Businesses that have opted European patents out of being litigated before the Unified Patent Court (UPC) are only blocked from withdrawing that opt-out if national litigation concerning those patents was initiated after the UPC opened, not before, the UPC Court of Appeal has ruled.
Patent experts at Pinsent Masons said the decision, which reverses an earlier ruling by the Helsinki local division of the UPC, will provide new litigation options for some patent rights holders and could pave the way for an increase in UPC litigations in future.
The UPC became operational on 1 June 2023. It has exclusive jurisdiction for disputes relating to the infringement and validity of unitary patents as well as classic European patents that have not been ‘opted out’ of the UPC’s jurisdiction. If opted out, the European patent is subject to the exclusive jurisdiction of national courts. Rights holders were first given the chance to opt out European patents in the three months immediately before the UPC became operational, in the so-called ‘sunrise’ period. The right to opt-out continues to apply during the UPC’s transitional period, which is currently due to expire on 31 May 2030.
The provisions which govern opt-outs are found in Article 83 of the UPC Agreement (UPCA) and Rule 5 of the UPC Rules of Procedure (RoP). Article 83(4) of the UPCA allows patent holders to withdraw their decision to opt-out during the transitional period. However, withdrawal from opt-out is not available if an action in respect of the European patent or relevant supplementary protection certificate (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.
For classic European patents that have not been opted out, there will be a parallel jurisdiction in the transitional period, so rights holders or those challenging the validity of those patents can decide whether to bring proceedings in the national courts or the UPC.
The question of what is meant by the wording ‘unless an action has already been brought before a national court’ contained in Article 83(4) UPCA came before the Helsinki local division of the UPC in a dispute which is part of ongoing multi-jurisdictional litigation between Swiss company AIM Sport Development AG (AIM) and various Supponor entities (collectively, Supponor) regarding virtual advertising billboards in sports stadiums.
AIM owns a European patent which claims a method for digitally overlaying images onto advertising billboards in sports stadiums, so that advertisements displayed on electronic billboards in the stadium can be overlaid and replaced by different advertisements during TV broadcasts.
AIM filed an opt-out for the patent during the sunrise period, on 12 May 2023, but subsequently filed an application to withdraw the opt-out on 5 July 2023. On the same day, it filed a UPC infringement action as well as an application for a preliminary injunction (PI) against Supponor.
Supponor filed objections to both the infringement action and PI application on the basis that the UPC lacked competence to hear either action due to the ineffective withdrawal of the opt-out. It argued that, owing to pending national proceedings in Germany relating to the German part of same European patent, AIM was precluded from withdrawing its opt-out under Article 83(4) UPCA. AIM argued that Article 83(4) UPCA cannot apply to national actions filed prior to the entry into force of the UPCA on 1 June 2023.
The Helsinki local division sided with Supponor on the issue. It found that the attempt to withdraw the opt-out was ineffective and that the UPC lacks competence to hear the infringement and PI actions brought by AIM. AIM appealed to the UPC Court of Appeal. The meaning of ‘unless an action has already been brought before a national court’ was considered in detail on appeal.
AIM argued that Article 83 should be read within its context, and in accordance with the general rules of interpretation of international treaties as set out in the Vienna Convention on the Law of Treaties, highlighting among other things how Article 83 features in the section of the UPCA that deals with the UPC’s transitional period, and arguing that this therefore meant ‘actions’ raised prior to the transitional period starting was outside the scope of the wording.
Supponor, in contrast, argued that the wording should be interpreted in line with the literal wording, context and object of Article 83 and in line with the guidance on opt-out withdrawals set out in Rule 5.8 of the RoP. It argued there was no temporal limitation to the word “action” in Article 83(4) specifically, with the effect of that being the bar on withdrawing an opt-out should apply irrespective of when the national action was commenced.
The UPC Court of Appeal agreed with AIM that the Vienna Convention applied and considered that the word ‘action’ does not just cover infringement and revocation actions, but all actions mentioned in Article 32 of the UPCA, which includes actions for provisional measures and declarations of non-infringement, amongst others, over which the UPC has jurisdiction.
Regarding the Article 83(4) wording specifically, the Court of Appeal concluded that the phrase ‘unless an action has already been brought before a national court’ refers only to actions brought during the transitional period – i.e. after the UPC became operational on 1 June 2023. It considered that national litigation brought before the transitional period – i.e. before 1 June 2023 – is unaffected by the UPC transitional regime, and, likewise, there is no reason why such earlier national litigation should affect the operation of the UPC’s transitional regime.
The appeal court agreed with AIM that the possibility of filing and then withdrawing an opt-out was designed to give patent rights holders the opportunity to gain more confidence and familiarity with the functioning of the new UPC before subjecting their patents to the new system.
The decision has therefore clarified that, for the purposes of Article 83 UPCA, “action” means an action brought before a national court during the transitional regime.
Sarah Johnson, patent expert at Pinsent Masons, said: “This potentially opens the door for an increase in UPC actions, because patentees that have filed an opt-out in relation to a particular patent which is the subject of national proceedings commenced prior to the UPC coming into effect on 1 June 2023 may withdraw the opt-out under Article 83(4) UPCA, and enforce the patent in the UPC, even where the prior national action is still pending.”
“However, if national proceedings were commenced after the opt-out was registered and after the UPC came into being, then the patentee cannot withdraw their opt-out and must continue to enforce in the national courts,” she said.
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