74.    It is over ten years since the Committee last looked at the question of the need for a unitary Community patent. The 1975 Convention had not (and still has not) been ratified by all Member States - both Denmark and Ireland had constitutional problems - and a number of technical issues required further work. A conference had been held in Luxembourg in December 1985 to try to take matters forward.Various amendments and additions to the 1975 Convention had been agreed in principle. In its 1986 Report, A European Community Patent, the Committee examined the state of the negotiations, the need for a uniform Community patent and the possibilities of overcoming the outstanding differences. It concluded that the setting-up of a Community patent system operating uniformly throughout the Community and subject to ultimate adjudication by a common appeal court would be of major benefit to commerce and industry. Such a system would contribute materially to the smooth operation of the Single Market. The Report called for the introduction of a Community patent "without further delay". If all Member States could not agree, that should not hold up the rest of the Community.

  75.    More than ten years later we are little further on. The Luxembourg Convention has still not entered into force, notwithstanding the important revision work completed by an inter-governmental conference on the Community patent in 1989. It seems unlikely ever to do so. The recent action taken by the Council and the Commission to revive the issue of a Community patent has been generally welcomed. The Green Paper has rekindled an interest in the subject in the minds of users of the patent system, national, European and world-wide, and their Governments. Though the benefits are not always quantifiable there seems little doubt that patents are a valued industrial and economic tool, an important adjunct to research and innovation. Patents are used by and serve industry in various ways, depending on the sector concerned. They are not the preserve of large firms. Individuals and SMEs also use the patent system.

  76.    Patenting is, however, an expensive business. The protection of the invention is buttressed, under patent laws, by an act of a public body, namely the grant of a patent. Obtaining a grant involves the payment of fees, official and professional. Moreover, patents once obtained have to be maintained (by payment of renewal fees) and policed, if necessary through the courts. The increasing expansion and inter-relationship of markets world-wide may compel industry to seek patent protection in many more countries. The notion of having one patent valid in fifteen States, for the whole Single Market, is therefore attractive. Our witnesses identified the potential advantages in terms of cost savings, the simplification of regulation and reduced complexity. Consumers should also benefit from improved and cheaper products.

  77.    It was, however, the uniform response of witnesses that if the Luxembourg Convention came into force, thereby making it possible to obtain a Community patent, there would be few, if any, takers. The reasons for this are essentially twofold: the requirements for translations are burdensome and costly; and, potential users do not have confidence in the judicial arrangements. These two basic issues dominated our enquiry. It is clear that satisfactory practical and political solutions have to be found for both if the Community patent is to be a reality and bring about the benefits described above.

Language/translations

  78.    The cost of translating patent specifications is a major element in the overall cost of protecting an invention in more than one country. The Green Paper gave some figures for the cost per page of translations. A table prepared for the Committee by Zeneca and other statistics produced by the EPO helped to show those costs in relation to the total costs borne by the applicant for a patent in the current European system. The EPO's study shows that, depending on the number of national patents designated and therefore translations needed, the cost of translation may amount to some 30%-60% of the cost of obtaining patent protection in the Community.

  79.    Any Community patent has to be affordable. If everything had to translated into all official Community languages then we doubt whether the proposal would be sufficiently attractive to users and whether, therefore, it would be a practicable proposition. The burden of the costs of translation would fall hardest on small firms (who, according to the EPO's study, are more likely to be seeking coverage throughout the whole of Europe). Even large firms, who also have budgets, might be dissuaded. Industry would certainly weigh up the advantages and disadvantages of a Community patent compared to a bundle of national patents. A European patent covering the major industrial countries may be good enough. Witnesses pointed out that the translation problem can only get worse with Enlargement. Costs would increase if additional translations were required, making the Community patent less attractive to users.

  80.    In 1986 the Committee took the view that it was essential to limit the extent to which a Community patent must be translated. The Committee believed it was reasonable to expect that translations of the claims, which define the scope of the patent monopoly, should be available in a national language of each Member State. But to require the translation of the description of the invention into all languages would pose a serious threat to the viability of the Community patent. The Committee was impressed by evidence (which was reiterated by witnesses in the current enquiry) stressing that translation of a complete specification at the time of grant of the patent comes too late to be of real value to those most interested in the technology. The Committee took the view that Member States should not be able to insist on the provision of any translations apart from translations of the claims. If this could not be agreed, the best compromise would be to require translation into the official languages of the EPO. The Committee said that any moves to allow every Member State to demand translation of the whole specification into a national language at grant should be firmly resisted. (paras 51-52)

  81.    The Green Paper canvassed views on a number of approaches to the translations question. However, most of our witnesses favoured a more radical, "English only", solution, under which a party could file the application in any of the Community official languages but thereafter English would be the sole working and official language of the Community patent. This solution has a substantial measure of support from European industry generally. That is clear from the evidence given directly to us as well as the submissions made to the Commission at the Luxembourg hearing. The Commission's statement of Conclusions of that meeting states that "a large number of users' representatives on the side of industry support a radical solution. This consists of using only one language for the granting procedure, with no translation of the granted patent afterwards". Diplomatically, the Commission does not identify the "one language" concerned.

  82.    The Committee would have no hesitation in supporting the "English only" solution. It would be simple, cost effective and reflect the current practice increasingly to use English in technology and patenting. Under any Community regime we would anticipate that the large majority of applications and grants would, as is the case for European patents, be in English, if only because of the substantial number which could be expected to come from the United States and Japan. We have doubts, for the reasons given by witnesses, that it will emerge from the Commission as the solution for the Community and even if it did whether it would ever be politically acceptable. It would be a major step for other Member States to accept a regime under which their citizens could file in their native (official) language but would thereafter have to work in English.

  83.    The Green Paper rightly describes the language question as "a thorny problem" and it is noteworthy that when soliciting views from interested parties on the language question the Commission asked for "realistic solutions". We share the view expressed by the Patent Office that some form of compromise on the language question will have to be struck. One possibility is to limit the number of official languages to three (English, French and German). The precedent is the EPO, though as witnesses pointed out it is not completely apt because a State may still require translation of the specification into its official language when the European patent is registered in the national patent office. It would be a solution based more on historical political considerations than current practical ones. Apart from being the working languages of the EPO, the three languages as a group have no other particular supremacy or importance in relation to technology and invention. We could nevertheless accept the three EPO languages as a compromise. However, any attempt to increase the number, for example from three to five (the number of working languages for Community Trade Mark purposes), should be strongly opposed.

  84.    But even three languages might not be any more acceptable to all Member States and their Parliaments than one. The argument that the individual citizen should be able to read in his or her language what he or she may not do, though in practice remote from the realities of life even among smaller firms, has a strong popular appeal. We are bound to acknowledge this, even though all the relevant information may not be available until late in the patenting process and in practice those with any substantial commercial interest will read the documents in their original language or obtain their own translation. We wonder, therefore, whether other Member States will in fact be prepared to forego their citizens' language rights. A compromise whereby some minimum amount of information about the patent is published in every language will have to be accepted. Since such a compromise will be based not upon practical grounds (which plainly point to an English only solution) but upon political expediency, the Committee finds it difficult to say how much translation there should be. One possible compromise would be to allow the application to be submitted in any official language, to require the claims to be translated into all official languages but thereafter to provide for the use of English as the sole working and official language of the Community patent. In the end, the question is whether the cost of translation can be kept low enough to make a Community patent a viable option for industry. If it is too high, it will not be able to compete with the available alternatives of EPO or national grants.

Judicial arrangements

  85.    It is a feature of a unitary patent that it can lapse, be transferred or, particularly important in the present context, be revoked as a single whole. If the Community patent is to succeed it must be supported by judicial arrangements in which industry and users have complete confidence. That is not the case with the arrangements existing under the Luxembourg Convention. These provide that, in addition to opposition proceedings before EPO Boards of Appeal, national courts would in effect act as Community courts and deal with questions of validity. A new court, COPAC, would have a central appeal function and give interpretative rulings. Many witnesses could not accept the risk that a patent could be invalidated by any national court. Their concern is that the judge might not have sufficient knowledge and experience of patents.

  86.    The Green Paper favoured allowing the EPO Boards of Appeal to handle all validity questions, with a right of appeal to the existing Community Courts, i.e. to the Court of First Instance and then, on points of law only, to the Court of Justice. Witnesses were, however, critical of the system and actual handling of appeals under the EPC. Further, the Green Paper proposal would have the consequence of separating infringement actions, which would remain with national courts, from validity questions. The evidence we received on this point was unanimous in insisting that infringement and validity issues, which are in practice almost invariably inter-related, should be dealt with together by one and the same forum. We agree that, when it is necessary to do so, the two matters should be capable of being dealt with together. The Committee agrees with witnesses that the Green Paper's proposal as regards the use of the EPO boards of appeal is not the way forward. It appears to have no chance of acceptance by industry.

  87.    There have been suggestions that the Boards of Appeal of the EPO could be strengthened by the addition of patents judges from Member States, perhaps on a temporary and rotating basis. This proposal would have much to be said for it as an improvement in the service provided by the EPO, even if there was no question of introducing a Community patent. But the Committee do not think that the EPO, even in this form, could provide a judicial structure for the enforcement as well as the grant of Community patents. It could not provide a court of first instance for infringement proceedings and it is doubtful whether it could operate even as an appellate court in such cases without a substantial change in its procedures and culture. In addition, it is hard to see how the EPO, as a non-Community institution, could be fitted into the judicial system of the Community. The main advantage of bringing national patent judges onto the Boards of Appeal of the EPO would be to provide a model of a multinational European patent court which could be used by the Community.

  88.    The solution preferred by our witnesses was to have a Community Patent Court operating at both first instance and appellate levels. Those courts would be staffed by experienced patent judges from across the Community. It is a bold and ambitious approach which in principle we support. But we do have doubts as to whether it is feasible for a new system of patent courts for the whole Community to be set up and made fully operational and effective from as it were a standing start.

  89.    To set up a system of Community Patent Courts, with the necessary and appropriate judges and other staff, premises and, not least, rules of procedure, will require a massive practical effort and goodwill on all sides if it is to work. It can, we believe, be done if there is the political will backed up by a substantial commitment in terms of resources. We are not optimistic about the prospects of this being achieved except over a fairly long period. On the other hand, a system which gives the national courts of any Member State the power to revoke a Community patent with effect throughout the Community is likely to be regarded as making them too vulnerable to compete with an equivalent bundle of national patents granted by the EPO. The Committee thinks it is unlikely that this perception by industry would be much diminished either by restricting the number of courts upon which any Member State can confer jurisdiction over Community patents or by providing a right of appeal to the Court of First Instance or some other European court. Of all the practical difficulties involved in creating a Community patent, the judicial system is the one upon which it most likely to founder.

  90.    We do not go further into the detail about the judicial system in this report but there is one matter to which we believe it is necessary to draw particular attention. Under the Luxembourg Convention, which, as mentioned in paragraph 85, created COPAC, there remained a substantial role for the Court of Justice.[9] A major constitutional question which will have to be determined at the outset is that of the relationship of any new Community Patent Courts to the existing Community Courts.

  91.    One possibility is for the CFI to take on the role of one of the Community Patent Courts. It might do this by way of a new specialised chamber staffed by judges experienced in intellectual property matters. Its jurisdiction and procedures would need to be amended to enable it to exercise the full functions of a court of first or second instance in patent cases—it would not simply have the role of reviewing the legality of the decisions or other acts of another institution (as is its general function, including its responsibilities under the Community Trade Mark Regulation[10]). Were the CFI to take on responsibility for patent cases affecting Community patents for the whole of Europe it would be a substantial addition to the workload of that court. Leaving to one side the pressures which the court is currently suffering (we examine these in our contemporaneous report, The Court of First Instance: the Single Judge) adding patents would have a profound impact on the character and working of the court. We do not agree with those who have suggested that the issue whether there should be a new court for the Community patent or whether a specialised chamber of the Court of First Instance should have the jurisdiction is only a question of nomenclature. There will, in our view, be substantial implications for the Community's judicial architecture.

Other issues

  92.    In addition to the problems of translations and of judicial arrangements witnesses identified a number of other matters concerning the present Convention and with which they had difficulty. We deal with these briefly below. One of them, renewal fees, raises wider issues.

Prior use, compulsory licensing, exhaustion of rights

  93.    Concern was expressed by witnesses about uncertainties relating to the extent of rights to continue prior use of an invention protected by a Community patent and also as regards the grant of compulsory licences in respect of such inventions. The national laws of a number of Member States preserve prior rights of use and confer powers of compulsory licensing. The Luxembourg Convention (Articles 38 and 46 respectively) provides that national rules should be applicable to a Community patent in so far as it has effect in the particular Member State.

  94.    Both these matters affect the scope of the right and it is pertinent to question whether they should be left to (potentially divergent) national laws. The Committee agrees with witnesses that, in a unitary Community patent system, prior use rights should in principle extend to the whole of the Community. As regards compulsory licensing, it should be made clear that the patentee's rights under a Community patent are not exhausted in one Member State by the grant of a compulsory licence of that patent in another Member State. In the absence of the Community patent instrument (whether convention and/or regulation—see below) itself providing a compulsory licensing regime for Community patents, it needs to be considered further whether there should be appropriate harmonisation of national laws.

Renewal fees

  95.    In costs terms, the decision to apply for a Community or European patent may not depend simply on the number of translations (discussed above). Other factors, including renewal fees, have to be considered. It is to be expected that any Community system will be self-supporting but there is concern that it may be more than self-supporting and that renewal fees will be regarded as a source of general revenue. Witnesses expressed concern about the possible high level of fees. The flexibility a patentee now has with a bundle of national patents, to decide which to maintain and which to allow to lapse, will not exist with a Community patent. The level of renewal fees will have an effect on the success of the system, particularly if they were to exceed the sum of the renewal fees of more than the national patent offices of the larger Member States or of the average number of national patent offices designated in European patent applications. In 1986, we took the view that it was imperative for an agreement on renewal fees to be worked out which was advantageous in comparison with national renewal fees and would make a substantial number of applicants to the EPO opt for the Community patent rather than a national "bundle". As we have said above, the Community patent must be affordable.

  96.    The question of renewal fees has, however, another dimension. This concerns how the revenue from applications for Community patents will be divided. The current position is that renewal fees on patents in force in the United Kingdom, whether granted by the Patent Office or by the EPO, are used to support directly the national patent system and also, indirectly, the European patent system[11]. The Green Paper proposed that the body in charge of the Community patent system (this will almost certainly be the EPO) should retain all the different fees paid by users. It also questioned whether it was appropriate for renewal fees on European patents to be used partly to finance national patent systems. Witnesses uniformly spoke of the need for national patents and European patents to remain available for the foreseeable future. If the Community patent system were introduced in such a way that the current arrangements were modified as suggested in the Green Paper, the position of the national patent system might be affected detrimentally. The Government pointed out that the Commission has yet to assess the financial implications of its proposals. In the view of the Committee such assessment should be a matter of priority and urgency.

Convention or regulation?

  97.    The Green Paper noted that the European patent system in Europe (i.e. the EPC and the Luxembourg Convention) was set up by means of international agreements. This was, according to the Commission, because the Community's competence in the field was then not clearly established. The legal position, it said, had changed and the Green Paper raised the question of the establishment of a Community patent system by way of a regulation under Article 235 of the EC Treaty. Such a regulation would require unanimity but would have the advantages of having a fixed date of entry into force and being simpler to deal with in future enlargements of the Community since it would automatically be part of the acquis communautaire.

  98.    Witnesses generally accepted that the Community had the necessary competence under the EC Treaty. The question, we agree, is not now a matter of dispute. The Court of Justice has held that the Commission is competent, in the field of intellectual property, to harmonise national laws pursuant to Articles 100 and 100a and may use Article 235 as the basis for creating new rights superimposed on national rights, as it did in the Community Trade Mark Regulation.[12]

  99.    On the question whether further Community action should be by way of regulation or convention, the majority of witnesses supported the idea of a regulation under Article 235 as the basis for any Community patent regime for the reasons given in the Green Paper. While the Committee agrees that those reasons are valid ones, there are two further factors affecting the choice of the appropriate legal instrument. First, there are the implications for the judicial arrangements. Use of a regulation alone would seriously limit the opportunities for innovation. A regulation would enable existing mechanisms to be used (the Green Paper's suggested use of the EPO Boards of Appeal and the Court of First Instance for questions of validity—a similar structure has been adopted in relation to the Community trade mark) but would not permit the creation of a new Community patent court or courts. For this there would have to be a Convention and/or revision of the Treaties. As we have indicated above the creation of a system of supranational pan-European Community Patent Courts will inevitably have major implications for the Communities' judicial architecture.

  100.    Secondly, it is necessary to consider the effects as regards the external competence of the Community. As the Court of Justice has made clear, the existence of provisions in the Treaty, in particular Articles 100a and 235, which give the Community power to act in relation to intellectual property does not confer exclusive competence on the Community[13]. The exercise of those powers by the adoption of a regulation would, however, increase the competence of the Community in international fora such as the World Intellectual Property Organisation (WIPO) and the World Trade Organisation (WTO) and consequently restrict that of the Member States. The Patent Office acknowledged that this was a question to which Ministers would have to give some attention. The Committee agrees.

  101.    Finally, it must be remembered that proceeding by regulation, rather than convention, does not overcome the major political issue of securing agreement on the proposal, particularly on the sensitive matter of the use of languages and translations. Unanimity will be required. We do not underestimate the difficulties ahead.

FURTHER HARMONISATION—THE EUROPEAN PATENT

  102.    Patent law is an area where there is already a substantial degree of harmonisation at both international and European level, from the Paris Convention of 1883 through to the GATT/WTO Agreement on trade-related aspects of intellectual property rights (TRIPS). Action at Community level has so far been limited to the creation of supplementary protection certificates for pharmaceutical and plant protection products.[14] Witnesses were in favour of further harmonisation, a number expressing a preference for that to be done at a global rather than a European level, on such fundamental issues as what should be patentable. Reference was made, in particular, to the current work of WIPO and the WTO. At a European level it was hoped that any Community patent might lead to a greater harmonisation of procedural rules especially in relation to the litigation in patent cases.

  103.    The Committee supports in principle the greater harmonisation of patent laws and procedures and considers that in a number of areas, such as the definition of patentability and simplification and co-ordination of filing procedures, that work may best be carried forward at the global, rather than the European, level. This viewpoint reflects the importance of innovation and the legitimate protection of inventions by patents in all markets and thus the desirability of taking action with worldwide effect.

  104.    At the European level it is to be expected that any Community patent will have an effect on national patent laws and practice, drawing them ever closer together. One area where it will, in our view, be necessary to co-ordinate both substantive and procedural development is that of the relationship of any Community patent to the European patent. It is generally accepted that the EPO will administer Community patents and be responsible for their grant, while at the same time carrying its responsibilities in relation to the European patent. We see problems ahead if the substantive law of the two patents and its practical application were to drift apart. Some have argued that the Community should mount a takeover bid for the complete European patent regime. We do not advocate that. But there must be an adequate mechanism in place to ensure co-ordination of substantive law and procedure as well as consistency in individual decision-making.

Conclusion

  105.    The Committee believes the Community patent, a single patent which is valid throughout the Community, would have advantages over the present system of European and national patents. The success of the system depends firstly, as we said in our 1986 Report, on keeping the costs down. A practical solution has to be found to the question of the number and extent of translations. There must also be judicial arrangements which will command the confidence of industry. The Community patent has to be sufficiently attractive to industry and able to compete alongside national patents and the European patent. If not, it will remain a white elephant which no-one will want. It is clear to the Committee that there is substantial interest in and support for a Community patent within industry at the present time. A major political push and a preparedness to compromise on the language question are needed if the idea is to become a reality.

RECOMMENDATION

  106.    The Committee considers that the Green Paper on the Community Patent and the Patent System in Europe raises important questions to which the attention of the House should be drawn and makes this Report to the House for information.

10   The Court of first Instance has jurisdiction to hear appeals under the Community Trade Mark Regulation. Appeals are dealt with first by Appeal Boards within OHIM. It is far too early to say how that is going to work. Cases have yet to emerge from the appeal process within OHIM. Back

11   Currently 50% of the renewal fee is passed on to the EPO as a contribution towards its costs. Back

12   Case C-350/92, Spain v. Council: [1995] E.C.R. I-1985, at para. 23. Back

13   Opinion 1/94: [1994] E.C.R. I-5267. The matter arose in relation to the definition of the extent of the Community's and the Member States' participation in the TRIPS Agreement. Back

14   Council Regulation (EEC) No 1768/92 concerning the creation of a supplementary protection certificate for medicinal products, OJ L 182,2.7.1992, and Regulation (EC) No 1610/96 of the EP and Council concerning the creation of a supplementary protection certificate for plant protection products, OJ L 198, 8.8.1996. In our 4th Report 1993-94, Patent Protection for Biotechnological Inventions, we considered a proposal for a Directive, currently before the European Parliament, which, if adopted, would set out the conditions in which a patent may be obtained for a biotechnological invention. Back