On June 23, 2016, British citizens voted in a referendum in favor of exiting the European Union. Termed “Brexit,” the United Kingdom’s departure effected global markets and caused the British pound to fall to its lowest level in decades. Brexit, however, may have also jeopardized Europe’s plans for consolidating its patent system through a Unitary Patent system.
Some quick history — the Unitary Patent system is the European Union’s attempt in 2013 to propose a new European patent with unitary effect and a unified European patent court (“Unified Patent Court” or “UPC”). Both are designed to promote homogenous patent protection across participating EU states, so companies can enforce their patent rights with greater predictability and efficiency. Under the Unitary Patent system, when a patent is granted, the patentee can request (1) a unitary patent—which is enforced across all participating states in a single action; (2) a traditional European patent; or (3) a unitary patent alongside European patent protection for any country not covered by the UPC agreement. For parties enforcing or defending their patent rights, the UPC could eliminate the unnecessary duplication of multiple actions in different member states and avoid divergent results from parallel court proceedings.
Enter (or exit, rather) Brexit. The United Kingdom’s departure from the EU presents a logistical nightmare for the proposed Unitary Patent system. Most obviously, the UK is one of three states that must ratify the new system for it to take effect even in other parts of Europe. Further, London was originally slated to be one of the three locations for the UPC central division (a division for hearing revocation and declaratory judgment actions). Brexit will likely force the European Union to renegotiate these and other aspects of the Unitary Patent system altogether.
So what does this mean for U.S. companies with a European presence?
For companies applying for a traditional European patent, not much. The Unitary Patent system governs what happens at, and after, the grant of a patent, so companies will continue to use the same process when applying for and participating in the examination of a European patent.
Companies looking to enforce a European patent in multiple markets, however, should closely monitor how the European Union negotiates the Unitary Patent system in the wake of Brexit. Proceeding without the UK would significantly diminish the value of the Unitary Patent—the UK is home to the world’s fifth largest economy by GDP and boasts a significant portion of European patent filings.
Companies should also review their present and future licensing agreements. Any company granting or receiving a license to a traditional European patent should negotiate provisions clearly defining which parties have the right to enforce the patent under future regimes.
While it is still too early to determine the full effect of Brexit on the future of the European patent system, one thing is clear: Companies have much to think about while the dust settles.