The law governing licences and assignments of future European patents with unitary effect (unitary patents) is determined by a residency/place of business test for applicants based in the states of the EU participating in enhanced cooperation (member states); German law will apply to licences and assignments for other applicants. This may sound esoteric, but will in fact be of practical significance to many UK-based practitioners, because many large corporations based outside the member states file all their patents in their own name, including for inventions devised by UK-based affiliates.
The UPC Agreement (UPCA) and associated EU regulations determine only some of the things that you can do with a unitary patent. For anything not regulated by the UPCA, the national courts of the member states remain competent (Art.32(2) UPCA). Article 7 of Regulation 1257/2012, implementing enhanced cooperation, applies to the unitary patent as an object of property, which includes how it is treated for the purposes of assignments and licences. This Article 7 provides a set of rules for deciding which country’s law applies to these matters, based upon the member state which is the unitary patent applicant’s country of residence or principal place of business (or, failing that, place of business) on the date of filing.
In the case of a single applicant, the unitary patent is treated in all member states as being a national patent of that member state. So, for example, for an applicant resident in/having a place of business in France on the date of application for a European patent, French law will apply to licences and assignments.
In the case of two or more joint applicants, the first named applicant decides the applicable law, unless the first named applicant fails the residency/place of business test, in which case the country of residency/place of business of the next named applicant prevails. So for joint applicants, one French and one German, the first named will determine the law, which will be French or German accordingly. A positive choice of country could be made to select the most advantageous law, although one can foresee disagreements arising in relation to this matter. In an alternative case of joint applicants, one English and one from the US, the relevant law will be that of England, regardless of which applicant is named first, because the US applicant does not pass the residency/place of business test. For well-known reasons, joint ownership has never been a preferred option for intellectual property practitioners and there are creative ways to avoid it, provided that the parties can agree.
No Applicant from a Member State
In the case in which no applicant (regardless of how many applicants there are) fulfils the residency/place of business test, then, in accordance with Article 6(1) EPC, the unitary patent is treated in all member states as a national patent of the state in which the European Patent Organisation has its headquarters, which is Germany. This is not an academic consideration, because for tax and other reasons, many international companies file their patent applications in the name of entities which are not domiciled/have no place of business in a member state. If we take the case of a multinational Japanese electronics company which files all its patent applications in the name of the Japanese parent, including those which derive from its European affiliates, then patent applications originating, for example, from an affiliate located in London will be subject to German law as regards licences and assignments. The same would apply to patents filed in the name of a company domiciled in Switzerland or, currently, even in Spain.
Get to Know the Relevant German Law
As a result of this, those working for or representing UK affiliates of companies whose businesses are outside the member states may be confronted with questions concerning the German law governing licences and assignments in the near future. The same applies to anyone representing an affiliate in any other member state. A familiarity with fundamental principles will therefore be important. The book* entitled, “The Unitary Package Handbook: a Practitioner’s Guide”, by Steins et al is one source of basic information for non-German speakers.
Or Avoid German Law?
It may be possible to avoid this situation altogether by filing unitary patents in the name of an affiliate from a member state or jointly with such an affiliate (but see the above comment about joint applicants). Indeed, with the advent of Patent Box regimes in the UK (see Richard Turner’s IP Copy Article of 4 December 2014 on the subject) and other European countries, filing in the name of the local affiliate may now be advantageous, but that is a question for tax rather than intellectual property specialists.
Richard Wilding 11 December 2014
Richard Wilding is a consultant at K2, the network of patent and trade mark attorneys and IP consultants developed by Keltie LLP
*I do not seek to recommend this work and derive no benefit from mentioning it. It is available for free as an e-book
Article 7 of the Unitary Patent Regulation indeed refers to national law. In case of a party not based within the UPC territory, that national law is German law. However, the national law of all 25 Contracting Member States, including Germany, also includes the EU Rome I Regulation on the law applicable to contractual obligations (Regulation (EC) 593/2008), which in Article 3 provides for a freedom of choice of the law governing the contract. So, a licence agreement can still contain a valid choice of law, which does not need to be German law.
Bird & Bird
Would this regulation apply if both parties to the assignment/licence agreement are not from a EU member state?
Interesting. Rome I is not restricted to EU parties (see article 2), unlike the Brussel I recast regulation. Moreover, if you assume that a license is a contractual obligation (which is indeed may be debated), there is no reason whatsoever to assume that article 7 of the UPP regulation would cover it, because a license is not a matter of property. Hence, article 4 Rome I applies in the absence of a choice of law in the license, so the applicable law is the law of the country of residence of the non-paying partee, hence patentee, even if non-EU law. Of course, where a licence is relied on as defence against alleged infringement of a unitary or non-opt-out EP patent, the UPCA is competent to decide the issue.