The Unified Patent Court: Opting European Patents Out

1. Introduction

The Unified Patent Court (UPC) is a new patent court that will be fully in force starting June 2023 and, along with the Unitary Patent system, represents the biggest change in European patent practice in decades. The UPC will have jurisdiction to hear cases regarding infringement actions and patent revocations of European Patents and European Patents with unitary effect, i.e., Unitary Patents.

The decisions of the UPC will be applicable to the participating member states,[1] but will have no jurisdiction over national validations in non-participating EU members, such as Spain and Poland, or over national validations in non-EU countries including the United Kingdom.

The UPC will be divided into a Court of First Instance, comprising a Central Division, located in Paris and Munich, and Local and Regional Divisions divided across the participating member states. A Court of Appeal will sit in Luxembourg. Cases will be heard by panels of five judges in the Court of Appeal and panels of at least three judges in the Court of First Instance. Panels of the Court of Appeal will include three legally qualified judges and two technically qualified judges. The technically qualified judges will have technical degrees and demonstrable expertise in the relevant field of the case being heard. Panels of the Court of First Instance in the Central Division will include two legally qualified judges and one technically qualified judge, while panels of the Court of First Instance in the Local and Regional Divisions will include three legally qualified judges and, upon request of one of the parties or the panel itself, an additional technically qualified judge.

Separate from the decision whether to obtain a Unitary Patent or a traditional European Patent, European Patent (EP) holders will need to decide whether to allow their traditional EPs, including those expired and those granted before the UPC begins, to fall under the jurisdiction of the UPC or the national courts of each participating member state. To avoid the UPC, EP holders will need to affirmatively “opt-out” of UPC jurisdiction.

2. Timeline of the UPC and Important Dates

The start of the UPC depended upon the timing of Germany depositing its instrument of ratification. Upon depositing, a sunrise period begins the first day of the next month. Germany completed its deposit on February 17, 2023. Accordingly, the sunrise period will start on March 1, 2023. The UPC will be fully open after this three-month sunrise period, that is, on June 1, 2023. The sunrise period provides an opportunity for patent holders to opt-out any EPs that they wish to avoid the jurisdiction of the UPC.

Upon fully opening, a transitional period of seven years, which may be extended for a further seven years, will commence during which the national courts of participating states will continue to have jurisdiction over European Patents. This jurisdiction will continue after the transition period for those European Patents that were opted out of UPC jurisdiction.

3. Opting European Patents Out

As shown in the figure below, Unitary Patents will be within the exclusive jurisdiction of the UPC. However, Granted European Patents, and Supplementary Protection Certificates (SPCs) therefrom, may or may not be with the exclusive jurisdiction of the UPC. For national validations in non-participating EU members (e.g., Spain and Poland) or national validations in non-EU countries (e.g., United Kingdom) (collectively referred to as non-UPC countries in the figure), jurisdiction will lay with national courts. However, for national validations of participating member states (collectively referred to as UPC countries in the figure), jurisdiction will be with the UPC after the transitional period, unless there is an opt-out of the UPC jurisdiction as shown in the green boxes. Furthermore, expired European Patents can be opted out. Opting out is all-or-nothing for a European Patent. It is therefore not possible to select particular national validations to opt-out, nor is it possible to opt-out only a European Patent and not its corresponding SPC (or to opt-out an SPC and not its corresponding European Patent).

Note that the above figure has been simplified. The diagram does not show all possible opt-out scenarios, such as opting out a pending European patent application or opting out after receipt of an intention to grant. Furthermore, it is also possible to revoke an opt-out. That decision is irreversible, that is, a second opt-out may not be filed. Finally, during the transitional period, for those traditional European patents where there has been no optout, jurisdiction will be shared between the UPC and the various national courts based on where an infringement or revocation action is first filed. This shared jurisdiction during the transitional period can be visually shown as follows with the dashed line indicating the shared jurisdiction:

Opt-out requests may be filed beginning on the first day of the sunrise period. This crucial three-month period allows time for patent holders to decide which of their patents to opt-out of the UPC jurisdiction, with respect to participating member states. After the sunrise period, patent holders may still choose to opt-out unless and until a case concerning a particular patent is brought before the UPC. Timely decisions should be made during this period to avoid patents unintentionally falling under the jurisdiction of the UPC. There is no official fee for opting out.

4. Potential Benefits of the UPC

By deciding to not opt-out of the UPC, patent holders should expect that any litigation brought after June 1, 2023, may be before the UPC. Patent holders should consider at least the following potential benefits of this default UPC option:

• There will likely be a reduced cost and complexity of prosecuting patent enforcement actions, including obtaining injunctions and damage awards across the participating states. Likewise, defending invalidity actions will be less expensive and less complex.
• Opportunities to influence and develop new jurisprudence early in the UPC’s tenure.
• Other litigation benefits including the ability to forum shop from available UPC divisions, avoidance of patent-unfriendly national courts, expedited procedural timelines, ease of litigating in a single language, recovery of costs for the prevailing party, and discovery mechanisms not available in all national systems.

5. Potential Drawbacks of the UPC

In spite of the potential benefits, patent holders should carefully consider opting their EPs out of the UPC, taking account of at least the following potential drawbacks and considerations:

• A patent holder may spread risk across multiple national courts, as opposed to the “all eggs in one basket” litigation before the UPC. The potential for a central revocation is the primary risk of choosing to fall under UPC jurisdiction.
• It is possible to opt back in to the UPC, which makes the initial opt-out decision reversible if intending to bring an infringement action before the UPC. However, it is not possible to opt-out a second time and opting in is foreclosed if litigation commences in a national court.
• Without an established jurisprudence, the UPC will, at least initially, be unpredictable.
• Any particular national court may be more favorable to a patent than the UPC.

6. Perspectives

The numerous advantages of litigating before the UPC do not make the decision whether to opt-out or to not opt-out plainly obvious. Patent holders should carefully analyze their European Patent portfolios and consider the likelihood of bringing infringement actions, the likelihood of being subject to a revocation proceeding from a third party, the likelihood of winning or losing before the UPC and, ultimately, whether it is beneficial to reach a disposition for at least 17 jurisdictions in a single action.

As a default, we expect many patent holders to opt-out most, or all, of their European Patents, including expired European Patents, at least during this initial period of greater uncertainty with the court. Patent holders may take a “wait and see” approach by opting out broadly during the sunrise period, and then strategically choose when, and if, to return some patents to the UPC jurisdiction by opting back in. Others may take a hybrid approach, opting out some EPs, such as critical patents covering commercially important products, to avoid the risk of central revocation, while leaving other EPs incrementally covering the same product under the UPC.

For those patent holders satisfied with their EPs falling under the jurisdiction of the UPC, no action is required.

However, for those considering opting out, it is important to begin confirming ownership and authority to opt-out now, rather than later, to ensure each EP is timely and effectively opted out of the UPC before the court is fully online in June 2023. For each EP to be opted out, the true proprietor(s) must be identified and give consent, supported by a clear chain of title where necessary, and ensuring that each national register is up to date and accurate. Opt-outs are only effective from the date they are correctly filed, and therefore mistakes in the opt-out request will leave EPs under the jurisdiction of the UPC and vulnerable to central revocation proceedings when the UPC is fully open. Especially for patents that have transferred ownership between entities, or even where an entity has simply changed its name, early diligence and prompt corrective action, as needed, will be critical in the coming months before the UPC opens.

[1] The initial participants in the system are Austria, Belgium, Bulgaria, Denmark, Estonia, Finland, France, Germany, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovenia, and Sweden. The United Kingdom withdrew from the agreement and is no longer eligible to join. Spain, Poland, and Croatia have not yet agreed to join. Cyprus, Czech Republic, Greece, Hungary, Ireland, Romania, and Slovakia have signed the agreement but have not yet ratified it. The EPC member states of Iceland, Norway, Turkey, Switzerland, Serbia, Albania, and Macedonia are not eligible to sign the agreement as non-EU states.