UPC action points: opting out of the EU's Unified Patent Court

After many years of planning and discussion, the Unified Patent Court (UPC) will finally come into force in 2023. With the court due to open its doors on 1 June 2023, patentees need to consider now whether they wish to take part from the outset.

In December 2022, the UPC Administration Committee announced a two-month delay to the operational timeline for launch of the UPC. The "sunrise period" is now due to begin on 1 March 2023, with the UPC Agreement coming into force and the UPC therefore becoming operational on 1 June 2023. 

Despite this delay, the start of the UPC is now fast approaching. Proprietors and applicants for European Patents who have not already done so now urgently need to consider the potential benefits and disadvantages of participating in the UPC system, as delay beyond 1 June 2023 may cause the decision on whether to opt out to be taken out of their hands.

The transitional period and opt-out provisions

The ultimate goal of the UPC is to simplify and streamline the process of litigating patents in Europe by providing a single forum with exclusive jurisdiction to hear infringement and validity disputes for European Patents (EPs) in the states that have signed up to (and ratified) the UPC Agreement. The UPC will also be the exclusive forum for such disputes relating to the new form of Unitary Patent (UP) which patent applicants can elect to be granted instead of the traditional bundle of national EPs.

However, for at least the first seven years after the UPC becomes operational, proprietors of EPs will not be forced to make use of the UPC system if they do not wish to. This is because the transitional provisions of the UPC Agreement allow for an initial seven-year period during which the UPC will have concurrent jurisdiction with the national courts in respect of EPs, and during which patentees may, if they wish, opt their EPs out of the jurisdiction of the UPC altogether. After five years, the UPC Administrative Committee will carry out a consultation and may, if appropriate, decide to extend the transitional period for a further seven years.

Patent proprietors will be able to file opt-outs from the start of the three-month sunrise period right up until one month before the end of the transitional period. An opt-out made during this time will remain effective for the entire life of the relevant EP and will apply automatically to any SPC based on the patent, unless and until the opt-out is withdrawn.

Although opt-outs may be filed throughout the transitional period, patentees should nevertheless consider their options now – before the sunrise period begins – and decide on an initial strategy before the UPC comes into operation on 1 June 2023. The reason for urgency is that, once an action has been commenced in the UPC, that patent is "locked in" to the UPC system and cannot be opted out thereafter. 

Parties wishing to revoke or obtain declarations of non-infringement in respect of potentially problematic EPs will be monitoring the opt-out status of those patents throughout the sunrise period, and in many cases will seek to bring proceedings in the UPC on the first day of operation of the court, if they can. If a patentee does not file an opt-out before the end of the sunrise period, they run the risk that the decision whether to participate in the UPC will be made for them.

Although the process for opting out is itself straightforward, patentees need to make sure they build in enough time for discussions with any relevant stakeholders before the end of the sunrise period. Where a patent is jointly owned, for example, all of the proprietors must agree in order to opt out. Proprietors of jointly owned patents would therefore be sensible to begin discussions with their co-proprietors to allow sufficient time for any necessary negotiations over the approach to be taken.

Similarly, many existing patent licences will not expressly address issues relating to the UPC, including the potential for opt-out. Only the proprietor of the patent can file an opt-out, but their licensee(s) will no doubt have their own views on the matter. It would be sensible for licensors to canvass those views as soon as possible, in order to seek to agree a strategy before the UPC comes into operation.

In every case, patentees will need to carefully weigh the potential benefits and risks of participating in the UPC system.

Benefits of opting-out

There are potential benefits of opting out of the UPC:

• Avoiding central revocation – Patents that are not opted out of the UPC will be open to challenge in a single action. A successful UPC revocation action will revoke the patent in all EU Member States that have ratified the UPC Agreement at the time of the decision. This is in contrast to the current position, which requires challengers to successfully revoke patents in each national jurisdiction separately. Opting out allows a proprietor to continue to defend its patents in separate actions, avoiding the risk of their rights being lost across Europe as a result of a single unfavourable decision.
• Avoiding an untested court – The UPC is a brand-new court. Although the rules of engagement are set out in the UPC Agreement and the Rules of Procedure, the manner in which judges will interpret and implement those rules remains to be seen. There is no case law history and, at least at the beginning, results in the UPC may be unpredictable. Opting out allows a proprietor to defend its patents in familiar national courts and to monitor whether UPC case law develops favourably over time.
• Longer process – Opting out and requiring revocation in separate jurisdictions will usually mean that "clearing the path" across Europe will take significantly longer, prolonging uncertainty for potential infringers. This approach may give proprietors greater leverage when negotiating settlements, and maintain their market exclusivity for longer.
• More straightforward jurisdictional options – The concurrent jurisdiction of the UPC and national courts during the transitional period presents a range of jurisdictional options (and potential complications). Although this could be viewed by patent proprietors as keeping options open, it also keeps the options of potential challengers open, leading to a loss of control over the forum in which issues are litigated.

Benefits of staying in the UPC

There are also potential benefits to participating in the UPC:

• Pan-UPC remedies – The UPC has jurisdiction over all ratifying member states and proprietors can obtain pan-UPC remedies (including injunctions) against infringers. Participating in the UPC will, therefore, allow for enforcement of patents across Europe at lesser expense than pursuing parallel actions in each of the national courts.
• Sophisticated judges – Although the UPC is an untested court, the elected judges (34 legally qualified and 51 technically qualified judges) have significant specialist experience and largely hail from sophisticated patent litigation jurisdictions. Litigating in the UPC may therefore provide more predictable results than pursuing infringement proceedings in European jurisdictions that do not have a specialist patents judiciary.
• Potential to shape the UPC system – Patentees may take the view that participation in the UPC from the outset will provide an opportunity to make submissions that could shape the UPC case law in a way that best serves their future interests.
• Quick decisions – The UPC expects to provide first instance judgments within 12 months, which is quicker than in most national proceedings.

Osborne Clarke comment

Attitudes towards UPC opt-outs will vary depending on the proprietor and the nature of the patents in question. No single approach will be right for all patentees.

Proprietors who consider the costs of parallel national litigation to be a bar to effective enforcement of their rights may elect to keep all of their EPs within the UPC system in order to benefit from the ability to obtain relief across multiple countries in a single infringement action. Others may consider the possibility of revocation in all UPC states in a single action to be too great a risk and opt-out all of their patents. Those with a broad portfolio may wish to pursue a mixed approach, keeping some strategically less important patents inside the UPC to avail themselves of pan-UPC remedies and opting out other more strategically important patents to limit the risk of pan-UPC revocation.

Some patentees may simply take the view that the safest approach is to maintain the status quo by opting out their EPs for now and to wait and see how the UPC performs. If they subsequently decide that the UPC is indeed an attractive forum for enforcing their rights, provided that there has not been any national litigation in the meantime (in which case the relevant patent will be "locked out" of the UPC system), the option of withdrawing the opt-out and launching UPC infringement proceedings will remain open to them.