Q. Will the UPC system still go ahead?
A. Following both the UK government’s statement on 27 February 2020 regarding the UPC system and the publishing on 20 March 2020 of the decision of the German Federal Constitutional Court (Bundesverfassungsgericht - BVerfG) on the constitutional challenge to the UPC legislation, the future of the system is uncertain.
The UK government’s statement was: “The UK will not be seeking involvement in the UP/UPC system. Participating in a court that applies EU law and bound by the CJEU is inconsistent with our aims of becoming an independent self-governing nation.” Without the UK’s participation, it is a very different project and it remains to be seen whether there is political and industry appetite for a unitary patent and UPC system without the UK. If there is the will to proceed, several changes will need to be made. Just one example is that the section of the UPC’s central division that was to be in London will need to be relocated. The BVerfG’s decision was that the legislation enabling Germany to ratify the UPC Agreement was void because it was not passed by two thirds of the members of the Bundestag. This means that, if the decision is made to proceed with the UPC, legislation must be passed by both the Bundesrat and the Bundestag with the requisite majorities.
Q. If the UPC does go ahead, when is it likely to start?
A. If the participating member states decide to proceed with the system without the UK, a realistic estimate is a late 2021 or early 2022 opening of the Court. However, this timing depends on several factors. These include the time taken to decide not only to proceed but also on the new location for the London section of the central division, which indications are may not be straightforward and may even open up debates on other potential changes to the system (including, for example, the UK’s common law influence on the Rules of Procedure). The UPC Agreement will need to be amended accordingly (possibly by a Protocol) and there will be varying procedures (of varying length) required in each country to consent to an amended Agreement or a Protocol. The legislation enabling German ratification of the amended UPC Agreement will then have to pass through the German parliament. If that is not achieved by mid 2021, there will be further delay due to the German federal election later that year.
Before the Court opens, there will be a provisional application phase (PAP) of six to eight months during which final preparations for the start of the UPC system will be made. There will also be a ‘sunrise period’ of about three months before the Court opens in which ‘opt-outs’ may be registered - see below. The PAP will be able to start after the legislation enabling German ratification has been passed by parliament and also another state has consented to the PAP’s start (and several states appear to be in, or almost in, a position to do so). Three months before the end of the PAP, Germany will deposit its instrument of ratification of the UPC Agreement to allow the Agreement to commence and the Court to open immediately after the PAP.
Progress will in any case be slow while the COVID-19 pandemic continues. Also, it has been reported that the complainant in the BVerfG case has indicated that a further constitutional complaint may be filed. The potential grounds for a further complaint are not clear, but even if unsuccessful this could cause further delays.
Q. Why do I need to understand the new system now? Can't it wait until the Court is nearly open for business?
A. There are a number of reasons why it is wise to prepare for the new regime now:
The new system will affect all existing European patents, these automatically coming under the exclusive jurisdiction of the UPC subject to complex transitional arrangements which allow for ‘opting out’. You will need time to consider the full implications for opting your existing European patents out of the UPC, bearing in mind that if you do wish to take this step, it will best be done before the UPC opens and considerable due diligence may be required – see below.
You will also need to consider those patents which you license-in and discuss with the proprietor potentially opting those patents out.
You will need to take the UPC regime into account in drafting new licence and joint venture arrangements.
You will need to be aware of the possibility – which will be significant – of being sued in the new court by competitors and/or non-practising entities (to whom the UPC will probably be much more attractive than national EU courts).
The new system is not just about setting up a new court, but also about allowing patentees to apply for a single unitary patent covering a large part of the EU. Any patents in the application stage now (except pre-March 2007 ones) which come to grant after the system starts can potentially benefit from unitary effect, and there are budgetary and litigation factors to take into account in deciding upon future patent filing strategies.
You may also wish to reassess EPO opposition filing strategies: whilst the UPC does not cover all EPC countries, central UPC revocation actions may be an alternative and/or additional way to attack competitors’ patents.
You may even decide that long term investment decisions (such as where to site R&D and manufacturing facilities) may be influenced by the availability of injunctions having broad geographic effect.
Q. If I want to opt my patents out of the system, how would I do this?
A. As mentioned above, careful thought should be given to whether to opt existing European patents out of the UPC, and indeed any published applications (which can also be opted out). If you decide to do this, it will be possible (and advisable) to do so during the ‘sunrise period’ expected to begin about three months before the Court opens. The filing is to be done on a per patent (not per patentee) basis, but it will be done electronically and bulk opt-outs will be possible. There will be no fee. You should note that all proprietors of the patent, including (if different) all those proprietors of all national parts of an EP in states which have signed the UPC Agreement must be included in the opt-out. It is not what is on the register (neither EPO nor national registers) which determines who must opt out, but the ‘real’ proprietor(s). Checking the correct proprietors could involve significant due diligence internally in cases of large patent portfolios. Bristows can provide guidance on the procedure for opting out, as well as advice on the opt-out strategy itself.
Q. What are the factors I should be considering when deciding whether or not to elect for unitary protection for my newly granting patents?
A. The main consideration for most patentees will be budgetary. A unitary patent will cover all those countries which have ratified the UPC by the date of grant, which is likely to be 16 – 20. There will be no validation fee for a unitary patent and only one translation will be required. However, there will be renewal (maintenance) fees, and if you validate in fewer than four states it is unlikely that the unitary patent will be attractive despite the extra geographic coverage of the unitary patent if, as is usually the case, budget is a decisive factor.
If the budgetary aspect makes the unitary patent attractive, there is another matter to consider, which is the litigation regime applying to unitary patents. These are mandatorily litigated in the UPC, and cannot be opted out. This has upsides and downsides. The upsides are not only the principal advantage of central enforcement in a single action, but also that there is no transitional period (with its dual UPC/national jurisdiction) for these patents. On the downside, some teething problems are possible with the UPC meaning that enforcement may not be as straightforward as hoped, and of course, the flip-side of central enforcement is central revocation, including by proactive actions begun in the UPC central division.
Q. If I am sued, will it always be in my home state?
A. No. The rules state that actions can be commenced taking into account where defendants are domiciled and where infringing acts take place. In the case of groups of companies, often many different subsidiaries may be involved in alleged infringing activities, and infringement may be widespread. The first instance organisation of the UPC is complex with multiple divisions, and there are likely to be over a dozen potential venues in which most actions may be commenced, with the choice lying with the patentee. Hence, you might potentially be sued in almost any division of the UPC, but whichever division is used, its decisions have the same pan-European effect.
Q. If I am sued, will the proceedings be in my language?
A. Sometimes, but not always. The usual rule is that the case will be heard in a local language of local and regional divisions, and in the case of the central division in the language of the patent. Most (and possibly all) divisions will offer English as an option, and the use of English is likely to dominate for practical reasons, most notably because every panel in the UPC will include different nationalities and the most likely common language between these judges will be English.
Q. I am a licensee under a patent. Can I sue in the UPC, or do I have to own the patent?
A. If your licence allows this, then yes you can sue. This is so even if the licence is non-exclusive. The patentee will then have a choice as to whether to join in the proceedings or not.
Q. I have heard that the UPC allows French-style saisies where a bailiff knocks on the door unannounced demanding samples of products. Is that right?
A. Yes. It is open to a claimant to conduct a saisie anywhere in the UPC territory and then decide if it wants to sue. Hence you should be aware of this possibility if you have aggressive competitors.
Q. I understand that the UPC will be able to grant preliminary injunctions even without notice. Is that right? Can I do anything to prevent that happening to me?
A. It is right that the UPC will have wide powers to grant preliminary injunctions. Those applications made without notice should be rare, but you can try to prevent this happening to you by filing a ‘Protective Letter’ with the UPC Registry in Luxembourg (as is currently possible in Germany). This procedure effectively asks the Court to inform you of any applications for injunctions. Hence this is another thing you should consider before the UPC comes into operation.
Q. Will my ongoing EPO oppositions be affected by the introduction of the UPC?
A. No. The two jurisdictions are parallel and complementary, and the start of the UPC will have no effect on existing oppositions or ones to be started in the future. However, it is possible to foresee oppositions becoming somewhat less common in the long term as the UPC will eventually be able to revoke patents designating most important territories and is not subject to the 9 month post-grant window of the EPO.