On 20 March 2020, three years after the challenge was originally brought, the German Constitutional Court ruled that the approval of the Unified Patent Court (UPC) legislation by the German Bundestag was unconstitutional on the basis that the legislation had not been approved by the two-thirds majority needed for any legislative change which amends the German constitution in substantive terms, in this case by ceding significant sovereign powers to the UPC.
Although the required majority was not achieved, this appears to have been due to a lack of understanding of the proper process for ratification, rather than any fundamental lack of support for the UPC agreement in the Bundestag. In the event, the legislation was passed unanimously by the approximately 35 members of the Bundestag present on the day, but far short of a two-thirds majority of the 631 Bundestag members.
Importantly, the German Constitutional Court rejected the other grounds on which the approval of the UPC had been challenged. These concerned the procedure and basis for the selection of UPC judges, a lack of sufficient justification for interference with the German constitution, and an allegation that the UPC agreement would be contrary to EU law. Had these challenges prevailed, they would have represented far bigger obstacles to the establishment of the court.
At first glance, the only step that therefore now appears to be required is the re-ratification of the UPC agreement by the Bundestag, only this time with the proper two-thirds majority. While this might take time to organise, in particular in light of the current coronavirus crisis, it does not seem to represent a major stumbling block. Or does it?
The political landscape in Germany has shifted since the UPC agreement was last before the Bundestag. The right-wing Alternative für Deutschland (AfD), for example, now holds 89 seats and is known to oppose the UPC agreement. Achieving the majority required for approval is therefore not a given. But there are more fundamental questions to answer before we come to any re-ratification of the agreement by the Bundestag.
A number of important developments have taken place in the years that the constitutional challenge was pending. In particular, the UK indicated this month that they do not intend to seek to participate in the UPC following the UK’s exit from the EU. From the perspective of UK IP practitioners, this was an unwelcome move by the UK government. The Chartered Institute of Patent Attorneys (CIPA) had lobbied extensively for the UK’s continued participation in the UPC following BREXIT, although membership by non-EU states is not envisaged by the current agreement. This latest development means that the agreement will need to be renegotiated to decide the new location of the UPC section which was due to be located in London, with Italy and the Netherlands currently emerging as front runners. It is entirely possible that there will be attempts to renegotiate other aspects of the agreement in the process as well.
It therefore seems highly unlikely that the UPC agreement will come before the German Bundestag for re-ratification in its current form at all. In addition, a renegotiated UPC agreement would also need to be re-ratified by the other participating member states, while the UK will need to find a way to back out of an agreement it has already ratified.
All of the above will likely result in further substantial delays to the UPC project. However, delay is unlikely to spell the death for the UPC. There are far more fundamental questions to answer. In particular, does sufficient political interest in the UPC remain now that the UK has indicated it will not participate.
The stated aim of the UPC was to simplify and reduce the cost of patent litigation in the EU by providing a single forum for settling disputes. With the UK no longer intending to take part, the UPC has lost a large part of its attraction, as a need for separate litigation in the UK would likely remain and patent disputes in the UK are not only common but expensive. The UK was further expected to be a significant source of funding for the court, as well as providing access to judges with proven expertise in patent litigation. This expertise, in particular, will be hard to replace as high levels of IP litigation only take place in a small number of EU member states. The loss of UK judges is therefore a major blow to the project of establishing the UPC, given that well-respected judges will be fundamental to the success of the court.
What seems at first a minor stumbling block on the way to establishing the UPC may therefore yet play its part in spelling the end of this admirable project when viewed in the wider context of political changes and their implications.
UPDATE AS OF 26 NOVEMBER 2020: the German Bundestag approved the ratification bill for the Unified Patent Court (UPC) agreement, this time with the required two-thirds majority, demonstrating that the necessary political will to complete the UPC project remains. Read more in Tanis' blog German Bundestag approves legislation to ratify the Unified Patent Court Agreement.
