The IPKat has published a post this week (09/03/15) on the Unitary Patent’s renewal fees that raises important questions for the cost and the attractiveness of Unitary Patents. Renewal fees have in fact always been a hot topic as the cost of obtaining a Unitary Patent and renewing it might weigh heavily in the decision of the patentee as to which kind of patent to get. This is also particularly relevant in a context where Italy and Spain, two popular validation countries, will not take part in the UPC with the consequence that additional fees will have to be paid for both countries.
Moreover, renewal fees are central to the functioning of the European Patent Organisation (EPO), which is partly dependent on this income for its budget, as provided in Chapter Five of the European Patent Convention on Financial Provisions. Article 39 in particular states that “Each Contracting State shall pay to the Organisation in respect of each renewal fee received for a European patent in that State an amount equal to a proportion of that fee, to be fixed by the Administrative Council; the proportion shall not exceed 75% and shall be the same for all Contracting States.” This amount shall following Article 40 be fixed at such a level as to ensure that the revenue is sufficient for the budget of the Organisation to be balanced.
To this effect, the Unified Patent Court’s Select Committee launched at its 11th meeting -that took place in December 2014- preparatory work on the “distribution key for the repartition of renewal fees between the EU participating member states”, on the basis of “additional simulations of fee level scenarios submitted by the EPO”.
Therefore, although not yet public and consequently unverifiable, the document referred to by the IPKat, entitled “Proposals for the level of renewal fees for European patents with unitary effect“, sheds light onto the fee structure that could apply to the renewal of the Unitary Patent’ fees.
But what are EU Regulations saying about renewal fees? Before looking into the data published by the IPKat and their analysis, let’s look at what Regulation (EU) No 1257/2012 implementing enhanced cooperation in the area of the creation of unitary patent protection dated 17 December 2012 says.
Article 12 of this Regulation states that:
“1. Renewal fees for European patents with unitary effect shall be:
(a) progressive throughout the term of the unitary patent protection;
(b) sufficient to cover all costs associated with the grant of the European patent and the administration of the unitary patent protection; and
(c) sufficient, together with the fees to be paid to the European Patent Organisation during the pre-grant stage, to ensure a balanced budget of the European Patent Organisation.
2. The level of the renewal fees shall be set, taking into account, among others, the situation of specific entities such as small and medium-sized enterprises, with the aim of:
(a) facilitating innovation and fostering the competitiveness of European businesses;
(b) reflecting the size of the market covered by the patent; and
(c) being similar to the level of the national renewal fees for an average European patent taking effect in the participating Member States at the time the level of the renewal fees is first set.
3. In order to attain the objectives set out in this Chapter, the level of renewal fees shall be set at a level that:
(a) is equivalent to the level of the renewal fee to be paid for the average geographical coverage of current European patents;
(b) reflects the renewal rate of current European patents; and
(c) reflects the number of requests for unitary effect.”
Hence, according to the IPKat, in order to reconcile the imperatives of a balanced budget and an attractive cost for renewal, the EPO would have adopted the following structure for setting Unitary Patent’s renewal fees:
“Years 3 to 5: the level of the EPO’s internal renewal fees (IRF) [these are the fees payable to the EPO for pending patent applications currently]
Years 6 to 9: a transitional level between the IRF level and the year 10 level
From year 10, a level equivalent to the total sum of the national renewal fees payable in the states in which European patents are most frequently validated (TOP level).”
So what does it mean? Between years 3 and 5, the renewals applicable to a Unitary Patent would correspond to the same fee level as those applicable to European Patent applications; thus ensuring consistency in the application of the fees in the pre and post grant phases. In fact, as highlighted by the IPKat, charging a renewal fee for the first few years of the patent could discourage patentees to opt for a Unitary Patent, especially as “in some states, national renewal fees (which apply equally to national patents and to European patents validated in those states) are initially very low or non-existent until the fourth or fifth year.”
Moreover, the document that the IPKat had access to appears to argue that paying the total sum for national countries (three to five) might initially look more attractive in terms of costs than paying the internal renewal fees. The EPO however seems to point out in this document that the cost of hiring a local patent attorney or a specialist renewal firm would add to the final cost of renewal, with the consequence that the difference between the renewal costs of a Unitary Patent and those of a European Patent would be very small.
The three-tier fee structure proposed would then be divided between years 3-5, years 6-9 and years 10-20. For years 10-20 the calculations for the level would be based on the total of national renewal fees payable in the most frequently validated countries. But as the IPKat explains, “in the classical European patent system, patentees who have validated their patent in an average number of states after grant can always abandon the protection state-by-state over the patent term, and in the later years often narrow it down to the three major European markets. As they will lose this flexibility under the Unitary Patent protection in 25 states, they might be discouraged from opting for unitary protection if the fees for the last five years are prohibitive compared with those for just three to five of the bigger countries.” The EPO however seems to have taken this issue into consideration and for years 10 onwards, it proposes to charge the total sum of national renewal fees payable in the most frequently validated states, thus significantly reducing costs for users as their additional fee-administration charges will be considerably lower.
Following these observations and with the necessity to render the Unitary Patent cost-efficient for patentees in mind, two proposals have apparently been made. In the first one the years 10 onwards level would be based on current renewal fee levels for four European countries (TOP 4 level). In the second one the years 10 onwards level would be based on current renewal fee levels for five European countries (TOP 5 level) but with a reduction for certain categories of patentees, namely SMEs, natural persons, non-profit organisations, universities and public research organisations.
The IPKat gives the following numbers for TOP 4 and TOP 5 levels and provides us with a table presented as “the Annex 2 which compares the “Top 4” and “Top 5” proposal with the current EPO internal fees for pending applications, and the national renewal fees for 25 member states”:
“The TOP 4 level renewal fees would be as follows:
2nd year: EUR 350
3rd year: EUR 465
4th year: EUR 580
5th year: EUR 810
6th year: EUR 855
7th year: EUR 900
8th year: EUR 970
9th year: EUR 1 020
10th year: EUR 1 175
11th year: EUR 1 460
12th year: EUR 1 775
13th year: EUR 2 105
14th year: EUR 2 455
15th year: EUR 2 830
16th year: EUR 3 240
17th year: EUR 3 640
18th year: EUR 4 055
19th year: EUR 4 455
20th year: EUR 4 855
Over 20 years, that adds up to EUR 37 995.
The TOP 5 proposal involves a 25% reduction for the entities mentioned above in respect of years 2 to 10 only. The proposed fees are as follows with the fee reduction in brackets:
2nd year: EUR 350 (EUR 262.50)
3rd year: EUR 465 (EUR 348.75)
4th year: EUR 580 (EUR 435.00)
5th year: EUR 810 (EUR 607.50)
6th year: EUR 880 (EUR 660.00)
7th year: EUR 950 (EUR 712.50)
8th year: EUR 1 110 (EUR 832.50)
9th year: EUR 1 260 (EUR 945.00)
10th year: EUR 1 475 (EUR 1 106.25)
11th year: EUR 1 790
12th year: EUR 2 140
13th year: EUR 2 510
14th year: EUR 2 895
15th year: EUR 3 300
16th year: EUR 3 740
17th year: EUR 4 175
18th year: EUR 4 630
19th year: EUR 5 065
20th year: EUR 5 500
Over 20 years, that adds up to EUR 43 625 and EUR 41 655 for the normal and reduced level respectively.
Renewal Fees Table:
in € per OY TOP4 TOP5 SME EPO Internal renewal fees 25 MS
2 350 350 252.50 0 0
3 465 465 348.75 465 1,298
4 580 580 435 580 1,874
5 810 810 607.50 810 2,545
6 855 880 660 1,040 3,271
7 900 950 712.50 1,155 3,886
8 970 1110 832.50 1265 4,625
9 1020 1260 945 1380 5,513
10 1175 1475 1106.25 1560 6,416
11 1460 1790 1790 1560 7,424
12 1775 2140 2140 1560 8,473
13 2105 2510 2510 1560 9,594
14 2455 2895 2895 1560 10,741
15 2830 3300 3300 1560 11,917
16 3240 3740 3740 1560 13,369
17 3640 44175 4175 1560 14,753
18 4055 4630 4630 1560 16,065
19 4455 5065 5065 1560 17,660
20 4855 5500 5500 1560 19,197
Total 37,995 43,625 41,655 23,855 158,621
So what should we conclude from these different fees? It appears from this table that the Unitary Patent will not be financially attractive for patentees who wish to have a protection for less than 4 states, such as the UK, Germany and France. For users who on the contrary wish to get protection for at least four countries, and a fortiori for a large number of countries, then the Unitary Patent would be cost efficient and thus attractive. We thus fully agree with the IPKat who points out that many users would have liked the EPO to draft a TOP 3 –or lower- level. However, according to the EPO’s communiqué dated 15 December 2014, we will only have to wait until June to find out the exact content of “the appropriate decisions on the financial and budgetary aspects of the implementation of the Unitary Patent Protection”…
