This article was first published on Lexis®PSL, February 2017.
IP & IT analysis: It was recently announced that the Unified Patent Court (UPC) will open in December 2017. Alan Johnson, partner at Bristows, provides an update on the UPC plans in light of this latest announcement.
Unified Patent Court Agreement to enter into force in December 2017, LNB News 16/01/2017 175
The UPC Preparatory Committee has said the Provisional Application Phase (PAP) is likely to start towards the end of spring 2017. The Agreement on the Unified Patent Court (UPCA) is expected to enter into force and the court will become operational in December 2017. The PAP will mean the organisation will be established, including the start of operation of the UPC's formal governing bodies. The PAP will also mean that judicial interviews can begin and appointments confirmed.
The UPC Preparatory Committee announced on 16 January that the UPC will open in December 2017. Could that be affected by the Supreme Court decision of 24 January?
The UPC timetable makes no assumptions about the Brexit process, and since UK ratification should be completed by April 2017—a full two years before Brexit is likely actually to happen—there is no problem.
Leaving that aside, is there any other reason the timetable might change?
It would probably be foolish to say ‘no chance’, but the timetable looks fairly realistic, and slippage of more than a month or two seems very unlikely. Looking at what needs to happen, it is a combination of legal and practical steps.
Legally, the UK and Germany both need to complete ratification. The timetable expected would see these steps finished in both countries by April 2017, albeit that Germany would hold back from depositing its instrument of ratification until about August 2017, since this last step would trigger the four-month countdown to the start date. It is difficult to see why either the UK or Germany would not now ratify. The UK has committed itself, and Germany is picking up where it left off given the UK’s decision.
Practically, the most time consuming step will be to interview and appoint judges. That will need upward of six months, but it is expected that the ‘Provisional Application Phase’ (when this work can be started) will commence in mid-May 2017. There could also potentially be some IT issues to resolve, but it is to be hoped that this will not be a problem.
The Preparatory Committee also announced that the ‘sunrise period’ would commence in early September 2017. Can you explain what that is?
One of the more controversial aspects of the UPC is that it has a major retrospective effect. All existing European patents (and their supplementary protection certificate (SPC)) come under its umbrella unless positively opted out. So on day one of the new court opening, a patentee could find its most valuable patent the subject of central revocation proceedings. Equally, it would be compelled to use the UPC but could experience teething problems making it preferable in some eyes to have maintained the use of national systems. The answer to this was transitional provisions, which are in article 83 of the UPCA.
One aspect of those transitional provisions is the ability to opt patents out of the UPC’s jurisdiction for the life of the patent (and SPC). It was recognised, however, that if many patentees opted out, they would likely do so on day one of the court to avoid the problem of revocation actions being started on day one. This in turn would create pressure on the IT system. Also, article 83 says that, to be effective, the opt out has to be on the UPC register and, depending on how the system worked, and what checks were made by the UPC as part of the process, there could be delays in registering opt outs if many thousands of opt out requests were made all at once. For that reason, this ‘sunrise period’ was conceived whereby the practical aspects of registering the opt outs could be completed before the court opened. Hence, the announcement that the period will begin in early September confirms that there will be a period of several weeks pre-opening for users to opt their patents out.
So patentees will need to consider their opt out strategies. What else should they be doing in preparation?
There are three main things to consider pre-opening. One is the opt out strategy, and to complete that topic, they will need to bear in mind that the rules mandate that only proprietors, not licensees (not even exclusive) can opt out. Hence they will need to make their views known to proprietors. Licensors and licensees alike will have to look at agreements to determine existing rights and obligations and have discussions. (And remember also that future licence agreements should cover the new opt out possibility.) So there is a good amount of practical work to be done. Similarly, the rules need careful attention. They include all proprietors of all parts of European Patents (EPs) validated in contracting states (as well as SPC holders). Who is on the European Patent Office (EPO) and national registers is not the whole story. Due diligence in naming all patent proprietors and SPC holders will be essential to ensure the opt out is effective. Again, time is needed.
The second major part of preparations is to consider future patenting strategy. The UPC is, of course, just one part of the new system—unitary patents will also become available. Importantly, they can issue from any EP application coming to grant after the new system goes live (except for very old applications made before March 2007). Hence, patentees need to decide whether to take advantage of unitary protection or not. This will largely be a budgetary matter, but there are other considerations too, and the long-term and short-term budgetary considerations may often point to different decisions.
Finally, there is the more general point applicable to everyone, not just patent owners, but anyone doing business in Europe. Suddenly it will be possible to sue, and be sued, on a pan-European basis. Notwithstanding the opt out option, the UPC will in the long-term replace most national patent litigation in Europe, and the transition to this position may be more rapid than some expect. Everyone therefore needs to prepare for this in a general sense. However, there is another point. In some cases, this will mean not only the replacement of national litigation with centralised litigation, but also there will be some cases where it will be economically viable to sue when this was not otherwise the case (even in the major markets). And, of course, the inevitable uncertainty of a new court with new untested rules will make predictions of outcomes more speculative. Hence one can expect also an increase in litigation in Europe, notably non-practising entity (NPE) litigation and to state the obvious—one can opt out of the UPC as claimant, but not as a defendant.