UPC Update: Pros and Cons of Opting Out

Last Update: 09 March 2023

The long-awaited Unified Patent Court (UPC) is expected to become operational on 1 June 2023. In the countries participating in this new judicial system, all patents granted by the European Patent Office (EPO) – whether they have unitary effect or not – will eventually be under the exclusive jurisdiction of the UPC. In an initial transitional period of at least seven years after the system enters into force, however, a European (EP) patent without unitary effect[1] will fall under the joint jurisdiction of the UPC and relevant national courts in those signatory states where the EP patent had been validated. This will happen by default, not just to newly granted EP cases but also to those that already exist and in force, but it will be possible to "opt out" an EP patent or, preemptively, a patent application from the jurisdiction of the UPC. This requires the active step of filing a request at the UPC, and there is no official charge.

This option will already be available in a "sunrise period" that begins three months before the start of the transitional period, in order to allow patents to be opted out by the time the UPC begins to hear cases. This is intended to prevent a situation where an action is launched against a patent at the UPC before the proprietor has a chance to opt it out, because it will then no longer be possible to do so. Once opted out the patent will be "out" for the rest of its lifetime, even beyond the end of the transition period. It is possible to withdraw the request and thus "opt back in", unless an action has begun before a national court, and no further change of mind is allowed.

Opt out or stay in?

The key procedural facts are as above. What are the motivations for a proprietor of a non-unitary EP patent (i.e. a family of "standalone" national patents) to opt out of UPC jurisdiction? And what are the reasons to stay in?

Subjecting to the jurisdiction of the UPC will be appealing to those who favour the possibility of enforcing a patent across many jurisdictions in a single action, and are not afraid of a counterclaim for invalidity (see below). The UPC has the power to grant central injunctions across many
jurisdictions and to award damages across a broad territory.

It can also grant inspection orders, seizure orders and other "prompt and effective" provisional measures that might be more readily available than before some national courts. It will also be attractive to those who believe the new court will be patentee-friendly, or to those who are familiar with the German court system upon which much of the procedure is modelled and are content with such a system.

Traditionally, EP patent enforcement is carried out at the national courts on a country-by-country basis. This route is still available if the patent is not opted out. Alternatively, a single infringement action at the UPC could be advantageous in terms of costs if the size of the patent family is large. Although UPC litigation costs are likely to be higher than those that would be incurred at a single national court (at least for the plaintiff), savings would be made compared to a large number of parallel proceedings at multiple jurisdictions.

The UPC procedure is also designed to be very quick. It will be attractive to patentees who believe they may need to enforce their patents in jurisdictions where the national patent courts are notoriously slow, such as Italy, Belgium and France. It will also have specialist judges who, it is hoped, may dispense fairer justice than may be available in those smaller states where a patent action may fall to be decided by a judge who has little or no experience of patent litigation.

The big risk is that of central revocation. A patent subject to UPC jurisdiction is vulnerable throughout its lifetime to such a prospect through invalidity attacks by any third party (and not just by a defendant in infringement proceedings). By comparison, if a patentee opts out, there is only the ninemonth window for opposition and possible central revocation before the EPO. Opting out of the jurisdiction of the UPC will be especially attractive to those who find this prospect unpalatable. Where a patent owner typically licenses patents state-by-state, for example, it may be useful to know that revocation of the patent in one state will not automatically undermine the basis for a licence in another state.

There is no guarantee that any patent is forever invincible to challenge, but it has been said "there is no need to be afraid of the UPC unless you have a bad patent".[2] At the point of grant, a patentee normally has no reason to doubt its validity and has in any case the opportunity to amend under Article 105a EPC. If, on the other hand, prior art comes to the
patentee’s attention after the expiry of the EPO opposition period, opting out may indeed become attractive, especially if the newly discovered prior art is not novelty-destroying but merely casts doubt on inventiveness, on which different courts in Europe might plausibly take divergent views.

In choosing to opt out, a patent owner may simply be content with enforcement before the national courts. The UPC is also as yet untried and uncertain; its functioning will inevitably take time to become established. Proprietors who are on the cautious side may wish to observe its initial development before dipping a toe in, but it will perhaps not be surprising if ambitious businesses see this as a rare chance to take part in the shaping of the UPC’s own case law from its earliest stages.

Naturally, the pros and cons of being under or outside UPC jurisdiction for a European patent are relevant to the question of whether to register for a unitary patent or to validate a European patent in the traditional way, but there are other strong reasons for requesting unitary effect. These are already discussed in this Journal and we do not repeat them in this brief article. The value-for-money offered by the territorial scope of a unitary patent is a significant factor, while the pros and cons of the UPC jurisdiction are also relevant in forming an overall strategy for maintaining and working one’s patent portfolio.

In summary, joint jurisdiction under the UPC and national courts is certainly not for everyone. Some will jump at new options in litigation and negotiation strategy and enhanced "forum shopping", and some will shy away from an "all eggs in one basket" approach. It is time to start weighing the legal and cost implications for their European patent portfolio, in case they wish to opt out any existing patents and pending applications in the UPC sunrise period ahead of the full launch.

Dr. Matthew Yip is a Senior Associate at Maucher Jenkins

Lucy Holt is an Associate at Maucher Jenkins

[1] An EP patent with unitary effect by definition will fall under the sole jurisdiction of the UPC.
[2] Dr. Margot Fröhlinger, Principal Director of Patent Law and Multilateral Affairs at the EPO, Fordham Intellectual Property Law & Policy Conference, 24 April 2014.