European Union: The UPC System: Transitional Period

Last Updated: 30 September 2014
Article by Ulrich Blumenröder

The exclusive jurisdiction of the UPC is not as exclusive as it appears. During a transitional period, a plaintiff will be able to decide on whether to file suit before the UPC or a national court. During that same period, patent owners will also have the option of making sure that their patents will not be handled before the UPC.

Transitional Period

This exclusive jurisdiction of the UPC is not as exclusive as it appears. During the transitional period provided for under Article 83(1) UPCA (7 years or prolonged to 14 years, see Article 83(5)), a plaintiff will be able to decide on whether to file suit before the UPC or a national court. During that same period, patent owners will also have the option of making sure that their patents will not be handled before the UPC. A patent owner can file an opt-out application for a specific patent.

Nonetheless, nothing is as straightforward as it appears at first sight.

1. Transitional Period - Dual Jurisdiction

Article 83(1) UPCA provides

During a transitional period of seven years after the date of entry into force of this Agreement, an action for infringement or for revocation of a European patent or an action for infringement or for declaration of invalidity of a supplementary protection certificate issued for a product protected by a European patent may still be brought before national courts or other competent national authorities.

It can be taken that such dual jurisdiction is only available for traditional European patents and for certain of the actions listed in Article 32, namely infringement and revocation actions (including counter claims for revocation, Article 32(1)(e)). Actions for declaratory non-infringement (Article 32(1)(b)), for compensation for licenses (Article 32(1)(h)), concerning decisions of the EPO (Article 32(1)(i)) and relating to the use of the invention prior to the granting of the patent (Article 32(1)(g)) can definitely not go before the national court.

Note: Dual jurisdiction is not available for all actions, latest opinions need to be checked before filing.

The first open issue concerns actions for damages or compensation deriving from the provisional protection conferred by a published European patent application (Article 32(1)(f)). This action is not listed in Article 83(1) UPCA. Thus, on its face, damage claims have to be filed with the UPC. This literal interpretation is fostered by Article 83 UPCA. It is not only silent regarding damages, Article 83 UPCA is also completely tacit on the compensation mentioned in Article 32(1)(f). Moreover, any analogous application of another Article (here "Action for Infringement" in Article 83 UPCA) is usually not admissible. Hence, attempts to dismiss jurisdiction for damage claims in national courts will have to be expected.

However, they should not prevail. Article 32 UPCA is silent on claims for corrective measures as listed in Article 64 UPCA (i.e. recall and destruction), while this Article 64 UPCA explicitly lists "corrective measures in infringement proceedings". Neither does Article 32 UPCA express anything about the court's power to order the communication of information as mentioned in Article 67. Nonetheless, it is obvious that the court shall render decisions in this respect. Since Articles 64 and 67 UPCA are listed in the same section of the UPCA as Article 68 regarding damages, it appears that Article 32 UPCA considers corrective orders to communicate information and the like as integral part of an infringement proceeding. Likewise a damage award should be considered an integral part as well. As a result, the infringement actions listed in Article 83(1) UPCA are not limited regarding remedies and include damages and compensation awards.

Yet, Article 32 UPCA cannot be "argued away" to all extents. If all actions of Article 32 UPCA should be available in front of the national court during the transitional period, Article 83(1) UPCA would have been worded differently. Thus, Article 32 has to be construed in that separate actions for damages based on existing infringement decisions will no longer be allowed in front of the national court. Rather, such actions need to go before the UPC. At first sight, this should be rather a rare instance. Yet, in some countries such as Germany, infringement actions only include a motion to declare that damages are to be paid, being understood that the actual amount will be claimed in a separate additional action. Such separate additional action for damages will likely not be permitted before the national (typically German) court. Thus, (German) plaintiffs deciding to sue with the national court should take cautionary measures, i.e. to include the suit for damages into the infringement action by an action by stages (in German: "Stufenklage").

The second open issue concerns "actions for provisional and protective measures and injunctions" Article 32(1)(c) UPCA, i.e. preliminary injunctions. It appears to make no sense to allow the plaintiff to file infringement actions on the merits with the national court, but to not allow preliminary injunctions. However, the wording of Article 32(1)(c) UPCA is clear. Thus, Article 62 UPCA has the headline "Provisional and Protective Measures" and refers to "injunctions against alleged infringers". Moreover, Article 63 subsequently refers to "permanent injunctions", wherein "a decision is taken finding an infringement". Thus, the UPCA in its structure as well as Article 32(1) UPCA distinguish between "an infringement action" and a "provisional and protective measure action". This distinction is mirrored in Article 83(1) UPC. Only the infringement action is mentioned. Hence, making sense or not, the plaintiff runs a substantial risk with filing motions for preliminary injunctions with the national court. The risk does not include motions for inspection, known as "saisie-contrefaçon", Anton-Piller-Order or Fax-Card- Decision. Such motions are mentioned in Article 60(1)-(4) UPCA. And Article 62 on provisional and protective measures only refers to paragraphs (5)-(9) of Article 60 UPCA providing for the duty to lodge security and the like. Such motions are preparations for an infringement suit on the merits. They will still fall within the dual jurisdiction of the UPC and national court during the transitional period.

2. Dual Jurisdiction – Consequences

Initially, a "normal" controversy starting with a warning letter will proceed as before enactment of the UPCA. Yet, the options provided by the transitional period are tempting when court actions are to be filed. (Even though in the end the options are less wide spread than they appear.)

An infringement action of the patent owner before a national court in a first country can be followed by a revocation action before the UPC. The patent owner might feel induced to file a further infringement action in a national court of a second country. He can also decide to bring an infringement action before the UPC seeking injunctive relief and further measures. The patent owner will merely have to formulate motions excluding the territories of those countries where the national infringement actions have already been filed.

With a pocket deep enough, many constellations are possible. To avoid one constellation or the other a patent owner or a competitor might consider filing before particular courts. The most common idea mentioned for the competitor of a patent owner is to file a motion for non-declaratory judgment to ensure jurisdiction of the UPC. On first sight this does not stop the patent owner to file an infringement action in a national court. Article 83 UPCA does not rule anything to the contrary. However, Article 29 EU-Regulation 1215/2012 on jurisdiction makes suits with the same subject matter inadmissible. And an infringement action pertains to the same subject matter as the suit for declaratory judgment for noninfringement. It is the concept of the Torpedo case law.1

Note: During transitional period actions in different national courts and UPC pertaining to the same patent and defendant are possible.

Hence, those potential defendants wanting to ascertain exclusive jurisdiction of the UPC for infringement matters can do so by filing a suit for a declaration of non-infringement. At any stage of the proceeding, however such potential defendants can decide to challenge the patent in suit before the UPC or national courts.

2.1. National Revocation Action as Reaction to UPC-Infringement Action

It would make little sense for a defendant before the UPC to rely on national courts for invalidity actions.

The UPC can be confronted with an infringement action (or a suit for declaration of non-infringement) and national invalidity suits in all countries to which the infringement suit pertains. If the UPC considers the arguments raised in the national invalidity suits to be convincing it may make use of a number of Rules.

- It can apply Rule 295 (k) allowing the court to stay a proceeding "in any other case where the proper administration of justice so requires". With so arguing a defendant opens the floor for a number of undecided questions, the main one being whether the principles of Rule 37.4 shall apply, i.e. whether in case of a high likelihood of invalidity a stay until a final decision on validity is called for. The title of Rule 37.4 ("Application of Article 33(3) of the Agreement") calls for not applying Rule 37. A stay in light of national invalidity suits has nothing to do with Article 33(3) of the Agreement. While the UPC might be inclined to apply the same principles as listed in Rule 32.4, there is hope the UPC would consider filing of many national invalidity suits to show the attempt to prolong proceedings and would therefore be very reluctant to stay.

The question becomes even more virulent in a constellation, however, where the UPC deals with an infringement action and national revocation actions in fewer countries than are subject to the infringement action. The UPC can hardly stay arguing that proper administration of justice so requires. Where a patent is not challenged, the UPC will have to assume that it is valid. The traditional European patent is not actually a "bundle of patents" as is often said. Yet, it has the same effect as a national patent in each of the countries where it is validated. Despite determination of patent infringement according to Article 25 of the UPCA, a claim for injunctive relief can have different results in each country – for instance due to different results of national revocation actions (other reasons my be national rights to prior use, a license granted for a particular territory, or older rights invalidating the European patent only for the territory of a certain country). Hence, if a patent is not challenged, the UPC will have to find for infringement for the respective country and consider staying the proceedings with respect to other countries. A rather "unpleasant" result. The UPC might try to avoid it by not staying at all using Rule 295 (k).

- The UPC might also invoke Rule 118.3 giving the UPC large discretion when rendering its decision.

Rule 118.3 (b) explicitly refers to "the" revocation procedure, i.e. the revocation procedure before the UPC. Hence, the stay or suspension mentioned in Rule 118.3 (b) does not appear to be possible based on this Rule.

Rule 118.3 (a) Alt.1 grants the power to render a decision under the condition that the patent is held valid. Again, however, the Rule refers to "the" revocation procedure.

It is Rule 118.3 (a) Alt.3 which might give the UPC an option to deal with the situation. It grants the UPC the power to render its decision "under any other term or condition". It is yet another provision leaving patent owners and potential defendants in doubt about the meaning and the application of the Rules. Rule 118.3 (a) Alt. 3 is not meant for national revocation actions since revocation actions are addressed in Alt.1. However, Alt.3 appears to be meant for issues not explicitly foreseen but nonetheless justifying to render a decision under a condition. Since the Rules do not refer to national revocation actions, it is more likely that the UPC will allow application of Alt.3 in the case of national revocation actions. Having said this, it is far from certain that the UPC will apply Alt.3 as a standard. The UPC may (not must) render its decision under a condition. Hence, where the UPC gets the impression that filing a national revocation action is without merit or that it was meant to slow down the process and thereby impair the principles of fairness and equity, rendering a decision under the condition of a certain result of a national revocation action becomes less likely.

The UPC not staying will in many cases result in a final decision before there is any national decision on the national revocation action. National laws having a tradition of bifurcation tend to solve the problems arising from such a situation by allowing rehearings. Germany does so on the basis of § 580 Zivilprozessordnung ("Restitutionsklage") – yet only within five years. Countries having no tradition of bifurcation do not deal with the situation that often. It can happen, however, where third parties challenge the validity of the patent in separate proceedings and the patent is actually invalidated rendering a previous infringement decision (and possibly a decision on damages due to such infringement) wrong. British law "solves" the problem by giving deference to the principle of res iudicata. The defendant could have challenged the patent but did not do so. The decision against him is final and stays so. A hard law, but not all different from German law. German law provides for the same if the deadline of five years has expired.

The UPCA provides for a rehearing in its Article 81. The article, however, lists only a certain number of situations which will likely have to be construed as enumerative. It even does not deal with the issue. A later revocation of a patent is not among them. Article 81 (1) (b) UPCA even mentions a final decision of a national court as a reason for a rehearing. Yet, such national decision must pertain to "an act which was held, ..., to constitute a criminal offence". Rarely, a decision of a national court to revoke a patent is based on an act constituting a criminal offense. Obviously, the drafters of the UPCA did not want to allow a rehearing due to a later revocation of the patent in suit. Given the British national concept, this is not violating equity either. The fact that the problem can arise more often under the transitional regime cannot allow for a different construction. Firstly, the drafters refrained from implementing a rule for the transitional period. Secondly, a defendant in an infringement proceeding has the possibility to avoid the result by filing a revocation action before the UPC and finally, overruling the apparently rather clear wording by applying the rules of mutatis mutandis with respect to such a new law is difficult to justify.

Consequently (or coincidentally), the Rules of Procedure do not provide anything different in its Rules 245 et seq.

Fortunately, the final finding of the above problem is of secondary importance. A defendant in an infringement action before the UPC will think twice before taking the risk of having to convince the UPC to stay in light of national revocation actions or even to accept a rehearing in light of a national revocation decision. She will bring the revocation action before the UPC.

2.2 UPC-Infringement Action following National Revocation Action

The above findings are disturbing in cases where litigation starts with one or more national revocation actions. Nothing stops the patent owner to force the defendant into an infringement action before the UPC. Yet, given the above, the consequence will often be that the defendant will at least feel forced into a revocation action before the UPC. If instructed given the principles of fairness and equity influencing a decision under Rule 118.3 (a) Alt.3, the danger of being confronted with a final – irrevocable – decision in an infringement action irrespective of the result of a national revocation action should be less significant. But not many practitioners will advise an alleged infringer to rely on a national court for revocation if the infringement is dealt with before the UPC.

2.3 Summary

Any defendant of an infringement action before the UPC will have to consider the above. In general this will result in a revocation action before the UPC. Article 83 UPCA and dual jurisdiction do not keep what they say on its face. Rather dual jurisdiction is mainly for the patent owner. As a rule of thumb if the patent owner wants to have everything with the UPC both infringement and validity will be handled there. The defendant can only truly choose where the patent owner wants to litigate nationally. In this case the defendant can file the revocation action either nationally or before the UPC.

Note: If an infringement action is pending before the UPC, the revocation action should be brought.


1 The Italian decision of 28 May 2013 in The General Hospital Corporation (Massachusetts General Hospital) and Palomar Medical Technologies Inc. vs. Asclepion Laser Technologies GmbH ("General Hospital vs. Asclepion") finding for jurisdiction of Italian courts for non-infringement of foreign patents even without a party residing in Italy only confirms this principle.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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