Opting patents out of the UPC

The UPC will have exclusive jurisdiction for disputes relating to infringement and validity of new unitary patents (UPs). It will also have exclusive jurisdiction for classic European patents (EPs) unless they have been ‘opted out’ of the new court system. Opt-out is therefore a means by which patent holders can remove their European patents from the jurisdiction of the UPC. 

There are advantages and disadvantages to patents being subject to the UPC.

Relief granted by the UPC will have effect across all participating member states in respect of a UP. For a classic EP, relief granted by the UPC would apply across all UPC member states where the patent has been validated – EPs 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. For UPs and EPs, therefore, it might be beneficial to patent holders to be able to benefit from preliminary injunctions or final injunctions and damages awards taking effect over a large territory.

However, a UP may be centrally revoked with a single decision of the UPC. EPs exposed to the UPC’s jurisdiction could similarly be revoked in respect of their application in UPC-participating states with a single decision of the UPC.

Businesses will therefore need to make positive strategic decisions as to whether to opt-out any of their EPs. These will include considerations of, for example, the value and importance of a particular patent and any income streams, product launch plans and litigation strategies. 

Opting-out a European patent

A classic EP or published EP application may be opted out of the jurisdiction of the UPC. Any application to opt-out will extend to any supplementary protection certificate (SPC) based on the underlying European patent. UPs cannot be opted out from the jurisdiction of the UPC.

Steps to opt-out a classic EP can be taken as soon as the ‘sunrise period’ for the new UPC system commences – i.e. three months before the UPC begins operating – and up to one month before the end of the transition period which will commence from the date the UPC comes into force. The transition period will last at least seven years but can potentially be extended to 14 years. If opted out, the UPC will have no jurisdiction and the classic EP would be subject to the exclusive jurisdiction of the national courts. 

As the UPC is expected to come into force in the first quarter of 2023, the sunrise period may commence in late 2022 or early 2023.

An important strategic consideration in assessing the value of opt-out is the fact that disputes concerning classic EPs may be litigated in either the UPC or the national courts of the participating member states during the transitional period, unless the EP is opted out. After the transitional period, this dual jurisdiction will no longer apply – all classic EPs which designate participating member states will become subject to the exclusive competence of the UPC unless they were opted out during the transitional period. 

If the patent holder waits until the UPC has come into existence, opt-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. 

Patent owners will be able to withdraw their decision to opt-out during the transitional period. The effect of withdrawal will be that the dual jurisdiction of the UPC and the national courts is restored. An application to withdraw an opt-out will also apply to any SPC based on the EP. However, withdrawal from opt-out is not available if an action in respect of the EP or relevant SPC has been commenced in a national court. The decision to withdraw an opt-out is permanent – a patent which has been the subject of an application to withdraw cannot be the subject of a further application to opt-out.

Opt-out process

A patent owner or applicant that wishes to opt-out can lodge an application with the registry. Licensees will not be able to make an application for opt-out. This right is exclusively reserved for the patent owner(s) unless they are contractually obliged to consult the licensee and give due consideration to their preference.

While there are no costs associated with opt-out, there are certain administrative requirements.

An opt-out application must be signed by all, not just registered, owners of a patent for all European Patent Convention (EPC) member states for which the patent has been granted or the application designated. This is important: if it is not done properly the opt-out would be invalid. A patent holder would only discover this if UPC proceedings were issued against them, and in this event they would be locked into the jurisdiction of the UPC. Due diligence to ensure that all patent owners for all member states sign the opt-out application will therefore be required to ensure that opt-outs are correct and not vulnerable to challenge. Similarly, applications to withdraw an opt-out must also be made by all owners for all EPC member states for which the patent has been granted or the application designated. Conversations with co-owners of a patent should therefore begin at an early stage to ensure that opt-out strategies are aligned.

The opt-out process can be actioned using the UPC case management system (CMS). Once logged in, the database can be used to search for patents using their number. Once the correct patent has been identified, the system will request confirmation of authority to opt the patent out of the UPC. In the case of co-owners, authorisation will require relevant documentation confirming agreement between the co-owners and vesting authority in the person submitting the application.

As the UPC will not conduct identity checks on the owners listed in an opt-out application, or an application to withdraw an opt-out, there has been concern that there could be illegitimate as well as mistaken opt-outs or withdrawals, which might expose a patent to attack either out of or in the UPC. Recent amendments to the UPC Rules of Procedure have introduced a mechanism to address this. The amendments allow an owner to apply to remove an unauthorised opt-out or withdrawal of an opt-out. They must give reasons and, if accepted by the registrar, the unauthorised opt-out or withdrawal will be deleted. There is also a mechanism to seek a review of the decision by the president of the UPC Court of Appeal.

An opt-out will take effect once the opt-out is on the register, which is a public document. Once notified and registered, an opt-out takes effect for the EP for all participating member states where the patent has been validated. 

By default, an opt-out will remain in force for the lifetime of an EP, unless the proprietor withdraws it.

Before the UPC system becomes operational, patent owners should conduct an audit of their patent portfolios and make strategic decisions on whether to opt some, or all, of their EPs, out of the system, based on business needs. Businesses should also conduct audits of their commercial agreements to ensure that they are UPC and opt-out compliant.