In an order published on 20 March 2020 (but dated 13 February) the German Federal Constitutional Court (FCC) ruled that the Act of Approval for the Unified Patent Court Agreement (UPCA Approval Act) was null and void, meaning that the UPC agreement has not been enshrined into German national law and cannot be ratified on that basis. In this piece we set out the rationale for this decision and provide an outlook on possible future developments.
The extensive reasoning of the court takes its roots in the fundamental principles of the German constitution and of German representative democracy.
The German constitution states that parliament needs a two-thirds majority to approve a law that changes the fundamental rights enshrined in the constitution (Art.23(1) GG – the German constitution – in connection with Art.79(2) GG).
The FCC held that the UPCA Approval Act was, in effect, a piece of legislation conferring sovereignty to the EU or other supranational organisations closely related to it. The law therefore required the two-thirds majority, but this threshold was not met.
On 13 March 2017 the German parliament adopted the UPCA Approval Act unanimously. But when the vote was taken at 1:30am only 35 out of 630 members of parliament were in attendance and voted.
Accordingly, the FCC held that UPCA Approval Act violates the complainant’s rights equivalent to the fundamental rights laid down in Art.38(1) sentence 1 GG, Art.20(1, 2) in connection with Art.79(3) GG.
UPCA Approval Act under these circumstances constituted a violation of a fundamental right that could be challenged by an individual constitutional complainant.
Under German constitutional law the admissibility of a constitutional complaint requires the possibility of a violation of a fundamental right (Arts 1 to 20 GG) or, alternatively, the violation of a so called “right equivalent to fundamental rights”.
The FCC has only recently recognised the democratic principle as constituting a principle establishing rights equivalent to fundamental rights. As such, the FCC dedicated a large part of its reasoning to the assessment of that right.
The fundamental nature of the rights conferred by Art.38(1) sentence 1 GG, Art.20(1, 2) in connection with Art.79(3) GG led the FCC to find that the complainant had legal standing to bring the complaint.
The decision on this point was not a unanimous one – three (out of eight) judges dissented with the majority's view that the rights laid down in Art.38(1) sentence 1 GG, Art.20(1, 2) in connection with Art.79(3) GG provide a justiciable right equivalent to a fundamental right, violation of which may be challenged by a constitutional complaint.
Hence, the FCC's decision to admit the complaint at all was very close – only one more dissenting opinion would have led to a tied vote, and the complaint being dismissed (Sec. 15(4) BVerfGG). This is what makes the decision a must-read for any constitutional lawyer and a bedside read for the (interested) patent litigator.
Coming back to the UPCA and the parts that may be more interesting for the patent community, the court also addressed the other grounds raised, namely non-compliance with the German constitution due to:
- the violation of the identity of the constitution in light of the legal status of UPC judges being insufficiently regulated under the rule of law;
- interference in fundamental rights by a court (the UPC) that was not sufficiently legitimised by law; and
- the UPCA infringing EU law.
The FCC dismissed the complaint (that the UPCA provisions were not constitutional) because the complainant did not show a sufficient link between the provisions of the UPCA complained of and rights equivalent to the fundamental rights.
What does this all mean for the future of the UPCA and the European Patent Package?
First, the immediate impact of the decision is limited as the UPCA is not yet in force pending German ratification.
On the basis of the UPCA Approval Act, this will not be possible until the German parliament adopts the act again with a two-thirds majority.
It is almost impossible to foresee when (or even if) the UPCA Approval Act will be put on the parliamentary agenda again in view of the ongoing coronavirus crisis. The upcoming German elections in 2021 will likely also cause further changes to the legislative programme. We therefore foresee a considerable delay of the coming into force of the Unitary patent package, if at all.
Does this mean that the unitary patent package is doomed? Probably not, we think, at least for now. However, it will require significant political will if it is to continue in light of the need for a new vote in the German parliament and the UK’s withdrawal from the EU.
Putting the UPCA back on the agenda is fairly simple procedural matter as the unitary patent package has been widely supported by all German parties.
Even if a two-thirds majority is not easily reached, it appears achievable (in normal voting circumstances), particularly given the FCC saw neither any material issue with transferring sovereignty to the UPC nor any issue with its substantial law.
Without stretching things too far, the UPC could even be put on the agenda much earlier as expected, if its contribution to a facilitated access to Europe-wide patent protection is regarded as a helpful way of getting the economy up and running again once the coronavirus crisis is overcome.
Second, the FCC does not see issues with the UPCA and the unitary patent package as such. On the contrary, the FCC's reasoning on the substantive law included in the UPCA, which establishes the UPC and the law applicable to the Unitary Patent, does not suggest there has been any substantial change in the political view on the patent package.
The aspect of the constitutional complaint based on the alleged violation of the German constitution by the substantive provisions of the UPCA was dismissed as inadmissible for lack of substantiation.
This could leave the door slightly open to challenge the UPCA approval act again, once approved with a two-thirds majority, if ever, with a better substantiated reasoning of the complaint.
Such a ”second-chance” challenge appears rather theoretical, we think. The FCC's reasoning indicates that such arguments will not get much traction.
The analysis in the FCC’s decision suggests that the court does not consider that there is any violation of any justiciable fundamental right by the substantive provisions of the UPCA.
Further, if the dissenting opinions had prevailed, the complaint would have been dismissed as inadmissible once and for all.
This also shows that the issues the FCC accepted were limited to the circumstances of the adoption of the UPCA Approval Act rather than its substantive provisions.
This makes it unlikely that political support for the UPCA because of constitutional law concerns will dwindle.
The political and legal implications of the UK leaving the project will need to be assessed and addressed. For instance, some provisions of the UPCA will have to be renegotiated to address the non-participation of the UK.
These changes do not appear insurmountable from a legal standpoint – provided there is the political will to carry the project forward.
UPDATE 27 March 2020
The Federal Ministry of Justice indicated that the UPC Approval Act will be put on the agenda again within this legislature period, says juve-patent.com. The political will is there.
Despite the fact that the judgement will result in further delay the preparatory work will continue, while the judgement and the way forward is further analysed.