Unitary Patent: Unitary Effect & Opt-out

Introduction:

This article focuses on patent enforcement under the Unitary Patent System (‘UPS’). With the UPS scheduled to take effect on 1 June 2023, as announced on the Unitary Patent Court (‘UPC’) website, we are entering an era marked by the implementation of the Agreement on a Unified Patent Court (‘UPCA’).

In our previous article titled “Unitary Patent: Cost Savings Opportunity” we explored the potential cost savings achievable by requesting unitary effect as compared with validating classic European patents in the Member States of the UPCA.

Unitary Effect and Opting Out:

After the grant of a European Patent, proprietors must decide a crucial question: Whether or not to request unitary effect or adhere to the conventional process of validating the patent in national offices of the EPO Member States?

Requesting unitary effect means that the patent proprietor is choosing to have the European patent granted with unitary effect. This would provide uniform protection and enforcement of the unitary patent across all participating Member States of the UPC; a single renewal fee, a single set of rules, and a single court system for disputes related to the patent.

The request for unitary effect must be made within one month of the publication of the mention of the grant of the European patent in the European Patent Bulletin (Rule 6(1) UPR). Otherwise, the European patent will not have unitary effect and will instead be subject to the existing European patent system, requiring validation and maintenance in each of the individual countries.

“Opting out” of the UPC means that the patent will not be subject to the jurisdiction of the UPC; certain disputes relating to the patent may need to be resolved through the national court system of the country or countries in which the patent is validated. Therefore, it can be advisable to opt out before any disputes related to the patent arise.

The application to opt-out must be made through the online court filing system and will be managed by the UPC’s Registry. As representatives before the UPC, we are able to assist you with this if needed.

Centralised actions:

While it is true that opting out of unitary effect allows patent holders to maintain the territorial scope of their European patent and remove the prospect of a centralised attack under the UPC, it also means that they will have to litigate any infringement or validity disputes related to the patent in multiple national courts.

Depending on the geographical scope of the patent and the size of the portfolios, the litigation effort can easily become relatively time-consuming and costly.

On the other hand, requesting unitary effect may allow patent proprietors to bring all such disputes before the UPC, which can provide a more efficient and consistent forum for resolving patent disputes across multiple jurisdictions. Patent proprietors should carefully consider their business needs and the potential costs and benefits of opting for unitary effect or opting out before making a decision.

An invalidation action against a classic European patent, after the 9-month opposition period, may need to be brought against the European patent in each national court. On the contrary, under the UPS, a Unitary patent’s validity may be contested in the UPC and a single validity issue could have an impact on its ability to be enforced in all participating Member States.

Clearly, there are potential risks as well as advantages of centralised actions under the UPC and this should be carefully considered. You can decide whether to go with unitary effect or national validations by understanding the implications for your particular patent and taking into account elements like its strength, the market environment, and the likelihood of validity challenges. 

Additionally, the UPC’s establishment alters the patent litigation landscape in Europe. As a new system, it might take some time for the court to establish precedents and develop its jurisprudence. For example, there may be some unpredictability in the UPC’s early phases of operation. When making decisions about the enforcement and protection of their patents, patent proprietors should take into account these factors.

Hence, in order to mitigate this risk, patent proprietors have the option to register an “opt-out” i.e., by choosing to exclude their patent from the jurisdiction of the UPC, effectively avoiding central revocation actions.

As of 5 May 2023, there have been 76,099 cases opted-out of the UPC; 61,749 are patents and 14,338 are applications (plus 12 unpublished applications). A large proportion of proprietors have opted out of the UPS but appear to be removing only parts of their portfolios. There also appear to be a significant number of proprietors with relatively small portfolios, that have likely never been involved in litigation, that are also opting out of the UPS [1].

One possible reason for this may also be related to the court fee for a central “revocation action” under the UPC is EUR 20,000, which is significantly higher than that under existing way which include third party observations for which there is no official fee, and EUR 880 for opposition at the EPO. The conventional European patent may therefore be seen as a relatively more cost-effective yet less-risky option, again, depending on factors including the nature of the territories covered by the patent and portfolio size.

Under the UPC, a “central revocation” action cannot be done anonymously, which may deter some potential challengers and that there is also risk of counterclaim for infringement and damages,

Withdrawing the Opt-out:

According to Article 83(4) UPCA, once an opt-out is registered, it can still be withdrawn at any time i.e., effectively opting back into the jurisdiction of the UPC after having previously opted out – unless an action has already been brought before a national court, known as a “national lock out”.

If a patent proprietor chooses to withdraw their opt-out of the UPC under Art. 83(4) of the UPCA, the European patent will be subject to the jurisdiction of the UPC for any disputes related to the patent.

Withdrawing the opt-out of the UPC reinstates the risk of central invalidation of the patent i.e., if it is found to be invalid in a single Member State. This is because the UPC has exclusive competence in cases involving invalidation or nullity, and a single invalidity decision by the UPC would have central effect in all participating member states.

Again, the decision to opt back into the UPC should be carefully considered and based on a thorough analysis of the specific circumstances of each case, including the potential risks and benefits of opting back in.

UPC: “Exclusive Competence“:

Matters relating to Unitary patents cannot generally be brought before national courts, with the exception of situations where the patent proprietor has opted out of the UPC, in which case the national courts would still have jurisdiction.

The UPC has “exclusive competence” over infringement cases for all of the 17 EU Member States involved. This allows infringement actions for Unitary patents to be brought as a single legal action with immediate effect across all 17 Member States.

In addition to infringement proceedings, the UPC also holds exclusive competence in cases involving invalidation, non-infringement declarations, preliminary injunctions, and prior user rights.

The UPC does not handle compulsory licenses, disputes over invention ownership, or claims to ownership of a unitary patent. So whether a patent holder has requested unitary effect or not, all matters concerning these issues will still fall under the jurisdiction of national courts.

Proceedings brought before the UPC can offer clear time and cost benefits as compared with separate actions in national courts. However, it’s important to note that if a patent is found invalid, this determination applies to all 17 Member States through a single action.

In most national courts, it would be challenging to deliver decisions on counterclaims of invalidity and infringement within a year, but the UPC is expected to do so – hence, the “clear time benefit” mentioned above.

The UPC is expected to provide a better balance between duration and legal certainty, but there may be a cost as some tactical tools, such as the “injunction gap” in bifurcated jurisdictions, will no longer be available. The injunction gap refers to the situation where a patent holder is unable to obtain an injunction against an infringing party in a bifurcated jurisdiction until the validity of the patent has been determined in a separate proceeding. This can result in a delay in obtaining remedies for patent infringement.

European patents under UPC:

The UPC is also competent in matters concerning classic European patents, including those already granted and also those validated in at least one UPC member state.

If a proprietor of a European patent does not request unitary effect and does not opt out of the UPC, the patent will be subject to the jurisdiction of the UPC for any disputes relating to the patent, provided that the patent is not subject to national proceedings in a country where the UPC has exclusive jurisdiction.

If a European patent is found invalid by UPC, the determination will apply to all participating EU Member States where the patent is validated, regardless of whether the patent proprietor requested unitary effect or not. The UPC also has jurisdiction over European patents and a single action before the UPC can result in a determination that applies to all participating EU Member States where the patent is validated.

“During the transitional period of seven years after the date of entry into force of the UPC Agreement actions relating to (classical) European patents (not European Patents with unitary effect) may alternatively be brought before national courts or other competent national authorities as provided for in Art. 83(1) of the UPC Agreement. The transitional period may be prolonged by decision of the Administrative Committee” [2].

However, it is important to note that if the patent proprietor did not request unitary effect for their European patent, the patent will not have unitary effect and will be subject to the national laws of each participating EU Member State where the patent is validated. The effects of the determination may vary depending on the application of national laws of each participating EU Member State.

The strategic decision of whether to request unitary effect or opt out of the UPC significantly influences the future of European patent protection. As the UPC becomes a pivotal institution for unitary and classic European patents, it may be that the role of national courts will undergo transformation, potentially diminishing their level of influence particularly in matters where the UPC has exclusive competence.

UPC Locations and Divisions:

Understanding the UPC’s geographical layout is crucial for considering the implications of UPS and enforcement. The UPC has strategically placed divisions across Europe, ensuring comprehensive coverage and accessibility for patent matters.

Central Divisions: Paris, Munich, and Milan: The heart of the UPC is located in Paris, Munich, and Milan. These divisions act as key hubs for handling patent disputes, with specialised judges proficient in patent law. Efficient and informed decision-making is ensured in these divisions.

Local Divisions, including Brussels: Apart from the central divisions, the UPC includes local divisions catering to specific regions. Brussels, for instance, has a division for localised handling of patent cases in Belgium. These divisions ensure access to justice and efficient resolution of patent disputes.

Nordic-Baltic Division: The UPC has a dedicated division to address patent disputes in the Nordic and Baltic countries. This division provides specialised expertise for matters pertaining to these jurisdictions.

Luxembourg: Court of Appeal and Court of Justice: Luxembourg hosts the Court of Appeal and the Court of Justice of the UPC. These institutions handle appeals and ensure consistent interpretation and application of patent law across participating member states.

Arbitration and Mediation Centres: Portugal and Slovenia: To offer alternative dispute resolution, the UPC has designated arbitration and mediation centers in Portugal and Slovenia. Parties can choose to resolve patent disputes through arbitration or mediation, providing flexible and tailored solutions outside the traditional court process.

The interplay between the UPC’s various divisions and the influence of Member States may add nuance to the decision-making process. Hence, careful consideration is required when deciding on unitary effect for a European patent.

Hidden Prior Art and Opt-Out Considerations:

Hidden or unpublished prior art, novelty-only prior art also known as earlier-filed-later published art under Art. 54(3) EPC, in the context of the UPS, will become relevant for the entire territory covered by the Unitary patent. In other words, the scope of hidden prior art expands to cover the entire territory instead of being limited to national jurisdictions. 

Under the classic European patent system, separate claims for each state are possible such that applicants can amend claims specifically for the countries where such prior rights exist in order to avoid potential revocation proceedings based on earlier national rights. Under the UPS, however, this is no longer an option – Unitary patents possess a unified nature, meaning they will have a single set of claims. Consequently, only European patents with identical claims in all participating states are eligible for protection as Unitary patents.

To assist patent proprietors in making informed decisions between a European patent and a Unitary patent, the EPO provides a “top-up search” for hidden prior art just before grant, free of charge.

“Torpedo actions” and Opt-out considerations:

The opt-out provision under Art. 83 UPCA can be viewed both as an opportunity and a risk. On the one hand, opting out allows patent holders to avoid central revocation actions and withdraw the opt-out when potential infringement is detected. On the other hand, opting out also means the opt-out need to be withdrawn to pursue central infringement actions under the UPC, and also opens the door for a new type of legal manoeuvre to stop this, called “torpedo actions.”

In a torpedo action scenario, a competitor initiates national proceedings in a country where there is little interest e.g., for obtaining a declaration of non-infringement to block the patentee from withdrawing the opt-out – “national lock out”.

The competitor may start a case in the chosen country, using a local licensee or distributor as the plaintiff, and seek a declaration of non-infringement for that country and other designated EU Member States covered by the European patent. Once such a national case has been initiated, the patentee cannot withdraw the opt-out and pursue infringement proceedings in the UPC.

By way of example, under the Brussels Regulation, the principle of “lis pendens” applies requiring courts in other EU Member States suspend pending proceedings until a decision is reached in the national court. As national court decisions can take several years, initiating a torpedo action can significantly delay the patentee’s ability to enforce their rights through the such as through withdrawing their opt-out and initiating infringement proceedings under the UPC.

Belgium is a good example – even if a European patent is not in force in Belgium per se, there are no further validation formalities required and as a result, all patents that have taken effect after 1 January 2017 in Belgium remain in effect until renewal fees are not paid. Further, there is a grace period of five years before the patentee loses the opportunity to enforce their rights. This means that if the proprietor has opted out of the UPC, a competitor could in theory initiate proceedings in the Belgian national court against the European patent to create the national lock out, preventing the patentee from withdrawing the opt-out and pursuing infringement proceedings in the UPC.

Conclusion:

Factors discussed herein including unitary effect, opting out of the UPC, centralised actions, withdrawing the opt out, hidden prior art, and torpedo actions are just some of should be considered when formulating a strategy under the UPS.

The answer to the all-important-question: “Whether or not to request unitary effect or adhere to the conventional process of validating the patent in national offices of the EPO Member States? “should be carefully evaluated based on these factors, as well as the specific circumstances of each patent proprietor.

Other factors such as existing patents, territorial scope, potential infringement risks, and the likelihood of torpedo actions should also be considered in order to make an informed choice – so there is a lot for patent proprietors to think about and act on during such a critical and significant juncture in the European patent protection landscape!

We recommend patent proprietors to engage in thorough analysis and consult with legal experts to navigate the complexities of the UPS and make strategic decisions that best align with their patent enforcement goals and risk tolerance.

Overall, the UPS and the UPC have introduced new opportunities and challenges for patent holders in Europe. An in-depth understanding of the UPS coupled with strategic planning will be key to successfully navigating these changes and maximising the benefits of the unified patent system.

References:

[1] Navigating the UPC: An In-Depth Analysis of Opt-Outs so far – https://www.juve-patent.com/sponsored/simmons-simmons-llp/navigating-the-upc-an-in-depth-analysis-of-opt-outs-so-far/

[2] Unified Patent Court – FAQ’s – What is the jurisdiction of the UPC? – https://www.unified-patent-court.org/en/faq/jurisdiction-upc

This article is intended for general informational purposes only and should not be considered as legal advice.

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