The Future of the UPC After Brexit
The UK vote to leave the EU has no immediate legal consequences for the contemplated Unitary Patent System. In order to allow an implementation of the Unitary Patent System including the UK we propose that the exit-agreement between the EU and the UK should contain two agreements between the signatory states of the Agreement on a Unified Patent Court (UPCA): One is to permit the UK to stay within the UPCA. The other should provide an extension of unitary effect of a European Patent (EP) to the UK. The European Patent Convention (EPC) provides sufficient legal basis for both agreements which, if included in the exit-agreement, would not need ratification. The UK and the other signatory states should continue with their ratification process without delay.
I. Brexit vote and legal exit
The British voters have voted in favour of leaving the EU ("Brexit"). This article looks at the effect of Brexit on the future of Regulations 1257/2012 implementing enhanced cooperation in the area of the creation of unitary patent protection (EPUE-Reg), and 1260/2012 implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translation arrangements (EPUET-Reg), both of December 17, 2012, as well as of the Agreement on a Unified Patent Court (UPCA) (the "European Patent Package")?
First of all, there is no immediate effect since the British Government has not made the necessary notification of its intention to withdraw from the EU under Art 50(2) of the Convention on a European Union (EUC). Furthermore, such notification will trigger a two-year period for agreeing the details of an exit of an EU Member State (EU-MS), its "legal exit". During that period the details of the withdrawal including the framework for the country's future cooperation with the EU must be agreed, which would also need to include any form of UK participation in the European patent package.
What are the options for the EPUE-Reg and for the UPCA, if a continuing participation of the UK in the European patent package is desired?
1. In case that the current or a future UK Government notifies the EU of the UK's intention to withdraw from the EU, the UK participation in the EPUE-Reg and the EPUET-Reg would end automatically with the UK losing the status of an EU-MS, because both Regulations relate exclusively to EU-MS. This would be the legal consequence unless the exit-agreement provided otherwise. What could be the contents of the exit-agreement regarding both Regulations?
2. It is a welcome circumstance that one of the two legal bases of the EPUE-Reg and the EPUET-Reg is Art 142(1) EPC, according to which a group of Contracting States (CS) of the European Patent Convention (EPC) may provide, by a special agreement, that an EP granted for those CS has a unitary character throughout their territories.
3. Therefore an agreement may be reached between the EPC member states who are also UPCA signatory states, including the UK, preferably in the form of a Protocol to the UPCA, agreeing that the unitary effect of an EP with unitary effect (EPUE) pursuant to the EPUE-Reg would be extended to the UK on the basis of Art 142(1) EPC. That agreement would be binding on the Participating Member States of the EPUE-Reg (PMS) and the UK on the basis of international law only. It would lead to two parallel unitary effects of the EPUE (1) in the PMS on the basis of the EPUE-Reg and (2) in the UK on the basis of the special agreement pursuant to Art 142(1) EPC.
4. European Union law would not prohibit such an internal agreement between EPC Member States. The blocking effect of a Union competence used by the EU normally applies also to external agreements of the EU-MS on the same matter. But this would not be the case if the EU were to decide not to make use of its competence or even expressly permitted the external agreement by endorsing it. It could be envisaged that such endorsement be included in the exit-agreement EU-UK. Unitary effect in the UK would remain a matter of international law. The endorsement would only be needed for securing the competence of the Contracting Member States of the UPCA (CMS) to agree on that extension.
1. Art 84 UPCA provides that only an EU-MS may ratify the UPCA. If the UK has already ratified the UPCA at the time of the legal exit, absent any change of the UPCA, the UK (or the other CMS, being the other party) may theoretically use the exit to cancel the adherence of the UK to the UPCA pursuant to Art 62, 65, 67 of the Vienna Convention, because a fundamental circumstance has changed (Art 62 Vienna Convention). No side will do so. This could already solve the problem.
2. However, considering EU law the better way is amending Art 84 UPCA in a way that an adherence of the UK to the UPCA even after its legal exit could be admitted. The change could be based on Art 149a(1) lit a EPC, which forms the basis of the UPCA. Are there any legal obstacles opposing such change? How could that change be implemented?
3. The CJEU, in its Opinion 1/09, has decided that the UPCA may be concluded only if the referral procedure under Art 267 TFEU is not jeopardized. The relevant part of the text reads as follows (highlights are by the author):
“82. It must be emphasised that the situation of the PC envisaged by the draft agreement would differ from that of the Benelux Court of Justice which was the subject of Case C-337/95 Parfums Christian Dior  ECR I-6013, paragraphs 21 to 23. Since the Benelux Court is a court common to a number of Member States, situated, consequently, within the judicial system of the European Union, its decisions are subject to mechanisms capable of ensuring the full effectiveness of the rules of the European Union.”
Based on this section of the Opinion the Commission and the EU-MS concluded that the UPCA must be restricted to EU-MS.
4. However, there have been important developments after Opinion 1/09.
a) Pursuant to Art 21 UPCA and its reference to Art 267 TFEU the UPC is obliged to refer to the CJEU all questions regarding the construction of EU law applied by it. And Art 22 UPCA provides that all UPCA member states are jointly and severally liable for damages under Article 22 UPCA, if Union law is not applied correctly. Therefore, the requirements of Art 267 TFEU are met fully for all CMS. Moreover, Arts 71a ff Brussels Ia-Reg define the UPC as a common court of EU-MS. Art 1(2) UPCA) defines the UPC in the same way. Of course, Arts 71a ff Brussels Ia-Reg are secondary Union law and Art 267 TFEU is primary Union law. But Art 71a ff Brussels Ia-Reg still may be used as an argument in the discussion on the basis of primary Union law (Art 267 TFEU).
b) Precisely formulated the question which arises with the exit of the UK after its ratification of the UPCA is whether the UPC would lose its status as a court common to the EU-MS (Art 71a ff Brussels Ia-Reg) if one of the UPCA-CMS leaves the Union. There are good arguments in favour of the conclusion under EU law that the UPC will continue to be a common court of EU-MS after the UK (having ratified the UPCA before) has left the Union.
(1) At the time of ratification the UK was an EU-MS.
(2) In ratifying the UK accepted Art 21 and 22 UPCA, referring to Art 267 TFEU.
(3) After its exit the UK continues to accept referrals by the UPC to the CJEU.
(4) After its exit the UK continues to be bound by the answers of the CJEU with regard to a referral of Union law questions. It has subjected itself to UPC decisions implementing the Union law as defined by the CJEU.
c) Therefore, in the words of Opinion 1/ 09, the UPC's "decisions are subject to mechanisms capable of ensuring the full effectiveness of the rules of the European Union". The UPC remains squarely "situated within the judicial system of the European Union".
5. It is true that under Art 267 TFEU only the courts of EU-MS are permitted to refer questions pursuant to Art 267 TFEU. However the UPC is a common court of EU-MS (Art 71 a ff Brussels Ia-Reg) and it would not lose that legal character, if a non-EU-MS (UK) having ratified the UPCA while being an EU-MS would continue to participate in the UPCA after leaving the Union, because that former member, in ratifying, had fully accepted Art 21 UPCA and Art 267 TFEU and would continue to be bound to accept the Union law as defined by the CJEU. For safety reasons, a statement to that effect could be included in the special agreement based on Art 149a(1) lit a EPC and that agreement could also be endorsed in the exit-agreement EU-UK.
6. A special problem arises, if UK courts acting on the basis of Art 83(1) UPCA or after an-opt out pursuant to Art 83(3) UPCA during the transitional period would have to decide on a question of European Union law. On the face of it, they would not be allowed to refer questions to the CJEU. However, the national courts acting in the transitional period are not outside the UPCA system. They have to apply UPCA law. Therefore, the UK Court would be bound by Art 21 UPCA, to refer questions regarding Union law to the ECJ, even where Art 267 TFEU would no longer be applicable because of the exit. This would permit the CJEU to accept referral questions by the UK courts.
7. As a result European Union law would allow a change of Art 84 UPCA permitting a CMS who was an EU-MS at the time of ratification to continue to be a member state of the UPCA (as a CMS). This change could be performed by a Protocol (agreement) of the Administrative Committee of the UPCA pursuant to Art 87(2) UPCA which provides that the Administrative Committee may amend the UPCA to bring it into line with Union law. If the exit-agreement (having the legal status of Union law) would confirm the Protocol of the Administrative Committee, no ratification of the Protocol by the CMS would be necessary (Art 87(2) UPCA).
IV. Summary: Implemention
The possibility of an extension of unitary effect of an EPUE under the conditions of the EPUE-Reg and the EPUET-Reg to the UK could be provided for by a Protocol adopted by the Administrative Committee and prepared by the Preparatory Committee. The competence of the Administrative Committee (acting together with the Select Committee under Art 145 EPC) for that part of the proposed Protocol could be based not only on Art 142(1) EPC but also on the exit agreement between the UK and the EU. If the Protocol were based (also) on the exit agreement, the competence of the Administrative Committee could be based on Art 87(2) UPCA because the Protocol would bring the UPCA in line with European Union law. In that case ratification by the CMS or by the UK would not be needed.
The same applies for the part of the proposed Protocol (agreement) between the CMS according to which a CMS who, at the time of ratification, was an EU-MS but does not continue to be an EU-MS may stay within the UPCA (change of Art 84 UPCA). This change would have to be brought about by a Protocol to the UPCA established by the Administrative Committee (acting together with the Select Committee under Art 145 EPC) based on Art 149a(1) lit a EPC and on the exit-agreement UK-EU, again in combination with Art 87(2) UPCA, because the Protocol would bring the UPCA into line with Union law. Ratification by the CMS or by the UK would not be needed.
V. The way forward (timetable)
1. The UK should use its present position as EU-MS and deposit its instrument of ratification of the UPCA as soon as possible. In that case the UPCA could enter into force at the expected date (April 2017), well before the exit-agreement becomes operative.
2. After the entry into force of the UPCA, the Administrative Committee of the UPCA (acting together with the Select Committee) should amend Art 84 UPCA in providing in the form of a Protocol to the UPCA that a CMS will not lose its contractual position if it leaves the EU. It can do so on the basis of Art 149a(1)(a) EPC.
3. The Administrative Committee (acting together with the Select Committee) should include into that Protocol an agreement of the EPC-MS (identical with the signatory states of the UPCA) providing for an extension of the unitary effect of an EPUE to the UK. It can do so on the basis of Art 142(1) EPC.
4. Both agreements (2 and 3) should later be endorsed in the exit-agreement EU-UK. With the exit-agreement becoming operative, the two agreements contained in the Protocol would be covered by Union law (the exit-agreement being of such quality) thus providing the basis for an application of Art 87(2) UPCA.
5. At the date when the exit-agreement becomes operative the UK will stop being an EU-MS but its further adherence to the UPCA would be based on the amended Art 84 UPCA permitted by Art 149a(1)(a) EPC. The UK would be in the legal position to receive the unitary effect of an EPUE on the basis of Art 142(1) EPC.
By Prof. Dr. Winfried Tilmann, Counsel, Hogan Lovells International LLP, Düsseldorf