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What businesses need to do to prepare for the upcoming Unitary Patent and the Unified Patent Court

What businesses need to do to prepare for the upcoming Unitary Patent and the Unified Patent Court

Industry news UPC 18/04/2022

It is an opportune time for innovators to re-assess their patent strategy in Europe. Businesses will soon be presented with additional options for protecting inventions in Europe. The current possibilities are to seek either a European patent validated in any of the EPO states the applicant is interested in, or national patents. In addition to the existing options inventors will soon be able to obtain a Unitary Patent to cover all of the EU states taking part. This is a strategic consideration for companies to decide which route is best to take in the circumstances. Some companies are considering testing the UPC route for some less important cases and holding back other most valuable inventions.

Currently only 24 of the 27 EU states are open to proceed with the Unitary Patent. Spain, Croatia, and Poland have thus far chosen not to sign up - either to the Unitary Patent or to the related Unified Patent Court. In addition several countries including Ireland have not yet ratified the necessary EU legislation. Unitary Patents will only cover the states that have actually ratified, not any non-ratified states. It is likely that more countries will ratify over the coming months and years, and even more countries will join the Unitary Patent system in the future. The result of all of this will be that different generations Unitary Patents will have different geographical coverage. An important consideration for innovators will then be whether a Unitary Patent will actually cover all of the desired states.

A Unitary Patent will have a unitary effect across all of the EU states covered at that relevant time. A Unitary Patent may therefore be open to a single revocation for all of these covered EU states instead of separate validity proceedings in each country for each national part of a validated European patent. This central revocation possibility will exist even after the current limited 9 month EPO opposition period. For businesses which regularly encounter EPO oppositions to their important patents, this further period for centralised challenge will be an important factor to bear in mind. Equally businesses which have to deal with patent rights of competitors can avail of this centralised validity challenge mechanism to negotiate or take action.

Similarly a Unitary Patent will only be allowed to lapse for all of the EU states covered. Unlike with the current system of validated European patents, there will be no possibility with a Unitary Patent to gradually reduce renewal fees over time by allowing selected states to lapse. Furter a Unitary Patent could only be assigned with effect for all of the EU states covered.

The UPC will have exclusive jurisdiction for Unitary Patents so if a proprietor chooses the Unitary Patent route there will be no possibility to opt-out of the UPC and the central revocation risk. Even with validated European patents, the UPC may have jurisdiction in addition to the national courts for the time being. Businesses should carefully review the option of the opt-out if it is necessary to avoid this central revocation risk after the existing 9 month EPO opposition period. The patent owner could subsequently withdraw the opt-out status if the proprietor wishes to enforce the patent centrally at the UPC to seek a pan-EU injunction. In a number of years time the opt-out possibility will end, the UPC will then have exclusive jurisdiction for validated European patents also. So over time it will become more difficult to simply avoid the UPC altogether. It is vital for businesses to have an appropriate strategy in place at an early stage.

In the case of infringement actions before the UPC local or regional divisions, the local or regional division will have the option of handling counter-claims of revocation directly, or alternatively of referring the counter-claim of revocation to the appropriate central division. When a referral happens the local or regional division may suspend the infringement proceedings or decide to continue. This possibility of bifurcation will be an unfamiliar prospect for businesses more used to the common law approach of US or UK. Some commentators have warned that the UPC may become an attractive venue for patent assertion entities with the prospect of a pan-EU injunction without patent validity being considered in the same forum. To counter these concerns the UPC rules of procedure are designed to ensure that the revocation action is heard before the corresponding infringement hearing. The UPC will also have the option of awarding legal costs to the successful party. In other jurisdictions, such as US, fee shifting has been widely debated as a means to discourage frivolous patent litigation.

As with any other major change there is a general sense of uncertainty of how the UPC will operate in practice. It will take some time and quite a few real cases to understand how the language regime will work and what the speed of the proceedings will be. The expertise of the judges in the complex technical subject matter will be key, especially bearing in mind that judges in some of the smaller European countries may have little if any patent litigation experience currently. Will the UPC be seen over time to more favourable to patentees or will the UPC take a more pro-defendant approach? It will be interesting to see whether some local divisions are more inclined to embrace bifurcation than others. Any differences in approach between different divisions have the risk of re-introducing forum shopping which is what the UPC was designed to avoid in the first place. The procedural aspects will also take some getting used to, especially the limited discovery for those more familiar with common law litigation in US or UK.

There are financial matters associated with the new patent system in Europe that should be considered also. The single renewal fee for the Unitary Patent payable to the EPO may be financially attractive if the patentee would have validated in 5 or more EU states. Conversely if the patentee was only interested in validating in 3 or less EU states, then the Unitary Patent may end up being financially worse. It is common for many European patents to be validated in only 3 or 4 states.

Another cost factor to decide between the new Unitary Patent option and the existing validated European patents option relates to translations. During the transitional period of up to 12 years, for the Unitary Patent the proprietor will be required to file a translation of the patent specification from English into any other language of the EU, or from French or German into English. If the proprietor was interested in validating in 5 or 6 of the major EU states, this new translation cost may be more than the current costs associated with validation. For companies with large volumes of patents, these cost implications could be significant.

In terms of litigation costs the option of a single action at the UPC would significantly reduce costs compared to having multiple national patent litigations. However patentees and third parties need to be aware of the large court fees at the UPC which can increase substantially depending on the value of the action. The UPC will also limit the amounts when awarding legal costs in line with the pre-defined ceiling levels.

As we approach the commencement of this new patent system in Europe, now is the perfect time for businesses to review their existing patent portfolios to identify which patents should be opted-out of the UPC and which should continue into the new UPC jurisdiction. Another crucial point to be considered is whether the Unitary Patent option is the right route to use for future patents. If a mixture of some Unitary Patents and some validated European patents will be used in the future, thought will be needed to categorise the patent portfolio into different buckets. It is vital to consider the pros and cons of patent rights from the perspective of geographic coverage, costs, risks of central revocation, and benefits of enforcement for pan-EU injunctions.

These factors will also be relevant for licensees of patents when negotiating licence agreements. When a partner is in a situation where joint ownership of patent rights may arise now or at some stage in the future, the new patent landscape in Europe should be kept in mind to ensure agreement is reached on all potential actions. In addition competitors monitoring the patent rights of innovators will have further points to consider when launching products in the European market and performing freedom-to-operate analysis. Any business which is involved in brining challenges against patent rights of others will be impacted by the major changes coming for patents in Europe.