" between groups of contracting states for unitary European patents. One such special agreement was the Community Patent Convention ("CPC") signed in 1975 by all the EC member states of the European Communities. Parliament implemented the CPC in the United Kingdom by ss. 86 to 88 of the Patents Act 1977. So too did the legislatures of Denmark, France, Germany, Greece, Luxembourg and the Netherlands for their respective territories. Other contracting parties have not yet done so. Because those other member states have failed to pass implementing legislation, the CPC was never ratified. Consequently, the Community patent has been dormant for many years.
The Green Paper
In a green paper entitled "Promoting Innovation Through Patents" the Commission proposed reviving the Community patent by is a regulation under art 235 of the Treaty of Rome rather than wait for ratification.
The Policy
The introduction to the green paper notes that in a number of key indicators in  research effort the EU trails behind Japan and the USA. While noting that improving the patent system in Europe is not of itself going to reverse this trend, the Commission urges that the patent system must under no circumstances act as a further break on the competitiveness of European companies. It stresses that ease of obtaining patents, legal certainty and appropriate geographic coverage are all essential criteria for the effective protection of innovation in the EU. The thinking behind that observation appears to be that innovators in the USA and Japan find it easier to develop new products because they can obtain monopolies in large home markets more cheaply and conveniently than their European counterparts. No evidence was offered for that proposition or, indeed, for the notion that any such incentive to innovation is anything other than marginal. Possibly more compelling, though ostensibly disavowed by the authors of the green paper, is the stance attributed to anonymous commentators in academic circles for unitary protection for inventions for its own sake now that we have Community trademarks and designs.
Perceived Weaknesses of the CPC
The Commission claimed to have information that two fundamental aspects of the CPC detracted from its usefulness and practical attractiveness:

	Translation Costs: art 30 required specifications to be translated into each of the many official languages of the member states of the EU; and
	Uncertainty of Litigation: although revocation applications were to be entertained by the EPO under arts 55 to 58, any national court would also be entitled to revoke a Community patent with effect throughout the EU if its validity were put in issue in a counterclaim.

The second perceived weakness was by far the more serious. By its nature, patent litigation requires specialist tribunals, which not every member state of the European Union provides. Enforcement in some parts of Europe could be something of a lottery. There was also a risk of inconsistent judgments on the construction of the CPC by different courts.

Translations

The public was asked for its views on various options to reduce translation costs. The Commission calculated the cost of translating a 20-page specification into 10 languages at DM 25,000 (approximately £8,928.57 at the prevailing exchange rates) which it described as huge for firms, particularly small and medium size enterprises, to bear. That expense is certainly steep for what it is but in most cases it is chicken feed when compared to all the other costs of developing, marketing and protecting the intellectual property subsisting in a new product. Nevertheless, the so-called "package solution" appeared to be a sensible economy. The solution required

	an enhanced abstract of an application to be published initially only in the language of the proceedings at the time of application,
	the claims are translated into other languages only at the time of grant, and
	the full specification is translated into other languages only if the patentee contemplates infringement proceedings.

Bearing in mind that most technically qualified people in Western Europe are reasonably fluent in English, French or German, there may be something to be said for restricting all proceedings to one of the three working languages of the EPO. Also, it should not be forgotten that translation costs may eventually be eliminated altogether as software to translate natural languages is developed.

Litigation
The green paper proposed two possible solutions to the uncertainties described above.

One was to give national courts jurisdiction for infringement actions and actions for a declaration of non-infringement only. Counterclaims as well as petitions for revocation would fall within the exclusive jurisdiction of a new revocation division within the EPO. There would be a right of appeal to a special patents chamber of the
Court of First Instance and from there to the European Court of Justice on grounds of lack of competence, non-compliance with an essential procedural requirement, infringement of the Treaty of Rome and so forth.
The other proposal was to allow national courts to revoke patents within their own territories and any other territories in which infringement is alleged but not throughout the whole EU.

Neither of those proposals was entirely satisfactory.

Disadvantages of the First Proposal

The first would probably require an amendment to art 15 of the EPC to create the new division as well as Community legislation to establish the specialist patents chamber within the Court of First Instance. A footnote in the green paper acknowledges that if the proposal were accepted its implementation "would be the subject of detailed study, "which" would hinge chiefly on the nature of the legal instrument chosen for setting these procedures in place." Technically it might not be difficult to implement the proposal. The EPO already has jurisdiction to revoke a patent under art 102 (1) of the EPC if notice of opposition to a European patent is given within 9 months of publication of the mention of grant. The grounds for revocation in a counterclaim would be very much the same as the grounds for opposition under art 100. On the other hand, one patentee has already applied to the Divisional Court to review the revocation of its patent by the EPO on the grounds of breach of natural justice (see R v Comptroller General (ex parte Lenzing AG) [ [1996] EWHC Admin 390, [1997] RPC 245). It is not yet clear whether every patentee will welcome the formation of a revocation division within the EPO. Another consequence of Lenzing is that Jacob J held that the EPC had created a new legal order that was not justiciable in the English courts. He also observed that the EPC had nothing to do with the European Union. If the English courts cannot review such issues as lack of competence or procedural non-compliance it is not obvious why the Court of First Instance should be entitled to do so.

Disadvantages of the Second Proposal
The main disadvantage of the second proposal was that it would undermine one of the advantages of the Community patent. Allowing a national court to revoke a patent  within its territory but not in the rest of the EU would partition the single market. It is possible to envisage circumstances in which a patent could be revoked in one member state but not in another with the result that goods made quite lawfully in the first state could not lawfully be imported into the other state or indeed the rest of the Union. The exhaustion of rights doctrine would not apply in these circumstances because the imported goods would not have been made with the patentee's consent. A second disadvantage is that the danger of an eccentric order from a court in the backwoods affecting a monopoly either in the whole European Union or in one or more large member states would not be eliminated. Such a danger might increase with the
accession of countries from the former Soviet bloc where the concept of intellectual property is still relatively new.

Since the Community patent will be a unitary patent as provided by art 142 of the EPC, applicants would be expected to pay the same filing, search and examination fees as for existing European Patents. As no single member state will be designated there is scope for abolishing or at least reducing the designation fee.

Art 20 of the CPC envisaged the distribution of surplus renewal fees among the contracting parties. Although the authors of the green paper do not explain the reasons for their conclusion, they say that under a legal system covered by the Treaty such a system would not work and would have to be abolished. Even though the green paper considers any other scheme to be a non-starter, the public is invited to state whether the financial arrangements laid down in the CPC and EPC concerning renewal fees for Community patents should be amended such that the revenue from those fees accrues in full to the EPO in order to defray the costs of granting and administering Community patents. The answer is likely to depend on the level of those renewal fees. If they are to be substantially lower than the fees that would be charged for a European patent covering every member state most intellectual property owners would agree with the proposal. Few would favour the remittance of any part of those fees to the Commission. The green paper makes it clear that the body operating the Community patent should not as a general rule be able to make over any share of the revenue to other national or international bodies but it does not specifically rule out payments to the Union. Any such payments would be disguised taxation on non-European as well as European patentees. As such it would be very unpopular.
The green paper also discussed giving patentees the option of not paying a share of the annual renewal fee corresponding to certain member states in exchange for waiving their rights in those states. Much will depend on what the authors mean by "waiver". If a patentee is to lose his monopoly in those states, the unitary nature of the Community patent (and hence its main advantage) will be defeated. If, on the other hand, the quid pro quo for the reduction of a renewal fee is that licences to work the invention are to be available as of right in the state in question as under section 46 of the Patents Act 1977 there may be some advantages. The countries in which a patentee might not desire protection would tend to be the smaller and less developed member states. The availability of licences of right would be an incentive to local and
foreign investors to develop the relevant technology in those countries.
Conversion of Community Patent Applications
The green paper proposed that it should be possible to convert a Community patent application into a European one and vice versa if all the member states of the European Union are designated in a European patent application. That seems a very sensible proposal and should be supported. The possibility of converting a European application that does not designate all the EU member states into a Community
patent is not expressly ruled out but, as the authors remark, it would be more difficult to envisage.
Software Patents
As is well known, art 52 (2) of the EPC excludes from patentability programs for computers as well as other subject matter to the extent to which a patent or patent application relates to such subject matter as such. Paragraph (2) is echoed by s. 1 (2) of the Patents Act 1977 which was no doubt intended to have exactly the same effect in the UK. Rightly or wrongly it is believed that English courts construe s.1 (2) rather more narrowly than the EPO construes art 52 (2). The green paper noted:

	responses from the public as to whether para (2) should be deleted;
	new guidelines for examiners on software related inventions issued by the United States Patent and Trademark Office ("USPTO") on the 28 Feb 1996;
	the USPTO's decision in Re Beauregard to grant a patent for a computer program stored on a tangible medium; and
	new guidelines issued by the Japanese patent office on the 8 Aug 1996 allowing patents for inventions which involve a high degree of technological creativeness using the laws of nature.

The public was asked inter alia whether differences between judicial precedents in the member states created barriers to trade or distort competition, differences between Europe and its main trading partners are likely to be create difficulties for European businesses and whether those differences call for further harmonization at
Community level. The public was also asked for its views on the deletion of art 52 (2) and, if so, whether there should be simultaneous copyright and patent protection, or, if not, whether the EPO's guidelines should be amended. As the underlying bargain between an inventor and the public is that the inventor dedicates his invention to the public in return for a monopoly it would be unreasonable to allow the inventor to rely on any copyright that has the effect of extending that monopoly.

Other Matters
The green paper consults the public on whether there should be harmonization of the laws relating to

	employees' patents,
	procedural formalities for the grant and renewal of patents, and
	whether additional harmonization measures should be taken in this area by the EU.

The green paper mentioned various alternative arrangements such as individual policies taken out by firms and voluntary insurance pools in a given sector, to spread the risks more evenly. It suggested some form of public financing (or part financing) for small and medium size enterprises. Since the outcome of patent litigation (in England and Wales at any rate) often depends on the length of each party's pocket, this proposal should be welcomed.

The EPO's Performance
The last section of the green paper concerned the EPO. The Commission invited the public to comment generally on whether:

	its fees (and if so which) could most usefully be reduced,
	discounts should be available for applications by small and medium size enterprises as they are in the United States,
	a share of the renewal fees should continue to be paid to the governments of the contracting parties, and
	the "package solution" developed by the EPO with a view to reducing translation costs is appropriate and effective, if not, why not and what else should be done. Some of these questions have already been addressed.

As 1998 will be the 25th anniversary of the EPC
there is little doubt that the EPO supplies a service that the public wants. Recent fee reductions are welcome. If there were scope for any more, lower designation fees would encourage applicants to seek wider geographical protection. If, as is often said, small and medium size enterprises are the powerhouse of innovation there is a clear case for assisting them with reduced procedural fees.

 

 

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