WORKING SESSION
The judicial system in Europe
Margot FRÖHLINGER - Director, Directorate-General Internal Market and Services - The judicial system in Europe
Ladies and gentlemen, good morning. It is a great honour for me to speak to you in this magnificent and distinguished building, and it is a great pleasure for me to be with all of you and to discuss with you the future of patent jurisdiction in Europe.
Yesterday, before taking the plane, I had a discussion with one of my colleagues working in Financial Services. We spoke about the great success my colleagues had achieved last week. Many of you may have heard about the creation of a European financial services regulator. Two years ago, nobody would have thought that that would be feasible. It was absolutely unimaginable that national supervisory authorities would give up their power and authority and confer it on a European authority. My colleague reminded me that we have been able to achieve this as a result of the financial crisis. The crisis has created such an urgent need for a European authority that, all of a sudden, we have been able to overcome all of the concerns and obstacles that had previously existed. I reflected that we have also another crisis, that of the European economy. But apparently this does not help us to make more rapid progress on patent reform.
Europe is losing out in terms of innovation, competitiveness and economic growth and we need to take urgent measures to boost innovation and competitiveness in Europe and in particular to stimulate the creativity of European SMEs, who are the backbone of the European economy. Sadly, all reports show that European SMEs are, on average, not as innovative as their counterparts in Japan and the US. There are many reasons for this. There is a lack of entrepreneurial culture in Europe and there is too little access to venture and risk capital. But as the reports also clearly show, one of the reasons is insufficient reliance on intellectual property rights and, in particular, on patents.
In simple terms, European SMEs patent much less than their counterparts in the US and in Japan, despite the fact that they create countless inventions. There is a current theme through all of the reports on the reasons for the lack of reliance on IPR and in particular, on patents. SMEs cite the current complexity and costs of the patent system after grant, the validations with national offices, the translations, the high transactional costs and say that litigation in Europe is too costly and too risky. There are many case studies which demonstrate this. Let me give you just one example.
One of the reports carried out by our colleagues in DG Enterprise contains a case study of a small company in Greece, in the Thessaloniki area, a micro-enterprise with only seven employees, which was launched some years ago by scientists from Thessaloniki University.
The company is specialised in technology and products for spinal implants. It had a very promising start but after some years it faced serious problems. The company says that in its sector it is a common habit to copy and that its products and technologies have been subject to copying in quite a number of member states. The company has patents for some of its products and technologies, but not for all of its products and components because this would be too costly. It also has patent protection in only a limited number of member states and, even in those member states where it has patent protection, it is very difficult for the company to litigate and enforce its patents. However, it has brought one infringement action in Germany which it won. That is good news. But its main competitor, who has been copying its products, is located in the UK and the company's lawyer advised against litigating in the UK, as it is much too costly. As a result, the UK market is lost.
In addition, the company is facing the problem that its products are, of course, also being copied in China. There are masses of products which infringe its patents; they come from China and are shipped to Europe via the port of Antwerp. The company has tried to get these products seized in Antwerp, under the EU Customs Regulation. But sadly it has not validated its patents in Belgium, because in Belgium one needs to produce a translation in Dutch and this was found to be too expensive. Consequently, there has been nothing that the customs authorities in Belgium could do to prevent the infringing products, from easily entering the European single market and in particular the Dutch and German markets. As a result, the company is also at risk of losing the German market. The company is now in financial difficulties. It has a lack of cash flow, which in turn prevents it from investing in new products and technologies and from innovating. This is a situation which should no longer be tolerated in Europe. And if we are serious about boosting innovation and stimulating innovation by our SMEs, we need to do something urgently.
But sadly all the voices of these small Greek, German, Dutch, Italian, Portuguese and other companies are not heard. They simply don't have the lobbying power to create real political pressure to change the situation.
However, we in the Commission are listening to them and are giving the reform of the patent system another try. But we have only very limited powers. We can make proposals but we cannot force our member states to agree. This concerns both the creation of a single EU patent and the creation of the unified patent litigation system, which people have been dreaming about in Europe for more than 50 years.
Let me first talk about the creation of the EU patent. We all know that the major stumbling block, for many, many years, has been the issue of languages and translations. We have tried very hard to find a solution to this which would be acceptable to all our member states, but there is no miracle solution. We are committed to minimising the costs and complexity for companies. With this in mind, we think the best solution is to maintain the current language regime of the European Patent Office, which after all is well-established, which companies are used to and which is also logical to apply, because the EU patent is not a distinct and new type of patent. The EU patent is just a specific category of European patent which has a unitary character throughout the territory of the European Union. As we all know, we have doubts whether this proposal will achieve the required unanimity, but there are serious considerations, both within and outside the Commission, that if we cannot reach unanimity we should maybe consider creating a unitary patent for 25, 23 or 20 member states.
Concerning the creation of the unified patent litigation system, I think you all know the content of the draft agreement. I don't think it is necessary to explain to this audience what the major features of the envisaged litigation system are. Let me just stress what, from the Commission's point of view and from the users' point of view, are the most important features. Without them, the whole system would be of no or little interest for the users.
The first point is that the users want an independent, specialised, international patent court. There were previous ideas, and even a proposal in the past from the Commission, to entrust patent litigation to the ECJ structure. We have been told by the users that this was not a good idea. The experience in our member states and experiences elsewhere in the world clearly show that in order to ensure high quality, predictability and speediness of judgements, a high degree of specialisation, judges experienced and specialised in patent litigation and tailor-made procedural rules are vital. If this cannot be achieved, then the whole project should not go ahead, since it will be of no interest to the users of the patent system.
Secondly, what is also very important for the users is that the court should not be completely centralised. Instead users want a decentralised court of first instance, which is closely linked to existing national structures. We need to make best use of existing court structures at national levels, especially in the initial period when the European court system will be built up gradually. We will be unable to get specialised and qualified European judges if we cannot use the experience and qualification of national judges dealing with patent litigation in our member states.
The third element, which is indispensable from the users' point of view, is that the new patent court works with uniform rules of procedure, which are designed in a way that, on the one hand, they ensure speed and efficiency of procedures and, on the other hand, do not impede the parties from best presenting their cases.
This afternoon you are going to discuss the rules of procedure which we are in the process of drawing up. These rules of procedure are still work in progress. Nonetheless, they already represent a very impressive piece of work and I am extremely grateful to all of you who have been closely involved in this work and have shared with us your expertise and experience. These rules of procedure build on different traditions and different judicial systems in our member states. They bring together the best elements from each system and try to avoid their respective drawbacks and flaws. It has been a unique and fascinating experience to work on this. If we manage to create the European Patent Court and if one day these rules of procedure are in place, their importance will go far beyond ensuring the functioning of the European Patent Court. In themselves, they will be a major contribution to European integration. Judges from all of our member states working together in a unified patent court, dealing with private-party litigation under uniform rules of procedure, would be a major achievement not only in a practical sense but also of symbolic importance far beyond the field of patent litigation.
I deeply regret that this afternoon I cannot participate in the discussion on the rules of procedure, but unfortunately, tomorrow, I will be speaking at an event organised by GRUR in Hamburg. However, I wish you a very interesting and stimulating debate this afternoon.
At this point I should add that we are also already working on practical and financial arrangements for the future patent court. And, again, we have had very interesting discussions with judges and lawyers concerning the number of cases which might initially pass to the European Court and about the caseload a judge could possibly deal with, etc. Again there are very different traditions and experiences in our member states. We still need some time to work on all this because there is a long way to go.
The next step will be the opinion of the European Court of Justice, which is still awaited. Recently, there has been some agitation amongst practitioners about the opinion of the Advocates General. I find, as an official of the European Commission, that it is not appropriate for me to comment on the opinion of the Advocates General. This opinion was not intended for publication. It is an internal document of the European Court of Justice. The only thing I would like to say is that press reports about the opinion have been highly exaggerated and misleading. Likewise what I sometimes hear in discussions with patent judges and litigators makes me think that there are many misunderstandings. It is true that there are some concerns expressed by the Advocates General, but at the same time the Advocates General themselves point to possible solutions. I do not want to comment on the possible solutions. We will wait for the opinion of the European Court of Justice and if the European Court of Justice has the same concerns as the Advocates General, or different concerns, we will work on possible remedies.
We very much hope that the European Court of Justice will give us, by and large, the green light to go ahead. We hope that then we can very quickly adopt a negotiation mandate for the Commission, open formal negotiations, organise a diplomatic conference, obtain the consent of the European Parliament and get the process of ratification completed. And if you remember the process for ratifying the EPC 2000, ratification will be an important step in the procedure which will also take time. But we do hope that we can make this project happen. As a European newspaper pointed out last week: "Any further delay will only play into the hands of the Asian Tiger". At a time when countries such as China are creating a first-class specialised, centralised patent court, Europe cannot afford much further delay. And with this in mind, we count on your continuous support, help and, if possible, some enthusiasm for this project and for Europe. Thank you very much for your attention.