Microsoft announces industry coalition on European patent system

We are pleased to announce Microsoft’s participation in a cross-industry coalition dedicated to the creation of an effective European unitary patent system. It’s truly a unique coalition: 14 global innovators and users of the European patent system, who are in many cases fierce competitors, plus two associations representing another 25 innovative companies in the technology sector, have been working collaboratively for several months to suggest solutions that support the creation of an effective, balanced and harmonized Europe-wide patent system. Today, the coalition released a letter to European policy makers on recommendations to those solutions.

We’ve written previously about the potential creation of the new European unitary patent and Unified Patent Court (UPC). The UPC has the potential to decrease the costs of obtaining patent protection, increase European competitiveness, and support the long-term growth of innovative industries in Europe and abroad. Now, as the UPC continues to move forward, member countries will be asked to vote on draft rules of procedure for the court.

There are two areas of particular concern in the draft rules, and the coalition letter calls attention to the unintended consequences of these measures if not corrected in the final rules.

The current draft rules allow cases to be brought in a so-called “bifurcation” system. Under this system, which is regularly used to resolve patent disputes in countries such as Germany, the related issues of whether a particular patent is valid and, if so, whether it has been infringed, are decided by different courts. The UPC Agreement signed by 25 EU member states earlier this year also allows for bifurcation, but provides little guidance as to when or how bifurcation will be implemented. This lack of clarity creates significant opportunities for abuse by allowing plaintiffs to obtain a quick infringement ruling and injunctive relief banning products from most of the European market, before any determination of whether the patent in question is actually valid.

Injunctions and their use in patent infringement cases is another area of concern. The current draft does not provide sufficient clarity in how to impose injunctions. Rigid application of an injunction rule could enable unprincipled litigants to “hold up” manufacturers and extract unreasonable royalties, even if the patent in question turns out to be invalid. A rule that does not offer sufficient guidelines on when to grant injunctions will create strong incentives for abusive behaviors and harm the innovation that the patent system is designed to promote.

In addition to this letter, Microsoft and other members of the coalition will recommend specific changes to the proposed rules to the Preparatory Committee, which is responsible for establishing and implementing the UPC, as part of the ongoing public consultation. We look forward to working with European signatories and the Preparatory Committee to achieve mutually beneficial reforms that build confidence in the new unified system and drives European economic and technological growth.

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