UK: Filing Strategies, Enforcement And Clearing The Path In A Unitary Patent World

The fragmented nature of the current European patent system runs contrary to the EU ideal of a unified market and has provided the political momentum behind the multi-national Unitary Patent (UP) and the Unified Patent Court (UPC) system, which will soon be realised. The delivery of the UP/UPC system has been undertaken in close consultation with stakeholders, but businesses should continue to monitor and assess the potential opportunities and pitfalls that the developing patent and court system present.

Efficient use of patent budgets and UPs

High on an applicant's list of priorities is the efficient use of patenting budgets for the desired territorial scope of protection. The application fees for UPs are the same as for any other patent application at the European Patent Office (EPO), but news around post-grant fees was keenly anticipated. The EPO has now announced that the renewal fees payable for UPs will be equal to the sum of the renewal fees payable in the four most commonly designated European Patent Convention-contracting states: Germany, France, the UK and the Netherlands. This news has dispelled the worst fears of applicants regarding an excessive UP renewal fee burden. It remains to be seen if the applicants responsible for only validating their European patents (EPs) in the UK, Germany and France – representing over 50 per cent of EPs – will be swayed to use the UP despite the higher renewal costs, stick with the traditional EP model or opt for national filings instead. Our analysis shows that the lower official fees more than compensate for the upfront translation costs of a reasonable length application if filed only in the UK and Germany. Adding France can also be fiscally sound for an application with a short description.

Opt-in, opt-out or go national?

Considering that nationally prosecuted patents in certain technology areas grant more quickly than those filed at the EPO, and that excess claims fees payable nationally are lower than those charged by the EPO (if payable at all), the national route retains some of its key attractions – not least for inventions with short product lifecycles. Applicants are also reported to be unhappy about the EPO's insistence on a large number of clarity and added matter objections, leading to a reduction in claim scope as compared to what can be obtained nationally.

A major concern besides the costs of obtaining and maintaining patents is, of course, that the UPC will eventually have exclusive jurisdiction over all patents granted by the EPO, be they UPs or old-style EPs. Businesses will have an opportunity to monitor the performance of the UPC during the seven to 14 year-long transition period before it becomes necessary to decide whether or not to continue filing patents at the EPO or to prosecute through individual national patent offices. The importance of this decision cannot be overstated.

It seems reasonable to predict that patent proprietors in fields in which individual patents are high-value assets, most prominently blockbuster drug patents, will make heavy use of the option to opt these patents out of the UPC's jurisdiction, initially in any event. This may slow the development of case law in the UPC specifically relating to such patents. This may in turn compound the slow take-up problem and make those patent proprietors less likely to consider the UPC as a desirable forum for disputes, and the UP as a viable choice of protection.

Users of the current European patent system are already making regular use of the available routes for attacking a European patent (application) centrally. High value pharma patents are, for example, keenly opposed at the EPO by large numbers of opponents per patent. Third party observations are most keenly filed to prevent drug related patents proceeding to grant. The usefulness of such patents may only become apparent sometime after patent grant. Therefore, the opportunity to attack such patents centrally after the end of the EPO opposition period within the context of the UPC will not be lost on businesses and their advisors and should be borne in mind by patentees when considering whether or not to opt-out, even if, at the time, the value of the patent has not yet been fully established.

An increase in EPO oppositions?

Some observers predict that, because of the perceived patentee friendly nature of the UPC, non-practising entities (NPEs) in the high-tech field are likely to make extensive use of the system in an attempt to gain speedy, advantageous infringement decisions and injunctions (but see our comments below). If so, it may also result in an increase in EPO oppositions in the high-tech field (which, currently, is not one of the areas of technology in which many oppositions are fought), mirroring the popularity of the new US PTAB proceedings for counteracting NPE activity. Given that oppositions at the EPO are a cost-effective way of challenging an EP European patent (and, in future, UPs), this means of invalidating patents – which is most effectively conducted with a monitoring service - will continue to gain popularity.

Moreover, in our experience, added matter and sufficiency attacks are more likely to lead to revocation or at least claim narrowing at the EPO than in the UK courts, with prior art attacks being more readily accepted by the latter. Given that the UPC will be staffed by experienced national judges, the EPO may well continue to be, where possible, a better forum for attacks based on added matter and sufficiency.

However, businesses should feel confident that the courts of the central division of the UPC, which have jurisdiction over invalidity attacks under certain circumstances (see below), will, like EPO opposition divisions, have the required technical expertise through the use of technical judges which will sit alongside the legal judges where required.

The UPC

One of the aims of the UPC is to enable parties, where possible, to resolve patent disputes in all participating EU Member States in a single action before a single court, cost effectively.

The UPC will comprise a Court of First Instance and a Court of Appeal. At first instance, there will be a central division, local divisions and regional divisions located in participating EU Member States. All divisions (central, local and regional) will have multi-national panels of judges.

A claimant will have flexibility in choosing the division to hear an infringement action, which may be brought in a local or regional division of a country where either: (i) infringement has occurred or is threatened; or (ii) the defendant (or one of the defendants) is resident or has a place of business. "Foreign" defendants (i.e. defendants that are neither resident nor have a place of business within the participating EU Member States) can also be sued for infringement in the central division. Likewise, if the relevant country (under (i) or (ii) above) does not have a local division or participate in a regional division (e.g. Luxembourg), the case may be brought in the central division.

If there is a counterclaim for revocation, the local or regional division will have the discretion to: (i) proceed with the infringement and revocation proceedings together; (ii) proceed with the infringement proceedings and send the revocation counterclaim to the central division (i.e. bifurcate); or (iii) stay the infringement proceedings (pending the resolution of the revocation proceedings) and send the revocation counterclaim to the central division. If the parties agree, the infringement action and revocation counterclaim can both be sent to the central division.

An action for revocation must be brought in the central division, but that does not limit a corresponding action for infringement. The infringement action may then be brought either: (i) in the central division; or (ii) in a local or regional division as indicated above.

An action for a declaration of non-infringement must be brought in the central division, but if a corresponding infringement action is commenced (i.e. in a local or regional division), the central division must stay its non-infringement action unless that action pre-dates the corresponding infringement action by three months or more.

Appeals will be to a central Court of Appeal, located in Luxembourg. This will ensure harmonisation of substantive law and procedure across the local, regional and central divisions.

The decisions of all divisions of the Court of First Instance as well as decisions of the Court of Appeal should be enforceable in any Contracting EU Member State without the need for a declaration of enforceability.

A cost effective forum

The costs of enforcing a UP should be significantly less than enforcing patents in parallel national proceedings in the EU. It is anticipated that proceedings before the Court will be conducted mostly 'on the papers' (which can be filed with the Court electronically) and that oral hearings will, in most case, be short and informal. This should reduce costs. Proposals on the fees payable to the Court (and recoverable costs) are currently being considered. It is proposed that the UPC fees comprise a fixed fee for all proceedings and an additional value-based fee for certain proceedings with a value of greater than 500,000 Euros. For example: an infringement action will be subject to a fixed fee of €11,000, with an additional value-based fee ranging from €2,500 (for actions worth more than €500,000) to €220,000 (for actions worth more than €30,000,000). By contrast, a counterclaim for revocation will be subject to a fixed fee of €11,000 and, irrespective of the value of the action, a fee of no more than €20,000 will be payable in total. A revocation action will be subject to a fixed fee of €20,000. There are proposals to discount these fees for certain organisations (e.g. SMEs and non-profit organisations), if the fee payable "threatens the economic existence" of a party and for those actions that are withdrawn or settle. It is also proposed that the winning party may recover a (small) proportion of its costs, based on the value of the action. Recoverable costs range from up to €50,000 (for actions worth up to €250,000) to up to €3,000,000 (for actions worth more than €50,000,000). The results of the consultation on court fees and recoverable costs are due shortly.

Consistency of approach

The UPC's Rules of Procedure are a significant achievement. They bridge the different approaches of the courts within Europe and the aim is for the Rules (and the substantive law to be developed by the Court) to be applied consistently by the separate geographically distributed divisions of the Court. However, it will be necessary for the Court to guard against cultural differences in approach which may lead to inconsistency in the interpretation and application of the Rules. For example, the Rules provide that the grant of an injunction is a discretionary remedy. How will this discretion be exercised by the courts of the UPC in, e.g. the UK (where they are used to exercising such discretion) and Germany (where they are not)?

It is expected that Patentees will be granted an injunction unless there are circumstances in which it may be considered unjust and/or disproportionate to do so, e.g. where there is existing demand for a pharmaceutical product. Alternatively, an injunction may be granted but deferred, depending on the particular circumstances, e.g. where the patent only relates to a small component of a product (e.g. a phone). This would provide an infringer with a short period of grace before the injunction bites to produce a non-infringing product. The UPC's goal is to enable the enforcement of a patentee's valid property right, but to do so in a just and proportionate way. The onus will be on the infringer to adduce evidence at the final hearing before the UPC to enable the Court to exercise its discretion to achieve such a result.

Playing the system

The geographically distributed divisions of the Court will also need to adopt a consistent approach to prevent abuses of the system. The threat of an injunction covering most, if not all, of the EU will be a powerful weapon in the hands of a patentee whose primary goal is to monetise its patents. The Court's exercise of its discretion in this regard may blunt this weapon, if it is exercised according to clear principles consistently across the courts of the UPC. If not, any prolonged uncertainty and/or inconsistency in approach (e.g. between local divisions in different countries) will play into the hands of such patentees and lead to forum shopping within the UPC.

Well-funded patentees that wish to monetise their patents are increasingly suing would-be licensees under multiple patents to increase the cost and burden to the target licensee (e.g. Rovi's unsuccessful assertion of 11 patents against Virgin Media and TiVo in the UK over the past seven years – all held to be invalid and/or not infringed). Unfortunately, the UPC provides an additional dimension for such activity because the current (18th) draft of the Rules of Procedure does not prevent a patentee suing a target licensee in multiple geographically distributed courts of the UPC at the same time in relation to different patents. This allows the same parties to be in dispute in relation to the same or similar subject matter in different courts within the UPC system (e.g. where patents covering the same or similar products are asserted against a defendant in geographically spread local divisions of the UPC). This may result in a defendant having to engage different legal teams in different countries to deal with such a dispute. The courts of the UPC will need to proactively manage, and coordinate the management of, such cases to prevent patentees abusing this aspect of the system (i.e. where there is no good reason for such multiple actions against the same party). For their part, claimants (and Defendants) in the UPC will need to be mindful of their conduct in the course of proceedings and it is to be hoped that the court will adopt a tough line in relation to any abuse of process and will exercise its inherent power to manage cases and its discretion to grant an injunction accordingly.

Quality and unity of the judiciary

Ultimately, the responsibility for the early success of the Court will rest largely with the UPC's judiciary. Current indications are that the UPC's judiciary will be staffed by a core of experienced national judges working closely together and alongside less experienced judges. The quality of the judiciary and their ability to work together in unity to manage cases proactively and consistently across the geographically dispersed courts of the UPC will underpin and provide the bedrock for a successful Unitary Patent and a Unified Patent Court system.

This article was first published in Managing Intellectual Property.

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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