Unified at Last? Germany’s Constitutional Court Removes UPC Hurdle

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On July 9, 2021, Germany’s Federal Constitutional Court rejected a pair of applications for a preliminary injunction directed against the German Approval Act on the Agreement on a Unified Patent Court (UPC) (decision of June 23, 2021, 2 BvR 2216/20). Thus, German ratification of the Agreement now only requires a presidential signature of the Approval Act and the subsequent deposition of the ratification.

The Constitutional Court’s press release can be found here (in English and German). The text of the decision itself is available here (in German only).

BACKGROUND

So far, 15 EU Member States have ratified the 2013 Agreement on a UPC. In recent years, the ratification process has faced several unexpected hurdles and proved to be cumbersome. Last year, post-Brexit, the United Kingdom formally revoked its ratification (as of July 20, 2020). Since then, of the ratifications required for entry into force, only Germany’s remained pending.

Germany’s Federal Constitutional Court annulled a first national ratification Approval Act on February 13, 2020, after a successful constitutional complaint. Now, following an apparently unsuccessful second round of constitutional complaints, nothing remains to prevent the second Approval Act, which was redrafted and approved by the German legislator in fall 2020, from being formally signed by the German president.

GROUNDS FOR THE CONSTITUTIONAL COURT’S DECISION

The Constitutional Court stated that the constitutional complaints were inadmissible on the merits because the complainants had not sufficiently substantiated the possibility of a violation of their fundamental rights.

Under German constitutional law, national legal acts may only transfer sovereign rights to the European Union or EU-related institutions under certain conditions. In particular, in order for a national act to be deemed unconstitutional, it must be established that the transfer of rights would undermine the German constitution or, in the words of German constitutional law, would affect the integral core or identity of the German constitution. In its 2020 decision, the Federal Constitutional Court recognized that the first Approval Act lacked the two-thirds majority in parliament required for such a significant transfer of sovereign rights. The first Approval Act was adopted unanimously, but only 35 of the approximately 600 German members of parliament were present for the vote, which was found to be too few for such a far-reaching piece of legislation.

In principle, the hurdles for a successful constitutional complaint are high. The Approval Act represents a democratically legitimized majority decision by a constitutional body. Now 570 members of parliament have voted in favor of the second Approval Act. Therefore, in the present decision, the Federal Constitutional Court (for the first time) considered the merits of the law rather than the formalities of passage.

In the present case, the complainants argued that Articles 6 et seq. of the UPC Agreement violated the independence of judges established in the German constitution and the constitutionally guaranteed principle of the rule of law due to the appointment of the judges of the UPC for six years, their possible reappointment and the insufficient appealability of a removal from office. Complainants also alleged a violation of the principle of democracy.

The Federal Constitutional Court rejected the allegations of a constitutional violation. The Court explained that it would only find such a violation in exceptional cases under its so-called identity or ultra vires doctrine. However, in the view of the Federal Constitutional Court, the UPC Agreement can and must be interpreted in the light of EU treaties in such a way that it does not go beyond the already existing, constitutionally unobjectionable distribution of competences between national (constitutional) law and EU law. The complainants failed to demonstrate that a different interpretation was imperative.

NEXT STEPS

The next steps on the road to the UPC seem rather routine compared to the previous national debates around the Agreement, but with the ratification history in mind, one should refrain from taking their fruition for granted. The most likely scenario may be as follows:

The German president could sign the German Approval Act without waiting for further guidance from the Constitutional Court. As a result, the German Approval Act would enter into force the day after it is promulgated. The remaining ratifications of the Protocol on Provisional Application by two Member States could follow soon, as the German decision may be seen as an important signal in this regard.

Upon ratification of the Protocol by those two Member States, funds would be released and a provisional period would begin, allowing the UPC preparatory committee to continue to work on final practical preparations in advance of the UPC hearing cases. The committee has announced that it will shortly publish on its website “a timeline and a more detailed plan for the start and execution of the Provisional Application Period.”

Then, Germany must formally deposit its instrument of ratification. On the first day of the fourth month after such deposition, the UPC Agreement would enter into force.

Practice Note: Owners of European patent portfolios should assess whether they want to opt out of the UPC regime. Such opt-outs can be exercised and withdrawn until the last day of the seven-year UPC transitional period. Opt-outs apply to the whole lifetime of a patent. When considering whether to opt out, patent owners should be aware that it remains uncertain how UPC judges may respond to the most pressing issues in patent litigation, such as proportionality of injunctive relief.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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