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18 May 2023FeaturesPatentsPeter Scott

Opt-outs and the UPC—now or never?

The long-anticipated launch of the Unitary Patent (UP) and associated Unified Patent Court (UPC) on June 1 marks “the biggest change in patent law in Europe for a generation”, said  Martyn Fish, partner and CEO of  HGF in the UK.

Speaking at a panel discussion organised by HGF and  Wolters Kluwer in Singapore today, May 18, Fish and panellists from the US, UK and the Netherlands explored how the new system will pan out—and what companies can do now to make sure they don’t get any nasty shocks when it launches.

The pressing issue for corporations and their counsel is whether to take advantage of the ‘opt-out’ procedure for existing European patents, which will automatically be subject to the jurisdiction of the new court unless opted out.

“The big concern is that this is the first time ever you’ll effectively be able to get a pan-European injunction,” Fish said, though he added that there are important jurisdictions—in particular the UK—which are not part of the new system and therefore not subject to this threat.

And while you can continue to opt patents out after June 1 for the next seven years (with the possibility of that period extending to 14 years), as  Jennifer Uno, partner at HGF, noted: “If there’s been litigation that has been started at the UPC it would be impossible to opt out after that’s started.”

Fish advised that while a wait-and-see approach may work for some, “you should opt out early if you are worried about a day-one revocation action.”

In practical terms, he warned that filing opt-outs has proven technically challenging, with system outages meaning lawyers are “finding it quite difficult” at times to process them.

To opt out or not?

Whether a given company should opt its patents out of the new system is a “very personal” decision specific to that company, Uno said, noting that an “across-the-board opt-out is probably very safe”, even if it has cost implications.

Indeed, said  Jonathan Osha, partner at Osha Bergman Watanabe Burton in the US, his firm’s US and Japanese clients have so far all chosen to opt out. “The biggest factor is the fear of the unknown,” he said, noting that: “it’s very difficult even for sophisticated clients to make the analysis.”

Ricardo Dijkstra, partner at Vondst in the Netherlands, agreed that many are opting out, but observed that some pharma companies are opting out the so-called “crown jewels” in their portfolio but leaving others in, because they want to help “shape the system” as it develops.

Value for money

In theory at least, the Unitary Patent provides excellent value for money—the GDP of the 17 countries it covers is hugely disproportionate to the costs of filing and maintaining protection when set alongside a patchwork of country-by-country rights. But that’s not the whole story.

Osha noted that the vast majority of his firm’s clients “cover Europe by filing in UK, France and Germany”, and that there’s generally “limited interest in the pan-European right”. Additionally, a UP limits a company’s ability to “taper” its rights through the life of the patent, for example if it hasn’t been successfully commercialised.

In this instance, companies may wish to let some registrations lapse while maintaining one or two and saving costs, but the UP, by virtue of its all-or-nothing nature, precludes that option.

Litigation

One of the most profound shocks for many under the new system will be the court procedures for the UPC, which are designed to generate fast outcomes, of as little as one year for a decision on the merits.

Dijkstra explained that “if you do want to litigate in the UPC it will be a very front-loaded procedure” and “the deadlines are really short”. In practice, this means that you need to be extremely well prepared before you file suit—including for example, by “involving your experts at the beginning of the oral hearing,” and thinking “in advance about any invalidity challenges”.

This is even more critical because the appeals procedure provides “very limited options to put forward new arguments or new facts” he said.

Fish noted that not only will the UPC procedure “front-load a lot of the cost” of litigation, “if you receive a claim you weren’t prepared for” it could put you under considerable deadline pressure, giving an advantage to the plaintiff.

Forum shopping

The panel agreed that there would likely be competition between the local court divisions in the first instance to attract cases, and, said Fish, “different approaches from different countries,” which may lead to forum shopping.

Dijkstra said that it may make sense “to go to a court where you have two national judges on the panel [and one from elsewhere],” which means Germany, France, Italy, and the Netherlands. In other local divisions there’ll only be one national judge and two from elsewhere. “Two national judges makes it a bit more predictable,” he said.

Further, because the judging panels contain a mix of legal and technical judges, teams will likely need to be larger, including lawyers and patent attorneys but also probably a lawyer from the particular locale of the case.

Other possible implications

To close, the panel discussed other potential impacts of the new system, including:

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