UPC Opt-Out.

The Unified Patent Court Agreement will begin shortly, and with this the Unitary Patent (UP) and the Unified Patent Court (UPC) will come into existence. The new patent and court system will introduce many opportunities for Patent Applicants/Proprietors as well as for competitors. Here we discuss the “Opt-out," which will be an important, and we expect popular, tool for Applicants/Proprietors who wish to avoid the jurisdiction of the UPC for their granted European patents.


What is an opt-out?

When the Unified Patent Court (UPC) Agreement enters into force, the UPC will have sole jurisdiction over Unitary Patents (UPs) and will have shared jurisdiction over European patents validated in contracting member states.

As such, when the UPC Agreement commences, an action for revocation or infringement of a classical European patent could be brought before the UPC, and a pan-European judgement for that patent across UPC contracting member states could result from such an action. Thus, classically validated European patents will be at risk of centralised attack.

The opt-out procedure affords a Patent Proprietor/Applicant the ability to remove its European patents or applications, or associated supplementary protection certificates (SPCs) from the jurisdiction of the UPC. The opt-out applies only to classically validated European patents and associated SPCs. Unitary patents are always subject to the jurisdiction of the UPC and cannot be opted-out.


When can a European Patent be opted-out of the UPC?

The UPC agreement will enter into force on the first day of the fourth month following the deposit by Germany of its UPC ratification instrument with the Council of the European Union.

An opt-out can be requested during a transitional period following commencement of the UPC, and during a sunrise period before its commencement.

The transitional period will last for seven years from the UPC start date. This transitional period may be extended by a further seven years.

Importantly, a European patent cannot by opted out if an action has already been brought before the UPC for the patent in question.

To reduce the risk of classically validated European patents being centrally attacked in the UPC before a Proprietor has an opportunity to opt-out, there will be a sunrise period during which requests to opt-out can be filed before commencement of the UPC.

Thus, Patent Proprietors have the option to remove their patents from the jurisdiction of the UPC before it starts, thereby reducing the likelihood of a timely filed action before the UPC resulting in the UPC having exclusive jurisdiction over the patent. The sunrise period starts when Germany deposits its ratification instrument to the Council of the European Union, and will provide a minimum of three months for patent holders to opt-out their patents, before the UPC gets underway.


How long does an opt-out last?

An opt-out lasts for the life of the European patent and any associated SPC. An opt-out may be withdrawn provided an action has not already been brought before a national court. Importantly, the withdrawal of an opt-out may be carried out after the transitional period.

However, a European patent (or SPC) can only be opted-out once. If the opt-out is withdrawn, this cannot be reversed.


How to opt-out

A European patent or application or SPC may be opted out by lodging an application with the Registry of the UPC requesting opt-out. The opt-out shall take effect upon its entry into the register. Advantageously, opt-outs can be carried out in bulk.

The right to opt-out is reserved for the Proprietor or Applicant, subject to contractual obligations to the contrary. If there are two or more Proprietors or Applicants, all Proprietors or Applicants must lodge the Application to opt-out. Licensees cannot validly request opt-out. As such reviewing license agreements is advisable for handling the opt-out.

If the Proprietor or Applicant is not recorded as the registered Proprietor or Applicant a declaration must be filed which indicates that the person seeking the opt-out is entitled to do so. As such, keeping track of chain of title will be particularly important, particularly for large portfolios and acquired patents.

There is no official fee associated with an opt-out application.


Opt-out or not?

An opt-out will remove a European patent or application or SPC from the jurisdiction of the UPC, and any action for infringement or revocation of such an opted-out patent or SPC would need to be brought before the relevant national court or other competent national authority, in each jurisdiction of interest.

A significant consideration for Patent Proprietors will be the risk of centralised litigation in an untested court system. This is likely to lead many Proprietors to initially opt-out many or all of their patents (or at least very important patents) from the jurisdiction of the new Court. The entry into force of the UPC agreement may also result in a flurry of divisional application filings, with Proprietors choosing to opt-out some members of a patent family and not others. It may also lead to an increase in national patents, which can never fall under the jurisdiction of the UPC.

An opt-out will not change renewals procedures for classically validated European patents, and translation fees will already have been incurred for such patents. Thus, while there may be many attractions for requesting unitary effect for patents that grant early on in the existence of the UPC, the prospect of an untested centralised court system may be less attractive for classically validated European patents. Notwithstanding the forgoing, the ability to, for example, secure a preliminary or final injunction in a single litigation action across a large territory will be very attractive to some Patent Proprietors. Hence, while there may be merit to large scale opt-outs in the infancy of the new court system, the decision as to whether to opt-out or not will likely need to be taken on a case-by-case basis for some key patents.


Overall

The UPC Agreement is expected to enter into force in early 2023. Classically validated European patents in UPC contracting member states will fall under the jurisdiction of the UPC, as well as the jurisdiction of national courts in those states. The UPC will enable a single litigation action to result in a unilateral determination for a European patent across the UPC contracting member states. Being a new Court, the UPC is untested and so some uncertainty surrounds how the law will be applied by the Judges of the Court. While an injunction across the UPC contracting member states may be an attractive prospect for some Proprietors, the risk associated with a centralised attack will likely lead many Proprietors to opt-out their classically validated European patents.

Advantageously, the opt-out is a reversible and inexpensive procedure.

However, if an opt-out is incorrectly requested, the opt-out will not take place, and the patent will remain under the jurisdiction of the UPC.

It is imperative that Patent Proprietors have a considered approach to the opt-out, and that they assess whether or not the opt-out is appropriate for their patents on an individual and wider scale. Critically, this assessment should be carried out in advance of the UPC starting. With the opt-out procedure likely to be very popular in the sunrise period and the infancy of the UPC, now is the time to develop an appropriate opt-out strategy, and to ensure chain of title is in order to minimise the risk of an opt-out request being ineffective.

If you would like more information on the any of the topics discussed above, please Con O'Connor at c.oconnor@frkelly.com


This article continues FRKelly's series on the upcoming Unitary Patent and Unified Patent Court. For more details, check out the following articles:  


1. What is a Unitary Patent?

2. What is the Unified Patent Court?  

3. How to Apply for a Unitary Patent

4. UPC Structure

5. Register for Unitary Patent Protection

6. UPC Operations

7. What Rights Are Afforded by a Unitary Patent? 


Further articles will be posted to our UP/UPC page.

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