Patent trolls are a familiar part of the Intellectual Property landscape, although activity in Europe has historically been lower than in the US.
With the anticipated arrival of the Unified Patents Court, a single court covering most of the EU market this was expected to change, but the UK’s General Election has thrown a huge spanner in the works of UPC ratification.
In fact, there is a huge question mark over the UK’s future involvement in the UPC after Brexit and this could have implications for UK companies looking for a single court to enforce and protect their patents throughout the European Union.
The role of patent trolls
In the world of technology, intellectual property (IP) is the secret sauce that will determine how valuable the business is - now and in the future. Not only will it help to differentiate between tech companies, but it is vital for attracting future investment and supporting international expansion.
Yet, not everyone uses intellectual property in the same way. Some parties, patent trolls, base their business model on aggressive IP lawsuits and quick settlement payments.
Patent trolls fall under the so-called Non Practicing Entities (NPEs), organisations that hold a patent for a product or process without any intention of developing it. However, not all NPEs are patent trolls: universities, research organisations or individual investors who lack the resources to develop something they hold the patent for also fall within this category.
There are so many factors in a patent system that might influence or encourage activity by an aggressive NPE, including litigation costs, the cost risk involved, uncertainty around outcomes and the speed with which cases are decided on.
Currently the US system is more attractive than Europe for NPEs: with the losing side typically not paying the winner’s legal costs, NPEs feel encouraged to ‘have a go’. The US additionally is a large geographical area, so a single decision can be effective across the entire country.
In Europe it is still necessary to enforce patents country-by-country, but the arrival of the Unified Patents Court (UPC) could change all that.
Unified Patent Court
The common patent court enables businesses to protect and enforce their patent rights across Europe in a more streamlined way – with a single patent and through a single patent court.
It will make it easier and a lot more cost-effective for tech companies to enforce their patents across a number of European countries.
However, it can also become fertile ground for patent trolls. Once ratified, the UPC could play into their hands by giving them a much larger geographical market and a single court to enforce patents across 25 EU countries.
The economic impact of court decisions are likely to be very high for the losing party, much higher in fact than in the present system. Currently, it’s also difficult to predict how the court will behave. Both factors will act as an incentive for parties to settle before issues come to a trial, again tipping the balance in favour of patent trolls.
The UK’s role in the UPC
Before Prime Minister Theresa May called a General Election, it was widely anticipated that the UK would have ratified the UPC agreement late April or in May so that the Court could come into operation early 2018.
This would have meant the UK operating under the UPC at least a year before the UK comes out of the EU. In turn, other European countries would have found it more difficult to take the UK out of the UPC, giving the UK a much stronger hand at the Brexit negotiation table.
Alas, that wasn’t to be as the General Election closed the very small window of opportunity as it simply wasn’t high up on the priority list of a Parliament preparing to be dissolved.
What this effectively means is that the UPC is very unlikely to come into effect in early 2018 and the earliest is probably a year later in 2019 – around the same time that the UK completes its Brexit negotiations and steps out of the EU.
The likelihood that the UK will be part of the UPC in the future is looking increasingly small.
Impact on UK businesses
This high level of uncertainty has no impact on what companies should be doing now. No amount of speculation and theorisation will shed any light on what the situation will be like in two years’ time, so companies should keep their options open.
A UK company looking to protect their IP throughout Europe should make an application at the European Patent Office as usual. A European patent application filed today is unlikely to be granted before the anticipated date of Brexit in 2019.
Avoiding the trolls
When it comes to patent trolls the risk for UK companies will remain effectively the same, regardless of whether the UK will be part of the UPC. Yes, the UPC could make it easier for a patent troll who successfully asserts its legal power to close off 25 valuable markets with one fell swoop, but the reverse is also true: companies can enforce and protect their intellectual property through one court diminishing costs significantly.
For NPEs, the UPC becomes slightly less attractive as a playing ground if the UK isn’t part of it: it is a relatively small part of the much-larger European market.
When it comes to avoiding patent trolls altogether, unfortunately, there are no proven methods but there are steps that companies can and should take.
Think like an IP lawyer in order to identify what could possibly go wrong. Fully assess any potential risks, do your due diligence and be aware of the patents you use so that any issues don’t hit you by surprise. Consider building your own patent portfolio.
Tech companies operate in an industry that is constantly and rapidly changing. To prevent falling foul of IP law, patent trolls or any other IP challenge which could stunt international expansion, tech companies need to keep an eye on the changing IP environment in the context of Brexit and the UPC.
By taking proactive steps themselves they put themselves in the best position to protect their businesses against future legal challenges, regardless of whether this is in London’s Patent Court or one of the Unified Patent Court’s locations.
Peter Arrowsmith, Partner, Gill Jennings & Every
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