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Ratification of UPC Agreement in Czechia postponed. Forever?

12.11.2018

Last year the Czech Industrial Property Office and the Ministry of Industry and Trade commissioned a study on the overall impacts of the patent package on the Czech Republic. The Czech Republic signed the UPC Agreement but has not ratified it yet.

The study was carried out by PWC. Its conclusions include clear recommendation not to hurry with ratification but rather to wait for the system to be implemented in countries that have already ratified the package, and for their experience with its functioning.

The study quotes among the main reasons for postponement the legal and constitutional hurdles and the likely negative economic impact on Czech SMEs.  While SMEs play a major role in the Czech economy they hardly apply for any patents. According to the study less than 0,1% of all European patent applications was filed by Czech companies. For instance, in 2016 the total number of patent applications filed by CZ companies with EPO amounts to 185, most of these applications originate from large enterprises such as Skoda Auto or Zentiva. The study concludes that if patent package is ratified the Czech SMEs would be passive recipients of the new system not its active players. Though the total numbers of European patents validated in the Czech Republic is rapidly growing (in 2016 almost six thousand EPs were validated in Czechia), this amount corresponds to only 6,5% of all European patents. Things could however drastically change for SMEs if patent package comes into force and it is ratified by Czech Parliament. Suddenly not merely thousands but dozens of thousands of unitary patents are likely to flood the Czech economy. This would significantly increase the SMEs costs for freedom to operate clearance searches and obviously the likelihood of patent infringement disputes against Czech SMEs as well. The study points out that Czech SMEs may lack necessary financial resources for clearance searches and for their effective defence in patent litigation at UPC should they be sued for patent infringement.

The differences in terms of litigations costs between the current system in Czechia and proposed UPC system would be immense and could lead to liquidation of many Czech SMEs who could not afford to defend themselves at UPC even if the patent claims raised against them would be unsubstantiated.

To give one illustrative example while the basic flat fee for filing a counterclaim seeking the invalidity of a future unitary patent with UPC is proposed to be up to EUR 20,000 (although some discounts could be available to SMEs), the present official fee for invalidation of EP in the Czech Republic which is decided by the Czech IPO is only 2,000 CZK (around EUR 80) so the fee could be 250 times higher.

As economic cons of patent package ratification are likely to persist for many years to come, the author of this article is rather sceptical that UPC Agreement is ratified by the Czech Republic any time soon even if Constitutional Court clears the path to its ratification in Germany and BREXIT issues are resolved.

In the meanwhile, please feel free to contact us should you require information and assistance with validation of your European patents in the Czech Republic.