Getting closer to the starting line

An update on the Unified Patent Court

By Dr. Claudia Milbradt and Anja Schwarz

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Preparations for the Unified Patent Court (UPC) are in their final throes, with the UPC expected to become operational on December 1, 2017. However, there is a chance this deadline will be delayed following the announcement of a UK general election to be held in June that could delay the UK’s ratification of the UPC.

The UPC Agreement is intended to address several problems that arise when enforcing or seeking the revocation of a European patent across multiple jurisdictions. Specifically, these problems include high costs, the risk of diverging decisions and a lack of legal certainty.

The UPC aims to solve these problems by creating a specialized patent court with exclusive jurisdiction over litigation relating to European patents and European patents with unitary effect (unitary patents). The court will hear cases regarding infringement and revocation proceedings for both unitary patents and European patents.

The central division will be in Paris with subdivisions in London (specializing in chemistry cases, including pharmaceuticals) and Munich (specializing in mechanical-engineering cases). Local divisions are planned for Germany in Düsseldorf, Mannheim and Hamburg. The UPC Court of Appeal will be in Luxembourg.

Current status

Over the last six years, immense political progress has been made toward establishing agreement to implement the unitary patent and the UPC. In 2016, however, Brexit threatened to derail that progress. In order to establish the new system, the UK, along with Germany and France (the EU Member States with the most patent applications), must ratify the UPC Agreement. Ratification requires acceptance of the supremacy of the European Union Court of Justice as the highest authority, hence the view that Brexit would prevent the UK’s ratification and undo the negotiated agreement. Surprisingly, UK Minister of State for Intellectual Property Lucy Neville-Rolfe announced on November 28, 2016, that the UK would still ratify the UPC Agreement, paving the way for the UPC. The German Bundestag has also recently passed two laws to enable the UPC to become a reality. However, the recent announcement that a general election will be held in the UK will most likely delay the UK’s ratification of the UPC Agreement, which will make it difficult for the UPC to become operational by December 2017.

Sunrise period

September 1, 2017, will mark the beginning of the sunrise period, which  gives current owners and applicants for traditional European patents a minimum of three months to decide if they want to opt out their European patents from the UPC before the courts become operational.

After this phase, patent holders will have a transitional period of seven years to decide whether to stay in the UPC or opt out (except in instances where an invalidity action has already been filed with the UPC). Unless the patent in question is involved in a dispute, the decision to opt out may be withdrawn at any time and the traditional European patent may be placed back in the UPC system.

Opting out

A decision to opt-out must be filed by the actual proprietor (regardless of the party that registered it). It involves a simple electronic filing procedure using the UPC Case Management System and is not subject to any administrative costs. Coapplicants and coproprietors must act together. All valid opt-out actions filed during the sunrise period are considered registered the day the UPC Agreement comes into force.

The advantages of opting out include avoiding the risk of a central attack – although one single cancellation request invalidates a unitary patent in all countries the patent enjoys protection – and litigation on a court-by-court basis in different jurisdictions where there is a preference for a well-known national court over an unknown UPC panel. If litigation takes place in one country alone, it might be less costly and sufficient to settle the dispute.

On the other hand, it might be advantageous to have a single court with jurisdiction for the whole territory where the European patent is valid. Enforcement might be simpler within the new European patent system.

learly, patent owners will need to assess the decision to opt out of the UPC on a case-by-case basis.

Forum shopping

Introduction of the UPC provides a choice of different courts: national courts or the UPC. National courts are primarily concerned with national patents, while the UPC will handle unitary patents. The UPC will also handle traditional European patents following a transitional period of seven years during which infringement and revocation actions for traditional European patents may also be brought before national courts. The current legal situation allows patent applicants to choose between the two court systems on a case-by-case basis for actions concerning the same patent. The lis pendens rules state that choosing the UPC first blocks national courts, whereas choosing the national courts first limits the authority of the UPC. This means that compared with the current system, the UPC Agreement offers more opportunities for forum shopping.

Possible strategies

In view of all advantages and disadvantages of the UPC, each patentee should consider which cross-border strategy is most suitable for him or her to adopt. With regard to national patents, a national application is advantageous if the patent is needed only in certain jurisdictions. In this case, conversion to a utility model is possible, no double-patenting issues exist, and the patent can be used to prevent others from being granted a unitary patent. A disadvantage might be the need to translate applications in different jurisdictions into different languages.

If patent protection is needed throughout Europe but the patentee does not want to litigate in various jurisdictions or if the location of the future market is unclear, a unitary patent is recommended as it would be valid for all participating European countries. The risk of a central attack against the patent does, however, remain.

For traditional European patents, it might be advisable to choose the jurisdiction of the UPC with enforcement throughout Europe. At the same time, however, a risk exists that the patent could be revoked for the whole of Europe following a single decision.

The possibility of opting out must also be considered. It is a useful tool if the validity of a patent is uncertain, and it has the clear advantage that there is no risk of a central attack. Having said this, however, the patent applicant must decide if he or she is willing to litigate in various jurisdictions.

Concluding remarks

  • It is expected that the UPC will become operational on December 1 2017, but further delays are still possible.
  • The sunrise period could be useful for the undecided as it gives them time to think about whether to opt out or not.
  • Opting out should be decided on a case-by-case basis.
  • Forum shopping should be considered and may also prove to be a useful tool

claudia.milbradt@cliffordchance.com

anja.schwarz@cliffordchance.com