25 Apr 2017 in Newsletter
UPC: Factors to be Considered in Making the Decision of Opting Out
Despite the ongoing uncertainties in the ratification process of the Unified Patent Court (UPC) Agreement, the so called “sunrise period” giving the possibility of opting out of European patents/applications from the exclusive jurisdiction of the UPC before the UPC becomes operational could nevertheless start soon, i.e., in September 2017 at the earliest.
In addition to the uncertainties generated by the Brexit vote, further doubts on an imminent operation of the UPC despite the British declared intention to ratify the UPC Agreement have been cast by the UK Prime Minister’s recent decision to call snap elections in Great Britain, which are now scheduled on June 8, 2017, and could postpone the UK ratification. It may, in fact, be difficult for the UK to ratify the UPC Agreement before the elections and thus meet the December target for the UPC to operate.
However, for the time being, no planned change has been communicated by the UPC Preparatory Committee and no official communication has been made retracting or contradicting the UK declaration to ratify the UPC Agreement. Accordingly, to be on the safe side, Proprietors of European patents and Applicants of European patent applications should still consider December, 2017 as a possible target date for the entry into force and, as a consequence, September, 2017 as the earliest opt-out date, thus preserving European patents and applications from the validity challenges offered to third parties under the UPC Agreement.
Therefore, what factors should be considered in identifying the European patents/applications to be opted out? Among the factors for consideration, Proprietors/Applicants should take into account the following non-exhaustive considerations:
- The relationship between the patent and their core business. Proprietors may prefer to preserve as long as possible their “crown jewel” patents from the risks of a central revocation;
- The number and distribution of the patents covering a certain technology. The more patents there are and the more distinct their scope, the smaller the impact of a possible revocation of a non-opted out patent;
- The territorial protection of an applicant’s patent portfolio. If it is used to validate European patents in a few countries, a Proprietor may be more inclined to opt out because of a more limited benefit offered by the UPC;
- The geographic distribution of potential infringers in Europe, especially when a patent portfolio covers many European countries participating to the UPC, and also in case of patent applications, for which the choice of territorial coverage is still open. If a Proprietor opts out, it needs to lodge infringement proceedings in several national jurisdictions to stop the alleged infringers, and it will still be unable to stop any alleged infringers operating outside those jurisdictions;
- The type of technology underlying the patents/applications. In some technological fields, the cost of litigating in several national jurisdictions could still be acceptable when compared to the values in dispute;
- The need of having a good balance between opted-out and non-opted-out patents. In the long term, after an initial period of seven years which might be extended up to 14 years at the most, all European patents/applications will fall under the exclusive jurisdiction of the UPC. Accordingly, if a Proprietor does not systematically opt out all its patents, it may gather experience and get acquainted with the UPC system. Also, since withdrawal of opting out is forbidden whenever national revocation proceedings are instituted against opted-out patents/applications, a systematic opting out might result in giving alleged infringers the opportunity to lock opt-out patents out of the UPC system; and
- The expected benefits of a centralized litigation system: for example, under the UPC, judges are bound to a single law shared by all participating countries, a first-instance decision must be issued within 14 months from the lodging of the action, and the UPC judges are expected to be specialist judges, which is not always the case in many national jurisdictions. Also, although it is still unknown how the practice will impact the determination thereof, injunctions, damages and compensation are available under the UPC Agreement.
The review of a Proprietor’s patent portfolio with the aim of identifying the European patents/applications to be opted out is an exercise requiring careful consideration. Under the present circumstances, this exercise should be completed before September 2017.