The single most remarkable reform in the European patent landscape is soon here, as the Unified Patent Court (UPC) and the Unitary Patent (UP) system will come into force on 1 June 2023.
To make the best out of the ongoing sunrise period which started on 1 March 2023, our experts from different jurisdictions will under this blog series share their insights on topics that may have received lesser attention in the ongoing lively UPC/UP discussion.
The second part of our UPC blog series is about different UPC strategies, and especially if you should opt-out your traditional European Patents (EP) from the UPC’s jurisdiction.
Given the perceived general uncertainty related to the UPC and the risks of an UPC-wide revocation action, it has for long been predicted that the majority of the EPs will be opted-out. However, the industry’s view of the UPC has changed in the past year.
The Rules of Procedure now form a solid basis for litigation for patent owners. A very important step was the appointment of legally qualified judges. It is now clear that the best patent judges from the national courts of the participating member states have been appointed. Their views are known from the case law of their national courts.
The UPC is determined to issue judgments on the merits within little more than a year. It covers countries where national courts are less experienced in complex patent litigation. Indeed, there is the risk of a central revocation action, but that has to be balanced against the advantage of an infringement action that covers a market of over 300 million consumers and probably more in the coming years.
In the first three weeks of the Sunrise Period only just over 2000 opt-outs have been registered. In Germany 917.053 patents were in force in 2022, which shows that opt-outs are limited in numbers until now. Besides, whether opting-out indicates the patent owner’s permanent decision with regard to the UPC, is a completely different question.
Indeed, one should remember that opt-outs can be withdrawn, and it is thereby possible to opt back in to the UPC at a later stage. Patent owners have understandably found this wait-and-see strategy as a suitable one, as it may help you to avoid the risks of the UPC without turning your back to its advantages.
However, when following this strategy it is important to remember that you are nevertheless opting-out and withdrawing your earlier opt-outs requires certain conditions to be fulfilled. In addition, by opting-out you may also be sending silent messages to those who are keeping a close eye on your patent activities. Hence the question: is wait-and-see truly the best UPC strategy after all?
The possibility of opting back in is understandably a key precondition for a successful wait-and-see UPC strategy. Indeed, if the market situation changes and a UPC-wide injunction is suddenly needed, it is crucial to be able to opt back in promptly and in an orderly fashion.
The conditions of opting back in (the act of filing an application to withdraw the earlier opt-out) have been set out in Article 83 of the UPC Agreement and Rule 5 of the Rules of Procedure. In essence, the said provisions provide that the opt-out withdrawal application is possible at any time, provided an action concerning the EP in question has not already been brought before a national court.
However, it is worth noting that the wording of the Rules of Procedure (Rule 5, paragraph 8) implies that the prior national action which bars the opt-out withdrawal application may be any national action that predates the effective date of the opt-out application (or the correction thereof, if any). In other words, even old and already final national actions concerning the opted-out EP might prevent the opt-out withdrawal application – and not just those that are initiated after the opt-out.
Although there has been some debate on whether this was intended, the said ambiguity should definitively be accounted for when considering a wait-and-see strategy for an EP that has already been subject to prior enforcement or revocation measures. This in turn requires the EP owner(s) to be aware of any prior litigations – an issue to be addressed also in any IP due diligence involving EPs going forward.
Another point worth noting is that like the actual opt-out application, the application to withdraw the opt-out requires confirmation from all owners of the opted-out EP, not only in the current 17 UPC member states, but in all 39 EPC member states. So, if you are about to discuss the question of opt-out with other co-owner(s) and you agree that opting-out is the right thing to do, it might be a good idea to also discuss the question of opting back in.
Final point to note is that opting back in may be done only once. So, once you are back at the UPC, you will stay there.
While there are no single right answers to the question of whether one should opt-out or not, there definitively has been many general considerations and even recommendations on this topic. These include among others the following:
Given the above considerations and the fact that opt-outs will be publicly searchable at the UPC’s Registry, the acts of opting-out will certainly be closely monitored by those who are close to the patent owner’s business and assessed if they tell something about the EP in question. I did not expect them to opt-out, so why did they? I was sure they would have opted-out, so why they didn’t? Is their EP very valuable? Is their EP easily revokable? Are they planning to enforce their EP before the UPC? Should we do something before they make their first move?
While such speculations may of course turn out to be completely wrong (only the patent owner knows why they opted-out or stayed in), it has been assessed that the acts of opting-out or not opting-out might in fact trigger third parties to initiate national revocation actions or declaratory actions for non-infringement to make sure that the EP in question cannot be litigated before the UPC. This of course means that those who opt-out because of their “wait-and-see” strategy cannot in fact follow it through and may be caught in national proceedings.
Indeed, the patent owners should be conscious about the fact that both the act of opting-out and staying within the UPC may send a silent message to others in the field and therefore having a well thought and executed UPC strategy is important.
We hope this blog post gave you some food for thought. You will find the earlier and upcoming parts of this blog series and further information about the UP/UPC system under Bird & Bird’s UP/UPC website.