German Federal Constitutional Court rules against the Unified Patent Court

The Unified Patent Court and Unitary Patent Package has received another hit. Will the project be relaunched soon by a new vote of the German Bundestag?

On 20 March 2020, the German Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) published its long-awaited decision regarding the constitutional complaint filed against the German ratification act for the Unified Patent Court Agreement dated 19 February 2013 (UPCA). In a surprise decision, the BVerfG has admitted the complaint and declared the German ratification act null and void. Its remarkable decision – at worst – places the future of the entire project in question and – at best –significantly delays its implementation.

UPCA: a brief history

Already in the 1960s, an attempt was made to create a patent with unitary effect in all member states of the European Economic Community. Although, this project failed, this initial idea formed the basis for the European Patent Convention (EPC) concluded in 1973. Under the EPC, the European patent was created, which did not have the same legal effect and consequence in each of its member states, which was different from the European Economic Community (today's EU). The European patent is applied for, examined and granted by the newly introduced European Patent Office, but after being granted each patent split into its national parts and legally speaking becomes a national patent.

By 2000, the discussion about a patent with unitary effect in all EU member states – comparable to Community Trademarks or Community Designs – surfaced again. The European Commission gave massive support to this project, eventually resulting in EU Regulation No. 1257/2012, which introduced the European patent with unitary effect.

In fact, this EU Regulation gives applicants the option of designating that the European patent can have a unitary effect in all EU member states participating in this project of enhanced judicial cooperation in addition to designating it as a recognised patent in another EPC member state. For the EU Regulation to come into force, however, the UPCA must come into force since the Unified Patent Court is needed to ensure the unitary effect of the patent. The UPCA must be ratified by at least 13 member states, among them France, the UK and Germany – the three member states where the most patentees of granted European patents originated in 2012. Currently, France, the UK and 14 additional member states including Italy and the Netherlands have ratified the UPCA.

In order to come into effect, the UPCA must only be ratified by Germany, which had been considered the "safest candidate". The decision of the BVerfG delays this ratification and the entire project.

The constitutional complaint

The constitutional complaint in Germany against the ratification act for the UPCA was filed immediately after German legislators had passed the law on 31 March 2017. The complaint's filing became publicly known on June 2017 when it was revealed that two months before, the BVerfG had asked the German Bundespräsident not to proceed with execution of the ratification act because of a constitutional complaint that had been filed. The BVerfG gave few details about the applicant and the reasoning behind the complaint. Both became known in August 2017 when the BVerfG asked the German government, both German parliamentarian chambers (Bundestag and Bundesrat) and several interested German and international associations to comment on the constitutional complaint.

Now, almost three years later, the BVerfG has rendered a decision, which has shocked many experts. In fact, the second senate of the BVerfG made its decision with a 5:3 vote. However, the dissenting opinion of the three judges was not based on the ascertained lack of compliance with the formal requirements on the majorities set by the German constitution (Grundgesetz – GG), but whether the applicant has a standing to sue.

The BVerfG's decision is based on the fact that the German ratification act for the UPCA lacks the majority of two-thirds of the members of the German Bundestag. The draft bill was accepted unanimously after third reading on 10 March 2017. However, when the vote was taken only 35 MPs or so were present. Furthermore, when the ratification act for the UPCA passed the Bundesrat on 31 March 2017, it was not recorded whether the Bundestag had a quorum or if the vote was made with the constitutionally required two-thirds majority.

The BVerfG holds that the UPCA is a treaty concluded under international law, but also supplements EU law and is closely linked to the EU. Therefore, the ratification law for the UPCA must comply with Art. 23 GG, which sets specific constitutional requirements if certain sovereignty rights are transferred from Germany to the EU. In particular, according to Art. 23 para. 1 sent. 3 and Art. 79 para. 2 GG, a qualified majority of two-thirds members in both parliamentarian chambers are required since, according to the BVerfG's opinion, the UPCA amends the German constitution. This opinion is based on the fact that the purpose of this treaty is the transfer of jurisdiction of patents from German courts to a supranational court, the Unified Patent Court. However, in Germany jurisdiction in principle is overseen by the BVerfG, the Federal Courts (Bundesgerichte) and the courts of the Federal states (Bundesländer), according to Art. 92 GG. Hence, the transfer of jurisdiction as envisaged by the UPCA modifies this constitutional allocation of competence. Furthermore, it effects a material change of the constitution since German courts will no longer be able to ensure compliance with the fundamental rights of citizens warranted in the constitution to the extent that competence has been transferred from them to a supranational organisation.

What's next?

The project to create a European patent with unitary effect will be significantly delayed, if not halted indefinitely.

Certainly, a new bill of the ratification act for the UPCA could simply be passed through the two German parliamentarian chambers (Bundestag and Bundesrat) with constitutionally required majorities. Fortunately, the BVerfG holds that all other objections based on material German constitutional law are unsubstantiated. Still, the applicant will reportedly consider to file a new constitutional complaint with elaborated reasoning against any newly passed ratification act. Therefore, the high court's decision appears to be a clear demand that the Bundestag carefully review formal constitutional requirements in the legislative process, and devise a legislative way to fix this failure.

This decision, however, comes at an inopportune time. Currently, all countries are struggling with the coronavirus crisis and have other pressing priorities. Moreover, the Bundestag has already dealt with the ratification act for the UPCA. In February 2019, while its constitutionality was pending at the BVerfG, the right-wing German Alternative für Deutschland (AfD) party filed for revocation of the ratification law for the UPCA. After debate in the Bundestag in March 2018, this request was sent to four commissions. This clearly indicates that passing a new ratification bill in the German parliament will not happen easily or quickly, particularly with the new majorities that will come to power after the 2021 election.

Also, the current international situation must not be overlooked. Even if Germany ratifies the UPCA soon, it is questionable whether its ratification by the UK will still be sufficient for it to come into effect after Brexit. Certainly, this ratification requirement could be overcome with Italy's ratification. But even then, it seems clear that the UK no longer intends to be a member of the Unified Patent Court system and allow European patents with unitary effect within its territory. The UK's exit could significantly reduce the value of a European patent with unitary effect. Furthermore, the section of the central chamber of the court of first instance of the Unified Patent Court, which would oversee chemistry and pharmaceutical cases, would have to be de-localised. This would likely entail an amendment to the treaty, which would lead to fierce negotiations between member states.

Despite all these potential hurdles and obstacles, one fact still brings hope, and that is the many challenges the project has overcome in the past and the many enthusiastic supporters who remain committed to bringing this project to life.

For more information in the UPCA in Germany and German patent issues, contact your regular CMS source or local CMS expert Dr. Thomas Hirse.