Framing the IP framework

Patricia McGovern examines the threat to the effective enforcement of patents and why Ireland must play to its strengths to continue to attract FDI.

In its Statement of Strategy 2011-2014, the Department of Jobs, Enterprise and Innovation set out what it saw as Ireland’s competitive strengths. These include having a strong legal framework for intellectual property (IP) and a proven track record in attracting the world’s top multinationals as well as strong indigenous enterprise sector.

It is crucial for the future of the Irish economy that those strengths are not diminished in any way. Ireland is currently on the cusp of making a decision which, depending on the decision that is taken, may enhance those strengths or alternatively may make Ireland a less attractive place in which to conduct business.

The background to this matter involves patents. Patents are the means by which inventions are protected and the obtaining and enforcing of patents are key elements of the IP strategy of businesses that generate IP such as those in the pharma and hi-tech sectors.

These are sectors which are of immense importance to our future growth. Currently if a business wishes to obtain patent protection in Europe it can obtain national patents in the countries of interest or alternatively it can apply for a European patent and designate the countries of interest.

A European patent is not a single patent valid throughout Europe. Rather, an applicant for a European patent ends up with a bundle of national patents granted under the laws of the participating countries that it has designated in its European patent application. National patents, and patents acquired via the European patent system, are enforced and their validity determined on a country by country basis.

For decades, plans have been under discussion at EU level to create a system with a single patent that would be valid in all member states of the EU and enforceable in a single court. These plans eventually came to fruition in 2012 with the creation of the Unitary Patent (a single patent effective in all participating EU member states) and a Unified Patent Court.

Unified patent agreement

The Agreement on the Unified Patent Court (UPC), February 19th 2013, has been signed by 25 EU member states including Ireland; Spain, Italy and Poland are not participating. The agreement will come into existence once it is ratified by 13 EU member states including France, Germany and the UK. The only countries that have ratified the agreement to date are Austria and France (there are unconfirmed reports that Malta may also have ratified).

Ireland will need to hold a referendum on the issue as the ratification by Ireland will require an amendment to the Constitution to provide for the role of this new court in the administration of justice. This referendum is likely to take place at some stage in 2015.

The UPC will be a very different type of court from anything that we have been exposed to in Ireland before. It will be a pan-European court and will have a two tier structure consisting of a Court of First Instance and a Court of Appeal. There will also be a Registry. The Court of First Instance will have a central division – based in Paris with subsidiaries in London and Munich – and each member state participating will be entitled to elect to either host a local division or opt to join a regional fivision. It is this choice, whether to host a local division or to become part of a regional division, with for example, the UK, that will determine in the long-term whether Ireland can maintain its competitive strengths.

Local versus regional

If Ireland does not opt to host a local division then a business based in Ireland litigating or defending patent disputes will have to leave Ireland to do so. By way of example, you could have a business in Mayo who discovers that a business in Cork is infringing its unitary patent. If Ireland has not opted to host a local division but rather has opted to join a regional division with the UK, then this dispute will have to be litigated in the UK.

This will have many consequences; not only for the individual businesses which will have to incur increased cost and the additional management time involved, but it will also have a significant effect on the Irish economy.

The increased expenditure will leave individual businesses with less revenue to invest locally and will invariably have an adverse effect on job creation. It will also be a factor that may be taken into account when multinationals are deciding if Ireland is an appropriate country to base all or part of their business. In addition, the income (and consequent tax take) that would arise from the litigation being conducted in Ireland will be generated elsewhere. Inevitably the expertise of IP professionals in Ireland in the field of patents will diminish.

While the number of patent cases in Ireland each year is relatively small, this is not of itself a reason to opt to join a regional division. Indeed, the agreement recognises this by expressly permitting a country with less than 50 patent cases per year to host a local division.

Opting to join a regional division will erode Ireland’s currently strong legal framework for IP. It will also erode Ireland’s ability to attract foreign direct investment. Currently Ireland, at 17.8%, is the EU country with the highest percentage of jobs generated outside the EU. It will be next to impossible to sell Ireland as smart economy where access to justice within Ireland to protect and defend key IP rights is not available.

As Courts of First Instance sit in panels of three judges, if Ireland opts to host a local division, the panel will consist of one judge from Ireland and two judges from a pool of judges made available from other member states. However, should Ireland opt to become part of a regional division with the UK, the panel will consist of two judges who are nationals of the participating member states and one judge drawn from the pool.

There is no guarantee that there will be an Irish judge on the panel in such instances. A court with no Irish judge may not fully appreciate the local impact in Ireland of a decision it makes, particularly in circumstances where it grants an injunction, the effect of which could be to shut down a plant in Ireland.

Public debate

It is regrettable that there has been little or no public debate on this issue which is of such immense importance to Ireland’s future.

Understandably, any government in the current world economic climate is rightly concerned about costs. However, even if Ireland opts to joint a regional division it will still have to contribute for the first seven years to the cost of the UPC. There is no reason why the existing court structure, such as buildings and personnel, cannot be utilised to offset the cost of hosting a local division.

Indeed, under the agreement it is permissible for a judge of the UPC to exercise other judicial functions at national level. A similar debate is currently taking place in Scotland with Scotland urging British MPs to ensure a division of the UPC is located in Scotland and pointing out that Scotland will undoubtedly suffer if it cannot determine its own patent issues in Scotland. This has led the UK government to state that it is open to locating local divisions in different parts of the UK. If a number of local divisions are located throughout the UK, this will put Ireland at an even greater competitive disadvantage, as the UK will be able to offer multiple locations for the convenience of litigants.

Many interested bodies including Ibec, the American Chamber of Commerce, the Law Society of Ireland and the Bar Council of Ireland have made submissions to the Department of Jobs, Enterprise and Innovation strongly urging the Minister to opt to host a Local Division. The agreement contains a seven year transitional phase. Ireland could opt to host a local division and use the seven year period to analyse its success. However, if it opts to join a regional division, it will be next to impossible to reverse that decision in the future.