Mr. Naoise Gaffney:

A Chathaoirligh agus a bhaill an choiste, go raibh maith agaibh as ucht an chuiridh labhairt libh inniu faoin Unified Patent Court. Is dócha liom gurb é an t-ainm atá air i nGaeilge ná Cúirt Aontaithe na bPaitinní nó rud éigin mar sin. I thank the committee for the opportunity to discuss the UPC. My name is Naoise Gaffney, and I am chair of the IBEC corporate IP group and vice president of IP for GH. Research. I am also an adjunct professor of patent law at Trinity College Dublin. I am joined by Aidan Sweeney, IBEC's head of enterprise and regulatory affairs. We are here today to talk about the UPC, the referendum that is required before Ireland might participate in the system, and why, in our view, it is important that the committee gives due consideration and scrutiny to this matter. We would like to ensure that the country does not miss out on the substantial opportunities for economic growth the UPC presents. IBEC welcomed the Government’s recent reconfirmation of Ireland’s commitment to the UPC. It sent an important message to other countries, as well as international investors, that Ireland is determined to be fully involved in the UPC. While progress on the UPC had stalled across Europe due to Brexit and some legal issues in Germany, these issues have now been resolved. The pace has picked up considerably across Europe, with the new court on track to open its doors in early 2023, with or without Ireland.

To provide members with an overview of what it is all about, the UPC is one part of a two-part package that also includes the unitary patent. This unified patent package will create a simpler and more efficient mechanism for obtaining and enforcing patents in Europe. As part of this, the UPC will be a newly-established single court system under international agreement for pan-European patent litigation and enforcement. It will ultimately have exclusive competence in respect of infringement and validity of all patents granted by the European Patent Office, EPO. By way of reference, most patents currently in force in Ireland have been granted by the EPO, which is a centralised European clearing house for patents. The Intellectual Property Office of Ireland, IPOI, based in Killkenny, has similar competence. However, most of the activity from a patent perspective tends to go through the EPO. The unified patent package is needed simply because the current European patent enforcement system does not work effectively for companies, and in particular for SMEs. The current system of country-by-country patent protection. Litigation is extremely expensive, time-consuming and resource-intensive. Under the new system, there will be centralised mechanisms of both protection and enforcement. This could be particularly beneficial to Irish SMEs. SMEs tend to have only a few patents - if they have any at all. These patents are likely to cover their core technologies, which are often their most valuable assets. Under the existing system, getting pan-EU protection and enforcing those rights all the way across Europe can often be prohibitively expensive for such companies. The new system would make this a more realistic prospect for them. Having part of this new system based in Ireland would be further beneficial for these enterprises because they would be able to enforce their pan-European rights through an Irish based court rather than having to play away from home, as it were. As we have alluded to already, it represents a significant opportunity for Ireland. The business case for Ireland’s participation in the UPC has gotten stronger since it was first examined almost a decade ago. Ireland is uniquely positioned to establish itself on the international stage as a patent enforcement hotspot. If done right, Ireland’s participation could yield very substantial gains for the wider Irish economy - gains that would go far beyond an increase in legal services. That point is important, so I would like to re-emphasise it. If Ireland participates in the UPC in an effective fashion, the economy as a whole - not just legal services - stands to gain significantly.

The UPC has been designed to comprise several local divisions across the contracting states. It was decided that Ireland will host its own local division, subject to the referendum passing. This was an important decision. Infringement litigation will not be spread evenly across each local division, and forum shopping is to be expected. Internal conversations are already under way in many large companies to select one location to establish their base for patent enforcement, and a variety of other corporate functions will co-locate to this base. Ireland can compete for this investment, but to stand a chance of success, the local division must be established here in a timely fashion. After Brexit, Ireland has two powerful and unique advantages over other UPC locations. We should bear in mind that a lot of the patent litigation that will take place in the UPC will be global in nature and involve parties originating outside Europe. Being able to litigate on a pan-European basis before a court with native English proficiency and common law experience is a big deal for many such parties, particularly for those from countries with their own common law traditions like the US. Ireland can now take advantage of a marketplace the size of EU and combine it with the fact the country is a hub of patent-intensive industries, both multinational and indigenous.

Let us get to the figures. An attractive and timely-established local division in Dublin will support the further expansion of the patent-intensive sectors across the country, creating jobs, benefiting SMEs and boosting Ireland’s innovation performance. It is expected to contribute at least €415 million, or 0.13% in GDP growth, per annum. It could rise to as much as €1.663 billion, or 0.5% in GDP growth. In addition to the broad economic benefits to the wider economy, there will also be increased expenditure and employment in legal, professional, and other technical advisory services. That is the prize that we can compete for at the moment, but we must play our cards right. While Ireland stands to gain significantly through participating in this system, we will only be able to do so if we participate in a timely fashion. Establishing a well-run and attractive local division that is ready to go when the UPC starts operating or very shortly thereafter will be key to competing for patent litigation to be heard before the Irish-based court. A slow start to implementation will prove costly and prevent Ireland from making the fullest use of the potential of the unified patent system. We should also bear in mind that there will likely be a period between holding a referendum and setting up a local division should the public agree to the establishment of the UPC. That must be factored into the equation. It is possible that an Irish local division could be established soon after it is launched by the initial 16 ratifying states, which will likely take place in early 2023, but it could also be as late as two years down the line. This is likely to affect the attractiveness and take-up of the Irish local division.

Projections indicate that while patent litigation activities could still increase, albeit from the existing extremely low base, we might only get a quarter of the cases that would be available to a well-run, timely and attractive local division. This translates into a significant opportunity cost. While we have stated that there is between €415 million and €1.66 billion to play for, a conservative estimate is that a significant proportion of this will not be available to latecomers to the system. It will be off the table. We are happy to go into more detail on that if the committee wishes. In addition, delayed ratification in Ireland clearly would benefit locations elsewhere. Many of those expected to gain would be key competitor locations for foreign direct investment, FDI.

Prompt action is now required. While the Government has committed to running a referendum on this issue in May 2024, if not before, it is IBEC’s view that May 2024 is the absolute latest date that a referendum should be held and even then, it is at the risk of missing out on significant opportunities. Should other issues be put to the people earlier, the referendum on the unified patent court, UPC, should absolutely be included. Work on enabling legislation should resume. Government should also convene an inter-departmental preparatory group on the UPC and work with external bodies, such as IBEC, to try to influence decisions on the UPC at European level and prepare the groundwork.

Ireland is not out of the running by any means. We have a unique position within the UPC system that could benefit the system as a whole and be of significant advantage to the Irish economy. What we are delivering today is a simple two-part message. The first part is that there is a substantial opportunity here. The second part is very important in that much of the opportunity is only available within a limited timeframe. This is the reasoning behind IBEC’s call for a clear timetable, which captures the urgency of the opportunity at stake. I thank the committee for its attention. We look forward to answering any questions or addressing any specific issues that members of the committee may have.