How business can prepare for the Unified Patent Court

The anticipated introduction of the unitary patent (UP) and Unified Patent Court (UPC), currently expected to take place in early 2023, will reshape the European patent landscape.

The UPC will offer transformational opportunities for businesses with operations in Europe, regardless of sector. It is important for businesses to understand the impact of this new system and to adapt European patent commercialisation and litigation strategies accordingly.

What can businesses do now to prepare for the UPC?

The UPC will radically change how patents are enforced. UPC decisions, including patent revocation, and relief including damages and injunctions, will have an effect across all participating member states in respect of a UP.

For a classic European patent that has not been opted out of the UPC, relief granted by the UPC would apply across all UPC member states where the patent has been validated (however, note that European patents may have effect in territories beyond the UPC member states, such as the UK, Spain, Poland and Croatia, in which case separate national litigation would be necessary to obtain relief in those jurisdictions).

Therefore any business with patents in its armoury of intellectual property assets—even those that do not now or have not ever needed to get involved in patent litigation—need to prepare.

Patent portfolios, ownership and opt-out

Patent portfolio audit
Patentees should proactively review their European patent portfolios and consider their plan for maximising their value.

This will include evaluating who owns each asset, and a review of European and National Patent Registers to ensure that they are up to date, a step which can be overlooked.

For the purpose of opting classic European patents out of the jurisdiction of the UPC, it is critical that the ownership of each patent is clear. This is because an opt-out application must be signed by all (not just registered) proprietors of a patent for all EPC member states.

If done incorrectly, the opt-out would be invalid, but a patentee would only discover this if UPC proceedings were issued against them, which would pin them into the UPC.

Checks to establish ownership can take time, and therefore businesses are advised to commence them as soon as possible.

Co-owned patents
As part of the audit, co-owned patents should be identified. Conversations with co-owners about the UPC and opt-out strategy should be had as soon as possible because consent is required from all co-owners for an opt-out to be valid.

Opt-out strategies
Having armed themselves fully with all relevant information concerning their patent portfolios, patent holders should consider whether to opt some or all of their existing classic European patents out of the UPC.

There are many factors which impact these decisions, such as the scope of protection and strength of the patent, the type and value of the product, and market share, amongst other things—the weight of which may differ depending on the patent and scenario in question.

Consideration should be given as to whether valuable patents and related income streams should be subject to an untested system. In the early days, there may be an element of unpredictability, which may be risky with valuable patents.

On the other hand, including some, perhaps less valuable, patents in the system may help shape the jurisprudence.

The choice of whether to opt a classic European patent out of the UPC should ideally be made during the so-called ‘sunrise period’, which will begin three months before the UPC opens its doors—most likely towards the end of 2022 or early 2023.

If the patentee waits until the UPC has come into existence, opting out may no longer be available; if a competitor has already commenced proceedings in the UPC, the patentee could be ‘pinned’ into the UPC and be forced to defend the patent there.

Businesses that opt out can later opt their patents back into the UPC’s jurisdiction if the patent has not been subject to national court proceedings in the interim. However, withdrawing an opt-out is permanent—opting out can only be done once.

Divisional patent filing strategies
Where there is a pending European patent application, a business may decide to file divisional applications. This would mean that within a single patent family, there are related rights both in and outside the UPC system, which provides additional enforcement and forum choices.

Future patenting strategies
Businesses should also consider their options for pending and future European patent applications, and whether they should be converted to UPs, which are subject to the exclusive jurisdiction of the UPC.

Commercial agreements

Commercial agreement audit
Patent owners should audit their IP licence agreements and other material IP-focused agreements (such as agreements for R&D, collaboration, joint ventures, etc.) which to understand the impact of the UPC on the operation of the IP provisions in those agreements (for example, who controls patent prosecution and enforcement of European patents).

Parties to such agreements are advised to initiate early conversations with their counterparts so that the parties can align on strategies for the European patents early on and, if necessary, update the agreements accordingly.

Opt-out
Opt-out provisions are important in IP agreements, particularly in exclusive licences where the decision of one party can materially impact the rights of the other. Parties should therefore agree on a mechanism for deciding whether to opt-out any patents which are the subject of the agreement, and how to deal with opt-out withdrawals.

If the agreement is entirely silent on the subject of opt-out, including provisions regarding control of prosecution and enforcement rights, then the proprietor or applicant of the European patent or patent application, or their authorised representative, would, by default, have the right to opt-out—not the exclusive licensee. For an exclusive licensee who has a large market presence in one or more countries in Europe, this may come as a surprise.

Enforcement
Consideration should be given as to who should decide to enforce a patent, and who would have control of any litigation. In an exclusive licence, both the proprietor or applicant and the exclusive licensee would have standing to litigate the patents absent any language to the contrary, but they may have very different views on where an action should be brought.

This could have important consequences—if European patents are subject to the jurisdiction of the UPC, one decision by a court in the UPC system could invalidate the European patents across all the states participating in the new UPC regime in one go. As such, licensors and licensees will want clarity and a degree of control over such enforcement decisions.

Competitor activities

Monitor competitor activities
Opt-outs will be published by the UPC Registry, which is publicly accessible. Monitoring opt-outs filed by competitors may therefore give an indication of which patents are considered to be business-critical and may give an insight into competitor strategies.

Similarly, monitoring the filing of divisional applications may also be informative, and may provide an insight into patenting strategies and potential product launches.

Litigation strategy

From a horizon-scanning perspective, it is vital that corporate offensive and defensive patent litigation strategies are well thought out in advance of the UPC becoming operational. The UPC provides an additional forum for European patent litigation, with new strategic opportunities and challenges that must be navigated.

Factors such as the location of allegedly infringing acts and manufacturing, market share, speed of litigation, and judicial experience all feed into litigation strategy and should be evaluated at an early stage.

When the UPC becomes operational, the court structure and locations of the various divisions will also be relevant in terms of whether proceedings should be brought in the UPC or national courts.

This is important because classic European patents which have not been opted out are subject to a dual jurisdiction—ie. a choice as to whether to bring proceedings in the UPC or national courts—during the minimum seven-year transitional period.

It is also relevant to the choice of UPC division in which proceedings should be commenced.

Given the renewed momentum for the UPC to commence operations, businesses in all sectors will need to proactively take steps to ensure that they are ready.