The Unified Patent Court (“UPC”) has stated it will open its doors on June 1, 2023. On that date, the UPC’s electronic Case Management System will permit users to start lodging cases. The European Patent Office (“EPO”) has promoted the UPC, along with the Unitary Patent, as the foundational elements of a stronger, more centralized, and more cost-effective European patent system. Unitary Patents are meant to simplify and reduce the cost of the patent application process by making it possible to get patent protection in up to 25 European Union Member States by submitting a single request to the EPO. The UPC is intended to end costly parallel litigation and increase legal certainty, by functioning as a common court deciding infringement and validity disputes for participating European Union Member states. The UPC is also meant to provide simpler, quicker, and more efficient judicial procedures. The transition to a new European patent system with a UPC and Unitary Patent will be, by design, a lengthy one—there is a seven-year transitional period that may be extended for another seven years—but there are also immediate changes that will take effect in the next several months that are important to consider.
Since 1977, the EPO has provided a single centralized process for granting patents. The EPO has not, however, provided a single centralized source for validating or protecting the rights of European Patents. Instead, patents granted by the EPO must be validated and maintained in each country in which they are to take effect and can be enforced only in national courts that each apply their own laws and procedures. Such individual country enforcement is not only impractical from a financial perspective, but it can also lead to inconsistent litigation results. The European Union Counsel and the European Parliament promoted addressing these inefficiencies by adopting two regulations to lay the foundation for Unitary Patent protection in the European Union.
On February 19, 2013, the Agreement on a Unified European Patent Court (“UPC Agreement”) was signed by most European Union Member States. The UPC Agreement paved the way for the Unitary Patent that can be enforced in all member states simultaneously through the UPC in lieu of having to separately enforce the patent through individual national courts. To enter into force, the UPC Agreement required ratification by 13 member states, including Germany, France, and Italy. Nearly ten years later, this requirement has finally been achieved, with Germany expected to deposit its instrument of ratification of the UPC Agreement in February 2023, triggering the start of the sunrise period on March 1, 2023. To date, seventeen countries, have ratified the UPC agreement: Austria, Belgium, Bulgaria, Denmark, Estonia, Finland, France, Germany, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovenia, and Sweden. (The United Kingdom’s ratification was withdrawn due to Brexit on July 20, 2020). Seven additional European Union Member States who have previously signed the UPC Agreement may choose to ratify at any time.
II. The Unitary Patent
The Unitary Patent is not intended, for now, to replace “classic” European Patents, but will provide a new option for patentees. The Unitary Patent is described as a “European Patent with a unitary effect,” meaning it will issue as a classic European Patent granted by the EPO under the rules and procedures of the European Patent Convention. Thereafter, a patentee in any of the 17 ratifying countries will have one month from publication of the patent grant to request unitary effect by initiating a post-grant procedure with the EPO. If all requirements are met, the EPO will register a Unitary Patent for the European Patent. A Unitary Patent can only be limited, transferred, or invalidated, or lapse in all of the ratifying countries together. A Unitary Patent will also be subject to the exclusive jurisdiction of the UPC. Inventors will continue to be able to apply for classic European Patents without unitary effect with the EPO, as well as national patents with national patent offices.
The primary aim of the Unitary Patent is to allow the EPO to act as a one-stop shop for the administration of Unitary Patents. Unitary Patents will be able to be obtained, maintained, and managed with a single organization, instead of with a multitude of national authorities.
The Unitary Patent System is expected to begin on June 1, 2023, the same day the UPC opens its doors. On this date, the two European Union Regulations setting up the Unitary Patent will apply, and the Rules relating to Unitary Patent Protection, which formally entrust the EPO with the administration of the Unitary Patent, will become effective. (Rules relating to Unitary Patent Protection are available on the European Patent Office’s website at https://www.epo.org/law-practice/legal-texts/official-journal/2022/04/a41.html). However, in an effort to promote the uptake of the Unitary Patent, the EPO has introduced two transitional measures to apply earlier. The first transitional measure permits certain applicants to make early requests for unitary effect starting on January 1, 2023. If the requirements for the registration of unitary effect are met, the EPO will register unitary effect once the Unitary Patent system begins on June 1, 2023. The second transitional measure, which likewise begins on January 1, 2023, permits an applicant to request a delay in the issuance of a European Patent after dispatch of a communication under Rule 71(3) EPC by the European Patent Office and before approving the text intended for grant, so that the European Patent will be eligible for Unitary Patent Protection.
III. Considerations Regarding Filing for Unitary Patent Protection
A primary benefit of the Unitary Patent that the EPO is promoting is lower costs. Such lower costs can be realized in connection with validation, renewal, and translation processes. When a classic European Patent is granted by the EPO, the patent must be validated through the national patent office in all countries in which protection is sought. The cost of validation includes validation fees that vary by national patent office as wells as fees charged by attorneys or other service providers who may be necessary to navigate the specific validation rules of that country. Under the Unitary Patent system, a single action provides protection in all participating countries. The Unitary Patent system likewise centralizes renewal for Unitary Patents—a single renewal fee, corresponding to the combined renewal fees due to Germany, France, the UK, and the Netherlands in 2015, is paid to the European Patent Office, whereas for classic European Patents, renewal fees must be paid to each national patent office. Translation requirements and fees will also be reduced. Under the Unitary Patent System, when applying for a Unitary Patent, the applicant must file only one full translation of the European Patent in English or another official language of a European Union member state. The European Patent Office estimates that during its life, a Unitary Patent will cost €3,680 less than a classic European Patent. (Details of the costs estimates are available here: https://www.epo.org/applying/european/unitary/unitary-patent/cost.html).
The benefit of lower costs, however, need to be considered holistically along with other effects of the Unitary Patent system which are discussed more below. One such effect is the Unitary Patent’s vulnerability to centralized attacks on validity—a unitary patent may be invalidated in all 17 countries through a single action, whereas a successful challenge to a classic European patent in one country has no legal effect in any other country. The uniform nature of the Unitary Patent system can also reduce patentholders’ flexibility to structure their patents differently in different countries. Under the current European patent system, patentees may be able to strategically exclude claims in certain countries, or avoid seeking registration in certain countries altogether to reduce risk of challenge by a competing national patentholder. Such flexibility will not be available under the Unitary Patent System.
IV. The Unified Patent Court
Similar to the Unitary Patent, the UPC will not replace the national courts that currently hear infringement and validity actions, which will continue to operate as they did before. Rather, for now the UPC will provide a new international jurisdiction for infringement and validity actions, not a replacement of national courts that currently hear infringement and validity actions. The UPC will also have exclusive jurisdiction for litigation relating to Unitary Patents.
V. Structure of the Unified Patent Court
The UPC has two levels, a Court of First Instance and a Court of Appeal. The Court of First Instance is composed of three divisions, the Central Division, Local Divisions, and Regional Divisions. The Central Division has its seat in Paris and a second location in Munich. It will hear invalidity and non-infringement actions. It may also hear a certain number of infringement cases. The Local Divisions has locations in Vienna, Brussels, Copenhagen, Helsinki, Paris, Dusseldorf, Hamburg, Mannheim, Munich, Milan, The Hague, Lisbon, and Ljubljana. The Local Divisions will be the primary forums for infringement actions and invalidity counterclaims. The Regional Divisions may be set up for two or more participating European Union member states. Currently, there is a Nordic Baltic Regional Division for Sweden, Estonia, Lithuania, and Latvia with its seat in Stockholm, and additional locations in Riga, Tallinn, and Vilnius. The Court of Appeal has its seat in Luxembourg and will decide appeals of decisions from the Court of First Instance.
On October 19, 2022, the UPC announced the appointment of 85 judges in two categories of appointment—legally qualified judges and technically qualified judges. The 34 legally qualified judges have been assigned to specific courts and locations, whereas the 51 technically qualified judges have been appointed to five fields of technology: biotechnology, chemistry and pharmaceutics, electricity, mechanical engineering, and physics. The Central division will have three-judge panels hear cases that are composed of two legally qualified judges from different member states and one technically qualified judge. The Local Division and Regional Divisions will also have three-judge panels hear cases, made up of three legally qualified judges, and where warranted, a fourth, technically qualified judge. Many of the technically qualified judges are in private practice and will sit as part time judges.
VI. The UPC’s Jurisdiction and the Sunrise Period
When the UPC opens its doors on June 1, 2023, European Patents, patent applications, and supplementary protection certificates will be subject to the jurisdiction of the UPC as a matter of default. This will mean that patentholders will be able enforce European Patents within ratifying Member States by bringing a single action to enforce in the UPC. It will also mean a European Patent may be invalidated in a single action lodged in the UPC. Holders of European patents, applications, and supplementary protection certificates, may, however, remove their patents from the jurisdiction of the UPC, but to ensure they are not subject to the jurisdiction of the UPC they must do so during the Sunrise period. As long as a patent is not the subject of an action in the UPC, the option to opt-out will remain available during the seven-year transitional period that begins on June 1, 2023. The transitional period may be extended an additional seven years. Patentholders must opt-out their patents using the UPC’s Case Management System after they register as representatives. After opt-out, the UPC will have no jurisdiction concerning any litigation related to this application, patent, or supplementary protection certification. However, an opt-out may be withdrawn at any time as long as the application, patent, or supplementary protection is not subject to an action before a national court. After a patentholder has withdrawn an opt-out, the patentholder may not opt-out the patent a second time. After the transition period, it will no long be possible to opt-out European patents, applications, or supplementary protection certificates.
VII. Effects of the Opt-Out Option
Certain patentholders may elect to opt-out as a defensive measure, as opting out will prevent the possibility of their patent being more easily and efficiently invalidated across countries in a single invalidity action in the UPC. Another reason to opt out is a patentee’s fear of having its patents tested in an unknown legal environment. On the other hand, cost-conscious patentholders may see a benefit from the ability to defend their patent against invalidation in a single action.
It may also be possible to opt-out and then withdraw an opt-out strategically. For instance, a patentee could maintain its patents’ opt-out status to defend against centralized invalidity actions in the UPC and then subsequently withdraw its opt-out to bring infringement actions in the UPC, where they may benefit from lower costs and more efficient procedures. However, the benefits of such a strategy is limited not only by the rule prohibiting opt-out a second time but also because an infringement action brought in the UPC subjects the patent-in-suit to invalidity counterclaims in the UPC. Furthermore, an invalidity action brought before a national court will make it impossible to opt-in again.
VIII. Likely Jurisdictional Challenges
Although the UPC opens for business in June of 2023, achieving the goal of a common court is likely years down the road, as there are likely to be numerous jurisdictional challenges that will have to be worked out. During the transitional period, European Patents will be subject to litigation in both the UPC and national courts (though not parallel proceedings). Similarly, patents that are opted-out will continue to be subject to potentially conflicting decisions in different national courts for at least seven years, and possibly up to 14 years, during the transitional period. This includes potentially conflicting invalidity decisions, infringement findings, and FRAND rates and terms. Even after the transitional period ends, there may still be alternative courts to the UPC. For instance, there continue to be members of the European Patent Organization that have not ratified and may not ratify the UPC Agreement. Spain, Poland, and Croatia are all European Union member states that have not signed the UPC Agreement. And because the United Kingdom exited the European Union, it subsequently withdrew its ratification. Switzerland and Turkey are not part of the European Union and therefore have never had the option to ratify. All six of these countries are therefore outside the UPC’s jurisdiction, even though they are members of the European Patent Convention and can be designated by a European Patent. Designated contracting states are the countries the European Patent applicant enters in the patent application as the countries in which protection is sought for the invention. Contracting states are countries that have ratified the European Patent Convention and are thus members of the European Patent Organization. If these countries remain outside of the UPC Agreement, the UPC’s rulings on validity of patents, will not automatically apply in these countries.