Unitary Patents and the Unified Patent Court

After many a false start, Europe is finally on the verge of a radical overhaul of its patent system, with the bringing into being of the Unitary Patent (UP) and Unified Patent Court (UPC). However, while the philosophical underpinnings of this change are based on simplicity, the practical implementation will be anything but, at least initially. That said, there is nothing to fear, and perhaps a great deal to gain, for those who are able to navigate it effectively. The following is a brief guide to the key points to note.

Current status

The so-called “Provisional Application Period” for the UP/UPC system came into effect on 19 January 2022. This allowed the formation of various bodies necessary to complete the preparations for the system to go live, in particular the Administrative Committee of the UPC which will formally adopt the Rules of Procedure of the UPC and oversee a process for hiring judges and other practical arrangements.

The start date for the new system will be the first day of the fourth month after Germany formally completes its ratification process, which will provide users with some official notice before the system is in place. At present, the Administrative Committee has hinted that the start date may be as soon as October 2022, although commentators generally consider this ambitious, and it would not be surprising if this were delayed by a few months.

The case for change

Currently, the European patent system which has proved so effective over the years is based on the European Patent Convention (EPC), which established the European Patent Office (EPO) and a harmonised approach to prosecution of patent applications to grant (and some post-grant procedure, notably Oppositions). However, this was only ever conceived as part of the story. Obtaining patent rights is useful only if those rights can in principle be effectively enforced. While the EPO has been a huge success in providing a harmonised European approach to the first part, Europe has to date lacked a central body able to offer the latter.

As a consequence, “European patents” today are in fact a bundle of national rights. After grant at the EPO, a patent is “validated” in one or more European states, and then enforced individually in each of those states. There is a cost to this, even in the absence of any active patent enforcement: the cost of validation varies from country to country, although costs have fallen in many states since the London Agreement in 2000 led to a significant reduction in translation requirements in many states; and granted patents must be renewed annually in each validated state. Once patents are enforced, the costs of multiple proceedings in separate countries are clearly undesirable (albeit in practice generally avoided) and still worse is the possibility of conflicting decisions on the same patent rights in different jurisdictions.

In a platonic ideal world, a single grant process would lead to a single patent enforced by a single court system. In reality, the shadow of this ideal we see by the flickering firelight is not so geometric in form.

A new Europe

The European patent system is full of “you know it when you see it” fudges and shortcuts. The EPO will ask you to prove you solved a “technical” problem but will not define “technical”. However, the real elephant in the room is the word “Europe” itself, which has a geographical definition but is often used as shorthand for the European Union. Neither of these match either the European patent system today, or the parts of Europe covered by the UP and UPC.

The EPC, and thus the EPO, covers 38 states, including all of those in the EU and ten others, including the United Kingdom as well as countries like Switzerland, Norway, and Turkey. The proposed changes have no impact on any existing EPO activity. As such, these countries will continue to cooperate in all European patent procedure up to grant.

While EU membership is irrelevant to the current European patent system, only EU members will be taking part in the new elements. The driving forces behind the UP/UPC project are in tune with those of the EU. If you want a single market across the EU, with common rules applied, it is logical to wish to see intellectual property rights applied harmoniously. Today, goods on the market in, for example, Germany may infringe a European patent, while the same goods in a neighbouring EU state may not, for no more complex a reason than the patent has not been validated there. As such, the market on each side of the border is not the same.

One might expect, therefore, that the UP and UPC would be EU-wide institutions. Indeed, this was the original intention. However, history has led us to a different point. An EU-wide agreement could not be reached, and so a process of “Enhanced Cooperation” among a subset of EU states was used to progress the project. In the end, the UP and UPC will not cover all EU states, but a coalition of the willing, which will include, for example, France, Germany, Italy, and the Netherlands, but will not include, for example, Spain and Poland. With even theoretically willing countries not all having completed their ratification process, the system is expected to start with 17 countries as illustrated:

The distinction between the geographical scope of the European patent system we are accustomed to and that of the new system is the core understanding necessary to taking informed decisions on how to respond.

UPs

For participating EU member states (at present, the 17 states indicated in the map above), it will be possible for a single patent to be granted on request in place of the existing system of multiple national validations. This will provide a unitary right in place of the existing system, and the practical aim here is to reduce costs, specifically those incurred at validation and in subsequent renewals.

Requests for “unitary effect” will be filed at the EPO within a month of the grant date. In comparison, at present proprietors have up to three months after grant to validate in each participating member state. As a result, patent applicants will need to be aware of their intended strategy in good time in order to make informed decisions.

It will not be obligatory to opt for UPs even in those countries where it is available. The existing national validation route will continue to exist. For example, an applicant may choose to obtain a UP and also to validate in one or more countries where the UP does not apply, or simply to continue with their existing practice, validating only in those states of interest.

In making this decision, the cost may be the primary consideration, but it is also worth bearing in mind that UPs can only be litigated through the UPC, which is as yet an untested system. UPs are, by design, an “all-or-nothing” system, so if the UPC revokes a UP that decision will be effective in all states. Similarly, unlike the current system, it will not be possible to trim renewal costs by reducing the geographical coverage of a UP.

The table below illustrates the proposed UP renewal fees. These costs are broadly in line with the current costs associated with renewals in four member states. As such, significant cost savings will be made in comparison with the current validation procedure across the 17 member states covered by the UP. However, in practice, many applicants do not currently employ such a broad validation strategy, and the true benefit may be increased coverage for a similar cost to current strategies in many cases.

What is the UPC?

The UPC is the litigation aspect of the system. It is a centralised court system (albeit there will be divisions of the UPC in various locations) to replace the current independent national courts for participating member states. Ultimately, the aim is that all patent litigation for those states will be handled by the UPC, but initially, a hybrid system will exist.

The UPC will at first instance have a central division based in Paris and Munich (and likely a third location – this was originally to be London but since the UK is no longer taking part this will need to change). There will also be a number of local divisions in individual member states and regional divisions set up by groupings of those states. In board terms, infringement actions may be brought in the local or regional division where the infringement occurs or where the defendant is domiciled, while revocation actions would initially be brought in the central division.

At each division, a panel of judges will hear a case. Each panel will be international in nature, with the aim of ensuring consistency between the different divisions. Nevertheless, it may be expected that some local character will be present in proceedings.

One aspect of the UPC that will be watched closely is the possibility of “bifurcation”, the splitting of procedures handling infringement and revocation actions on the same case. Procedurally, it will be at a local/regional division’s discretion whether, when a counterclaim for revocation is made to an infringement action they are hearing, to handle both aspects together themselves, refer both to the central division, or to split them by referring only the revocation to the central division. Defendants in infringement actions will be keen that decisions on infringement are not reached without validity having been tested. It is expected that such an outcome will be rare if it occurs at all, but practical implementation will be closely monitored.

As noted above, all UPs will be litigated through the UPC. However, this is not the limit of the UPC’s jurisdiction. Ultimately, the intention is that all European patents validated in the conventional way in participating states will also be subject to the UPC’s exclusive jurisdiction. Nevertheless, there will be a transitional period of seven years (this could in theory be extended) during which that jurisdiction is not exclusive and those bringing proceedings will have a choice of the UPC or existing national courts for such patents.

Moreover, in that time, patent proprietors will also have the choice to opt out individual patents from the system entirely, perhaps to avoid the possibility of central revocation at an untested tribunal.

Opt-outs

The option to opt out from the jurisdiction of the UPC is designed to address the concerns of patentees nervous to subject their assets to the decisions of an untested body in its infancy, particularly as this could lead to a central revocation of the case across all participating member states. There will be an option to opt back in if the patentee later considered it desirable. It is important to note that this opt-out procedure will apply to existing portfolios of European patents as well as those granted in future. Of course, litigation for those states that do not participate in the new system, both within and outside the EU and including the UK, will continue at present.

Opt-outs will be possible in the so-called “sunrise” period that will start three months before the actual start date of the UPC. In principle, this sunrise period could even start as early as July 2022, hence this decision may come around quickly.

In terms of the practicalities, an opt-out can only be registered on behalf, and with the authority, of all of the actual proprietors of the patent, who may differ from the registered proprietors if ownership changes after grant have not been recorded. The opt-out procedure requires a declaration that the patent proprietors listed in the opt-out application are entitled to be registered as such, so as a practical matter it will be important that care is taken to ensure the chain of title is understood.

As well as granted patents, opt-outs can also be filed for pending applications. If a UP is then later requested, this will in effect cancel the opt-out, since UPs cannot be opted out of the UPC.

The role of the UK

Due to its exit from the EU, the UK will no longer take part in the UP or UPC. However, this does not affect the UK’s participation in the EPC or the EPO, so patents in the UK will continue to be available through this route. Moreover, European patent attorneys based in the UK will also have full rights to handle matters relating to UPs and rights of representation at the UPC. As such, Venner Shipley’s offices in the UK and Germany will continue to be well-placed to serve the interests of clients throughout the European patent landscape.

Decisions to make

Patent applicants and proprietors need to take a view on how valuable they consider the possibility of UPs to be to their business, and potentially how threatening they consider UPC central revocation to be to their existing assets. The key decision points in the near term will be on the issues of whether to obtain UPs and whether to opt-out of existing patents, and non-unitary patents in future, from the UPC.

In making these decisions it will be important to bear in mind all stakeholders. In particular, where licence agreements are in place or anticipated, due care will be required to ensure that the terms of such agreements are clear on these points.

Please get in touch with your usual Venner Shipley contact for more information or advice on any unified patent court news, or email upc@vennershipley.co.uk. You can also learn more with our Unified Patent Court FAQs here.