On 20 June 2013, the Netherlands signed the Unified Patent Court Agreement (hereinafter: UPCA). After being delayed repeatedly, the Unified Patent Court (hereinafter also referred to as: UPC) will commence on 1 June 2023. This will allow patent proprietors to simultaneously enforce their patent in all countries which have ratified the UPCA at a single court, the UPC. Before that happens, proprietors of European patents must make an important decision. The UPC ‘sunrise period’ runs from 1 March 2023 to 1 June 2023. During this sunrise period, proprietors of European patents have the option to safely withdraw these patents from the jurisdiction of the UPC (hereinafter: Opt-out). From 1 June 2023, an Opt-out will fail if a third party has filed a claim against the patent in question with the UPC. If no Opt- out is filed, existing European patents will automatically also fall under the jurisdiction of the UPC. In this blog we discuss the context, the advantages and disadvantages of such an Opt-out.
The UPC System
UPCA member states
Seventeen European countries are expected to have ratified the UPCA by 1 June 2023, meaning that the Unified Patent Court will only concern these countries for the time being. Ireland, Cyprus, the Czech Republic, Greece, Hungary, Romania and Slovakia have signed but not yet ratified the UPCA. Other European countries including: The United Kingdom, Croatia, Spain, Norway, Switzerland and Poland do not participate in the UPC at all. The image below shows the countries for which the UPCA enters into force as of the 1th of June:
The Unified Patent Court is made up of two tiers. The first instance court consists of the local, regional and central divisions. The local and regional divisions will mostly function as the first stop for patent enforcement. These divisions are spread throughout the UPCA territory. The central division will have branches in Paris, Munich and (probably) Milan. Each of these branches will focus on specific technical fields. The central divisions will have exclusive jurisdiction in revocation- and declaration of non-infringement proceedings. Local and regional divisions can also refer proceedings to the central division under certain circumstances. The Court of Appeal in Luxembourg handles appeals against decisions of the local, regional and central divisions.
Two kinds of European patents
From 1 June 2023, there will be two tracks for granting a European patent application.
First, the existing route for obtaining an European patent remains largely unchanged. An inventor can file an application with the European Patent Office (hereinafter: EPO). If granted, the patent can be validated for the European countries designated by the applicant, after which the European patent turns into a bundle of national patent rights. These patent rights can then be (separately) enforced in each of the individual countries where they provide protection. The entry into force of the UPCA means that the Unified Patent Court will now, in principle, also have jurisdiction to hear actions relating to these European patents. This means that the UPC can invalidate a European patent (including all national validations) in its entirety. A third party that wants to invalidate a European patent throughout Europe, will thus not, unlike under the current system, need to conduct invalidity proceedings in all countries where the patent has been validated. This is a substantial shift within the judicial process for patents. Patent proprietors do however have the opportunity to Opt-out. This allows them to withdraw their European patents from the jurisdiction of the UPC.
Second, the entry into force of the UPCA introduces the European patent with unitary effect (hereinafter: Unitary Patent). A patentee can request unitary effect from 1 June 2023, after the European patent has been granted by the EPO. European patents already granted before 1 June cannot obtain unitary effect. The introduction of the Unitary Patent does not change the granting procedure.
Unitary Patents will have no validity in those countries that have not ratified the UPCA. A patentee will still have to validate the underlying European patent nationally if he wants to protect his invention in these countries. There is no Opt-out possible for a Unitary Patent, nor do national courts have jurisdiction over proceedings concerning a Unitary Patent. For the enforcement of a Unitary Patent, a claimant can only turn to the Unified Patent Court.
Proprietors of already granted European patents thus have until 1 June 2023 to file an Opt-out request. That is, with a guarantee that this request will be honoured. The reasons for requesting or not requesting such an Opt-out are discussed below.
Reasons for Opting-out
That the Unified Patent Court can simultaneously declare a European patent invalid for Germany, France, Italy and The Netherlands along with 13 other countries, represents a very high risk for patent proprietors. Patent proprietors could lose their exclusive rights to a product or process important to their business operations, within a very significant part of the European market in one fell swoop. An Opt-out minimises this risk because it deprives third parties of this ‘easy’ route. These third parties will instead have to turn to the various national courts, each of which makes its own assessment. Although many national courts will indeed also look at what their fellow courts in other countries have already ruled on a particular patent, practice shows that they nevertheless regularly reach different conclusions. Requesting an Opt-out is therefore a form of risk spreading.
An Opt-out also makes it less attractive for third parties to initiate invalidity proceedings. Proceedings at the UPC will (presumably) usually take less time, effort and money than conducting several parallel national proceedings. An Opt-out thus makes third parties less likely to initiate a legal procedure.
Much is also still uncertain regarding the Unified Patent Court. The UPCA and the Rules of Procedure are the result of a series of compromises between different countries with different legal systems. The UPCA and the Rules of Procedure give the judges discretion on several points. This applies, for example, to the question of whether or not a local or regional division faced with a counterclaim to invalidate the invoked patent in patent enforcement proceedings will refer the case to the central division. The approach to such issues will have to crystallise in the coming years. As a result, it is more difficult (for now) to estimate the course and perhaps outcome of proceedings at the UPC than the existing well-known national proceedings. This may also be a reason to Opt-out.
Finally, an Opt-out is not definitive. An Opt-out request can be undone at any time, unless an action concerning that patent is already pending before a national court. The withdrawal option gives companies the flexibility to strategically influence the choice of forum. Should a patent proprietor who initially opted out still wish to enforce its patent at the UPC, than that patent proprietor can withdraw its Opt-out.
Reasons against Opting-out
The Unified Patent Court also has advantages of course. Litigation in a multitude of national courts can be expensive, complex and time-consuming. You need a team of lawyers in each relevant country, you face the different idiosyncrasies of each legal system involved and the outcomes can differ. The UPC provides a centralised institute for patent litigation for a large and important part of the European market and can bring certainty regarding patents within this market. It should be noted that a substantial number of European countries have not ratified the UPCA. For these countries, patent proceedings will continue to be conducted in national courts. Thus, the UPC is not a complete European one stop shop.
Litigation at the Unified Patent Court and acquiring a Unitary Patent is not cheap, but will generally be cheaper than validating, maintaining and enforcing a European bundle patent validated in multiple countries. Under the current system, patent proprietors regularly choose not to validate the European patent in each country to save costs. However, this significantly limits the patent proprietors’ enforcement options in these countries. Opting for a Unitary Patent is the most cost-effective way to obtain patent protection in the 17 UPC countries.
The Unified Patent Court has the potential to change a lot about how inventions are protected in European patent practice. The UPC brings both certainty and uncertainty and has advantages, but certainly also disadvantages. Depending on the nature of the patent proprietor’s business, the UPC can be a big risk or a big opportunity. Over the next two months European patent proprietors face the important choice of whether to request an Opt-out, or not. Whether an Opt-out is desirable for your company may depend on the characteristics of your patent portfolio. The choice may be influenced by questions such as to what extent risk diversification is desirable and in which (and how many) national markets the inventions are utilized. If you are curious about what we can do for your company regarding the UPC, please feel free to contact us.
In State of the Art, the lawyers of the Intellectual Property & Technology section explain an interesting doctrine or relevant development within intellectual property law.
 Art. 5(6) Rules of Procedure of the Unified Patent Court (hereinafter: Rules of Procedure).
 This jurisdiction is not exclusive (for now). National courts may also have jurisdiction.
 These are: The Netherlands, Belgium, Luxembourg, France, Portugal, Germany, Italy, Austria, Bulgaria, Denmark, Sweden, Finland, Estonia, Latvia, Lithuania, Slovenia and Malta.
 Art. 7 UPCA.
 For example, the central division in Paris has jurisdiction over patents relating to electrical engineering; the central division in Munich over mechanical engineering; and the ‘Milan division’ over pharmaceutical and chemical patents.
 Art. 33(4) UPCA.
 Art. 33(3) sub b UPCA.
 Art. 32 and 83 UPCA.
 Art. 83(4) UPCA.
 After the Opt-out is revoked, there is no possibility to request a new Opt-out.