Differences in patent systems throughout the world raise the cost of global enforcement by requiring litigation in multiple jurisdictions to monetize the same underlying invention. To redress this inefficiency, the European Union has created a centralized patent court system—the Unified Patent Court (UPC)—that is projected to begin operating once Germany and the UK ratify the system at the end of this year.
The UPC is certain to have wide-ranging implications for patent attorneys and innovators alike. Despite some uncertainty surrounding Brexit’s impact, the changing regime in Europe likely will make things easier for patent holders. Indeed, the new court has several features that suggest it will be an appealing alternative to US patent courts—potentially paving the way for the EU to surpass the United States as a center of innovation.
Patent Changes in Europe
Today, each European country has its own system to resolve patent cases. Intellectual property owners must file patent applications—and litigate patents—in every country in which they wish to protect unauthorized use of their inventions. This means patent owners must be prepared to navigate different procedural and substantive legal regimes in more than two dozen countries to obtain full European coverage. The sheer complexity and expense required to enforce patents in Europe has led many companies either to forego their rights altogether or to pursue more limited enforcement strategies. By the same token, the inability to efficiently enforce European patent rights encourages so-called “efficient infringement” by companies who implement and monetize the research-and-development efforts of others, reducing marginal incentives to innovate going forward.
A primary objective of the UPC, therefore, is to create a single patent system that uses the same procedures, relies on experienced judges (including ones with deep technical experience), and provides a common appeal system. The new court will be available to participating the EU Member States, and will offer patentees the opportunity to obtain pan-European injunctions. With the EU’s population of more than 400 million and its GDP nearly equal to the United States’, the UPC is of obvious appeal to patent owners frustrated by perceived drawbacks in US patent law.
All looked promising until the June 2016 Brexit vote to leave the EU, which called into question whether the UK would participate in the UPC. Further, since the UK is one of three EU Member States required by the UPC agreement, the UPC itself was also at risk. But the UK happily surprised many in the IP world when it announced in November 2016 that it would ratify the UPC agreement, premised on the reasoning that the UPC is an international patent court, not an EU institution.
While Brexit may ultimately impede the UK’s ability to participate in the UPC over the long term, the court still offers broad-based appeal vis-à-vis the United States.
The US IP landscape after eBay v. MercExchange
A number of Supreme Court decisions have shaped the way patent litigation is handled in the US (see Justin Daniels’ article in the Fall 2016 issue of the Burford Quarterly). Perhaps the most significant ruling was the Court's 2006 eBay v. MercExchange decision, which considered whether a patent owner had the right to obtain a permanent injunction for a patent it did not itself practice. In its ruling, the Court determined that an injunction should not automatically issue upon a finding of patent infringement, thereby overturning long-standing precedent to the contrary. Instead, plaintiffs must now satisfy a four-factor test to be granted injunctive relief. In practice, patent owners—practicing and non-practicing entities alike—have found it nearly impossible to obtain injunctive relief, even against their fiercest competitors.
The eBay decision implements a sharp distinction between the US and the new centralized European court, as the UPC will automatically grant European-wide injunctions against defendants who infringe valid patents. Proving monetary damages in patent cases is notoriously difficult. An injunction against infringing products is a very effective mechanism to force defendants to pay what they perceive to be the true value of a patent holder’s invention. Thus, the realistic opportunity to obtain injunction relief could be the deciding factor for innovators considering whether to shift R&D and legal budgets to Europe.
Global implications of a centralized European court
The coming changes will dramatically affect how attorneys manage global patent portfolios and litigation. From a US litigator’s perspective, the main advantages of the UPC are that it will allow easier coordination of litigation strategies, lower the costs of enforcement, all while offering a superior suite of remedies in the event of success. For innovators confident in their legal position, fee shifting against the losing party is also a powerful incentive to litigate in the UPC.
In speaking with firms and clients about financing IP litigation outside the US and the larger issue of managing legal costs and risk related to IP, we view the creation of the Unified Patent Court with optimism. Even if the UK does not participate for the long term, the UPC will certainly make it easier for patentholders to litigate and enforce their patents in Europe. And because the UPC will grant injunctions as a matter of course, it may well end up being more hospitable to patent litigation than US patent courts.
 UK Intellectual Property Office, UK Signals Green Light to Unified Patent Court Agreement (Nov 28, 2016), available at http://www.gov.uk/government/news/uk-signals-green-light-to-unified-patent-court-agreement.
 eBay Inc v MercExchange LLC, 547 US 388 (2006).