23 March 2020

German Constitutional Court: “the UPC needs a German Constitutional Change” – will the UPC survive?

On March 20th, 2020 the German Constitutional Court issued its long-awaited decision on the constitutionality of German ratification of the Unified Patent Court (UPC). The Court upheld the constitutional complaint against ratification, stating that the ratifying Act violates Article 38 of Germany’s Basic Law. Article 38 establishes the German people’s democratic rights, and ratification ran afoul of the Article as it was not passed with a two-thirds parliamentary majority. The decision signifies a critical blow to the establishment of the UPC, at least in the near term, it being highly unlikely the German Parliament will deal with this quickly both in light of the current global Covid-19 pandemic and their challenges with an expected change of Chancellor in the next 12 months.

What was the legal rationale?

In its decision, the Court held that Art. 1 of the UPC Agreement, which establishes a unified court for settling disputes relating to European patents and those with unitary effect, amounts to a transfer of adjudication authority, which affects the German populace’s constitutional rights. The establishment of an international adjudicatory authority, where it is compatible with the German constitution, requires a 2/3 majority vote in the German Federal Parliament, a threshold not met in the ratification of the UPC Agreement.

What future for the UPC?

This decision means Germany must go back to its parliament in order to ratify, and most likely there will now be a pause whilst the other participants consider what future they want for the UPC after the UK Government’s announcement on February 27th that the UK would not be participating in the UPC following Brexit.

The creation of the UPC and the Unitary Patent, though long championed by many, always had its contentious issues, not least the fact the EU narrowed it to EU members only, excluding participation by the full 38 jurisdictions of the European Patent Convention. In addition with the focus on English, French and German, there were language issues with several countries, especially Spain, with these countries feeling that their people would be at a disadvantage by not being freely able to review patents in their language. Over these issues and others, Spain and Poland had decided not to ratify the UPC Agreement. Can these reasons and the delay caused by the German decision now allow us time for Europe to re-think the approach to maximise the potential for this court?

There remains a way to make the UPC come alive on a grander scale: it being possible for the UPC to proceed and include the UK if it reverted to the original intent of a court open to all members of the European Patent Convention. If that were to happen, it would mean a court covering 38 jurisdictions, considerably more than the UPC’s current proposal. Such a plan would meet EU resistance, but the EU nation states could overrule the EU position. The resistance comes from the EU’s view that the UPC’s operation other than in a role as part of the EU institutions subject to the CJEU is an interference with the internal market. The EU therefore opposes non-EU countries participating, and say the court must be subject to the CJEU.

There may be a solution though, and the UK Government has been asked to consider it. It comes from analysing how the EU views the European Patent Office (EPO). The EPO is outside of EU control, and the EU justifies its position in relation to the internal market on the basis that the EPO does not itself grant patents. Instead, the EPO recommends the applications be granted, and then local patent offices grant them in each territory. For example the French patent office grants a patent for France inside the internal market, and as it is part of the EU that is acceptable. The fact the same patent can grant in Switzerland is of no concern to the EU. So why not shift the UPC to being an arbitration style court? This means countries agreeing that the UPC hears and determines cases, but leaves technical enforcement of any decision devolved to national courts. So like the local patent offices, the local courts retain a limited engagement. This would not be difficult to establish, and it is similar to the concept of registering and enforcing a foreign judgment. Whether the members of the EU & EPC can agree to such an approach or not we wait to see.