Recently, the EU Unified Patent Court ("UPC") preparatory committee announced that the UPC is expected to become operational and start to receive cases on April 1, 2023. This date reflects the current state of the project (e.g., recruitment of judges). However, it remains to be seen whether there could be further delays. Regardless, the message is clear: We are getting close to the start date, and companies should consider how they will react now.
Once operational, the UPC will be a court common to the participating EU member states, with exclusive jurisdiction over disputes relating to (traditional) European patents ("EPs") and European patents with unitary effect ("UPs"). The UPC will have jurisdiction over both infringement and invalidity actions. Interestingly, the UPC’s jurisdiction will also extend to EPs that have already been “validated” in one or more participating EU member states, unless opted out.
This Legal Update addresses how businesses can opt out their EPs—and what should be considered before opting out.
Effect on European Patents That Have Already Been “Validated”
It’s expected that on April 1, 2023, EPs validated in 17 EU member states will fall under the jurisdiction of the UPC (Austria, Belgium, Bulgaria, Denmark, Estonia, Finland, France, Germany, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, Sweden). For national EP parts in these countries, unless opted out, the UPC will have jurisdiction for infringement and invalidity actions . This can be beneficial for patent owners because even EPs that have already been validated in these member states can be enforced through a single action before the UPC. However, similarly, these patents face the risk of being revoked by a central invalidity action. Therefore, businesses will need to consider carefully which of their EPs could benefit from the system.
How to Opt Out
The Agreement on a Unified Patent Court sets out a transition period of seven years during which a proprietor of or an applicant for an EP granted or applied for prior to the end of the transition period (as well as the holder of any supplementary protection certificate issued for a product protected by such EP) can opt out from the exclusive competence of the UPC. Actions for infringement or revocation of EPs that have been opted out from the jurisdiction of the UPC may still be brought before national courts.
To opt out, EP owners will need to notify the competent registry at any time during the transition period, which will start on the same date the UPC starts operations (currently, April 1, 2023). However, if an action concerning a specific EP has already been brought before the UPC (e.g., a centralized invalidity action), this patent can no longer be opted out. An action can be brought on the very first day the UPC starts to receive cases. To avoid an EP becoming barred from being opted out before the patent holder has a chance to notify the registry, an additional opt-out period, called the “Sunrise Period,” is provided. The Sunrise Period starts three months before the UPC becomes operational (currently, January 1, 2023). All opt-outs declared during that period will take effect immediately at the time of the effective date of the UPC.
EP owners that do not want to risk being locked within the UPC system should decide during the Sunrise Period whether they want to let their patents become subject to the authority of the UPC or to opt out. The opt-out can be withdrawn at any moment.
Pros and Cons of Opting-out
When considering whether to opt out, patent owners should think about the individual strategic value and strengths of their patents. While the UPC system provides advantages for patents that are intended to be used for litigation throughout Europe, it might impose unnecessary risk for defensive patents that are unlikely to ever be enforced. The latter may also apply to patents that are licensed out and therefore ought to be protected against a centralized attack. While patents that are strong on the validity side or ones that already have been subject to an invalidity proceeding might not be exposed to additional risk by the UPC system, the opposite may be true for patents that are rather weak on the validity side.
By evaluating their patent portfolio before the end of the Sunrise Period, patent owners can make the most of the strategic options offered by the new UPC system without taking unnecessary risks. While the opt-out might be the best option for some patents, becoming subject of the UPC system might be better for others. A portfolio that relates to the same technology can even be split to take advantage of both the UPC and the national, member state systems.