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Out-Law Analysis | 02 Feb 2023 | 3:26 pm | 6 min. read
All businesses – even those that do not now or have not ever needed to get involved in patent litigation – need to prepare for the Unified Patent Court (UPC) becoming operational.
The UPC, currently expected to become operational on 1 June 2023, is relevant to all businesses with patents in Europe, and those without patents who wish to enter new markets. It will radically change patent enforcement and defensive strategies, and will provide relief across a large territory. UPC decisions, including patent revocation, and relief including damages and injunctions, will have an effect across all participating member states in respect of a unitary patent. For a classic European patent that has not been opted out of the UPC, relief granted by the UPC would apply across all participating member states where the patent has been validated.
Companies are advised to review patent portfolios and patent filing strategies, audit commercial agreements to understand the impact of the UPC on those agreements, and adapt European patent commercialisation, enforcement and defensive strategies accordingly.
Pinsent Masons has developed a checklist to assist business preparations. The points included in the checklist are expanded on in the sections below.
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 involve a review of European and national patent registers to ensure that they are up-to-date. It is a step which can often be overlooked.
For the purpose of opting classic European patents out of the jurisdiction of the UPC, it is critical that there is clarity on the ownership of each patent. This is because an opt-out application must be signed by all proprietors of a patent for all European Patent Convention (EPC) member states, not just those countries that are participating in the UPC.
If an opt-out application is made incorrectly, the opt-out would be invalid. However, a patentee is only likely to discover this if UPC proceedings were issued against them, in which case the patent would be locked into being litigated before the UPC, which may not be desirable for the patent holder.
In many, but not all, cases, checks to establish ownership will be straightforward but can take time, and therefore businesses are advised to commence them as soon as possible.
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.
This is a challenging but essential aspect of a business’ strategic planning, and may be critical to future successes. Existing European patents and pending European patent applications will automatically fall within the jurisdiction of the UPC, unless positive steps are taken to opt them out. Therefore, when patent holders have all relevant information concerning their patent portfolios, they should consider whether to opt some or all of their existing classic European patents out of the UPC. Of course, one option is to do nothing, leaving all such patents in the UPC system. However, this strategy is not without risk.
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 each 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, and depends on the factual scenario in question. In the early days, there may be an element of unpredictability, which may be risky with valuable patents. On the other hand, including some patents in the system may help shape the case law of the court.
The choice of whether to opt a classic European patent out of the UPC should ideally be made during the ‘sunrise period’, which is planned to begin on 1 March 2023. If the patentee waits until the UPC has come into existence, opting out may no longer be available – this is because if a competitor has already commenced proceedings in the UPC, the patentee could be locked 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 a permanent action as opting out can only be done once.
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 strategic enforcement and forum choices.
Businesses should also consider their options for pending and future European patent applications, and whether they should be converted to unitary patents, which are subject to the exclusive jurisdiction of the UPC.
Patent owners should audit their licence agreements and other material agreements, such as agreements for R&D, collaboration, joint ventures, etc. The audit should examine IP rights under those agreements with a view to understanding the impact of the UPC on the operation of those agreements – for example, who controls patent prosecution and enforcement for 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.
Parties should agree 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. 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.
If the agreement is entirely silent on the subject 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 that has a large market presence in one or more countries in Europe, this may come as a surprise.
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 scope to litigate the patents, but 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. Licensors and licensees will want clarity and a degree of control over such enforcement decisions.
Both patentees and third parties should turn an eye to horizon scanning with a view to identifying future plans by competitors. Opt-outs will be published by the UPC Registry, which will be 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 and national patent applications may also be informative, and may provide an insight into patenting strategies and potential product launches.
The UPC provides an additional forum for European patent litigation. With it comes new strategic opportunities and challenges for businesses that must be navigated.
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 – in other words, there is a choice as to whether to bring proceedings in the UPC or national courts – during the transitional period for the UPC, which will apply for at least an initial seven years and may be extended to 14 years.
It is also relevant in terms of the choice of UPC division within which proceedings should be commenced.
Further, 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.
Pinsent Masons’ UPC preparations checklist can assist businesses in all sectors over the actions they will need to proactively take steps to ensure that they are ready.
UK government plans to revamp holiday pay calculation for part-year workers