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The EU Patent Package Politics vs. Quality and the New Practice of Secret Legislation in Brussels

Dr. Jochen Pagenberg1

The status quo2

1. The European “patent package" consists of two draft regulations, one for the language question and one for the unitary patent ("EU patent"), and a draft agreement for a unified patent court.3 In response to considerable resistance from user circles on the grounds of numerous deficiencies in the draft Agreement and the Patent Regulation, and because of a lack of agreement concerning the seat of the central division, the planned date of signature at the end of December was cancelled by the Polish Presidency. Since then, the Danish Presidency could not recommence the work on the said texts, since it was necessary to await the outcome of the French presidential elections. Presently the Council and the Presidency are apparently considering final discussions on May 30, a proposed European Parliament reading on 13 June 2012, vote on 14 June 2011 and a date for signature by the end of June. Since it is hardly likely that the many objections and open questions will have been resolved by then, the European patent community must prepare for the most serious deterioration if not destruction of the patent system imaginable.

1 Rechtsanwalt, admitted to the Munich and Paris Bars. The author was a member of the EU Commission's Committee of Experts and withdrew from this body by the end of 2011.2 The following summary is based in particular on the last documents of the Polish Presidency: st13751/11 of 2.9. 2011, st15289/11 of 7.10.2011, st16741 of 16.11.2011, st17539/ of 24.11.2011, st17578/11 of 1.12. 2011, st18239/11 of 6.12.2011. 3 Of each of these drafts, there are a number of versions, the relevance of which cannot be assessed from outside because the entire project has in the last six months been subject to a completely unusual secrecy, which will be discussed below.

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2. It is therefore hoped that the adoption of the text will once again be postponed and instead the increasingly pressing reservations of industry and user associations everywhere will be taken seriously. It is high time to address the urgent wishes of those for whom this "work of the century" is intended. In the "hot phase" of the discussions in November and December, there was much to be found in various blogs on how different texts were being sent backwards and forwards between the Council, the EU Parliament and the Commission.4 However, resolutions and legal opinions from industry, university circles, judges and lawyers were dismissed, even by members of the EU Parliament, as spurious since these specialist circles – although partly long-time expert advisors of the EU Commission and all of them future users of the system - were allegedly lobbyists or “interest parties” who need not be paid any attention.

3. This blithe refusal to address the demands of user circles is now joined by a further component that is constitutionally and under generally accepted democratic rules highly dubious and whose relevance has only recently become apparent to the author.5 This concerns an agreement between the EU Parliament, the Commission and the EU Council according to which the public is to be shielded from recognized legal and factual reservations and known legal deficiencies concerning the proposed legislation, from which one can deduce that the overall positive announcements by the EU authorities to the public apparently do not even reproduce one half of the truth.

4 Cf. http://ipkitten.blogspot.de/2011/12/good-morning-from-amerikat-monday-is.html ; http://www.managingip.com/Article/2944672/Managing-Patents-Archive/Ministers-close-to-EU-patent-deal.html

5 We refer here to the essay by Stjerna, Mitt. 2012, 54et seq., that only became known to the author after completion of his own paper. Accordingly, it was no longer possible to avoid overlaps; see also the blog contribution by Horns dated 18.12.2 to 11, http://blog.ksnh.eu/en/2011/12/18/eu-council-something-to-hide-might-legal-opinion-tun-out-to-be-a-bombshell/

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4. Despite the mentioned stand-still in the drafting process, a group of experts is working on drawing up procedural rules, the absence of which had been criticised for some time and that have no longer been taken up by the EU Commission. Accordingly, the group of experts is working in a law-free space, and as it proceeds it is discovering numerous inconsistencies in the draft Agreement that stand in the way of reasonable procedural rules.6

5. The public announcements by the Commission and the Council have promised that with the Agreement to be signed everything introduced by the new patent system will allegedly be better than it was in comparison to the national patent systems:- Lower costs for patent applications and judicial proceedings- Improved efficiency of the courts thanks to simple and fair procedural rules- Easy access to the courts through local presence and local language- Predictability of judicial practice and legal certainty for the parties- Judges with maximum quality, competence and proven experience in patent disputes7

The following not even complete list of disputed items shows that none of these promises has any prospect of being fulfilled, for each point either impractical and expensive provisions are proposed or no provisions whatsoever.

I. Costs of the Unitary Patent (“EU Patent”)

After grant of an EP patent, the proposed application procedure provides the possibility of receiving, instead of designating individual countries, a unitary patent ("EU patent") for 25 countries. The costs have as yet not been determined, neither the designation fees nor the

6 An eighth draft comprising 511 paragraphs was sent out for comment in April to selected recipients.7 These criteria are contained in numerous papers from Brussels, including the extensive Commission document st8302/07 of 4.4. 2007

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annual fees, so how can one promise lower cost? The only document published8 with a proposal for fees contains a heading renewal fees, however with the explanatory text deleted. For the overwhelming majority of applicants who are only interested in protection for three to six countries, there is anyway no doubt that both the application costs and the annual fees will increase if they choose an EU patent. A proposal which apparently was made during the Polish presidency allegedly promised as to annual fees

o to allow to all Member States that they keep their current renewal fee income while at the same time ensuring that those Member States which currently have a low renewal fee income will significantly increase their renewal fee income

If the income of member states will be increased, then the users have to pay more, not less, so that the promised considerable reduction of costs in order to be able to survive in competition with the USA and other countries cannot be true, and the Council must know why it does not disclose further details. If there are advantages at all then they will benefit only the small percentage of applicants who need protection in 25 countries, although the favourable translation rules will anyway only enter into effect following a long transition period. For all others, the costs will obviously increase if the promised higher income for member states will come true. Apparently the Council had intended in December to sign the secret proposals without further consultation with the users and now intends to do this in June. This would be a bad surprise for the users.

In this context account must also be taken of the fact that with the unitary patent it is no longer possible to drop individual countries before the end of the life of the patent in order to save annual fees, and

that in the event of the enforcement of the right, a counterclaim can involve the risk of revocation with effect for 25 countries by one stroke, even if an infringement action has only been filed for one country.

8 St18239/11 of December 6, 2011, cf. further details below.

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The latter is not a fundamental deficiency, since one of the consequences of the more global enforcement of rights is that patent holders must as a rule also reckon with the risk of a greater loss. But this is certainly one of the reasons that a large majority of the present applicants for bundle patents ("EP patents") who hitherto have been satisfied with designating only a few countries, will not perceive the EU patent as a welcome alternative or substitute for the EP patent unless it involves very considerable additional advantages - which the costs are very certainly not.

But above all, for the EU project, it is still not possible to even approximately assess in addition to the cost the quality of the judges and the efficiency of the system as a whole, so on what should a choice be based? Promising improvements at this point are clearly premature.

II. Jurisdiction of the courts

The following remarks are based on the present proposal that EU patents and EP “bundle” patents are to be judged by the new court, although this will lead to a situation like in the US that SMEs will no longer be able to afford litigation for cost reasons. This point will be discussed below.

The rules concerning the choice of jurisdiction have become unnecessarily complicated, and each new discussion paper shifts powers from the local divisions to the central division. This takes us further and further away from the principle of a jurisdiction based on decentralised local divisions and judges that can easily be reached by the users and whose hearings are held in their own procedural language.9

9 Cf. this demand in the submission by German patent judges of September 2008.

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Originally, the rule was that the action could be brought at the place where the infringement occurred or at the defendant's domicile in conformity with Regulation 44/2001. The new proposals, in the case of a defendant domiciled outside the EU, lay down that the action can also be brought at the central division, where it is not the local language of the proceedings that applies but rather the language of the patent. For patent owners this means that they will have to travel presumably very far and cannot use their local divisions as promised.

There is allegedly proposed another rule that if the defendant is domiciled in the EU and an infringement takes place in the territory of more than three local courts, the defendant can demand that the entire proceedings be transferred to the central division although the patentee, for limiting his financial risk, might only have started proceedings in his home market. In this way, the local divisions lose jurisdiction, the language might change and the patentee is all of a sudden exposed to a much greater financial risk than originally intended.10 For a small or medium size company this is unacceptable.

Even if the proceedings remain before the division seized, "as a compromise" the rule is proposed that upon application by the defendant the language selected by the plaintiff will be changed to the language of the patent, namely "for reasons of simplicity and fairness". The original provision stated that the language could be changed only with the consent of both parties.

It is at this stage unknown whether these proposals have found a majority, but already that they are being discussed behind closed doors and contained in presidency papers11 show that the objectives of the agreement are being changed dramatically, and would deny SMEs access to their local jurisdiction; this was never intended to happen. A

10 The case is also referred to the central court if the parties agree on a different language but the court refuses its consent.11 Cf. the Polish paper st16741/11 of 11.11.2011 Art. 15-15a

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provision according to which, where a foreign infringer is making a huge incursion on the market, a medium-sized enterprise can be suddenly obliged after filing the action to travel to a foreign central division and to translate the entire materials of the case into a new procedural language because this is supposed to be easier for the defendant, is the opposite of efficient enforcement and another one of the broken promises being announced publicly.12 Anyone who thinks that, after months of preparing a patent infringement action, having determined the court and language for filing the action, one could change language and court without radically impeding the enforcement of a patent has little or no knowledge of the practice of patent litigation.

It is also not convincing that a defendant is treated unfairly if a case is tried in a foreign language. Already according to current practice - in national courts as well as in the EPO - defendant's lawyer can provide him upon request just like it is customary for a foreign plaintiff with translations of pleadings and an interpreter.It is under all circumstances more significant that the judges and the attorneys discuss the case in the language of the local court than whether the defendant can follow the oral hearing in his own language directly or by translation. Why should precisely the domestic plaintiff be forced to change his language in his own country for the defence of his patent, having been promised proximity to the courts, if the defendant was obviously in a position to organise the marketing of his products in the plaintiff's country? Nobody would make such a proposal for the situation of a traffic accident anywhere in Europe in which a foreigner is involved: the language of proceeding would of course be the local language of the court where the accident has happened independent whether the foreigner is the plaintiff or the defendant.

12 Still in December the Polish presidency confirmed: The Court should be accessible for parties with limited resources, but behind closed doors the opposite was suggested. This proposal for a “three country rule” also gives rise to a new opportunity for forum shopping: an infringer will infringe in three countries simultaneously after an action has been filed so as to "escape" a possibly fast and efficient local court and calmly set himself up on the market without being disturbed.

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As will be shown below in a different context, it may well be that more concentration of cases in the central division could be envisaged for larger international cases in which the parties do not mind travelling abroad or changing the language, but it is inappropriate and certainly entirely unfair for small and medium enterprises and actions dealing only with one country.

III. Litigation costs 1. According to one of the last Polish proposals, again contained in a text whose validity is unknown, court costs should amount to between EUR 6,000 and 1 million Euros, "on the basis of a complementary value-based fee system applicable above a pre-defined ceiling ". There is no mention of what is to be used to determine this (turnover? profits? damages? licence fee?). The expert committee currently working on the procedural rules is not addressing the question of costs – no one is. A judicial agreement without a regulation of costs, however, cannot be qualified as ready for signature if lower costs and predictability are promised but the envisaged rules on cost are kept secret from the public 13 .

In comparison to German practice – which has often been used as a benchmark in official documents -, considerable increases are to be expected if the court costs are to be self-financing. The German bifurcation principle has become subject to considerable criticism, although the draft Agreement contains a fair option between the different possibilities of case management for the judges. But each of the different possibilities will have an effect on costs. In Germany, in out of 100 infringement cases, only between 25 and 30 revocation actions are filed, while in countries with a combined system this figure is 95%. If the bifurcation system is abandoned or if local jurisdiction is shifted increasingly towards a central division applying the combination

13 Cf. footnote 8 above

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system, this will have an effect on the efficiency of the courts, the duration of the proceedings and hence the costs.

2. With more and more local divisions choosing the combination system in which an infringement action and a nullity action are heard together, an entire day will be needed for an oral hearing as compared with the current German practice according to which four “infringement-only” cases can be heard in a day. If it turns out that parties prefer divisions without bifurcation they must know that this increase in costs cannot be avoided and thus must be taken into account by parties which prefer more centralisation - in any event in cases concerning EU patents. But then one must make it clear that EU patents are not fit for smaller cases and/or smaller budgets, instead of telling the public the opposite and hiding the real figures.

3. For technically difficult international cases that would otherwise be litigated in parallel in different countries, the combination system will provide a centralisation of legal and factual issues which would certainly be welcome for parties which apply for EU patents. This is even more apparent, if a case requires voluminous expert opinions that otherwise would have to be obtained in different languages in each country. These cases will be made much easier and much cheaper to conduct, and for these cases the central division may offer advantages once the quality of the judges there can be ascertained.

For the majority of average infringement cases however, the parties will have to face substantial additional costs and delays at the expense of a rapid enforcement of rights,14 since combined proceedings are practically an invitation to the defendant to file a counterclaim. A multiplication of litigation cost for average cases is hardly acceptable

14 As pointed out by Kley speaking on behalf of German chemical industry in an interesting presentation at the occasion of the 50th Anniversary of the German Federal Patent Court, [published in: 50 Jahre Bundespatentgericht] p. 27: "[The bifurcation principle], in which nullity suits are separated from the infringement itself … usually shortens legal proceedings considerably."

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for SMEs who will remain the main users of EP patents in the form of bundle patents, and they will need the local courts for enforcing them.

This shows that a lack of differentiation between plaintiffs is in conflict with the business interests of a large number of patent applicants and owners, in particular SMEs. Compared with German practice, the proposed rules can lead to a three-fold increase of revocation actions and a fourfold increase of the time needed for infringement cases. This may be acceptable for EU patents that require protection in 25 and more countries. However, to expect SMEs to bear such cost increases for EP patents would be a serious mistake for the new judicial system. The promised substantial cost savings through the avoidance of parallel litigation15 will not be achieved for the large majority of parties, namely again for the SMEs. On average, only 5-8% of litigation in countries like Germany, France and Italy involve parallel proceedings in other EU countries, and not 20% as alleged in a study16. In the large majority of cases it is precisely not SMEs that conduct these parallel proceedings and that could profit here.

As a result of such changes in proceedings initial estimates come to the conclusion that litigation costs will increase by at least a factor of three if one takes again todays’ German cost as benchmark. This might not be alarming for certain jurisdictions, but for SMEs this goes beyond the threshold where the risk when going to court is no longer affordable. In this context also the mentioned arbitrary changes of language and court, etc. must be recalled. This explains that there is no chance for a reduction of costs17 and the examples show that the

15 Cf. the press release by the Polish Presidency of 5.12. 2011 http://ipkitten.blogspot.de/2011/12/good-morning-from-amerikat-monday-is.html quoted by IPKat on the same day, in which SMEs were promised a substantial cost saving but without providing any details.16 Even if the figure of 20% were correct: what about the remaining 80% of patentees who have no interest in and cannot afford higher cost? 17 As also argued by the British industry federation FPI on 22.9.2011, the Swedish Industry Federation Svenskt Näringsliv on 30.8. 2011, and the UK IPO Committee on 14.6. 2011. All of the comments from industry cited in the following warn against substantial cost disadvantages in particular for SMEs.

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intended replacement of the national court systems by a more centralized and much more expensive judicial system will in practice lead to a denial of justice for SMEs and eventually even to a collapse of the enforcement system in view of the number of cases if EP patents must also be brought to the new court and no choice for national courts is provided.

IV. Refund of costs by the losing party

It has long been overlooked that the amount of court costs, which hitherto have not even been close to being regulated, by no means permits an assessment of the risk of judicial proceedings as a whole if there is no rule concerning the award of costs after an action has terminated. The proposal in the draft Agreement is, however, even less precise than that on the court costs, and it is surprising for the Polish presidency to claim in a press release at the beginning of December 2011 that agreement had been reached on everything

….the fees, the language of the Court, and the transitional period as well as the Revision clause. So, basically almost everything has been accepted with one exception the seat of the Central Court…18

The proposal, however, provided only that the losing party was required to bear the procedural costs "up to a maximum amount". There is nothing about how high this amount is, what costs must be refunded or how the amounts are to be calculated. Since the practice on this point in the member states varies extremely, there would have been an urgent need to at least agree on the principle of calculation, as was repeatedly demanded in the expert committee. The announcement by the presidency was therefore again deceiving for the users, and nothing has changed since then. So there is no rule on cost which has become known.

V. Seats of the courts

18 http://video.consilium.europa.eu/webcast.aspx?ticket=775-979-10498 ; and IPKat report of 6.12.2011

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Contrary to the urgent recommendations of the experts and the industry, separate local courts can be set up in each member state, even if 14 countries record fewer than ten patent proceedings per year, nine of them having none whatsoever in the last few years. This would lead to a substantial dilution of quality, efficiency and predictability, all of which are laid down as precondition in the Agreement. Nor was this author's recommendation adopted to begin with a gradual development of a few local courts in countries which already possess experienced judges. This would have solved also other problems like an insufficient test phase, but also this question was not even discussed with industry.

Moreover, there has hitherto been no agreement concerning the seat of the central division.

VI. Selection of judges

Although maximum quality and experience in patent law is required for the judges in the draft Agreement, this requirement is not insured. The original aim was precisely not to introduce country proportionality, according to which each country should designate one judge – or the same number of judges – but the guaranty of quality. For this reason, patent practitioners with international experience were to be consulted to draw up a list. However, according to the latest proposals the decision will now be made by an administrative board consisting of government representatives that are required to decide on appointments on a broad geographical basis and should adopt decisions unanimously. This will mean that no representative can (and will) vote against the deletion of a judge from his country so that in the final analysis and on the basis of the figures above one half of the judges will not come from patent countries.

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This question could be solved by a gradual development of the court and the inclusion of inexperienced judges in a longer-term training programme which ensures that less experienced judges sit in experienced divisions as extra judges and “learn by doing”, not only in classes with theoretical lectures. No rules exist so far what one can expect here. Accordingly, the composition of the local and other divisions is completely open. Thus there is no guarantee of experienced judges.19

VII. Parallel option for EP patents and transitional periods

1. A significant part of industry is waiting for the introduction of the unitary (“EU”) patent and a corresponding court system under the condition that it will provide maximum quality and legal certainty as promised, which must be measured against the existing national patent courts. But as mentioned earlier there are a number of reasons why it does not make sense and would constitute a serious error if the applicants for EP patents that only need protection in a few countries are forced into the same judicial system as those for unitary EU patents before the new divisions have the opportunity to prove themselves in competition with the national courts.

Such an exclusive solution is the more surprising, since a different approach was adopted for the establishment of the EPO and of the OHIM, which were required to prove themselves in competition with the national patent and trademark offices, and indeed did so very successfully. Why not adopt these very positive examples?

2. This author has for many years 20 demanded that the holders of EP patents should have an option to choose between the national courts

19 The judges without maximum quality and experience in patent law also include those of the ECJ in preliminary ruling cases; the ICC also warned against this in a submission to the EU parliament dated 25.11.2011.20 Pagenberg, Colloque Strasbourg 16 October 2008, A Pleading for parallel

national litigation

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and the EU court .21 The different needs and different financial resources of the users as well as the advantage of quality competition between the courts make this essential.

This necessity has also been set out by a voice from German industry cited before:

We, the industry, want the community patent as well as European patent jurisdiction alongside national patent jurisdiction. But we do not want this at all costs. A European patent court should strengthen our industry’s innovative power and not weaken it. It must be effective, provide legal security and be cost-effective..

Irrespective of this, we need strong domestic patent jurisdiction going forward as well. On the one hand because Germany is a country characterized by its medium-sized enterprises. And not every medium-sized company wants to have its inventions patented throughout Europe.22

It would indeed involve a considerable risk to close the national courts before the new system has been seriously tested for efficiency, quality and predictability in all its legal and administrative functions.23 Otherwise, one would blithely risk a system recognized already now – even by the Council as we will see below - as being deficient entering into force without the possibility of reversal and all experienced patent courts in Europe being closed from one day to the next. The resulting economic risks of a wrong political decision for an economic area in which both small and large enterprises depend all on a reliable protection of their research in view of the international competition have been apparently disregarded by the political decision makers. A number of similarities with the introduction of the Euro come to mind where also the project acquired its own momentum that politicians apparently no longer wished to stop, and not because they were

21 To the same effect, the "Stellungnahme deutscher Patentrichter"of September 2008.22 Kley loc. cit. footnote 14 p. 34/35. 23 Likewise the English IP Federation (UK) of 14.6. 2011, the Swedish Industry Federation, loc. cit., the UK IPO Committee loc. cit., FICPI on 22.9.2011, CIPA on 30.11. 2011

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convinced that all conditions were fulfilled to guaranty a proper functioning in practice.

2. The proposed short transitional period, criticised from the very start and originally intended to be five years and now eventually seven years, makes little sense. With such user-hostile transitional periods, it can be expected that over 90% of the holders of EP patents will make use of the opt-out possibility. At the same time, this will mean that potential EU patent applicants will not even think of filing for an EU patent because this will be viewed all the more as an inescapable and in addition unjustifiably expensive trap. Such an exodus will leave the new court initially entirely without work, with the result that the short transitional period itself will constitute a further serious risk for the failure of the system as a whole. Seven years are not even sufficient to test the EU court with one single legal issue, let alone its general experience and case management efficiency. Following the introduction of the EPC, it took precisely 10 years after the opening of the EPO for the first infringement case to come before the courts in Germany and finally be decided by the Federal Supreme Court.

It would be particularly detrimental for industry as well as the EPO if the excessively short transitional period were to lead applicants to return in droves to the national patents out of mistrust of the new system, as many companies have already begun in parallel to the EP patents. With a longer transitional period however companies might be willing to gradually test the new court.

VIII. Lack of rules

For years, there has been criticism of the absence of rules concerning protection certificates24 and termination and dissolution rules25.

24 Resolutions of the EPLAW loc. cit., UK IPO Committee loc. cit., CIPA loc. cit.25 Most recently criticised by the UK IPO Committee, loc cit., CCBE, loc cit., EPLAW loc. cit., IP Federation loc. cit., CIPA loc. cit.

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That an agreement that could soon prove to be an obstacle to progress throughout Europe should be impossible to terminate, is intolerable.

This is in fact not only a formality, since it must be mentioned here that those who are in favour of a European patent litigation system and chose the EU patent early since they urgently need protection in 25 countries will have no guaranty that this will ever happen if the Agreement has been signed and will enter into force after ratification by less than all 25 countries. What the Commission had apparently feared, namely that the EU as a whole might become hostage by a few member states who do not or perhaps cannot ratify, may turn out to become another inescapable trap.

What will happen if the minimum number countries have ratified and companies start filing EU patents for the members of the “club”, e.g. for 13 countries, but none of the other countries or only a few will finally ratify the Agreement? What if the those countries have set up local division and “closed” the national courts for EP patents, but the remaining countries keep their national courts and will never join, in particular when they recognize the deficiencies of the system? Some may have constitutional problems and may not even be able to join, and nobody can force them to. This shows that even the promise of patent protection in 25 countries cannot be assured, so that it would be a serious mistake to start the system already after ratification by only a few. If there is no termination clause which at least provides an escape for unforeseen events one could face a situation where the most experienced courts would close down very soon, and this for a deficient system which will never be complete.

IX. The ECJ as third instance and Art. 6-8 Patent Regulation

(1) The ECJ decision of 8 March 2011 holding that the draft agreement was incompatible with the EU treaties led to a dramatic reversal of the

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legislative goals on the judicial system. No doubt because they felt chastised by the ECJ, the Commission, the Council and the European Parliament tried to outdo each other in a kind of "anticipatory obedience"26 and completely lost sight of the aims of the project. Instead of examining the ECJ decision in detail and then doing everything to ensure a high-quality and efficient patent court system, a number of the actors were of the opinion that extreme s0lutions must now be implemented. By inserting an important part of substantive patent law into Arts. 6 and 8 of the EU Patent Regulation and by threatening judges and member states with penalties in the Agreement in case of non-referrals of cases to the ECJ they opened the door to an unpredictable number of preliminary referrals.27

The comments and opinions of academics, practitioners, judges, attorneys and industry show that they are all convinced that the decision to entrust judges without specialisation in patent law with the review of significant substantive and procedural patent law questions will damage European patent law:

- because of the extended duration of the litigation, - for cost reasons, and - for reasons of the interpretation of the law by non-specialists.

The assessment of patent law questions by the judge requires years of patent law experience and an understanding of mostly highly technical constellations. Such knowledge and skills are even necessary if the court appoints an expert who is supposed to brief the court, since such

26 Four articles alone of the draft Agreement regulate the liability of the courts and the member states – including damages – in the event of a failure to submit a case to the ECJ.27 It would be idealistic to hope that "things won't be so bad", since a party that has lost an infringement case for the entire EU will do everything in order to keep the proceedings in abeyance for a further two years or more; and judges under the threat of penalties are hardly determined to refuse an application for a referral only to test the borders the ECJ may define.

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an expert opinion cannot be understood by a judge without sufficient experience in patent litigation.

The users had been promised that there would be no extension of the ECJ's preliminary ruling powers to legal issues going beyond existing EU law. If this condition is not complied with, the entire project will no longer make sense, since this would be the most serious error in the patent package.28 Leaving aside the fact that the Advocate General set out in the ECJ proceedings a number of ways of how a reasonable court system could be developed which has not been considered by the drafters, most lawyers are unable to understand how Article 118 of the TFEU can be used convincingly to come to the conclusion that substantive, so far national, patent law must necessarily be converted into Community law if on the other hand the entire EPC is to remain outside Community law.

X. Secret Legislation as a new form of democracy?

The way in which the vote on Articles 6 – 8 of the Patent Regulation and subsequently of other parts of the patent package came about in the European Parliament and the Council is also worth discussion.

1. Opinion of the Legal Service of the Commission

In the month-long debate during the Polish Presidency, reference was made on several occasions in Brussels to an expert opinion by the Commission's Legal Service, which had allegedly come to the irrefutable conclusion that Articles 6 to 8 of the Regulation were to be retained. This author had on several occasions asked for a copy of this expert opinion, without ever receiving it. The members of the Legal

28 Cf. the criticism of the ICC loc. cit.; the paper by the Swedish Industry Federation loc. cit., the expert opinions by Kraßer and Jacob, www.eplawpatentblog.com/eplaw/2011.../Opinion, and the resolutions of the lawyers' associations such as EPLAW of 27.9. 2011, CCBE of 12.12. 2011, and CIPA of 30.11. 2011.

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Affairs Committee of the European Parliament were also apparently informed of the existence of such an expert opinion, since it was referred to in the decisive parliamentary debate in November. In the latter, the Swedish member Cecilia Wikström, who, referring to numerous submissions from academia and specialist circles, pleaded for the deletion of Articles 6 - 8 of the Regulation, found herself opposed by a majority of committee members who cited this legal opinion for their vote. In the Legal Affairs Committee debate on 21.11.2011, Cecilia Wikström commented:

The only argument I have heard against this proposal29 is that some lawyers, notably in the Commission’s legal service, are of the opinion that these articles need to be included in order to allow a legal basis under Article 118 TFEU. Although I have asked for a clarification on why this would be the case, they have not been able to provide me an answer until now. And they still haven't. I am still waiting for it. I find it remarkable and deeply unsatisfactory.30

It was only after the vote was held that it was announced, apparently even to the surprise of representatives of the Commission who had argued in favour of the deletion of Arts 6-8, that there was no written expert opinion at all, but merely an oral comment by one member of the Legal Service in an internal discussion, and this single remark had been circulated for months under the name "expert opinion".

Accordingly, the Legal Affairs Committee of the European Parliament had voted under the false assumption that there was an unequivocally convincing legal opinion which in their view was to be given even greater importance than for instance the academic expert opinion by one of the best patent professors in Germany, Professor Krasser, which had been submitted to the Legal Affairs Committee in writing. This dubious claim was used to deceive and stall Parliament and the public

29 To delete Arts. 6 – 8 of the Regulation30 Cf. the transcript of the debate at http://www.europarl.europa.eu/ep-live/en/committees/video?event=20111121-1500-COMMITTEE-JURI&category=COMMITTEE&format=wmv#, quoted in IPKat of 5.12. 2011

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for months. The Legal Service of the Commission claimed an authority for itself that it did not have and that was obviously of causal significance for the result of the vote. The majority of the Legal Affairs Committee of the European Parliament would hardly have been able to vote for the retention of Arts. 6 to 8, given the number and qualification of opposing votes, if they had known that there was no expert opinion by the Legal Service of the Commission. On top of that, the reporter for the Patent Regulation conceded in the debate itself that he was not even a lawyer and could only form an opinion based on that of legal experts.31 One may leave it open here what this means for the validity of the majority decision.

2. Opinion of the Legal Service of the Council

However, there is also a second expert opinion that likewise has a number of curiosities. This expert opinion was produced by the Council's Legal Service 32 . The published version consists of approx. five pages with a footnote:

This document contains legal advice protected under Art. 4(2) of Regulation (EC) 1049/2001… and not released by the Council …to the public

Page 6 then contains the noticeDeleted from this point until the end of the Document (page 14)

Over eight pages presumably consisting of a substantive discussion concerning the patent package are thus missing in the published version. Such legal secretiveness in connection with legislative proceedings of Europe-wide significance is of itself extraordinary, in particular in view of a great number of academic and industry expert

31MEP Rapkay on 21.11. 2011: You know I am something of a legal layman- I am happy to listen to legal experts… quoted from IPKat of 5.12.2011: http://ipkitten.blogspot.de/2011/12/good-morning-from-amerikat-monday-is.html 32 St15856/11 of 21 October 2011, published in part (5 pages) on 14.12. 2011

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opinions having been submitted which are until today without an answer.33

Because one interested party refused to be content with the reference to the need to maintain confidentiality with respect to the document, he submitted an official motion for its publication or disclosure, which was refused in writing by the Secretary General of the Council34 on the hardly credible grounds that the document concerned politically and legally highly complex and sensitive issues in an ongoing decision-making process that was the subject of heated discussions. The justification continues:

… public release of [the] document would risk to further complicate the ongoing complex and sensitive decision-making process described above thus compromising the Council's capacity to find agreement on the dossier.

Finally, the described negative effects of divulgation to the public could equally affect the ratification process in the Member States willing to participate in the envisaged agreement. This would ultimately delay or put into question the entry into force of the envisaged international agreement.. (quotation from the original reasoning, emphasis added)

In other words, the Council is aware of grounds that argue against the ratification of the Agreement that are so serious that they might lead to further political and legal discussions and might even call into question the entry into force of the Agreement(!). Therefore, they must be kept secret from the public, i.e. the users as well as the national parliaments (!) since this might lead to the rejection of the Agreement.

As has been reported on a well-known IP Blog, in order to protect these important secrets, representatives of the Legal Committee of the EU Parliament, after termination of the committee debate on 21.11.2011,

33 Prof. Rudolf Kraßer on 1 September and 18 October 2011 and Prof. Robin Jacob on 2.11. 2011, and the authors referred to in Footnote 19. Recently more than 100 pages of the UK Scrutiny Committee have been published in addition.34 Cf. the description by Stjerna, Footnote 5 supra, loc. cit. p. 58, and Horns, supra, Footnote 5 loc. cit.

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continued the further discussion of the legislation in camera on the following days up to 5 December 2011, meeting with the representatives of the Council and the Commission in order to "negotiate the text to an end".35 One may well doubt whether this circumvention of the separation of powers between the legislative and executive will find general favour if it serves above all the purpose of avoiding importunate discussions and concealing information from the public.

That there are important grounds against the current proposals has in the meantime also become known to the broad majority of users, but it was not yet generally known that the Council is also aware of these and that its members nevertheless are doing everything possible to deny these serious flaws and mistakes and to announce the opposite to the public.36

3. A “deleted” document ready for adoption

Further search confirmed the impression that those in charge of “finishing” the patent dossier – whatever this means – have become convinced that keeping the outside world uninformed makes drafting easier and that legal texts need only consist of headnotes without any content.

Thus one can find a document which had also been drafted under the Polish presidency37 and is called “Presidency compromise text” on the Unified Patent Court which would have been the text which the Polish

35 The topic was expressly deleted from the official agenda of the Parliament for reasons of secrecy, cf. the reports of IPKat of 5./6.12. 2011: http://ipkitten.blogspot.de/2011/12/good-morning-from-amerikat-monday-is.html , and MIPI: http://www.managingip.com/Article/2944672/Managing-Patents-Archive/Ministers-close-to-EU-patent-deal.html : A "deal" was reached with COREPER.36 For instance the press releases by the Polish Presidency, cf. the IPKat reports of 20.12. 2012: http://ipkitten.blogspot.de/2011/12/recap-update-unitary-patent-system-and.html, and the press releases by the Parliament: http://www.europarl.europa.eu/news/en/pressroom/content/20111219IPR34540/html/EU-patent-gets-Legal-Affairs-Committee-green-light.37 St18239/11 of 6 December 2011

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presidency had prepared to be signed shortly before Christmas. This document is particularly remarkable consisting of five pages and 11 headlines under which one can read 11 times the word DELETED – without any further text. The headlines read e.g. Renewal fees, Financial contributions of Member States, Court fees, Language of proceedings, Actions to be brought to the central division, Transitional period, Revision clause, Number of ratifications.. etc.

Further search brought another document to light2 March38 to which an additional document of 1 February 2012 was attached. According to this paper a person had applied for a non-redacted text of the Presidency’s compromise text. The Secretariat had refused the requested access and the Council then submitted a draft reply to COREPER, the Committee of permanent representatives in Brussels, by which the request of information was to be refused. The Danish, Estonian, Lithuanian, Austrian, Slovenian, Finnish and Swedish representatives were in favor of granting access to the full document, all others spoke against publication. The final decision was then left for the Council Meeting on March 8, 2012 where the refusal was confirmed – transparency denied39. Would anybody believe that the ECJ as well as national constitutional courts would approve of these activities as fulfilling the rules of democratic legislation? Constitutional lawyers this author has spoken to are very skeptical. Summary

It has only been possible to set out here a number of the particularly serious omissions and factual errors, already since nobody outside the clandestine circle knows which solutions are being contemplated as majority proposals to be adopted. Many issues are still open that will only become clear once a text which can be regarded as a serious basis

38 St6051/12 of 2 March 201239 st7308/12, with one minister switching camps: the UK voted this time in favor of publication; Germany, France etc. voted against.

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for discussion has been published, and such does not exist yet. The various proposals of the "patent package" are characterised by vague provisions, deliberate gaps and compromises that are completely incomprehensible to practitioners, and that in particular place small and medium-sized enterprises in a considerably worse position. In addition, the hiding of the faults and gaps of the proposed texts and publication of pages with deleted parts is not a legislative procedure how such an important project should be dealt with. The complete exclusion of the interested circles from any discussion in view of the many opinions, resolutions, and reports submitted to the EU Commission, the EP Parliament and the Council is highly unusual for a democratic legislative process. If the future ratification proceedings are not deliberately to be put at risk, the signing of any documents should be postponed and a proper involvement of the public should start in due time with full transparency of the further process.

A few remarks may be appropriate as a basis for further discussion.

If the European offices, the EPO and the OHIM, have had an unexpected success in competition with the national offices, why can the EU court not be expected to achieve the same if it must develop in competition with national courts? There is no other solution which would avoid major errors and is attractive enough for industry at large than to offer the users a choice between the judicial systems. If the aim of achieving the best possible quality is meant seriously, generally acceptable solutions must be developed.

To this end, some people will have to abandon the idea that a project of such commercial significance can be implemented without the consent of – or by ignoring – those who afterwards have to work with those rules. Representatives of industry have repeatedly warned, referring to

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the corresponding political promises,40 that industry would have no interest in a new patent system without visible additional value.41 It is difficult to imagine an obviously reduced value now being accepted even if the very unusual activities and incidents during the legislative proceedings in the last six months had not taken place.

Accordingly, it is time to put the entire package on a new basis and to conduct the discussions with the required transparency and openness. It is difficult to imagine that the Member States and the European Presidency in office have an interest in getting the present papers signed when they have been concluded by ignoring elementary democratic rules and will lead to actions for unconstitutionality if ratified. The Danish Presidency voted in favour of transparency on 8 March, but was defeated by a large majority in the Council.

If the project is to be successful and enjoy general acceptance, the objective must be to achieve the best possible solution, a system cast in one mould, and not a text with a maximum number of compromises; with the latter approach, the EPC would never have become successful. It must also be generally recognized that there are two large groups of users whose interests may not always be identical but who both need a well-functioning patent (court) system:

- Enterprises and individual inventors who for fear of high cost would prefer leaving everything as it is, such as most SMEs, for whom "another" court system could no longer be affordable. They need protection in a few countries by way of EP bundle patents, combined with an efficient and affordable court system close to home and in their local language.

40 Cf. the then German Minister of Justice Zypries who in 2007 at the international patent conference in Munich during the German presidency described the German position as being that there would be no compromise that would not constitute a clear improvement of the status quo; cf. http://www.bpatg.de/bpatg/symposium/symposium.html 41 Cf. the strict rejection by the Swedish Industry Federation, loc. cit., also citing the disadvantages for SMEs; the additional value was also emphasised by Kley, loc. citp S. 29, who warned against a political U-turn.

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- Multinational corporations whose products require protection in every country and that have long been waiting for a larger unitary economic area for which obtaining patents is made easier and where the cross-border defence of rights is efficient and of a high quality. Under such conditions, closeness to home and the question of language are of less importance than the avoidance of parallel proceedings.

Both groups would find their ideal conditions if the new and the present judicial systems were to coexist alongside each other, with respect to patent grant as well as enforcement, so that they will stimulate and fertilise each other.42 The members of the one group would then, depending on the constellation, make use of the institutions of the other group, with the consequence that there need not be a strict separation. The SMEs would be no more impeded or disadvantaged by the establishment of a Europe-wide jurisdiction than conversely an enterprise that frequently conducts parallel litigation in a number of countries would be impeded by the continued existence of the national judicial structures. Both would however require patent judges of the highest qualification.

Accordingly, everything should be done to ensure that the development of the new structures is not further delayed or fails again. This would not require complicated jurisdiction rules and transitional or other limited opt-out provisions if the existing courts were to continue to be available. The language rules would also lose their bite since those who tend towards a unitary language could do so in consultation with the court and the other party.

What all the interested parties wish for in addition – for reasons of cost and quality – is a gradual development of the new judicial structures and not an artificial local judicial presence: the courts should only be created where and when they are needed.43

42 One could even envisage an opinion poll among specialist circles on specific issues, cf. this demand from the FICPI in a submission to the Commission dated 20.9.2011.43 Perhaps one could also ask the judges of the ECJ whether they are at all interested in deciding a large number of private patent disputes for which the court was not created

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and that would definitively go beyond its capacity not only in terms of proceedings.