UPC and opt-out: definition, advantages and drawbacks
The present system of European (EP) patents granted by the European Patent Office, has the drawback that the same patent, validated in several states, may lead to several parallel disputes in these jurisdictions.
The Unified Patent package creates a unitary effect for European patents encompassing the states that have ratified the Unified Patent Court Agreement (UPCA – to be found here). That is to say, an EP patent with unitary effect will have the same effects in all the states that ratified the UPCA and where said patent has been validated.
It also creates a single court (the Unified Patent Court – UPC) having jurisdiction for such European patents with unitary effect.
The Unified Patent Court (UPC)
The UPC is expected to be operational by end of 2022. (See the notification on the UPC official website).
The UPC will be a single court that will have exclusive jurisdiction for European Patents with unitary effect (UP).
During a transitional period, it will have competence for European patents or applications without unitary effect (EP), in addition to the national courts, before which actions for infringement or for revocation of European Patents or declarations of invalidity of a supplementary protection certificate can be brought, provided the UPC competence is not opted-out (see below).
By default, when the UPCA will come into force, all current European patents, which are validated in countries that have ratified the UPCA, will automatically be subject to the jurisdiction of the UPC. The same will apply to pending European patent applications and SPCs based on European patents. However, to obtain a decision in a state where a European Patent has been validated but which has not ratified the UPCA, it will be necessary to bring an action before the competent national court (Spain and Poland).
Patents which fall within the UPC system are susceptible to be challenged by third parties before this Court and, in case of revocation, the decision will apply to all UPCA member states: By a single decision, the patent will be revoked in all states which have ratified the UPCA and where the European Patent has been validated.
Jurisdiction of the UPC over granted patents or pending applications without unitary effect can be excluded by choice of the owner or applicant so that only the national courts remain competent. This is known as “opt-out”.
Opt-out is an option open to applicants or patentees to exclude disputes related to any of their European patents (in force or expired) or applications without unitary effect from the UPC’s jurisdiction. Thus, any action for infringement or for revocation of a European patent will be heard by the competent national courts, just like the current system.
Opt-out has effect in all UPCA Contracting Member States in which the European Patent or the application is in force and for the entire lifetime of the patent without the need to notify the opt-out separately for the relevant Contracting Member States (Article 83.3 of the UPCA).
SPCs for opted out European Patents will automatically be opted out (granted SPCs or future SPCs based on the patent). Otherwise, SPCs can be opted out separately and this must be done by the patent’s owner.
According to an Explanatory Note by the Preparatory Committee published on January 29, 2014, a competent national court would have to apply the applicable national law and not the UPCA. Whether the national courts will follow this opinion, remains to be seen.
Period to Opt-Out
Opt-out will only be available during a limited period of time: the so-called “transitional period”.
Opting out will be initially available before the entry into force of the UPC, during the preceding provisional application (‘sunrise’) period expected to start at the end of summer 2022, up until the opening of the UPC (See the Entry into force of the Protocol on Provisional Application).
During this period, the UPC Registry will be established to register opt-out requests before revocation actions can be introduced at the UPC on the first day of the system. Indeed, if a UPC action is introduced before an opt-out is entered on the register, this will inhibit any later opt-out.
Opt-out will then be available during a transitional period of 7 years, as from the entry into force of the UPC agreement (with a possibility of an additional period of 7 years which may be decided by the UPC Administrative Committee) until one month before the expiration of the transitional period. (See Article 83.1 of the UPCA). After this transitional period of up to 14 years at most, the UPC will gain exclusive jurisdiction over European applications/European patents without unitary effect which would not have been opted out.
The opt-out requests will have to be filed with the UPC Registry. The opt-out will become effective on the day the notification of the opt-out is received by the Registry, provided that the opted-out patent has not already been the subject of a pending litigation before the UPC. It may therefore be crucial to file opt-out request once it is available.
The opt-out must be filed on behalf of the effective owner of the application or the European patent, at the time of the filing of the opt-out application, otherwise it will be considered null and void. Co-applicants or co-patentees of an application for a European patent or a European patent will have to act in common to exercise the opt-out.
Representation by a European patent attorney or lawyer is not required for filing opt-out requests. A person instructed by the company itself, such as an employee of the company can opt-out a patent.
It will be possible to manually identify an unlimited number of patents to opt out in the UPC Case Management system (CMS website can be found here) or to use an “Application Programming Interface” that will allow a selection of patents from a database outside the CMS that will then be exported to the CMS to be opted out. This last option will allow very large numbers of patents to be opted out easily and within a short amount of time.
Pursuant to Article 83.4 of the UPCA it will be possible to withdraw such an opt-out at any time, provided that no action has been brought before a national court.
Once the application to withdraw an opt-out is registered, it should not be possible to again opt-out, according to the current draft rules of procedure of the Unified Patent Court (Rule 5 No 10 of the 18th draft).
According to Rule 370 of Procedure which deals with Court Fees and Recoverable Costs voted on 25th February 2016, there would be no official fee to opt-out, or to withdraw the opt-out .
Consequences of the opt-out
Advantages of the UPC – [Opt-out would not create an advantage]
The UPC will include technical Judges that are likely to have a better understanding of technically complex inventions and a better reasoning on patent infringement. The new Court will by definition avoid the contradictory decisions that may appear before different national courts regarding infringement.
Moreover, in case of multiple infringements in several European countries, a single action can be brought before the UPC and will have effect over all UPCA member states. Choosing the UPC will, then, significantly reduce the litigation costs in comparison with several litigations to be carried out in many countries.
Disadvantages of the UPC – [Opt-out would be preferable]
With the UPC, a European patent can be revoked in all states by a single decision. This will allow third parties or suspected infringers to efficiently challenge the validity, during the whole life time of the patents.
Moreover, the lack of feedback or case law from the UPC may make the UPC choice risky as we do not know yet the position that will be taken by the court, in particular in view of the validity of patents. Also, UPC rules and procedures are untried; it will take several years to achieve consistency in decisions.
Another element to take into account where making the choice to opt-out patents is that all proprietors of all designations of a European patent, in all states who have signed the UPC Agreement, must agree to opt out. The first complication that may arise from this rule is to identify the true proprietors of the patent, which will not necessarily be the registered proprietors, especially when patents have been assigned from a third party. Ownership should be checked, although there is no necessity to update/correct registers. The second one is the necessity for all the proprietors to join the opt-out request.
Also, if infringement is concentrated in a unique or a small number of countries, the UPC costs may be greater than proceedings before the corresponding national courts.