IP Cases & Articles

Unified Patent Court - what is the opt-out?

The opt-out refers to the possibility for European patents (EPs) or pending EP applications to be opted-out from the jurisdiction of the Unified Patent Court (UPC). It will be available during a transitional period of seven years from commencement of the system (or perhaps longer), although it may be applied for even before commencement.The opt-out is not relevant for unitary patents (UPs) – these cannot be opted out of the UPC.

Why is the opt-out available?

Decisions of the UPC will take effect in all participating member states. For EPs (and any related supplementary protection certificates, or SPCs), this means in all participating member states in which there is a patent in the "bundle". This includes revocation decisions – thus the UPC provides the possibility to invalidate EPs in all relevant participating member states, in one go, in a similar way to opposition proceedings.

For some users, exposing valuable patent rights to the risk of multi-country invalidation in a new and untried court system is not acceptable. The compulsory imposition of such a system on existing valuable patents is therefore considered by some users to be inappropriate. Further, a transitional period during which the UPC system can stabilise is necessary. During this time, users should maintain the possibility of obtaining a European patent without exposure to the UPC.

Accordingly, the UPC Agreement provides for the opting out of existing and future EPs.

How long does an opt-out last?

Once on the UPC register, an opt-out will last for the life of the patent, unless and until it is opted back in.

Should I consider opting out?

This probably depends on your industry sector but the basic consideration will be: Do I have EPs which are so valuable that I cannot risk central revocation in the new system? This consideration could be tested by asking "will I be relieved when the opposition period expires and no opposition has been filed?" If the answer to that question is yes, then you should seriously consider opting out EPs which fall into this category. Patents already subject to opposition are obvious candidates to opt out. It may be that only a limited number of patentees really need to opt out, principally in the life sciences sector, where highly valuable products are often protected by only a limited number of patents. However, other sectors should give active consideration to the risk of central revocation.

If I opt out, where can the patent be litigated?

If opted out, a conventional EP can only be litigated in the relevant national court, just as now. This applies to both infringement and revocation proceedings.

Can I opt back in?

Provided no patent in the relevant bundle has been litigated in a national court, yes. You can only do this once and you cannot opt back out again. It does however provide the potential flexibility of removing an EP from the jurisdiction of the UPC until such time as the patentee may wish to use it.

When should I opt out?

The opt-out will be available as an option for a period lasting seven years from the commencement of the new system. An opt-out can be exercised at any time in that period, provided the EP has not been litigated in the UPC already: eg, the patentee or a third party commencing an action in the UPC would preclude the patentee then opting out.

There will be the possibility to opt out before the system formally commences, which will be necessary if there is any risk of an early revocation action or declaration of non?infringement in the UPC. The UPC will have a sunrise period, likely to begin on around 01 September 2017, during which opt-outs can be applied for and registered before the system commences (likely to be around December 2017). It will be highly advisable to make use of this possibility for valuable EPs, and to do so early to allow for any delays at the UPC Registry caused by a rush to file these pre-commencement opt-outs.

What happens if I don't opt out?

For at least the first seven years of the UPC, EPs that are not opted out will be subject to the jurisdiction of both the national courts and the UPC. During that period it will therefore be possible to choose between enforcement nationally, in member states' courts, or pan-nationally in the UPC. This flexibility is attractive to some users since it keeps their options open without the administrative hassle of opting out and opting back in again.

Once the transitional period is over however, any EP (or application for an EP) that has not been opted out will be subject to the exclusive jurisdiction of the UPC.

What about supplementary protection certificates (SPCs)?

SPCs can be opted out but this can only be done together with the patent with which they are associated. Equally, if a patent is to be opted out, all the associated SPCs must also be opted out. In practice it is the patent which is opted out and all SPCs must follow. This can cause problems if there are different owners of the patent and its various SPCs (see below).

How do I opt out?

The opt-out will be administered by the Registry of the UPC. Opt-out applications will be made online, via the UPC's case management system. It will be possible to submit batch applications for multiple EPs.

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UPC patent opt out flowchart

How much will it cost?

The good news is there will be no official fee to apply for an opt-out. The only costs involved therefore will be internal administrative costs, and any external adviser charges should you decide to ask a representative to make any applications on your behalf.

Who can opt out?

Only the 'true' proprietor can opt out, and all EPs in a bundle must be opted out together (along with associated SPCs). This can cause problems for example where:

  • There are different proprietors for each patent in the bundle: this may happen where for example different group companies may own the various patents in a bundle.
  • There are SPCs granted under the relevant patent but these are under different ownership from the patent itself.
  • The registered proprietor or holder is not the true proprietor. If the application is made in the wrong name, the opt-out may be invalid. A correction can be made but this will not be back-dated.
  • You are a licensee – you cannot opt out if that is the case.

In the cases of (1) and (2), a single application to opt out can be made for all the related patents and SPCs but the applicant for opt out must make a declaration and complete a mandate to the effect that they have the authority to apply on behalf of all proprietors and holders.

What should I be doing now?

You should be reviewing your portfolio to identify any EPs that are of very substantial value and/or may be susceptible to a central revocation challenge in the UPC. This may include patents already in opposition. You should plan to opt these out from the UPC.

In conjunction with this, you should identify any proprietorship issues. For example, if different companies in your group own the different EPs in a bundle, all proprietors must agree to the opt-out and provide authority to a specific person/entity to apply for the opt-out on their behalf. The same goes for any EPs in a bundle that you may have transferred to third parties, and SPCs.

It is particularly important to check the ownership situation for your EPs and SPCs, since some may be in different ownership from that shown in either the national or European Patent Office registers, or indeed internal records. As noted above, failure to apply for the opt-out in the correct name could render an opt-out ineffective.

It is also advisable to ensure that the relevant national registers (and the EPO register, in the case of a pending patent application) are up to date since there will be a rebuttable presumption that the persons listed on these registers are the persons entitled to be registered as proprietor/applicant, as appropriate.

You should also identify any EPs under which you are the licensee that fall into a similar value or risk category as regards your business, especially where you may be an exclusive licensee.

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