European Patent Holders Should Address Opt-Out Question Before Unified Patent Court Begins Operations
Should I stay or should I go? This is the question current owners of European patents and applicants for pending applications are asking as the European Patent with Unitary Effect (“Unitary Patent”) and Unified Patent Court (“UPC”) are scheduled to launch on April 1, 20231. Once in effect, a Unitary Patent will be enforceable in all Member States2, and the UPC will have jurisdiction over all disputes related to a Unitary Patent. Likewise, any remedy awarded by the UPC (including injunctions and/or revocations), will be effective in all Member States.
Advantages and Disadvantages of Unitary Patents and the UPC
On the surface, embracing the Unitary Patent may seem like an easy decision. The system provides a single patent that is enforceable in all Member States and that is also renewable in all Member States with a single, yearly payment. Patent litigation in the UPC is also simplified so that a single infringement (or revocation) action may be filed instead of requiring separate actions to be filed in every country where the European patent was validated. The result of the single UPC action likewise can be enforced in all Member States.
With the above in mind, it is logical to presume that the new system will have its desired effect, which is to make the patent system more streamlined. Patent applicants that want patent protection throughout much of Europe may find it easier to prosecute, manage, and protect against infringement in a single, unified system. This also can decrease the cost associated with obtaining and maintaining a patent relative to the current system’s requirements for individualized validation, maintenance, and enforcement activities, which aligns with a stated goal of the UPC, which is to provide faster and more cost-efficient litigation relative to the national courts.
The primary downside of the Unitary Patent is the fact that a single action before the UPC has the potential to lead to a total loss of patent rights in all Member States. This is a particularly risky proposition given that the UPC is a new, untested body, and it remains to be seen how various litigation strategies may or may not be effective with the UPC.
The primary downside of the Unitary Patent is the fact that a single action before the UPC has the potential to lead to a total loss of patent rights in all Member States.
The Unitary Patent also still fails to provide what the name implies, which is the ability to provide a single patent that is enforceable throughout all (or at least most) of Europe. The Unitary Patent will not apply to any countries that are not part of the European Union (“EU”), and this currently excludes Norway, Switzerland, Turkey, and the United Kingdom from the Unitary Patent. It likewise (currently) excludes EU countries that have not yet agreed to take part in the unified system, such as Croatia, Poland, and Spain. An applicant that therefore desires to operate within the jurisdiction of the UPC still must pursue the classical route of validation and maintenance at the national level in the countries not subject to the new system. While additional countries are expected to ratify the UPC Agreement, this likely will create a rolling set of different generations of Unitary Patents that apply to different sets of Member States, and a Unitary Patent that grants with a given set of applicable Member States will not be broadened to encompass additional countries that later become Member States to the UPC Agreement.
The Transition to the Unitary Patent and the UPC
Transitional options have been established for those who do not believe that a Unitary Patent is beneficial or those who simply want to take a “wait and see” approach. Nevertheless, for all existing European patents and applications, a decision must be made to affirmatively “opt-out” of the UPC. Otherwise, all existing European patents and applications will automatically fall under the jurisdiction of the UPC, as well as the national courts, on the date that the UPC comes into effect. The transitional period will extend for seven years from the date that the UPC is officially implemented, and an extension for an additional seven years is possible3.
For all existing European patents and applications, a decision must be made to affirmatively “opt-out” of the UPC.
Applicants and owners can file opt-out requests at any time during the transitional period (up to one month before the end of the transitional period), and it is also possible to reverse the opt-out decision and enter back into the jurisdiction of the UPC.4 The option to opt-out is no longer available, however, once an action with the UPC has been filed and, likewise, the option to reverse an opt-out is no longer available once any action has been brought before a national court. A “sunrise period” has been established for the three months leading up to the implementation of the UPC, and this is currently expected to encompass the period of three months beginning January 1, 2023. This provides a window of time to ensure that desired opt-outs of current patents and applications can be made before an action could be filed with the UPC that would otherwise preclude the ability to opt-out.
The European Patent Office (“EPO”) also recently announced that, as of January 1, 2023, applicants that have received a Rule 71(3) Communication informing of the intention to grant a patent may file a request to delay grant of any patent until after the UPC comes into effect so that the patent will automatically have unitary effect. Early requests for unitary effect likewise can be filed but must be done within one month of the mention of the publication of grant in the European Patent Bulletin. In light of these many, impending changes, European patent owners and applicants need to be thinking now about whether opting-out of the UPC is the right decision for each matter in their patent portfolios.
Planning for the Transitional Period and Beyond
There is no one-size-fits-all approach as we move into the transitional period and implementation of the Unitary Patent and the UPC. Each decision for whether a patent should remain in or be opted-out of the Unitary Patent system will likely be guided by a unique set of circumstances. The most important matter at this time is that patent owners and applicants are making preparations now, while they still have a full range of options. With the provision of the transitional period, both the new system and the current system for handling of European patents will proceed in parallel. As such, a patent owner retains a full set of options for validating a patent under the traditional pathway, including validating in countries that are Member States to the Unitary Patent, or proceeding under the Unitary Patent pathway. Further, as noted above, opting-in and opting-out may be reversed, under certain circumstances, in the absence of any intervening litigation.
As we enter into the sunrise period, applicants and their IP counsel should review their European patent portfolios and take action before the UPC Agreement comes into effect if opting-out makes the most sense for their particular needs. Such review may lead to a single decision affecting an entire patent portfolio, but it is likely that some patents of lesser importance may benefit from the potentially lower costs of a single, Unitary Patent system, and it is also likely that patents of greater importance may require opting out in order to ensure that the full set of options for enforcement in all validated countries remains available. Regardless of the conclusion, the time is upon us, and decisions for embracing the Unitary Patent or staying (at least in part) on the sidelines must be made sooner rather than later.
1 Pending the expected ratification by Germany by the end of 2022.
2 Current Member States are Austria, Belgium, Bulgaria, Denmark, Estonia, Finland, France, Germany, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Sweden.
3 If the transitional period is extended, it will only be available for European applications or patents that have been validated without unitary effect.
4 Note that if an opt-out decision is reversed, and a patent or application is moved back under the jurisdiction of the UPC, a later decision to again opt-out is no longer possible.