UPC Rules of Procedure – the opt out regime


The Preparatory Committee, in the Q&A section of its website, states that “applicants or proprietors of one single application for a European patent or one single European patent (emphasis added) will have to act in common to exercise the opt-out.” In this article we look at whether this is a correct interpretation of the UPC Agreement and the draft UPC Rules of Procedure. If it is correct, then to a significant extent this would re-designate existing European patents as a unitary patent for enforcement purposes, which would not only be a very controversial interpretation of the UPC transitional provisions, but for proprietors of some European patents would be a likely cause of significant disputes as to whether or not to opt out.

Under the present system – and it is, of course, the one to which patentees signed up when they applied for their patents – European patents are “unitary” in the prosecution and opposition stages, but purely national for enforcement purposes. Further, for revocation/validity purposes, Article 22(4) of the Brussels 1 Regulation (44/2001) is clear that validity is a purely national issue. Hence, the applicant has to prosecute the patent using one set of advisers, and if the patent is opposed, must still fight the opposition with a single set of advisers (on the record at least). However, the patentee who obtains, on grant, his “bundle” of patents may then assign or license its patents as it sees fit, and these assignees or licensees are new rights owners who can enforce nationally in different ways according to national systems. Whilst it is undoubtedly the norm that rights in Europe are assigned or licensed as a block, in some cases patentees decide to retain ownership of the EP designated in their home state, and sell off (or license exclusively) the rest of the bundle. Universities and other individuals or organisations not intending to practise their patents may sell designations individually to the highest bidder. There may be different fields of use which are separately licensed, even within individual territories. All of these points were known and understood by the original patentee and those who license or buy from them. All expected, and are entitled to be able to continue to expect, a litigation system to which they “signed up”.

Of course, since it was first mooted that the UPC regime would apply to existing European patents we have known that there would be some shifting of these goal posts. But this was always to be mitigated by the possibility to opt out. However, the Preparatory Committee statement highlights a serious issue applicable to the sorts of cases identified above, where the “bundle” is not owned by one entity. Let us take an example so as to identify some of the problems this causes.

Suppose a patentee is based in the UK. It is an SME and has developed a new product protected by a bundle of European patents covering the UK, Germany, France and Italy. Let us suppose it has decided it cannot service the market outside the UK, and so has sold off the other designations and kept only the UK designation. It has assigned all the other designations to a company based in Italy. The UK SME rather likes the new improved Patents County Court regime. Faced, therefore, with the UPC regime, it decides it wants to opt out its patent. As envisaged by the Preparatory Committee’s Q&As, it may apply to the EPO to opt out in the “sunrise” period just before the UPC comes into existence. Therefore, it will try to lodge its opt out for its EP(UK) and, although unhappy about having to pay a fee, it does so.  According to our understanding of the regime as now proposed, one of two things may then happen.

  • First, the EPO may point out that it cannot opt out only the EP(UK).  It may say its system does not allow this and refuse.
  • Second, the EPO may take the money and opt out all the designations, even though the patentee did not ask for this.

What then?

In the case of the first possibility, the patentee has no obvious means of appealing at the EPO – certainly not in time to sort this out during the sunrise period – and it cannot appeal to the UPC because that will not then exist. It may approach the owner of the other designations and try to obtain their agreement to the opt out. That second (Italian) owner may refuse: it may rather like the idea of being able to enforce its bundle of EPs in a single court. What then? Is the UK SME forced to accept that its patent may be the subject of a central revocation attack in the UPC, even though it wants to opt out?
In the case of the second possibility, the Italian owner may object strongly to the EPO’s act and may withdraw the opt out, in which case the UK owner can (according to the Rules) never opt out again. Or it may sue the original patentee for having exercised, albeit inadvertently, control over its patents.
Either way, someone is going to be deeply unhappy and in dispute with the EPO, the UPC Registry and/or the other party. Is this what those who drafted the opt out regime of Article 83(3) really intended? It is true that they also drafted Article 34 which says that decisions of the UPC have effect in all contracting states for which the European patent has effect – but that surely must mean the patents owned by the relevant proprietor and not those of uninvolved third parties.

The proper answer is, we believe, that individual proprietors must have the choice of opting out their rights on an individual basis. Looking at Rule 5 of the 15thdraft Rules of Procedure and the note to it one sees that the note states that the opt out covers “all designations covered by the proprietor(s) in question (emphasis added)”. This suggests that the Rules Committee intended proprietors to make decisions independently. Indeed, at a conference on the Rules in The Hague on 1 July, the Chairman of the Committee confirmed that intention. The Chairman of the Preparatory Committee (also speaking at the conference) said that the statement on the website would be reviewed. Hopefully this will result in a clarification of the point. However, it highlights how misunderstandings can arise, and how it is important that the Rules are made very clear on this issue so that when applicants are applying to opt out their patents, they are permitted to do so, and do not find themselves in a situation where:

  • entities who may be wholly unconnected are forced to come to a common decision on opting in or out; or
  • if they cannot agree, they must somehow sort out the dispute by litigation; and
  • if the EPO/UPC Registry will not accept an individual opt out, and there is a dispute between the owner of one designation and a third party which is fought in the UPC, that case is determinative of the rights of a separate entity which may not have had any involvement in the case and which wanted to opt out.

Looking to the future, if the freedom of purchasers of individual European patents to choose whether or not to opt out is taken away, the value of existing European patents will be diminished.

A quite separate issue is whether individual proprietors should have the right to opt out on a country-by-country basis, so as to (for example) opt out the EP(UK) whilst keeping their other EPs within the UPC system. We suggest that Article 83 does not rule this out. It says that “a proprietor” of a European patent shall have the possibility to opt out. The definition of “European patent” (Article 2(e)) does not imply the entire bundle, and on the contrary implies any national designation. Arguably, therefore, Article 83 does not say that every designation must be the subject of the same decision by proprietors of individual patents (and European patents, on grant are fundamentally separate national rights).
Whether or not this last (and more controversial) point is correct, it would require only a simple amendment to Rule 5 to clarify the position that different proprietors may take different opt out decisions. Additionally, of course, the opt out form for use by the EPO / UPC will need to accommodate this possibility!

James Boon


Richard Pinckney


Alan johnson


Philip Westmacott


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