Then it's time to decide whether you should opt-out of the Unified Patent Court
There has been a long and winding road for the Unified Patent Court ("UPC") after the signing of the UPC Agreement in February 2013. However, after Austria ratified the Protocol on Provisional Application of the UPC Agreement on 18 January 2022, the court is now expected to open for business in late 2022 or early 2023. It is therefore time for holders of European patents to start thinking about whether they wish to opt out of the jurisdiction of the new court.
What is UPC?
UPC is an international court for the enforcement of traditional European patents and European patents having unitary effect ("Unitary Patents*").
UPC will come into effect the first day after the fourth month after the ratification of the UPC Agreement by the thirteenth EU member state, including the three states with the highest number of effective European patents.. As of today, 16 of the 25 member states that have signed the UPC Agreement have ratified the agreement.
Before the UPC comes into effect there will be a provisional application phase ("PAP"). Due to the ratification of the PAP protocol by Austria 18 January 2022, the PAP formally started running on 19 January 2022.
The UPC will exist side-by-side with existing national courts. The relationship between the jurisdiction of the UPC and the national courts of the UPC member states will for European patents be determined by the opt-out scheme and the transitional period (which will be explained below).
A judgment from the UPC will have effect in all the contracting member states having ratified the UPC system. As Norway is not a part of the EU, it is not possible for Norway to join the UPC Agreement. However, the UPC and the new regulations regarding Unitary patents will be relevant for Norwegian entities seeking patent protection within the EU.
The jurisdiction of the UPC
When the regulation regarding Unitary Patents has entered into force, three types of patents will be available in Europe:
- National patents
- Unitary Patents
- European patents
National patents will fall outside the competence of the UPC, and will continue to be litigated before the national courts also after the establishment of the UPC.
Unitary Patents may on the other hand be litigated only before the UPC.
Traditional European patents may during a transitional period (of 7 + possible extension of 7 years) be litigated either in the UPC or in the national courts where the patent is validated. After the transitional period, the UPC will have exclusive jurisdiction also over European patents. It is however possible during the transitional period to opt-out of the jurisdiction of the UPC.
There will also be a period (which earlier has been suggested to be 3 months) during the provisional application phase (PAP) prior to the opening of the court, during which patentees can start to opt-out their patents from the UPC system. This period is also known as the "sunrise period".
Opt-out –what is the effect?
All European patents will automatically be under the jurisdiction of the UPC, unless the patentee has taken action to opt-out. If no further actions are taken, patentees may therefore find their European patents disputed before the UPC in the future.
Applications for European patents can also be opted out, and the opt-out will also apply to the patent as granted. A supplementary protection certificate (SPC) will be opted-out automatically if the basic patent it is based upon is opted out. This will be the case also for SPCs granted after the opt-out.
Opting a European patent out of the UPC will have the effect that the UPC no longer will be competent to handle disputes concerning this European patent – neither during the transitional period nor afterwards for the entire lifetime of the relevant patent. After opting out, the relevant European patent may therefore only be litigated before national courts.
It is however possible to withdraw the opt-out, and by this opt-in again. If the opt-out is withdrawn during the transitional period, a case may be filed either before the national court or the UPC. If the opt-out is withdrawn after the expiry of the transitional period, a case may only be filed before the UPC. Opt-out may be withdrawn at any time – but there is one restriction: if a patent is already subject to litigation before a national court, litigation must continue in that court. Withdrawal of the opt-out is in such cases not permitted. It is also not possible to opt-out again after having withdrawn an opt-out.
It is also important to note that if a revocation action has started in the UPC before the patent is opted out, there will no longer be possible to opt-out. Thus, if you have decided to opt-out, and want to avoid the risk of this possibility being blocked, the application should be filed during the sunrise period so that the opt-out is registered before the UPC starts receiving cases.
How do you opt-out?
To opt-out an application must be lodged with the UPC Registry via the UPC Case Management System. There is no fee for opting out.
The application must be filed by the patentee, or a representative of the patentee. If there are more than one patentee, the application must be lodged by all patentees. Licensees cannot file an application for opt-out.
The opt-out will, if lodged during the sunrise period, take effect from the date when the UPC Agreement comes into effect. If lodged after the sunrise period, the opt-out will take effect from the date of entry in the register.
Should your European patent be opted out?
Whether to opt-out your European patents from the jurisdiction of the UPC is a strategic question, which should be considered carefully for all the patents in your portfolio. Several factors are relevant in the assessment. Some of these are:
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The jurisdiction of the UPC is extensive compared to the national courts. A judgment from the UPC will have effect in all states that have ratified the UPC Agreement. Thus, there will be one single invalidation action in one single court (but with the possibility to appeal), that could result in invalidation of the patent in all states of the UPC. The scope of this effect will increase as more countries ratify the UPC Agreement. In light of this, the possibility of effective enforcement in the UPC should be balanced against the risk of simultaneous revocation in a large number of countries.
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UPC is a new court, with new patent judges, new rules of procedure and without any case law. There will as a result, during the first years of operation, be greater uncertainty in predicting costs, timescales and outcome of litigation.
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Litigation costs in the UPC may be higher than litigation in one single national court. On the other hand, if you foresee that you may need to enforce your patent in several states covered by the UPC, staying within the UPC may be advantageous when it comes to costs.
Thus, the number of patents included in the patent portfolio, the perceived strength of the patents and their commercial value and importance for your business should be taken into account when deciding your strategy.
Given the opportunity to withdraw an opt-out, we expect that patentees may decide to opt-out some of their patents and keeping others in until we have more experience and case law from the UPC.
*A Unitary Patent is a new type of European patent which will be available as soon as UPC has been established. A Unitary Patent will be valid in all participating EU member states.
