Countdown to June 1: Unitary Patents and Unified Patent Court Decisions Loom for European Patent Owners
Tuesday, April 25, 2023

This article is based on a Feb. 2023 Womble Bond Dickinson webinar featuring WBD Partners James Love (UK) and Ryan Cagle, Fabio Marino and Karthika Perumal (U.S.). 

Patent owners soon will be entering a brave new world when establishing and enforcing European patents. Talks of a single, unitary European patent began back in 1962. An attempt to create one in the late 1980s failed, but finally, the Unitary Patent System and accompanying Unified Patent Court will happen this year, after lengthy delays and court challenges. 

The new patent system will give patent holders a range of additional options to consider, but key decisions need to be made now, before the Unitary Patent System takes effect on June 1, 2023.

Unitary Patents Versus European/National Patents 

Currently, would-be European patent holders must either file applications in individual countries or file with the European Patent Office, then validate in the specific countries of interest. Patents must be enforced or challenged in each individual country. The Unitary Patent (UP) System creates a third pathway – a single patent that is enforceable across each of the participating member states.

But even when the Unitary Patent System takes effect, national applications can still be filed in any European country. Also, centralized patent applications will still be filed with the EPO and, upon grant, the applicant may request to register the grant as a Unitary Patent and/or validate in individual European countries.

“The Unitary Patent is intended as an additional pathway to having enforceable patents in various European Countries,” Cagle said. “It’s not a replacement for the traditional European patent system.”

“The Unitary Patent is intended as an additional pathway to having enforceable patents in various European Countries. It’s not a replacement for the traditional European patent system.”

RYAN CAGLE, PARTNER, WOMBLE BOND DICKINSON (U.S.)

A Unitary Patent covers the territories of participating Member States in the Unified Patent Court Agreement. Seventeen nations have ratified the Agreement to date: Austria, Belgium, Bulgaria, Denmark, Estonia, France, Germany, Finland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Sweden and Slovenia. 

Seven additional nations—Cyprus, Czech Republic, Greece, Hungary, Ireland, Romania and Slovakia—may ratify the Agreement at a later date. However, a Unitary Patent will not be retroactive in these seven nations if they ratify the Agreement. Spain, Poland and Croatia have said they will not adopt the Unitary Patent System. Norway, Switzerland, Turkey and the United Kingdom are not European Union members and, therefore, aren’t eligible to participate in the Unitary Patent System.

Love said that having the UK and Spain as outliers are significant omissions, since a substantial volume of patent activity takes part in these countries. Traditional validations will be needed in nations not covered by the Unitary Patent System. 

Applicants must opt-in to the Unitary Patent system – a request must be filed no later than one month after the mention of the grant of the European patent is published in the European Patent Bulletin. Otherwise, a granted European patent defaults to the traditional patent route.

“The good news is that nothing in the manner in which you file patent applications in Europe will change,” Cagle said. The only change is that applicants must expressly opt into the UP system. A patent that is opted into the Unitary Patent system cannot be individually validated in a UPC country.

Key Patent Decisions Must Be Made

The third patent pathway leaves patent applicants with decisions to make due to the legal framework of the UPCA and how that affects patent enforcement, patent challenges, and patent transactions, Love said.

Should applicants opt into the new Unitary Patent System? Love said a key factor is the advantage of central patent enforcement versus the concern a central patent attack can invalidate in one stroke rights across all participating European countries.

Cagle noted that the UPC is intended to reduce costs and simplify the process of establishing patent rights. There is no fee to register a patent with the UPC and no individual country costs. Also, applicants pay a single annuity rather than country-by-country.

“If cost-saving is a basis for deciding whether to opt into the Unitary Patent System, the number of countries where you would otherwise validate is going to be a factor,” he said. The more countries in which applicants have to validate, the more likely it is that filing in the Unitary Patent System will save them money.  

Patent holders can generate significant savings on annuities if patents are filed in four or more countries. In a smaller number of countries, the patent owner probably can save money in the traditional European model. 

An individual validation may be preferable for key patents to avoid a central revocation. But for ancillary patents, the savings offered by a unitary patent may outweigh these other factors, Cagle suggests.

“There are many considerations that may affect patent filing and prosecution in Europe,” he said. “While you may initially take a ‘Wait and see’ approach, there may in fact be a whole new manner of thinking about how this ‘third rail’ of the European patent system plays out.”

Litigation Considerations Under the UPC

The Unified Patent Court primarily covers three types of intellectual property:

  1. Patents granted under the Unitary Patent System;

  2. Classical European patents that haven’t been opted out; and

  3. Supplemental protection certificates (SPCs) based on 1. or 2. 

The UPC can host a wide range of patent actions, Love said, including infringement, declarations of non-infringement, prior use rights, revocation, protective and interim measures, and damages, etc. However, there are no provisions for dealing with unjustified threats of patent actions, as there are in the UK system.

Paris and Munich will serve as the court’s central divisions, with regional courts established throughout the participating nations. In addition, Milan is likely to become a central division as well. “I’ve heard the court described as a ‘Frankenstein court,’ in that it’s made up of bits and pieces of law and procedure collected from different countries,” Love said. He believes there will be forum-shopping in the court’s early days and how the court will function on a practical level remains to be seen.

“The plan is that a normal patent action should get through the court in 12 months,” Love said. He believes that goal is achievable, given the UPC’s focus on patents and court officials’ desire to prove its efficiency.

“The plan is that a normal patent action should get through the court in 12 months."

JAMES LOVE, PARTNER, WOMBLE BOND DICKINSON (UK)

What are the advantages of opting in to the UPC? Marino said one scenario would be if a patent holder plans to assert a patent throughout Europe. That way, one action can be filed against infringers to cover 17 countries.

But for patent holders that don’t plan to assert their rights in the near future, opting out is likely to be the preferred choice. “It’s probably easier to retain rights on a territory by territory basis, and reduce the risk of one central validity challenge,” Marino said.

The default position is that the UPC will have jurisdiction over classical European patents. However, patent holders can opt out of this position including during the UPC sunrise period in advance of the court opening on June 1, 2023. Once applicants have opted out of the UPC, they can opt back in—but they cannot opt out a second time. 

Marino said, “One risk to keep in mind is that if you opt out of the UPC, any challenge filed anywhere (in the 17 participating nations) will prevent you from opting into the UPC jurisdiction until that challenge is settled. In some cases, that can take a long time.”

“One risk to keep in mind is that if you opt out of the UPC, any challenge filed anywhere (in the 17 participating nations) will prevent you from opting into the UPC jurisdiction until that challenge is settled. In some cases, that can take a long time.”

FABIO MARINO, PARTNER, WOMBLE BOND DICKINSON (U.S.)

Another advantage of remaining in is the scope and size of the UPC. The nations represented by the UPC are home to 270 million people—nearly as big as the U.S. So this combined jurisdiction becomes a larger, more attractive venue for patent litigation, comparable to U.S. federal courts. 

Marino also noted that while the discovery period in U.S. courts often slows down patent litigation, it can yield information that may be useful in other courts, such as the UPC. 

In the German legal system, local courts consider patent infringement while federal courts consider validity and revocation. This so-called bifurcation (which isn’t a factor in UK and U.S. patent litigation) generally won’t be in place in the UPC, but Love said there are specific circumstances where it may arise.

Transactions in the Unitary Patent System

Perumal said the Unitary Patent System also will impact how IP transactions can be conducted in Europe.

“When we are working on technology commercialization, we usually engage in one of two types of transactions: assignment transactions and licensing transactions,” she said. With traditional European patents, patents are owned on a country by country basis, while in the Unitary system, the patent is a single asset across all participating states.

Perumal also said that under Unitary Patent System rules, the order in which applicants are listed on the patent matters and needs to be carefully considered when filing. The order of applicants and their respective residence or a principal place of business will dictate the appropriate governing law for the unitary patent. If none of them have a domicile in a UP country, it defaults to German law.

“Laws of these member states vary. So, co-applicants should discuss the impact of the order in which they are named. The laws of the member states become more important when conducting due-diligence on patent portfolios,” she said.

“Laws of these member states vary. So, co-applicants should discuss the impact of the order in which they are named. The laws of the member states become more important when conducting due-diligence on patent portfolios."

KARTHIKA PERUMAL, PARTNER, WOMBLE BOND DICKINSON (U.S.)

In licensing transactions, patent owners still will have the option to license the unitary patent in a specific country or in a set of countries. 

“Governing law is another provision where we expect a lot of discussion,” Perumal said. If clients already have European patents in their portfolio, the licensor gets the exclusive right to opt out of the Unified Patent Court. Co-owners have to make a joint statement to opt in or out. 
“Make sure you have these conversations with licensees about opting in or out for each patent in the portfolio, even though the decision is yours, the licensor,” she said.

As is often the case in IP strategy, there is no single right-or-wrong approach—differing circumstances, risk tolerances and business goals will determine a patent holder’s strategy for moving forward. But important deadlines are looming and patent holders need to be aware of the new options made available through the Unitary Patent System and Unified Patent Court.

For example, does the comprehensive coverage of a Unitary Patent best meet the company’s business goals? Or would a national patent or traditional European Patent protect important intellectual property from too much risk via a central revocation? Are the costs of prosecuting and maintaining a patent an important consideration and, if so, will a Unitary Patent reduce those expenses? And which approach best serves the company’s strategy in IP transactions? The answers to these (and other) questions will determine how a patent holder should proceed—and the time to ask them is now.

Key Takeaways:

  1. The June 1, 2023 deadline is fast approaching, so patent holders need to think about key decisions now.

  2. The UK and Spain aren’t covered by the Unitary Patent System, which impacts filing strategy.

  3. A Unitary Patent gives added options and isn’t a replacement route for European or national patents.

  4. Consider your licensing strategy in light of Unitary Patent System options.

 

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