World IP Day 2024: Creating balance in the European patent system will help tackle the climate crisis and promote Europe’s competitiveness

This year’s World IP Day focuses on the role innovation and intellectual property play in enabling us to achieve the Sustainable Development Goals (SDGs), and build a more sustainable future for all. Innovation offers the world a chance to address the climate crisis. It is crucial that the patent system functions properly so that green inventors get their ideas to market.

Europe faces a number of challenges right now, the green transition being high on the list. A balanced patent system is crucial for Europe’s success in this area as well as its global competitiveness. That is why IP2Innovate is calling for legislative action to further codify the proportionality requirement in EU law.

We believe that now is the time, 20 years after its adoption, to introduce targeted amendments to the Intellectual Property Rights Enforcement Directive (IPRED) to ensure that courts in the EU Member States and the newly established Unified Patent Court consider the proportionality of remedies in their handling of patent litigation cases. This has always been a requirement in theory under the IPRED but has almost never been applied in practice. Automatic injunctions are the norm in EU countries (over 99% of cases), which means that an accidental infringement by a manufacturer of a patent that relates to a minor feature of a complex product can result in the entire product range being immediately removed from the market. This creates a huge disincentive for investment in the R&D necessary to bring the next generation of green products to market.

Guidance issued by the European Commission in 2017, aimed at correcting the misapplication of the EU law, has not materially improved the situation. An analysis of patent court rulings provided by Darts-ip, the leading source of global patent case data, for the period 2018-2020, shows that 99% of cases saw no proportionality assessment – compared with 99.7% of cases observed between 2015 and 2017.

As this data clearly shows that the Commission’s 2017 Guidance has not brought a material change in the application of proportionality, we are pleased that the Commission is currently conducting a new study to examine how to solve the problem of the lack of application, of proportionality.

The further codification of proportionality in the IPRED will help create a more balanced patent system. This will spur innovation, including in relation to products and services designed to meet Europe’s ambitious climate goals, and, in turn, help to promote European competitiveness in this critical area.

German patent law reforms

Legal reforms adopted in June 2021 in Germany, where most EU patent litigation takes place, appear to have encouraged more defendants to view proportionality as a potentially viable defense to an injunction. Since the reform there have been at least 17 court cases where proportionality was pleaded by the defendant during a 15-month period, compared to only two cases over the preceding six-year period. It is still too early to assess the real impact of the German reforms but early indications show that at least proportionality is being raised more frequently than before the reform.

Further codification at the EU level is necessary to address an imbalance in Europe’s patent system that harms competitiveness and innovation in Europe. It is possible that other Member States will follow Germany’s lead and we definitely would encourage this, especially given the fact that many Member States never explicitly transposed the IPRED’s proportionality requirement into their patent legislation. However, having clear EU rules to ensure a harmonized approach across the EU Single Market is essential to effectively enforce the application of the proportionality principles in patent litigations.

UPC context

Ensuring the equitable resolution of patent litigation in the EU through targeted amendments of the IPRED is of even more importance with the establishment of the Unified Patent Court (UPC). If automatic injunctions become the norm in the newly established UPC, innovative companies would face Europe-wide automatic injunctions and not just ones at national level.

With the arrival of the UPC, the stakes have increased, making it even more important to ensure that courts will consider the proportionality of the remedies sought by plaintiffs seeking injunctions on the grounds of a patent infringement. Proportionality will ensure that the interests of plaintiffs and defendants, as well as the public, are flexibly assessed to ensure a balance of the reasonable interests of all sides, which is especially critical in the case of complex consumer products. The threat of having a product taken off the entire European market would worsen the imbalance between patent owners and implementers.

We believe that further codification of proportionality in EU law would ensure that proportionality is effectively applied at UPC level, as well as in national patent courts.