UPC: time to finalise opt-out strategies

Before the UK electorate voted in June 2016 to leave the EU, the new Unified Patent Court (UPC) and unitary patent regime had seemed on course to be operational from mid-2017. While many thought the Brexit vote threatened to derail the whole project or, at least, to introduce a significant period of delay, the UK government took many by surprise in November 2016 when it announced that it would proceed with its preparations to ratify the UPC Agreement.

In her statement, the Minister of State for IP at the time, Baroness Neville-Rolfe, said: “For as long as we are members of the EU, the UK will continue to play a full and active role. We will seek the best possible deal as we negotiate a new agreement with the European Union.

“We want that deal to reflect the kind of mature, cooperative relationship that close friends and allies enjoy. We want it to involve free trade in goods and services. We want it to give British companies the maximum freedom to trade with and operate in the single market—and let European businesses do the same in the UK.”

These words could be construed as giving positive support for the notion that the UK could participate in the new regime post-Brexit in some sort of bespoke UK/EU arrangement. This appears legally possible.

An opinion by constitutional barristers Richard Gordon QC and Tom Pascoe suggests that, as a non-EU member state, the UK could participate in the regime, provided it enters into a new international agreement with the participating EU member states, implemented by domestic legislation.

However, the opinion cautions that the agreement would have to contain sufficient safeguards to preserve EU constitutional principles, including supremacy of EU law and uniformity through preliminary references to the Court of Justice of the European Union (CJEU).

Clearly, this outcome is difficult to envisage in the current political climate. As well as Prime Minister Theresa May’s statements in her 12-point plan speech on January 17 about “taking back control of our laws and bringing an end to the jurisdiction of the European Court of Justice in Britain”, and not seeking“to hold on to bits of membership as we leave”, Neville-Rolfe stressed that “the decision to proceed with ratification should not be seen as pre-empting the UK’s objectives or position in the forthcoming negotiations with the EU”.

That said, while the government’s recent White Paper confirmed the intention to bring to an end the CJEU’s jurisdiction in the UK, it went on to say that the UK “will of course continue to honour international commitments and follow international law”. Given that the UPC Agreement is an international deal, this could be seen as providing some support to the UK remaining involved with the UPC regime post-Brexit.

Timeline

Assuming that the UK and Germany both now proceed with ratification (expected in spring 2017), the UPC preparatory committee has issued a conditional prediction that the court will be open for business in December 2017, with the first unitary patents also being granted from that date. This is based on the assumption that the provisional application phase (which will allow parts of the UPC Agreement to come into force before the court opens) will begin around May 2017. Interviews and appointments of the judges can also then finally begin.

The other important date announced is early September 2017, the likely start date of the sunrise period for standard European patents to be opted out of the UPC. This will give at least three months in which to lodge opt-outs before the court opens. Opt-out strategies must therefore be crystallised now, particularly given the potentially complex due diligence that may be needed for some portfolios.

Failure to register an opt-out before the new court commences could lead, on day one, to a pan-EU revocation action. All opted-out patents out will be published on the court’s website for searching by third parties, and there will be no requirement for a patent challenger to notify its intention to bring UPC revocation proceedings.

The opt-out regime

A unitary patent cannot be opted out of the UPC regime. European patents will also eventually be subject to the exclusive jurisdiction of the UPC, but during a period of seven years (which may later be extended by a further seven years), complex transitional rules will apply.

First, during the transitional period, European patents will be subject to the dual jurisdiction of the national courts and the UPC. The possibility of dual jurisdiction will raise potentially complex jurisdictional questions, and no doubt invite tactical opportunities.

However, also during the transitional period, the owner of a European patent (granted or applied for before the end of the transitional period) may opt that patent out of the UPC’s jurisdiction. If a European patent is not opted out, it will remain subject to the jurisdiction of the UPC (ie, the dual jurisdiction of the UPC and national courts during the transitional period).

Procedure for opting out

The opt-out applies to granted European patents and published applications. It will have effect for the life of the patent and cover all designations of the patent, together with any supplementary protection certificate (SPC) based on it. It can be registered at any point up to one month before the end of the transitional period. However, to avoid the risk of pan-EU revocation proceedings, those intending to opt patents out of the UPC should clearly do so during the sunrise period.

“FAILURE TO REGISTER AN OPT-OUT BEFORE THE NEW COURT COMMENCES COULD LEAD, ON DAY ONE, TO A PAN-EU REVOCATION ACTION.”

While there will be no fee to register opt-outs, the process will no doubt involve some administrative burden: opt-outs must be filed on a per-patent (not per-patentee) basis, although ‘basket’ (bulk) opt-outs will be available. Of more significance will be the due diligence that will be needed before lodging the opt-out.

Who can opt out?

For some patent portfolios, significant due diligence may be required in advance of the sunrise period. Where there are co-owners of a European patent, or designations (or SPCs based on the patent) are owned by separate proprietors, they must all agree to the opt-out application. The requirement is that those registered ‘or entitled to be registered’ must join in the opt-out, so it may be necessary to look beyond the register.

While exclusive and non-exclusive licensees are unable to opt a European patent out of the UPC, the licence agreement may provide for them to give consent or otherwise be involved in the decision-making process (such provisions may be more common in future). Licensees should enter into discussions with licensors at an early stage if they wish to influence the decision to opt-out.

Effect of the opt-out and limitations

A patent owner might decide to opt a European patent out of the UPC because of concerns over pan-EU revocation. If it later wishes to bring infringement proceedings in the UPC (eg, so it can obtain pan-EU relief), it can withdraw the opt-out. However, there are a number of limitations, both on opting out of the UPC and withdrawing an opt-out: