Europe's new patent system Part 2: What are the costs?

In the second in his series of articles on Europe's new unitary patent and Unified Patent Court, which are expected to come into force in 2017, Paul England examines the costs to companies of using the new system.

One intention of the unitary patent and Unified Patent Court (UPC) is to introduce cost efficiencies to patent ownership and litigation. Potential users will need to see all the figures – when they become available – to demonstrate this, but what do we know so far?

First, the unitary patent. This is created from a "classical" European patent on request, after the patent has been granted. The prosecution fees for unitary patents are therefore the same as classical patents, designated for all the member states participating in the unitary patent, but the most important change will be to renewal fees. These must be low enough to make the system attractive to users, while generating enough revenue to cover the administration costs of the unitary patent.

A key consideration is that the average number of country validations for a classical patent is four or five, and so a renewal fee set much above the average renewal cost for this number risks being unattractive for patentees who validate their patents in just a small number of countries. Also, whilst some may be prepared to pay more for the unitary patent because of the extra "free" member states that it covers, others may prefer the flexibility of classical European patents, which allow for a lapse of less valuable national validations as renewal fees increase.

At the time of writing, the Select Committee of the Administrative Council of the European Patent Organisation is working with two proposals: "TOP 4" (based on equivalent fees for four countries) and "TOP 5" (based on equivalent fees for five countries). The TOP 4 renewal fee begins at €350 (US$368) in the second year, escalating to €4,855 in year 20. TOP 5 offers a 25% fee reduction for years two to 10 for, amongst others, SMEs and universities, but the year 20 fee is higher at €5,500.

UPC fees

The next consideration is Unified Patent Court fees. These must enable the court to be self-funding and allow access to justice for SMEs. There will be fixed fees for initiating an action and making certain applications, and there will also be a fee for opting-out classical patents from the UPC.

However, the main cost for many users will be the value-based fee. This is proposed for actions valued above €500,000 and scaled up to a cap for actions worth €3 million or more. It's expected that partial reimbursements of the fee will be possible in certain circumstances, such as settlement, decision by default or withdrawal.

The dominant cost factor for parties considering using the UPC is the near pan-EU effect of its decisions. By contrast, in the present system patent disputes affecting more than one country must be dealt with in parallel actions in more than one national court.

The potential cost of a UPC action must therefore be weighed against the court fees that are otherwise payable in multiple national courts (which vary considerably), and the costs of paying the legal teams running those actions. Many may find the benefits of cost and scale in the UPC more attractive.

A consultation on court fees is expected to be launched in spring 2015. Renewal fee levels are being decided by the EPO Select Committee, which has yet to reach a decision.

Paul England is senior associate in the UPC Group at international law firm Taylor Wessing LLP.

Previously in this series: "Europe's new patent system Part 1: How will it work?"scripintelligence.com, 2 March 2015.