Regardless of the June 23, 2016 vote on Brexit, all owners of European patents, and all applicants seeking patents in Europe, will have both new options, and a new set of important decisions to make.  Most commentators anticipate that the Unitary Patents (UPs) and the Unified Patent Court (UPC) will come into effect and patentees will still need to make decisions about their granted EPs and applications.   Owners of European patents (EPs) likely will need to make decisions about their portfolios by the end of 2016.  The following is based on materials provided by our colleagues at HGF, and with thanks especially to Andy Camenisch, acamenisch@hgf.com.

The UPC opt-out option

Current predictions are that by Q2 2017 patentees will be able to opt for a UP, a single patent covering up to 26 participating member states of the EU. The UPC, a central court that will for patent litigation in the EU should also open at or about the same time. It is time now to review and prepare existing patent portfolios anticipating these changes, as there may be as little as 6 months’ notice of the UPC going live.

At this early stage, the initial review and decisions will be focused on whether to opt patents out of the jurisdiction of the UPC.

The opt-out

When the UPC opens for business, unless they are opted-out, granted EPs will be subject to the jurisdiction of the UPC as well as the relevant national courts. This will mean that a patent holder will be able to enforce EPs in a single action across all Member States that have ratified the UPC and for which the patent is validated.

It will also mean that an EP can be revoked in a single action brought before the UPC’s Central Division. In contrast to the current position where an EP is a bundle of national rights, each of which must be revoked in separate actions in the national courts. The Rules of Procedure allow for a sunrise period in order for patentees to opt-out their existing EPs from the UPCs jurisdiction before the court opens its doors.  For a transitional period of 7 years there will be an opt-out to take existing, pending and future EPs out of the jurisdiction of UPC for the lifetime of those patents. The opt-out allows patentees to keep any litigation before the relevant national court.

Factors for consideration

The opt-out decision will depend on many factors, and will not be appropriate across all patents in a portfolio of any size.  In a given case there may be advantages to keeping some patents within the jurisdiction of the UPC, or to strategize for each patent.  The Rules and Procedures for the UPC system are still evolving, resulting in patentees considering a nuanced approach to the opt-out (or remaining subject to the UPC’s jurisdiction) for their patent portfolio.

Pros regarding UPC’s jurisdiction (i.e. not opting out)

• potential for a pan-EU injunction throughout the participating Member States in a single infringement action before the UPC.
• 12 month target timeline for resolution of first instance proceedings within the UPC is significantly better than proceedings before many other national Courts (and equivalent to English, Dutch and German Courts).
• after the transitional period of 7 years the opt-out closes, there could be advantages in waiting for the new system to fully develop
• there may be no choice, licensees may not have control over whether to opt-out

Also, in the beginning, it is anticipated that not all of the 26 Member States who have signed the UPC Agreement will have ratified the Agreement so validations of EPs in those countries will be treated in the same way as they are under the current system, leading to multiple jurisdictional enforcement combinations.

Cons for exercising the opt-out

• a single action before the UPC’s Central Division could lead to the revocation of the patent, in all Member States. If a patentee might opted-out the “crown jewels” of their patent portfolio, patents would have to be revoked in the national courts separately.
• if EPs are opted-out, only the national courts have jurisdiction; you maintain the status quo.
• the UPC will be an unknown and untested forum, with about the quality and consistency of the judgments across all Local, Regional and Central Divisions.
• there is no fee for opting-out your patents but there are likely to be administration costs in terms of considering strategy and ensuring that the opt-out is validly implemented across a portfolio.
• assuming no ongoing national litigation, an opt-out can be withdrawn at a future date (although a subsequent second opt-out will not be possible).

Actions to take now

Portfolios of EP patents should be reviewed, considering the following issues:

• the strength of the relevant patents;
• the value of the technology covered by each patent or patent family to the business in the relevant jurisdiction;
• how your various patents interact to protect your commercial products;
• the likelihood in your industry that a third party will attack the validity of your patents;
• for patents that are jointly owned or licensed into or out of the business – who has the right to exercise the opt-out of the EPs (and any associated SPC)?

Ideally these reviews and decisions should be done before the launch of the UPC to allow time to execute any opt-out during the sunrise period.

Not also that if the decision is made to opt-out, the correct party or parties must exercise that opt-out to ensure that it is validly executed. Failure to validly opt-out creates risk that competitors might seek to revoke the patent centrally at the UPC.