Regulations of the UPC Patent Mediation and Arbitration Centre

In line with the current trend in giving greater importance to alternative dispute resolution (“ADR”) mechanisms, especially in intellectual property matters, Article 35, paragraph 1 of the Unified Patent Court Agreement (“UPCA”) provides for the creation of a patent mediation and arbitration centre (Centre) seated in Ljubljana and Lisbon.

Although the stated objective is to give the Centre a key role in the context of implementing the Unified Patent Court (UPC), the scope of the Centre’s activities is not fully defined and some provisions of the UPCA and the Rules of Procedures (RoP) that pertain to it are incomplete and leave room for interpretation.

The aims of the Centre are to:

(i) make institutional support available for mediation and arbitration proceedings,

(ii) provide mediation and arbitration rules, fees, model clauses for use in mediation and arbitration, and other regulations,

(iii) provide facilities that the parties can use to conduct mediation and arbitration proceedings,

(iv) promote and organize the training of mediators and arbitrators in collaboration with the UPC training centre in Budapest and, where appropriate, with other competent institutions.

The Centre’s scope of intervention

The Centre shall provide facilities for mediation and arbitration of patent disputes falling within the scope of the UPCA, pursuant to article 35(2) of the current UPCA (2. The Centre shall provide facilities for mediation and arbitration of patent disputes falling within the scope of this Agreement. Article 82 shall apply mutatis mutandis to any settlement reached through the use of the facilities of the Centre, including through mediation. However, a patent may not be revoked or limited in mediation or arbitration proceedings).

The UPCA’s scope of application is defined in article 3, which provides that the UPCA applies to:

(i) European patent with unitary effect,

(ii) supplementary protection certificate issued for a product protected by a patent,

(iii) European patent which has not yet lapsed at the date of entry into force of the present Agreement, or which was granted after such date, without prejudice to Article 83,

(iv) European patent application which is pending at the date of entry into force of the present Agreement, or which is filed after such date, without prejudice to Article 83.

It is not clear whether the Centre will be able to settle disputes on patents not covered by Article 3 of the UPCA, in particular European patents or excluded national patents, especially in the context of parties submitting their application to the Centre in order to resolve a dispute concerning a global patent portfolio.

The question also arises as to whether the parties can submit their patent dispute to another arbitration and mediation services provider. The lack of exclusivity conferred by Article 35, paragraph 2 of the UPCA alludes to the possibility that parties are free to submit their dispute to another arbitration or mediation centre. This non-exclusivity of the Centre in matters related to the UPC also has a textual basis in Rule 11, paragraph 2 of the RoP (2. Pursuant to Rule 365 the Court shall, if requested by the parties, by decision confirm the terms of any settlement or arbitral award by consent (irrespective of whether it was reached using the facilities of the Centre or otherwise), including a term which obliges the patent owner to limit, surrender or agree to the revocation of a patent or not to assert it against the other party and/or third parties. The parties may agree on costs to be awarded or may request the Court to decide on costs to be awarded in accordance with Rules 150 to 156 mutatis mutandis.) which provides for UPC’s confirmation of settlements or arbitral awards on patents that fall within the scope of application of the UPCA “regardless of whether it was reached using the facilities of the Centre or otherwise.”

Article 35, paragraph 2, dictates another rule that leaves room for interpretation: the patent cannot be revoked or limited in the context of a mediation or arbitration procedure. The question will therefore arise of whether the Centre will have no power to decide on questions relating to the validity and scope of the patent, or rather whether this exclusion concerns only decisions which may have effects on third parties, whereby the Centre may have to examine questions of validity or scope of the patent with inter partes effect. There are valid arguments in support of the latter interpretation, and they are supported by Rule 11(2) of the RoP which states that the UPC will uphold the terms of any settlement or arbitral award, “including a term obliging the patent holder to limit, renounce or agree to the revocation of a patent or not to enforce it against the other party and/or third parties.”

Parties are encouraged to resort to arbitration/mediation and make use of the Centre. In this respect, the judge-rapporteur plays a fundamental role, since one of his tasks is to seek amicable solutions, in particular during summary proceedings.

Article 52, paragraph 2 UPCA provides that the judge-rapporteur explores the possibility of a solution with the parties, including through mediation and/or arbitration, by using the Centre’s facilities. Article 104, letter d) of the RoP also establishes that the interim conference will allow the judge-rapporteur to explore with the parties the possibility to resolve the dispute or to use the Centre's facilities. Furthermore, article 332 of the RoP on the general principles of case management provides that “active case management includes: (...) (e) encouraging the parties to make use of the Centre and facilitating the use of the Centre (...).”

Finally, article 11, paragraph 1 of the RoP invites the Court to propose that the parties make use of the Centre’s facilities “if the Court deems that the dispute is suitable for settlement”. In particular, the judge-rapporteur shall during the interim procedure, especially at an interim conference in accordance with Rule 104(d), explore with the parties the possibility of a settlement, including through mediation and/or arbitration, using the facilities of the Centre. Parties who choose mediation in an attempt to settle a dispute are subsequently not prevented from initiating judicial proceedings before the Court in relation to that dispute by the expiry of limitation or prescription periods during the mediation process, which will stay the limitation or prescription periods until the end of the mediation process. If mediation proceedings are terminated without a dispute settlement agreement, the period shall continue to run from that moment.

Enforcement of settlements and arbitral awards

The rules regarding the enforcement of settlements and arbitral awards are also not definitive.

Article 35, paragraph 2 of the UPCA provides that the rules of enforcement of decisions issued by the Court apply “mutatis mutandis to any settlement reached through the use of the Centre’s facilities, including through mediation”, and Article 82 of the UPCA establishes that the decisions of the Court “shall be enforceable in every contracting member State”. These provisions can be interpreted as an incentive to use the Centre’s facilities to reach a settlement over other ADR service providers, because they imply that only transactions reached through the Centre will be enforced in the same way as decisions issued by the Court Centre. It should also be noted that Article 35, paragraph 2 UPCA applies to “any settlement’, “including” settlements reached “through mediation”, which implies that settlements reached through arbitration can also benefit from an enforcement mechanism equal to that of the decisions of the Court. This explains the reference made to consent granted in Rule 11, paragraph 2 of the RoP on the confirmation mechanism.

Article 79 UPCA also adds that “the parties may, at any time in the course of proceedings, conclude their case by way of settlement, which shall be confirmed by a decision of the Court. A patent may not be revoked or limited by way of settlement.”

The combination of articles 35, paragraph 2 (ut supra) UPCA and 79 (ut supra) UPCA raises many questions and risks leading to conflicting interpretations. On the one hand, it could be argued that settlements benefit from an enforcement mechanism equal to that of UPC decisions only if confirmed by a Court decision. On the other hand, it seems possible to interpret these provisions in such a way that any settlement reached through the Centre:

(i) is directly enforceable when no dispute is pending before the UPC, and

(ii) must be confirmed by an executive order decided by the Court when the dispute is pending before the UPC.

Furthermore, it is unclear whether this enforcement mechanism is also open to settlements that have reached without using the Centre’s facilities. On the one hand, the scope of application of Article 35, paragraph 2 (ut supra) UPCA appears to be limited to settlements “obtained through the use of the Centre’s facilities”. On the other hand, Rule 11, paragraph 2 RoP (ut supra) establishes that settlements (or the consensual arbitral award) can benefit from a confirmatory decision by the Court "regardless of whether they have been reached using the Centre’s facilities or otherwise.”

As far as arbitral awards are concerned, these are not covered by Articles 35, paragraph 2 (ut supra) UPCA and 79 (ut supra) UPCA. It can therefore be concluded that arbitral awards – with the exception of consensual awards, under Rule 11, paragraph 2 RoP (ut supra) which are essentially an arbitral award that registers a settlement – would not be enforceable through the provisions of the UPCA, but that they would rather be enforced under the New York Convention like any other arbitral award.

The Centre’s rules of procedure

The rules of procedure of the Mediation and Arbitration Centre published on 8 July 2022 contain some rules that are worth mentioning here.

Although the Centre has offices in Lisbon and Ljubljana, mediation and arbitration proceedings can be organized elsewhere (Rule 3).

The official languages of the Centre are English, French, and German (Rule 6).

The Centre establishes and updates a list of arbitrators and mediators in the field of patent law. The Director and the Expert Committee collaborate to determine the criteria and qualifications of arbitrators and mediators to be admitted to the list, which must then be accepted by the Administrative Committee (Rule 14).

That said, many – if not all – details still need to be defined (for example, the establishment of the bodies (director, expert committee) of the Centre, or the drawing up of the list of arbitrators and mediators).

Final observations

By establishing the Centre and calling for the use of arbitration and mediation processes, the UPCA and the RoP confirm the current trend in promoting the use of alternative dispute resolution mechanisms in patent disputes.

We expect the Centre to develop its activities particularly in the context of determining damages, after the Court has decided the infringement and validity. The consecutiveness of the compensation proceeding and the more stringent guarantees of confidentiality for the parties are all factors that can lead to referring these matters to the Centre.

Another area in which the Centre could develop its activities is that of FRAND dispute resolutions. While there appears to be no basis for the UPC to decide on FRAND in a stand-alone action (for example a declaratory action according to which a patent holder or implementer has acted in accordance with its FRAND obligations, a given set of license terms would be FRAND, or an action to ask the UPC to decide the terms of a FRAND license), the UPC is likely to rule on FRAND when it is presented as a defence in an infringement proceeding. In this context, the parties could be invited by the judge-rapporteur to refer the FRAND dispute to the Centre. Furthermore, the parties may have the right to use the Centre’s facilities, for example, for the purpose of determining FRAND terms and conditions, in case there is no dispute pending before the UPC, assuming, as discussed above, that the Centre is authorized to deal with matters involving patents not covered by Article 3.

That said, many questions currently remain unanswered, in particular regarding the Centre’s scope of intervention and the enforcement of settlements and arbitral awards reached through the Centre, and they will need to be addressed in practical cases in the coming months.