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Our tongue-tied patent system

Published on 01/10/03 at 01:53pm

The concept and creation of the Community Patent has been discussed without success for over 30 years, but substantial progress was made by the European Council in March 2003 in reaching an agreement on jurisdiction and language. However, the European business community and especially the pharmaceutical and bioscience industries have not welcomed the recent proposal.

Patents are important to the advance and development of new emerging technologies, where access to and sharing of information is vital for the progression of the industry. They are particularly important in industries where much investment has to be made to bring a product to market, and where imitation is much cheaper than innovation.

The existing European Patent system is essentially a bundle of national rights that benefit from a centralised application procedure. The patentee seeking protection through the European Patent system selects those European countries where protection for the invention is sought. Enforcement takes place in each country under differing procedures and quality. The Community Patent offers a single, unitary patent right that can be enforced and challenged in a single court with effect throughout Europe.

The BioIndustry Association (BIA), the trade association for UK bioscience companies, has called for a simple and cost effective patent system for Europe to compete with those of the US and Japan. The existing European Patent system has its advantages but is expensive and complex, on average a patent for eight countries is estimated at E50,000. This is largely due to translation requirements, as the claims of a European Patent must be translated into English, French and German at the grant stage. In most member states it must be translated into the language of that state to give the patent effect, with local registration fees added later.

Another problem with a non-unitary system is that different member states might interpret the same patent in different ways. The European Patent Convention sought to ratify and harmonise patent law throughout Europe, yet enforcement procedures differ between European countries. Local litigation lawyers must be retained and briefed in each country where the patent is enforced, adding to the duplication, costs and uncertainty, particularly for pan-European businesses.

The BIA hoped that the Community Patent would overcome these problems in a cost effective, quick and efficient way. The proposals agreed in March 2003 go some way to dealing with the European Patent issues, although some new difficulties are presented. The initial proposal of English as the single language of the Community Patent has been lost in an unsatisfactory political compromise.

Language and translation costs

The cost of translating a patent is prohibitive and can effectively act as a bar to patent protection. This is felt especially by SMEs in the bioscience industry who are in a catch-22 position. The present financial climate means money is at a premium and needed for continuous development while companies are faced with excessive, often impossible, costs to protect that development in securing patent rights. The Commissions proposal in 2000 for the Community Patent found that for an average European Patent, translation costs amounted to roughly 39% of the costs spent in applying for the patent and around 25% of the total costs taking into account the renewal fees post grant. The translation cost cited by the Commission was E12,600  greater than the costs of obtaining and maintaining an average US patent and only slightly cheaper than a Japanese patent.

A Derwent poll in 2000 of the pharmaceutical, bioscience, chemical and engineering industries found that translations and translation costs posed the greatest problems for companies patenting in Europe. Respondents felt that the current European system put European businesses at a disadvantage compared to the US and Japanese systems.

The Council has agreed that the language regime for the Community Patent will be the same as the European Patent up to grant, with applications filed in one of the three official languages of the European Patent Office  English, French or German. Upon grant, the applicant must also provide translations of the claims in the other two official languages. However, within a reasonable time after grant, translations of the claims must be filed in all Community languages, unless a member state renounces that requirement. The Council paper suggests that a failure to comply could result in the whole patent being invalid.

The Council settled on this position for the purposes of legal certainty, non-discrimination and dissemination of patented technology, but failed to recognise the cost issues, suggesting that the applicant can control costs by limiting the number and length of claims. The Council estimates the cost of obtaining an average Community Patent to be in the region of E25,000 which, although considerably cheaper than the average European Patent, is still not competitive with the US and Japanese models.

The Union of Industrial and Employers Confederations of Europe (UNICE) criticised the proposal due to the costs involved, estimating that without the translation costs a Community Patent may cost less than E10,000. The CBI went further, highlighting the fact that the costs would increase with the accession of a further ten new EU members in 2004.

The Council agreed that the maintenance costs for a Community Patent would not exceed those of an average European Patent, suggesting that there would be little cost saving in this regard. While there may be an overall cost saving for those requiring protection across the EU, it is unlikely to be cost effective for those whose interests need only be protected in the larger European countries.

Jurisdiction

The Council recognised the need for a unitary court for the Community Patent, which should secure uniformity of jurisprudence and have exclusive jurisdiction over all matters relating to Community Patents. Initial concerns with a unitary court, such as choice of language and location, have been met with compromises from the Council. Hearings may take place in member states other than where the court is located and proceedings will be conducted in the official language of the member state where the defendant is domiciled. Alternatively, the parties involved can agree to choose a different language for the proceedings.

With a Community Patent, the proprietor does put all of his eggs in one basket, whereas the European Patent, being a bundle of national rights, spreads the risk should one member state declare a patent invalid. If that patent were a Community Patent all protection would be lost but with a European Patent only the protection in that one member state would be lost.

However, the unitary Community Patent Court will probably only become operational in 2010. Prior to then, national courts of member states will have jurisdiction to hear disputes concerning the Community Patent. This transitional arrangement is an unsatisfactory political compromise to appease those who opposed a central court in favour of delegation to the national courts.

One of the problems that the Community Patent was designed to overcome was the uncertainty of national courts interpreting the law and patents differently from each other. Having national courts rule on Community Patents poses several problems. First, the Community Patent will be new and courts will have to create jurisprudence. This will cause disparity between the member states and make nonsense of the idea of a unitary patent. Once the unitary court is created, it will either have to assimilate all of the decisions of the national courts that would probably be impossible or ignore all the earlier decisions. Either way the situation creates uncertainty and, effectively, a temporary system.

Secondly, pending creation of the unitary court, national courts will be asked to

determine the validity of Community Patents. A Community Trade Mark (CTM) can be broken down into national rights if a particular member state finds a CTM to be invalid in one state, thereby preserving the CTM in the other member states. Such an option is not proposed for the Community Patent and therefore a finding by one national court that a Community Patent is invalid will invalidate the patent throughout Europe. Consequently, patentees could find their patents being challenged in jurisdictions where court systems are less robust, with the effect that protection is lost throughout Europe. This means that there is a risk of forum shopping, whereby patentees (which may be very small companies) may find themselves defending their patents for the whole of Europe in a jurisdiction that has little or no experience of deciding patent cases.

Summary

The Community Patent does provide advantages with it being a unitary right. As such it should be more cost effective and quicker to enforce the patent throughout Europe rather than having to start various national actions. This would be particularly attractive to the companies whose products are frequently sold throughout Europe. The costs of obtaining a patent are also likely to be lower than the average cost of a European Patent although the BIA believes that the costs could have been even lower and therefore helped improve competition between Europe and the US. Indeed, it may still be less expensive to obtain effective rights by only designating major countries in a European Patent application rather than incur the full expense of a Community Patent. The Community Patent will be administered through the European Patent Office who, it is hoped, will be able to make it a quicker and more efficient process.

The Community Patent is unlikely to be a reality until 2006 and given industrys reaction to this recent agreement, it is unlikely to be quickly embraced. Companies will need to weigh up the pros and cons, and the marginal cost savings of a Community Patent over a European Patent when compared with uncertainties of a new and fledgling patent right.

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