Out-Law Analysis

PODCAST: The UPC’s first year, and how Germany’s court digitisation could cause rise in mass claims

Munich Olympic Stadium aerial view SEO

Munich has been popular for filing UPC cases. Photo by TOBIAS SCHWARZ/AFP via Getty Images

One year into the new system governing patents in Europe, Judith Krens tells us that the UPC has been a success in unusual and unpredictable ways, and Alessandro Capone says that companies in Germany can expect to face more mass actions because of court digitisation plans.


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  • Transcript

    Hello and welcome once again to The Pinsent Masons Podcast, where we try to keep you abreast of the most important developments in global business law, every second Tuesday.

    This week we hear about how the first year of Europe’s Unified Patent Court has gone, and we find out why German courts system reform could mean that companies face more mass actions against them then ever. But first, some business law news from around the world

    Pharma companies will find patent extensions harder to get if EU court follows advice India demands contractors use mediation rather than arbitration And UK finance firms warned over advertising and promotions

    Pharmaceutical companies will find it harder to obtain supplementary protection certificates (SPCs) for so-called ‘combination’ medicines in the future if the EU’s highest court (the Court of Justice of the European Union) follows a recent opinion issued by one of its advisers. Advocate general Nicholas Emiliou proposed that applicants for SPCs should have to satisfy a two-step test in relation to one of the four criteria relevant to whether combination medicines are eligible to be granted SPCs. Opinions of advocates general are not binding on the CJEU but are often followed. A combination medicine is created by the joining together of two other medicines. The Court of Justice of the EU (CJEU) has been asked by courts in Ireland and Finland to clarify the criteria that must be met if combination medicines are to be eligible for SPCs, which extend patent protection. Karen Gallagher of Pinsent Masons said that a ruling in line with the opinion would be welcomed by patent holders but only if they can overcome that two step test set out by Emiliou.

    Contractors and suppliers to Indian public bodies will have to rethink their dispute resolution approach, as the government of India has issued guidelines encouraging the use of mediation over arbitration for disputes arising out of public sector contracts.

    This means that arbitration should not be used as the norm in procurement contracts, especially in large value contracts. The use of arbitration will be limited to disputes with a value less than Rs 100 million (approximately £940,000). The inclusion of arbitration clauses where disputes with a value exceeding that threshold are expected will need to be justified on a case-by-case basis and will require approval by the government.

    The Indian governments guidelines claimed that the arbitration process takes longer than expected and is expensive, and that a large majority of arbitration decisions are being challenged in the courts both by the government and by the opposite party. As a result, “instead of reducing litigation, it has become virtually an additional layer and source of more litigation, delaying final resolution”, it said. Scheherazade Dubash of Pinsent Masons said that "For international companies doing business in India, it's crucial to have a well-defined dispute resolution strategy from the outset and international businesses will now need to pay close attention to the dispute resolution clause if the public sector plays any part in the project.”

    Experts have said that UK financial investment and trading firms must maintain robust systems and controls in relation to social media communication, advertising and publicity arrangements, such as endorsements by influencers or celebrities. The warning comes after nine social media influencers were charged by the UK’s Financial Conduct Authority (FCA) with issuing unauthorised financial promotions and running an unauthorised investment scheme. The FCA alleges that the people used an Instagram account to provide advice on the buying and selling of investments called contacts for difference (CFD). It alleges that the influencers were paid by account owners to promote the Instagram account. Sébastien Ferrière of Pinsent Masons said: “Firms should note that the FCA is regularly monitoring social media platforms for unauthorised financial promotions and is increasingly likely to have misleading or unauthorised promotions removed before beginning prosecutions of firms or individuals.” In the last year, the FCA has secured charges, convictions or sentencing in at least 13 criminal cases. The majority of the cases concerned fraud in relation to areas such as unauthorised investments and CFDs.

    A year ago the way that companies could challenge and defend their patents in Europe changed completely. The Unified Patent Court, twenty years of wrangling in the making, came into existence, allowing companies to go through a single process to gain protection for inventions across Europe. Previously, companies would have to apply for patents in any individual country, meaning Europe-wide protection was not only time intensive and expensive, but inconsistent, so that you could have a patent granted in one country and rejected in another. So what happened in the first year of this major new patent system? Amsterdam based intellectual property expert Judith Krens told me that it had been, largely, a success.

    Judith Krens: Actually, a lot has happened during the first year. Lots of parties were waiting to start their litigation exactly on that first date which they did and then a lot of parties followed, but also a lot of administrative issues arise and meanwhile of course, the proceedings all went on. A lot of preliminary injunction (PI) proceedings, where there is a fast track that court hears the case and also a lot of procedural requests and actions in order to clarify what the Rules of Procedure actually means, so that is what we have seen over this first year.

    Matthew Magee: Countries have to opt into the system and currently 17 are part of it, with Romania becoming an 18th in September. There is an initial court, a court of appeal and the right to refer matters of EU law to the Court of Justice of the European Union. Judith said that observers have been surprised at some of the kinds of companies using the new system.

    Judith: What we see, many different industries, consumer goods, that's what we see a lot, that wasn't really predicted. We do see a lot of electronics before the opening of the unified Patent Court once said, well, we don't think that the life sciences industry will be among the first adapters of the court. But actually we have seen a couple of cases where life sciences companies are involved, mainly in the what we call the Med Tech sector, and that was it was unexpected that life sciences companies would be filing the cases in the first year. It was not expected because for life science companies compared to, for example, electronics companies, there is a lot at stake and their patent portfolios are just smaller than those of the electronics company. So for electronics companies, they can enforce really a lot of their patterns. So if they lose 1 pattern, they can just enforce another one. For life sciences companies, there are a couple of very crucial patterns which, if they lose that means, you know, a big set back for the company as such. So one thought, they would be on the conservative side of things. What we have seen last year, the most surprising thing I think is that a couple of life science companies which were litigating already against each other in the US in Europe, several places now opted for unified patent court as just an additional jurisdiction.

    Matthew: Though companies in 17 countries can bring cases to the UPC, the activity has not been geographically evenly divided, said Judith, which might alter the tenor of early rulings.

    Judith: Most of the cases, or really a large amount of the cases have been filed. One of them German local divisions. So the majority of the cases are handled by German judges, which is not a bad thing as such, but as the unified patent system is meant to be a European system with the good things from each and every jurisdiction in the European Union. As the majority of the cases is in Germany that there is much more German influence than one had thought before, or that one had hoped for. So that is not because the German judges are not good. The German patent system is excellent, but a better balance would be good.

    Matthew: The real impact of the UPC system will probably not be fully felt until rulings are made on legally substantial issues rather than just procedural ones. Judith says that the year ahead will be crucial.

    Judith: There has been quite a number of decisions on preliminary requests, either injunctions or with respect to seizure of evidence or other provisional measures. The first cases on what we call the merits have been heard and the first couple are coming out now. But because those cases usually take about a year, and that's also the ambition of the UPC to do it within about a year which is faster than in many other jurisdictions, I think we will see a lot actually during this the second year right now. What we will see is that we will get some decisions on the merits so that we will learn how do the judges will interpret the material law and the questions they have to deal with, and we will also see whether the type of companies which are using the UPC now will continue to use that. And also on the other side whether companies which haven't used it yet will be ready to start using it, or whether it's not time yet, so I do think it will be very interesting year.

    Germany is poised to pass a law that would digitise some elements of its court service in a bid to increase access to justice. The proposals would affect some regional courts and would allow citizens to directly file a law suit digitally for the first time. Those regional courts decide cases worth relatively modest sums – thousands of euros at a time, so you would think this wouldn’t have a major impact on big business. But the changes could have a significant impact on mass actions, where lots of people with small claims band together to sue a company for what can end up being a very big claim. Munich-based disputes expert Alessandro Capone first explained to me what the changes are.

    Alessandro Capone: So this new law is basically introducing so-called real world laboratories, which means that there's now the chance that the German state can pick certain courts and try new either technology or new systems in handling court cases, and it is doing so in this new draft law, it's not yet a real law, so that has to be passed. It is doing so in implementing online platforms where citizens can file lawsuits completely digitally which is a new way of filing actions, at least in Germany. This is mainly what this new law is about and maybe the second interesting aspect is that the court opens the whole court system for these real world laboratories so we can test new systems, new ideas, new technology, and in a much more easy way in Germany than it is the case right now.

    Mathew: The law is just a draft but Alessandro says that all the main political parties support the modernisation of court processes so the proposal is very likely to become law. Changes would affect many of the courts processes.

    Alessandro: The platform, this new draft law is proposing has this possibility of filing the lawsuit online, but also has other functionalities for the parties involved. For example, the parties could exchange directly over this platform messages or just conduct communication and the whole intake of the of the case would be different. You would have a uniform nationwide technical standard to take in the whole facts of the case and to structure the whole legal issue what the case is about. With this new platform, you would have a set structure for a legal issue and everybody has to follow this structure, which means that the whole problem is structured in a different way. Finally the new platform would allow to have the outcome of a case being published online via this platform. Right now we have really little amounts of cases being published in general in Germany and also not online. The goal is to make the whole court system more accessible for all citizens.

    Matthew: Giving citizens that easier, more direct access to courts could have outsized impact in the area of mass actions because it makes it more efficient and cheaper for people to make claims, including in a coordinated way.

    Alessandro: When it comes to mass actions, the value and dispute doesn't have to be that high for people to go after their case, so it can be also around €1000 or €5000 it's not really important, it's more whether the legal industry can make an offer to the claimants, to go after their right. So if you have a potential claim of let's say €1000, but it costs you €950 because you have to hire an attorney or to pay a legal tech or whatever, you're most likely not going to follow through on this because it's too much hassle. But if there is a solution by the by the claimant industry that you can go after your claim of €1000, for let's say, €50 more people are likely to do so. If this online platform has the technical possibilities that you can populate, for example, the whole site through which the intake of a case is performed then you could do it automatically and if you can do it automatically and for a huge number of people, it's even easier for the claimant side to bring their case. They have an easier way to file claims and therefore it's likely that even more claims or potential claims from citizens are being filed.

    Matthew: So if we're going to see more claims, which kinds of companies will that affect?

    Alessandro: I think you can break it down. All companies which deal with a lot of individuals. So all companies which have a high number of customers. All companies which have potential claims against them, which are higher probably than a couple of €100. I mean, it's not likely that people will bring their claims if it's about, let's say €10, cause it's too expensive for the legal industry to have an offer for these claimants. To make it sensible to follow through on this claim, you have to be aware that all the technical implications and all the road blockers for an easy workflow on either the defendant or the claimant side when it comes to mass action are also holding back certain types of cases, so if you have like the perfect technical setup and everything is being done by just a few clicks, you naturally make it easier to bring claims and therefore you lower the bar for any new potential claims. So when it comes to mass actions, I expect that the number will increase the more the accessibility of the court system increases.

    Matthew: Well, thank you very much for listening. We appreciate you spending time with us. We know you have lots of options out there. If you think this podcast would be useful to colleagues, contacts or friends, please do share it. If you're a first time listener, welcome, do subscribe. And remember, you can get up-to-the-minute business law news and analysis from our team of journalists at pinsentmasons.com. And make sure you get personalised news as it happens sign up for updates at www.pinsentmasons.com/newsletter. Thanks for joining us again and see you next time. The Pinsent Masons podcast was produced and presented by Matthew Magee for international professional services firm, Pinsent Masons.


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