On 23 May 2023, ACT | The App Association held an online event titled ‘Perspectives on the upcoming launch of the Unified Patent Court’. The event brought together App Association members who are affected by standard-essential patent (SEP) policies, academics, litigators, and industry experts. The conversation was centred around the highly anticipated launch of the Unified Patent Court (UPC).

App Association founder Mike Sax welcomed everyone and engaged in a conversation with Vincent Keunen, founder and CEO of the connected health company Andaman7, about the importance of intellectual property to his company. Vincent discussed the complexities of the legal systems and valuable insights into the challenges faced by small and medium-sized enterprises (SMEs) within this context.

The App Association’s IP counsel, Priya Nair, moderated our panel of experts:

  • Dr Enrico Bonadio, reader in IP Law at The City Law School, University of London, who has authored more than 100 articles, case notes, and book chapters and has delivered classes and talks in more than 120 universities and institutions spanning six continents.
  • Ms Giuditta Caldini, associate at Latham & Watkins, who has represented clients in complex cases involving all areas of EU competition law, including abuse of dominance, restrictive practices, and merger control.
  • Dr Andreas Kramer, partner at Vossius, who has extensive experience in patent infringement proceedings, in particular in the area of mobile communications including the antitrust-based fair, reasonable, and non-discriminatory (FRAND) terms.

During her introductory remarks, moderator Priya Nair assessed the potential influence of the UPC on SMEs and the licensing system with a focus on ensuring a balanced approach that safeguards the interests of SMEs and encourages innovation. She explained how SMEs operate on narrow profit margins, and unexpected legal fees, uncertainties, and injunctions can seriously diminish their business sustainability. She stated that the App Association will work to ensure that a single injunction granted across all UPC-participating countries does not disproportionately burden defendants, as the threat of a wide injunction could potentially hinder the willingness of SME innovators to continue operating due to excessive foreseen costs.

 The panellists engaged in a comprehensive discussion, sharing their expertise and insights on the UPC’s implications for SMEs and the licensing landscape. They analysed the potential effects of the UPC-mandated injunctions on SME defendants and the associated costs and uncertainties that standards users, and especially SMEs, might face in using the licensed technology in their products.

Dr Bonadio presented the preliminary findings of his upcoming study titled, ‘A proposed Legal Approach to the Unified Patent Court and Standard Essential Patents’. This study will propose a legal approach for the UPC to leverage on its analysis of royalty rate valuations, and the appropriateness of injunctions. The approach will seek to solidify a unified method to be applied across EU Member States and position the EU to positively influence global SEP law and policy.

In his presentation, Dr Bonadio provided an overview of the unitary patent system and the UPC. The unitary patent system will provide protection for inventions across a plurality of EU Member States, while the UPC will enforce and challenge these patents. He emphasised that it will take time for the UPC to establish case law and clarifications on various issues, and that there might be some influence from national laws especially German, Italian, and French law. Dr Bonadio also discussed the participating Member States and the advantages of the new system, including cost savings. One of the main challenges of the UPC will be to match the different interpretations of different national case laws, coming from judges from a variety of jurisdictional backgrounds. The UPC might create ‘confidentiality clubs’ where each information from each case will be kept confidential among lawyers and parties of the case, therefore reducing the general level of transparency that could be achieved through open-doors litigation.

Ms Giuditta Caldini discussed the main challenges and opportunities related to the operations of the UPC from an antitrust perspective. She covered two main topics: injunctions and FRAND terms. Ms Caldini emphasised the need to consider European antitrust laws. Regarding injunctions, the challenge lies in interpreting Huawei v. ZTE, particularly the concept of a ‘willing licensee’ to determine when injunctions can be granted.

On the topic of FRAND terms, Ms Caldini finds the disclosure of comparable licenses crucial for transparency. She referred to the Horizontal Guidelines to be issued by the European Commission on the application of Article 101 to standardisation agreements, which provide guidance on FRAND terms and royalty rates. She hopes that the Court will follow the general policy trend to enhance transparency for potential licensees.

Ms Caldini also referenced the new Proposal for a Regulation on a framework for SEPs proposed by the European Commission, pointing out the provision regarding the non-binding FRAND determination and the possibility for a SEP owner to request a financial injunction. Ms Caldini invited everyone who is interested in the functioning of the UPC to also follow the new draft framework for SEPs proposed by the European Commission because the UPC will inevitably operate in the context of that framework once adopted.

Dr Andreas Kramer discussed the potential impact of the UPC on the patent litigation landscape in Europe. He mentioned that the popularity of the court system in Germany for SEP holders, particularly in patent infringement cases, could be replicated by the UPC, at the detriment of those who innovate using standards. Factors that have contributed to the success of the German court system include the duration of proceedings, availability of injunctions, reduced costs, and territorial coverage.

The UPC, covering a broad territory, will be attractive to patentees for the significant effect of injunction provisions. If a patent infringement is determined, an injunction can be easily enforced, compelling standards users to either exit the market or surrender to take the license on the patentee’s terms.

Dr Kramer further explained how the upcoming UPC regime will share many similarities with the German court system, with its specific case law and interpretation of European law. We may see some level of harmonisation, but there may not be a considerable change compared to what has been decided in German courts so far. The UPC is expected to apply the German case law, attracting many patentees to file cases there. Other patent-friendly jurisdictions like the Netherlands may also see similar harmonisation within the UPC regime.

Our panel of experts provided pragmatic and constructive solutions to address the challenges associated with the UPC’s launch and the dynamics of FRAND licensing negotiations. The App Association remains committed to advocating for SMEs, driving innovation, and working towards a regulatory framework that rewards their contributions to the innovation technology landscape.