IP Cases & Articles

UP & UPC Preparatory Guide

Together, the unitary patent (UP) and Unified Patent Court (UPC) will comprise the biggest change to the patent landscape in Europe for more than 30 years. What steps should users of the European patent system take now to be ready?

It is important to remember that there are two parts to the new system: the UP and the UPC. These are interlinked but they are nevertheless separate things and need to be considered as such.

The UP will be a single patent right, obtained via a conventional European patent application and chosen as an option after grant. It will take effect in all the designated states that are participating member states of the European Union. It can only be enforced or revoked (excluding opposition ie, opposition and limitation procedures are still available at the EPO) in the UPC.

The UPC will be the litigation forum for UPs and, subject to an opt-out, all conventional European bundle patents (EPs) will fall within its jurisdiction.

In this guide we consider three key issues: opting out of the UPC, the UP and the impact of the UP & UPC on licensing.

The opt-out

What is the UPC opt-out?

The opt-out refers to the possibility for EPs or pending EP applications to be opted-out from the jurisdiction of the 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 UPs – these cannot be opted out of the UPC.

Why is the UPC 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, just as in opposition proceedings.

For some users, exposing valuable patent rights to the risk of pan-EU 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 to be inappropriate. Further, there should be a transitional period during which the UPC system can stabilise but during this time, users should maintain the possibility of obtaining a European patent in the EU without exposure to the UPC. Accordingly, the UPC Agreement provides for the opting out of existing and future EPs, for a period of time.

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 of the UPC?

This depends on your industry sector probably 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. 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 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 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 provisional application period (the "sunrise period"), likely to begin about six months before formal commencement of the system, during which opt-outs can be applied for and registered. 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 seven year initial 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.

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.

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 proprietor can opt out, and all EPs in a bundle must be opted out together. 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.

You are a licensee – you cannot opt out if that is the case (see also Licensing below).

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 to the effect that they have the authority to apply on behalf of all proprietors.

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. 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. Failure to do this 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.

Unitary patents

What are the benefits of a UP?

As indicated in the introduction, a UP will be a single patent right having unitary effect in the participating member states. This will provide widespread coverage across multiple countries with the convenience of central administration, renewal and litigation. It will have the added advantages of limited translation costs and cost-effective renewal fees, when compared to widespread EU coverage obtained via either EPs or national patents.

It can also be enforced centrally, through a single proceeding in the UPC.

What are the potential downsides?

The downsides are the mirror image of the benefits. So, if you do not obtain widespread patent coverage in the EU for your inventions, and/or tend to reduce coverage over time by letting patents lapse in markets that prove to be unimportant, then the cost benefit analysis begins to shift away from a UP. The renewal fee regime is such that in these circumstances, a UP could be much more expensive over the life of the patent.

The other potential disadvantage is central litigation. There are two aspects here. First, centralised litigation places your patent protection at risk across multiple countries all in one go. This is a matter of risk/benefit analysis.

Secondly, UPs can only be enforced in the UPC, which may not necessarily be a more cost effective enforcement mechanism for you as compared to national courts. This very much depends on the nature of your business, and whether you may need to enforce you patent in multiple jurisdictions against a defendant all at the same time.

When will I be able to choose one?

Applications filed at the EPO that proceed to grant at or after the commencement of the system, which is likely to be some time in the first half of 2017, will potentially be eligible for UP protection. The process for selecting a UP will be relatively simple – essentially, it is an option chosen within a month of grant at the EPO.

However, not all European patent applications will be eligible for UP protection and it will be necessary to take advice before selecting the option. It is also essential to remember that validation in non-participating EU member states, and EPC states outside the EU, will still be necessary.

Are there any pitfalls I should be aware of?

There are a couple of issues to be aware of.

First, for any new applications which may become UPs, thought should be given to the nationality of the applicant. The national law of that applicant, if from the EU, (or the first applicant, if there are co-applicants) will apply to property issues affecting the patent (transfer, licensing, mortgaging, utilisation by co-owners). If the applicant is not EU based, then the law will be German law. The main issue to think about is utilisation by co-owners, which can be an issue with some EU national laws. We suggest you seek advice on this issue especially if you have co-applicants that include nationals from the EU.

Second, UP coverage may be limited or even not available for some existing applications. Initially, not all member states who have signed up to the UPC Agreement will have ratified when the system commences. This means that rather than covering all 25 participating member states, early UPs will only cover a smaller number. This will no doubt affect the cost benefit analysis of UP selection in the early days.

In addition, some applications may not even be eligible for UP protection. These include applications filed before Malta joined the EPC (01 March 2007).

In all these situations, it will be important to assess the position early and to keep an eye on national validation deadlines in order that alternative coverage nationally is not lost inadvertently. We recommend taking advice on the availability of UP protection generally, and in particular during the early days of the UP and UPC system.


What are the main issues concerning licensing that the UP and UPC will impact?

Licensing touches on several important aspects of the UP and UPC.

As regards the UP, it will be the applicant who has the choice of selecting a UP. Licence agreements are likely to address the question of who deals with the prosecution and validation of pending EP applications, and these should cover, in general terms, the UP option. They will not however deal with it specifically, and there are of course important financial aspects of the choice.

There are several different licensing issues relevant to the UPC.

First, as regards the opt-out for conventional EPs, only the proprietor can do this. For licensees who operate under patents of great importance to their business, especially exclusive licensees, opting out may be an important consideration

Secondly, the UPC Agreement anticipates that all licensees – exclusive or non?exclusive – may have the ability to bring infringement proceedings, depending on the terms of the licence.

Thirdly, the UPC Agreement has a provision relating to declaratory actions whereby a proprietor or a licensee may be approached for "clearance" under a patent. Failure to respond to that approach, or a negative answer, could give rise to a declaratory action in the central division of the UPC.

What steps should I be taking now to address these?

It is advisable to review licences relating to pending EP applications and consider who has control over the UP option.

In addition, it is advisable to review licences to consider who has control over opting out decisions, litigation (including whether exclusive or non-exclusive licensees should have the right to sue in the UPC), and responses to requests for "clearance" as noted above. Most licences will have some general provisions that may apply to these circumstances but few if any will deal with them specifically. It is advisable to consider whether these situations should be specifically addressed, and certainly they should be dealt with for future licences.