European Union: The Unified Patent Court – Action Required Before The UPC Goes Live

The implementation of the Unitary Patent and Unified Patent Court – a patent and associated court system with unitary effect in up to 25 EU Member States – is accelerating. We are now predicting that the Unified Patent Court (UPC) will accept its first cases in approximately April 2017. This would require the Preparatory Committee of the UPC to finish its administrative work in Summer 2016, and the UK and Germany to be ready to ratify the UPC Agreement in Autumn 2016 along with at least two other countries (to take the total to at least 13).

This is realistic; these workstreams are progressing smoothly. The Preparatory Committee remains on track to finish its work by the summer in its series of pre-arranged meetings; the UK has published final form national legislation to give effect to the UPC Agreement, already approved by both Houses of Parliament; and Germany has published its own equivalent draft legislation. In the UK, the only legislation yet to be approved is the proposed Statutory Instrument on Privileges and Immunities of the Judges of the UPC, which is anticipated by early Autumn at the latest. Other counties are progressing their preparations towards ratification: Bulgarian legislation was enacted in April 2016 making ratification imminent; draft legislation was announced in the Netherlands in March 2016 and in Lithuania in April 2016 to enable those countries to ratify; and the Italian government has approved the draft legislation to enable Italy to ratify. The momentum towards ratification seems unstoppable.

If this proceeds to plan, the period of "provisional application of the UPC Agreement" (colloquially known as the "sunrise period") will commence in Autumn 2016. This will allow the Court to be established and finalise its locations, judicial personnel and support staff well before it hears its first cases. It is widely expected that the sunrise period will last for approximately six months.

Full recruitment for all UPC Judges commenced on 11 May 2016. Net monthly salaries (for a full-time role) have been set at €11,000 to €12,000. Judges can act full-time or part-time, and all the posts have a six-year term. Final interviews for judicial appointments are likely at the end of 2016 and appointments will take effect in "early 2017", during the sunrise period.

All of this also assumes of course that the UK votes to remain in the EU at the forthcoming referendum on 23 June 2016. If the UK votes to leave, the UPC will likely continue without it, but in a very different form. Delay would certainly be introduced.

What will happen in the "sunrise period"?

The sunrise period is the period of provisional application of the parts of the UPC Agreement covering institutional, financial and administrative matters. It will commence when 13 countries have signed the agreed "protocol" on provisional application, at that time allowing the Court to exist as a legal entity, with ability to hold funds, be an employer, pay staff, run computer systems and so on. That will happen when those 13 countries are ready to ratify the full UPCA (nine already having done so).

During the sunrise period, and beyond, patent proprietors will be able to "opt out" of the UPC some or all of their classic EPs (classic European patents designating a least one participating country). This presents some of the most urgent UPC-related decisions for patentees to consider.

Opting out of the UPC?

A reminder: the ability to opt out only applies to classic EPs, both existing or future. Of course, the UPC will have jurisdiction over both these classic EPs and the entirely new rights, Unitary Patents (UPs). UPs will be automatically and unavoidably subject to the exclusive jurisdiction of the UPC.

Opting out of EPs will not incur any court fees and will be possible in bulk. More urgent actions include the following:

  • Proprietors should review EP portfolios to decide whether to opt out.
  • Exclusive licensees / licensees should ensure they can force a patentee to opt out if they wish.
  •  Licensors should identify where licensees have the right to bring proceedings and manage licensees' expectations.
  • Patent ownership should be reviewed to ensure the actual legal owner files the application to opt out, otherwise opt-out will be ineffective.
  • Co-owners can only opt out by agreement, and so any negotiations should be started early.

Whether companies will want to opt out will depend on their view of the UPC as a good forum for litigation. But many companies are taking the view that having a mixed portfolio of UPs, opted-in classic EPs, opted-out classic EPs and national patents would be a conservative but prudent strategy, balancing the risks and rewards of the new system. When the system becomes more predictable, the emphasis will likely shift to opted-in classic EPs and UPs.

Opt out if you want...

  • To avoid the uncertainty of a new untested court
  • To avoid the risk of potential revocation across multiple countries in one action
  • To make it harder for competitors to clear the way to launch infringing products on the European market

Do not opt out (remain "opted in" by default) if you want...

  • To put defendants in greater jeopardy – injunctions and damages will be available in the UPC covering up to 420 million people
  • Cheaper legal costs of enforcement – costs in the UPC will be lower than combined litigation in several countries
  • To keep control of strategy – if opted-out, a patentee may lose the chance to opt back into the UPC
  • To keep options open – even if (automatically) "opted in" to the UPC, patentees can still use national courts
  • To have increased leverage if competitors threaten UPC proceedings under their patents – they may want to fight fire with fire
  • To influence and test the new system – the UPC may develop in an unbalanced way if it never sees patents of certain types of company

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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