Tuesday, 30 April 2013

Litigation in the Brave New World 4: The Governing Law

Impossible, or just improbable?
In this, the fourth in the series of blogposts on the European patent package reform, Don McCombie (Latham & Watkins) writes on the governing law for European patent disputes, taking in not only the increasingly complex provisions within the EU itself but the application of general principles of private international law.  This thoroughly-researched post reflects the thoughts of its author alone, and should not be taken to represent the opinion of any other person or entity.
Governing Law

Having now looked at jurisdiction and the questions of how and where to commence a claim, this post now considers the substantive law to be applied by the Unified Patent Court (UPC).  This is another long post, and it contains a fair amount of discussion which readers may regard as unnecessarily academic.  However, this is all focused on a single practical question: which laws will the UPC apply on day one?  The answer is not as straightforward as you might think.

Article 20 of the UPC Agreement states that the court shall apply EU law in its entirety and shall respect its primacy, and  Article 24 states that:

(1) In full compliance with Article 20, when hearing a case brought before it under this Agreement, the Court shall base its decisions on:
(a) Union law, including Regulation (EU) No 1257/2012 and Regulation (EU)
No 1260/20121;
(b) this Agreement;
(c) the EPC [European Patent Convention 1973, as amended];
(d) other international agreements applicable to patents and binding on all the Contracting Member States; and
(e) national law.

Each of these sources of law is dealt with in turn below.

(a) Union Law

As noted previously, the EU has only legislated in two specific, niche areas of substantive patent law and related rights; certain aspects of biotechnological inventions and supplementary protection certificates.  In addition, the directive on the enforcement of IP rights harmonises to a limited extent the “measures, procedures and remedies necessary to ensure the enforcement of intellectual property rights”, including injunctions and damages, but no patent-specific provisions are included.  Further, and as noted previously, several provisions of the recast Brussels Regulation are relevant to (and may conflict with) proceedings in the UPC, but these relate only to jurisdiction and the enforcement of judgments, rather than substantive patent law. 

Regulation 1257/2012, the Unitary Patent Regulation, states that the scope of the rights conferred by a Unitary Patent “shall be uniform in all participating Member States” (Art 5(2)), such rights being “those defined by the law applied to [Unitary Patents] in the participating Member State whose national law is applicable to the [Unitary Patent] as an object of property in accordance with Article 7” (Art 5(3)).  Article 7 states that a Unitary Patent will be treated as an object of property of the participating Member State in which that applicant had either his residence or principal place of business or, failing that, a place of business, at the filing date of the application. If the applicant had no place of business in a participating Member State at the filing date, German law will apply (Art 7(3)).  For example, the scope of protection of a Unitary Patent filed by a French-incorporated company will be defined by French law, regardless of which local, regional or central division of the UPC hears an action relating to that Unitary Patent.  A Unitary Patent filed by a Japanese-incorporated applicant having no place of business within any participating EU state would be governed by German law, again regardless of the UPC division which hears the case.

Following the removal of Articles 6-8 from the previous draft of the Unitary Patent Regulation, which had provided for substantive EU patent infringement laws, there is very little EU law applicable to questions of the infringement or validity of patents, even in the case of Unitary Patents created under an EU Regulation.  Many commentators have expressed doubts as to whether the CJEU will in any event take jurisdiction over questions of infringement, but these arguments will not be rehearsed again here.

(b) The UPC Agreement

Articles 25-27 of the UPC Agreement contain substantive direct and indirect infringement provisions and a list of ‘limitations to the effects of a patent’, i.e. the exceptions to infringement.  These provisions are almost identical to Articles 29-31 of the 1975 Community Patent Convention (CPC), subject to some additional exceptions to infringement which relate to certain niche Regulations and Directives.

The national laws of most EU Member States largely conform to the CPC, so the basic infringement laws should already be familiar to practitioners, and there is a substantial body of existing case law decided under these provisions.  The Court of Appeal for England and Wales explained its approach to the decisions of courts in other CPC countries in 2010 as follows:

80. Broadly we think the principle in our courts – and indeed that in the courts of other member states - should be to try to follow the reasoning of an important decision in another country. Only if the court of one state is convinced that the reasoning of a court in another member state is erroneous should it depart from a point that has been authoritatively decided there. Increasingly that has become the practice in a number of countries, particularly in the important patent countries of France, Germany, Holland and England and Wales. Nowadays we refer to each other's decisions with a frequency which would have been hardly imaginable even twenty years ago. And we do try to be consistent where possible.
The degree of uniformity currently enjoyed between EU Member States has its limits, however, and despite a common basis for countries’ infringement laws, some significant differences have arisen between national approaches to infringement.  Probably the most obvious of these is the approach to claim construction, which is not addressed by the UPC Agreement (see next section).  The existence of significant differences between national approaches shows, at the very least, that the express terms of the CPC do not provide a clear answer in every situation, and that additional input from national laws has been required.  In the event that a given infringement question cannot be answered only by reference to the express terms of the UPC Agreement, but where that question has been answered by, and forms part of, the relevant national law, it will be open to debate whether the UPC is bound by national law or if it will be free to decide the case using decisions of national courts as persuasive but non-binding authority.  Lawyers trained in the common law (including judges) will approach this question differently to lawyers trained in civil law systems, and the different legal status accorded to court decisions in common law and civil law jurisdiction may also complicate this analysis, i.e. in England, the rationes decidendi of judgments form part of national law and are binding on judges, and Article 24(1)(e) states that the UPC shall base its decisions on national law, which will include such judgments.

Finally, Article 65(2) of the UPC Agreement expressly incorporates the grounds of invalidity in Articles 138(1) and 139(2) of the European Patent Convention.

(c) The European Patent Convention

The European Patent Convention (EPC) relates to the examination, grant and validity of patents.  The EPC leaves the determination of the rights conferred by a European patent to national laws (Article 64 EPC), although the EPC does address the ‘extent of protection’ conferred by a European patent in Article 69, as further clarified in the Protocol on the interpretation of Article 69 EPC (see below).

There is a very substantial body of case law on the provisions of the EPC.  The foreword to the sixth edition of the Case Law of the Boards of Appeal (the EPO White Book) states that, as at June 2010, the Boards of Appeal have settled more than 28,000 cases since March 1979.  Members of the EPO boards of appeal are bound only by the EPC and not, strictly, by earlier decisions of the boards of appeal, although case law that results from the decisions of the boards plays a major role in the development of the EPO’s practice.  Similarly, only the EPC, and not EPO case law, is stated by Art 24(1) to be a source of law for the UPC.

The national laws of EPO contracting states are shaped by the decisions of the EPO Boards of Appeal. The UK Patents Act 1977, for example, notes at s.130(7) that the relevant provisions of the UK law are intended to have the same effects as in other convention countries, and the UK Supreme Court has summarised the UK approach to the application of EPO case law in Human Genome Sciences v Eli Lilly (see paras 83-95).

Whilst consistency is an oft-stated and laudable aim, there are some clear differences between the approached taken by the EPO boards of appeal and the national courts.  For example, the boards of appeal (and consequently the divisions of the EPO) in almost every case apply the “problem and solution” approach to assessing inventive step, which has been adopted by national courts in some EPC contracting states, but not in others.  For example, although the English courts have consistently emphasised the importance of ensuring consistency with the approach of the EPO boards of appeal, they have instead adopted the structured approach set out in Windsurfing/Pozzoli (at para 23).

The English courts have noted on several occasions that the Windsurfing/Pozzoli approach is not compulsory, but the various divisions of the EPO and the boards of appeal are more firmly wedded to the problem-solution approach.  Although it was stated in case T_465/92 that the problem-solution is approach is “no more than one possible route for the assessment of the inventiveness”, the EPO White Book calls this is a “one-off decision” (see p163).  English judges have voiced differing opinions on the merits of the problem-solution approach (see judgment here at paras 25-50), which has never been adopted. Although the differences may in many cases be formal rather than substantive, in some instances the alternative approaches may ultimately lead to differing outcomes.

Also, the common practice of the EPO boards of appeal, which is not adopted in every case, is to deal with each ground of invalidity separately.  By contrast, ‘squeezes’ are often deployed in some national courts between, for example, obviousness and insufficiency arguments, which require the two separate grounds of invalidity to be considered together.  There is no guidance under the UPC Agreement or the Rules of Procedure on this point.

Finally, and probably most significantly, approaches to claim construction vary significantly between EPC contracting states.  Article 69 EPC and the Protocol on the interpretation of Article 69 EPC establish the ‘extent of protection’ conferred by a patent.  Article 2 of the protocol states as follows:


For the purpose of determining the extent of protection conferred by a European patent, due account shall be taken of any element which is equivalent to an element specified in the claims.”

Gratefully relying on this note from Vossius & Partner, I understand that Germany operates a ‘doctrine of equivalence’, under which protection is not limited only to those features falling within the scope of the claim, but also equivalent methods of solving the same technical problem but which fall outside the scope of the claim, with key the question being “whether the skilled person having knowledge of the claimed invention will be able to solve the technical problem underlying the patented invention with modified but equivalent means”.  The differs markedly from the UK approach to ‘purposive construction’, which aims to assess what the skilled person would have considered the patentee to intend to claim based on the language used.  The Court of Appeal for England and Wales recently summarised the English approach to construction, stating inter alia that: 
(vii) It further follows that there is no general "doctrine of equivalents."
(viii) On the other hand purposive construction can lead to the conclusion that a technically trivial or minor difference between an element of a claim and the corresponding element of the alleged infringement nonetheless falls within the meaning of the element when read purposively. This is not because there is a doctrine of equivalents: it is because that is the fair way to read the claim in context.”  
A clear conflict therefore exists between the approaches adopted by different EPC contracting states, and it is not clear how the UPC will approach the issue of claim construction.  
(d) Other international agreements applicable to patents

International agreements and treaties such as TRIPS, the Patent Cooperation Treaty and the Paris Convention do not in general contain rules of substantive patent law having a greater degree of specificity than the EPC or the UPC Agreement, so they are of little help as sources of substantive patent law.

(e) National Law

Whilst I have noted the divergent approaches taken by national courts regarding issues of infringement and validity, both the EPC and the UPC Agreement do at least provide a legislative framework which can be applied by the court.  Readers, particularly those with civil law training, may regard the concerns I have raised above regarding the need to rely on national law as unimportant, with divisions of the UPC ultimately being bound only by the EPC and UPC Agreement for most issues, treating case law of the EPC and CPC contracting states as persuasive but not binding.  To lawyers trained in the common law tradition this would be a significant change, but we are an adaptable bunch.

However, important points such as accessory liability are not dealt with anywhere in the EPC or the UPC Agreement.  As noted by Mr Justice Arnold in 2009 (see p8), these issues will fall to be considered under national law, so certainty as to the applicable national law is important.  Similarly, the laws relating to offers for sale over the internet, in particular where such offers are deemed to take place, are not addressed by the UPC Agreement.  Where national law applies, Article 24(2) of the Agreement provides guidance on determining which national laws are to apply:

(2) To the extent that the Court shall base its decisions on national law, including where relevant the law of non-contracting States, the applicable law shall be determined:
(a) by directly applicable provisions of Union law containing private international law
rules, or
(b) in the absence of directly applicable provisions of Union law or where the latter do not apply, by international instruments containing private international law rules; or
(c) in the absence of provisions referred to in points (a) and (b), by national provisions on private international law as determined by the Court.
Private international law rules

The term ‘private international law’ may be understood as the set of procedural rules used to determine the substantive law and jurisdiction applicable to a legal dispute. The difference sources of private international law rules mentioned in Art 24(2) are considered below.

Union Law

Provisions of Union law containing private international law include Regulation 864/2007 on the law applicable to non-contractual obligations (“Rome II”), the Unitary Patent Regulation itself, and the IP enforcement directive.

Article 8 of Rome II governs the applicable law in respect of infringement of IP rights. Article 8(1) states that “[t]he law applicable to a non-contractual obligation arising from an infringement of an intellectual property right shall be the law of the country for which protection is claimed”.  Where the UPC has to adjudicate the infringement of a European patent, which is a bundle of separate national rights claiming protection in several member states, this provision will lead to difficult results.  If a European patent is designated in France, Germany and the UK, Article 8(1) of Rome II would require the UPC to apply French accessory liability laws to the infringing acts occurring in France, German accessory liability laws to the infringing acts occurring in Germany and English accessory liability laws to the acts committed in the UK.

Rome II does not extend to preliminary or incidental questions concerning the creation, registration, validity or transfer of IP rights, which are proprietary rather than tortious in character.  The choice of law relating to these issues, insofar as they are not covered by the EPC, will fall to national rules in the case of European patents. 

For unitary patents, Article 8(2) of Rome II states that, “[i]n the case of a non-contractual obligation arising from an infringement of a unitary Community intellectual property right, the law applicable shall, for any question that is not governed by the relevant Community instrument, be the law of the country in which the act of infringement was committed.”  The Unitary Patent Regulation contains specific provisions to deals with these points at Articles 5 and 7, as noted above. 

International instruments

The EPC is an ‘international instrument containing private international law rules’. The provisions which could be seen as relating to choice of law include Articles 2, 64 and 74.  As with Rome II, the EPC does not assist with identifying any single law which should apply to a bundle of separate national rights which are being considered simultaneously by a single court.  If there are any such instruments, I would be grateful if readers could name them, as time constraints have prevented me from researching this area.

National provisions on private international law

Article 24(2)(c) begs the question of which country’s national provisions of private international law are to apply. If the UPC is to be a supranational court, as opposed to a national court, it will not have lex fori (i.e. the domestic law of the forum).  Reading the relevant parts of Article 24(2) and sub-article (c) together, the problem becomes more apparent:

To the extent that the Court shall base its decisions on national law the applicable [national] law shall be determined by national provisions on private international law.

This appears to mean that the UPC must use national law provisions to determine which national law provisions apply to the question of which national law is to apply, which is circular and rather unhelpful where the UPC is not a national court.  I had always understood that the UPC was intended to be a single supranational court having divisions physically but not ‘legally’ located within individual member states.  However, this difficulty with Article 24(2)(c) led me to question whether the UPC was indeed intended to be a supranational court, as opposed to a conventional national court.

National or supranational court?

By way of background, the earlier Draft Agreement on the European and Community Patents Court from March 2009 had contemplated a supranational court open to all EPC countries, including non-EU Member States.  Opinion 1/09 of the CJEU declared this proposal to be incompatible with EU law.  In response, the proposals were recast and a draft UPC Agreement was issued on 14 June 2011, which is similar, but not identical, to the final approved UPC Agreement. Article 1 of the June 2011 draft stated that the UPC “is a court common to the Contracting Member States” and which is “to be part of the judicial system of the European Union and is subject to the same obligations as a national court with regards to the respect of Union law”. 

The wording of the final UPC Agreement contained a subtle change, stating that the UPC “shall be a court common to the Contracting Member States and thus subject to the same obligations under Union law as any national court of the Contracting Member States”, possibly suggesting that a division of the UPC is a national court ‘like any other’.  The waters are muddied further by Article 4, which states that “the Court shall have legal personality in each Contracting member State and shall enjoy the most extensive legal capacity accorded to legal persons under the national law of that State”.

However, a clue to the source of the final wording is found in paragraph 82 of Opinion 1/09, which cited the Benelux Court of Justice as a “court common to a number of Member States, situated, consequently within the judicial system of the European Union” that had been held to be compatible with Union law.  This wording has been adopted wholesale in the final UPC Agreement.  Council Paper 13984/11 of 9 September 2011 provided ‘reflections’ on the Benelux Court of Justice (BCJ), and whether it could “serve as an example showing the way towards a Unified Patent Court”.  The paper describes an arrangement under which national courts of the Benelux countries themselves apply Benelux law, referring questions on the interpretation of harmonised Benelux law to the BCJ as a procedural step in the course of proceedings before the national courts.  The arrangement appears very similar to that of the CJEU in relation to EU law, although I would appreciate comments from Benelux lawyers if this is incorrect.  Paper 13984/11 concludes by saying that “many of the common characteristics of the BCJ and of the UPC will contribute to address the legal requirements set out by the ECJ in Opinion 1/09”, before listing such ‘common factors’.  It therefore appears that the BCJ has been used as something of a model for the UPC, and that the UPC should indeed be viewed as a supranational rather than a national court.

However, I understand, based solely on Paper 13984/11, that the BCJ is not a fact finding tribunal, and does not issue decisions which are directly enforceable in the Benelux Treaty states.  Rather, it decides points of law abstracted from the facts, with the application of the law to the facts and the enforcement of decisions being left to the national courts.  A further key difference, and one which is highly relevant to the determination of the applicable law by the UPC, is that, according to Paper 13984/11, “the Treaty establishing the BCJ and the rules of procedure which are based on it constitute the court’s sole legal sources”.  As noted above, the UPC will draw on Union law, the UPC Agreement, the EPC and national law as legal sources, without there being a single judicial body with authority to issue definitive judgments on all of these sources. By contrast with the BCJ, the UPC will have to apply national law and have some clear mechanism of determining which national law is to apply.  The example of the BCJ is therefore of little help for determining how a division of a supranational court, which just happens to be physically located within the territory of a given member state, is to determine the applicable national law.

So which national law is to apply?

Without any division of the UPC being a national court, there is no default set of national ‘choice of rules’ to apply. A localising element or ‘connecting factor’ will need to be determined (see para 1-079 of Dicey, Morris & Collins).   Factors such as the lex situs of bundle rights encounter the same problem noted above in relation to Article 8(1) of Rome II. Ultimately the divisions of the UPC may have to apply the lex fori of their host countries in the same way that an arbitral tribunal may in some instances apply the law of the seat of arbitration when determining the law applicable to an arbitration clause (see para 2.1.2 of Chapter 4 of Cook & Garcia.  In such case, the UK local division would apply English ‘choice of law’ rules, the Paris Central Division French rules, and a regional division the rules of its host country.  Such divergence within a unified system is not ideal.

Precedent and statutory interpretation

Case law of the UPC is not one of the ‘sources of law’ listed in Article 24, and neither the UPC Agreement nor the Rules of Procedure appear to make any reference to any doctrine of precedent.  This is consistent with the view that the UPC will regard judgments of the UPC and those of national courts and decisions of the EPO boards of appeal as persuasive rather than binding.  There could be some debate as to whether, in the absence of specific rules on precedent, this issue will fall to national law, but as this post already extends to over 4,000 words, I’ll leave that debate to another day.

There are also no specified rules of statutory interpretation.  Neither the UPC Agreement nor the EPC are instruments of EU law, so there appears to be no reason for the UPC to apply established EU rules of statutory interpretation.  It would, again, be unsatisfactory in a unified system for statutory interpretation to be governed by individual national law rules.


Union law, the UPC Agreement and the EPC provide a framework to decide the majority of the legal issues that will need to be decided by the UPC.  Matters falling outside EU law, the EPC or the UPC Agreement are to be covered by national law (other international agreements are of little help in substantive patent law matters). 

When dealing with European ‘bundle’ patents, the above suggests that the UPC will have to apply several sets of national laws to issues of infringement under Rome II, with ‘proprietary’ matters being dealt with according to national choice of law rules.  Only a single set of national laws will apply to unitary patents, determined by reference to the applicant’s domicile or place of business at the time of making the application.

In summary, it’s complicated.  Whether this ends up being a lawyers’ dream or a lawyers’ nightmare remains to be seen.

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