The European Commission’s take on the UPC’s impact on SMEs:

The European Commission published in the last quarter of 2015 a “Staff working document”  analysing Europe’s single market strategy and ways to encourage modernisation and innovation within the EU.  The consolidation of Europe’s intellectual property framework, is -as expected- a pillar of the Commission’s strategy.  The Staff working document,  in Section 3.3.1, looks specifically at the effects of the UPC on the consolidation of Europe’s IP structure, and in particular on SMEs.

The impact of the UPC on the latter has been a hot topic since the start of the Unitary Patent Package and especially since the draft cost guidelines were published (see our post here). In fact, it has been feared that high litigation costs would be detrimental to SMEs, leaving them struggling to enforce their IP rights or defend themselves. The European Commission establishes in this document that if only 17% of all patent technology can be attributed to SMEs, “the cost exposure for IP rights and particularly patent litigation is significant, hits SMEs disproportionately hard and acts as a serious deterrent for SMEs to engage in patenting in the first place“. Under the Unified Patent Court, SMEs may indeed have to pay, the winner’s court fees of up to EUR 220, 000 euros, the winner’s legal costs of up to EUR 3 millions, plus damages.

In order to counter the negative effects of the UPC on SMEs the Commission therefore highlights a few measures:

  • The Commission considers that the development and launch of a European Commercial IP legal costs insurance could negate the risk of legal fee exposure and “lead to more investment by banks and other financial institutions into innovative start-ups and SMEs” thanks to the security of insurance and the possibility to increase the value of IP assets. The commission believes that this litigation insurance market could develop at European level as the scale would be considerably bigger than national level where it failed to grow . This would be launched when the unitary patent comes into effect.
  • COSME funds (European programme for small and medium entreprises), designed to encourage innovative European SMEs will be used to assist the latter in applying for European IP titles including the Unitary Patent.
  • The Horizon 2020  SME instrument will be used to “encourage European ‘disruptive’ innovators to protect their investments with unitary patents so that they exploit them commercially at EU level, rather than at national level where they may not be commercially viable“.

A more accurate analysis of the impact of the UPC on SMEs and response to the challenges that this will raise, will however only be possible once the definite cost guidelines are published scheduled for the coming months.

Furthermore, under Section 3.3.2 of the “Staff working document” the European Commission also voices its concerns regarding the following issues, although not specific to SMEs are essential in securing legal certainty for all UPC users:

  • The coherence between the upcoming unitary patent and current EU rules on SPC – in the absent of a unitary SPC title – will be important. SPCs are instrumental for industry sectors whose products are subject to regulated market authorizations;
  • The consequences of the rejection of a request for unitary effect, and the revocation of a unitary patent due to defeating national prior art 203 and the possible acceptable conditions to convert such a putative unitary patent into a bundle of national patents;
  • The principle of non-double protection deriving from unitary patent and national patents, except in very limited circumstances; and
  • The possible issues stemming from the obligation to designate all participating Member States for the purpose of obtaining a unitary patent.

These concerns raised by the Commission seem to be especially important in the light of the new target of 0.25% in EU GDP evaluated by the Commission, which captures the possible net productivity impact resulting from the reduction of validation and maintenance fees in the Member States for patents granted by the European Patent Office and, subsequently, the increase in the number of non-national patent rights enforced.