The UPC and Patenting

With the new opportunities of the Unified Patent Court (UPC) and the Unitary Patent, it is important that patentees are preparing now in order to get the greatest benefit from the new system. This article takes you through the new choices that patentees will have, and the relative merits of each.

National or EPO?

The first choice for a patentee is whether to file an application with a national patent office, or centrally at the European Patent Office (EPO).

It is cheaper for anyone seeking to have patent protection in more than one country to file and prosecute a patent application before the EPO rather than to follow the national route in multiple countries. This will continue to be the case. In addition, as is discussed below, the reforms will open up new options to patentees prosecuting patent applications via the EPO.

Patents prosecuted via the national patent offices will not be affected by the patent reforms, and the national systems will continue to function as they do now. The UPC will have no jurisdiction over national patents, which can be litigated only in the national courts.

I’ve chosen the EPO route, is a Bundle Patent or Unitary Patent better?

Bundle Patents

Once a European Patent has been granted, a patentee has the choice where to validate it. This can be in any of the 38 European Patent Convention (EPC) Member States, and countries are selected individually, and patentees get a “bundle” of rights, hence the term, “bundle patents”.

The formalities required to validate a patent in different countries vary significantly from country to country. One significant cost comes from the requirement in some countries for translations of the patent into a national language if it is to be maintained in force. Whilst in some countries including the UK, Germany, and France, no translations are required, in others, such as the Netherlands and Denmark there must be a translation of the claims of an application prosecuted in English, and in yet others, such as Italy and Spain, there must be a full translation of the whole patent into the national language. The need to pay for a translation in order to maintain a patent in effect in a particular jurisdiction can be a substantial disincentive for doing so.

A patentee is also liable for renewal fees for every bundle patent in each state in which it is to remain valid. Whilst these fees start relatively small (usually tens of euros in the first couple of years), by the end of the 20 year life of a patent, the annual fees for each country are in the thousands of euros. Over the full term of the patent, the cumulative average renewal fees total approximately €10,000 per country. Some patentees may choose to “drop” a bundle patent after a certain number of years to avoid having to continue to pay renewal fees for that country.

Unitary Patent

When the UPC opens its doors, which is expected in early 2017, it will be possible to obtain a “Unitary Patent” providing protection in all participating member states. Such a Unitary Patent will cover at least 13 EU Member States, including the major patent jurisdictions of the UK, Germany, France, Italy, and the Netherlands. It will still be possible to obtain bundle patents in some or all of the UPC Member States as an alternative to a unitary patent. Protection in non-participating countries such as Switzerland, Turkey and Spain will of course continue to be available via “bundle” patents as before.

The principal formality required to validate a Unitary Patent is a translation of the whole patent into one other language. This has to be a translation into English if the patent application was prosecuted in German or French. For applications prosecuted in English, the translation may be any national language of an EU member state. This includes languages of EU member states which are not participating in the UPC/Unitary Patent system and hence could, for example, be Spanish. This Spanish translation could then serve as the required translation for a Spanish bundle patent.

The total cost of renewal fees for maintaining a Unitary Patent over its 20 year life is equivalent to the cost of maintaining a bundle patent in the four most popular countries for validating European patents (UK, Germany, France, and Italy) over the same period. In effect, therefore, looking only at renewal costs, a patentee choosing a Unitary Patent will effectively get “free coverage” in at least 9 more countries, and potentially up to another 21 countries, as and when more countries ratify the UPC Agreement.

Which option to choose?

Which option is best for a patentee will depend on the particular circumstances, including the subject matter of the patent, but most importantly the geographic breadth of coverage the patentee will want.

The big three

Currently, about half of all patentees with coverage in the EU choose to validate their patents in only the UK, Germany, and France. This combination has several distinct benefits, in particular:

• These three countries have over 50% of the EU’s total GDP on their own. This is a very good renewal fee: coverage ratio.
• Once there is protection in these three countries, it is dissuasive for competitors to try to enter the market in the EU as a whole.
• No translation is required to validate in these countries: the validation costs are therefore very low for this option.

For patentees who currently choose coverage in just the UK, Germany, and France, it seems likely that many will continue to do this even with the extra option of the Unitary Patent. The Unitary Patent will be more expensive to validate (as it requires one full translation), and to maintain (as the renewal fees are higher).

Four/five countries

Another 40% of patentees at the moment choose to get patent protection in four or five countries, typically the UK, Germany, France and one or two others most often Italy and/or Spain.

Spain is not, at the moment, going to join the UPC and Unitary Patent systems, and patentees wanting coverage there will have to continue to obtain a bundle patent if they want protection in Spain (either alongside other bundle patents, or alongside a Unitary Patent). However, patentees prosecuting patents in English who choose the Unitary Patent route may use a translation of the patent into Spanish (which is required for a Spanish bundle patent) as the required translation into an EU language for the Unitary Patent. This will save on costs if the patentee wants coverage in Spain in any case.

For patentees who would now choose the UK, Germany, France, and Italy (with or without Spain), careful consideration of the Unitary Patent will have to be made. The costs associated with maintaining and renewing a bundle patent over its lifetime in these four countries is largely equivalent to the costs for a Unitary Patent over its lifetime. Even more specifically, there is no saving in upfront costs, as the bundle patent route would require a translation into Italian, and the Unitary Patent route would require at least one translation, which could be Italian.

A key concern with Unitary Patents will be that such patents will be vulnerable to central revocation in the UPC. In contrast, proprietors will be able to opt-out “bundle” patents from the jurisdiction of the UPC and the only way of revoking such opted-out patents will be to bring national revocation actions in the national courts on a country-by-country basis. The possibility of “opt-out” which comes with the “bundle” route may be a significant factor in going down the “bundle” route, particularly in the case of highly valuable patents where proprietors want to avoid the risk of central revocation since this cannot be avoided if a proprietor opts for a Unitary Patent. The opt-out will be particularly attractive in the early years of the UPC’s operation, as companies get a sense of how the procedure will work in practice and how the court will be used.

There are also other more minor factors which might sway some patentees towards the “bundle” route, for example, whilst it is possible to “drop” some designations of a bundle patent over time, with the patentee allowing individual patents in less commercially important jurisdictions to lapse, this is not possible for a Unitary Patent: the patentee will have to have coverage in all the countries it started with unless it chooses to surrender the patent entirely. This practice of “dropping” countries will still be possible for those with bundle patents. However, this is likely to be of limited importance since the Unitary Patent will only cost the same as bundle patents in four countries over their lifetimes and unless a patentee routinely prunes its bundle patents to fewer than four, the Unitary Patent will still be cheaper.

Many countries

For patentees who now want very broad territorial coverage, the Unitary Patent’s excellent cost/coverage ratio will be enticing. For a fraction of the price, the patent will be valid in up to 25 jurisdictions. For this reason, some patentees who want broad coverage will choose the Unitary Patent.

There is a caveat to this, however: those patentees who currently choose the broadest territorial coverage tend to be those with a few extremely valuable patents, such as a patent which covers a blockbuster pharmaceutical. Owners of such patents will be particularly concerned with the danger of central revocation in the UPC.

Enforcement Options

The UPC will provide owners of patents with a number of options on enforcement which will be determined by an applicant’s choice between filing in the national patent offices and the EPO and whether or not they choose to obtain a “unitary patent”.

(i) National patents obtained via national patent offices

For a patentee wanting to enforce a national patent, the situation will remain the same as it is at present: the patent will be enforceable through the national courts. For someone wanting to bring a revocation action against a national patent, similarly, this must be brought in the national courts.

(ii) Unitary Patents obtained via the EPO

For a patentee wanting to enforce a Unitary Patent, the only option for enforcement will be in the UPC. Anyone wanting to revoke a Unitary Patent must also go to the UPC.

(iii) “Bundle” patents obtained via the EPO

The situation is more complicated for bundle patents.

During a transitional period of seven years (renewable by another seven years), patentees will have the option to enforce their bundle patents either on a country-by-country basis in the national courts or alternatively centrally in the UPC.

This flexibility makes bundle patents particularly attractive as the rules of procedure of the UPC differ significantly from the rules in the different national courts and a proprietor can choose the forum where a patent is enforced.

In many cases, enforcement in the new UPC court will be attractive. UPC cases are intended to reach trial within a year which is much faster than many European jurisdictions. Further, the UPC offers the possibility of European-wide enforcement in a single action which may be very attractive in certain circumstance.

However, equally in other circumstances enforcement in the national courts may be preferable. For example, the bifurcated nature of patent litigation in Germany where infringement and validity are decided in separate actions may make enforcement there particularly attractive.

Indeed, in some circumstances, a patentee may have the option of pursuing litigation in respect of infringement of some bundle patents in the respective national courts, and pursuing litigation in respect of other bundle patents in the UPC.

When the end of the transitional period is reached, the choice of bringing an action in the UPC or in the national courts will be lost. By default, all patents granted by the European Patent Office having an effect in the participating member states will then fall within the exclusive jurisdiction of the UPC. The only exceptions will be patents where an opt-out was filed before the end of the transitional period. Such patents will fall within the exclusive jurisdiction of the national courts. No new opt-outs will be allowed and equally none of the existing opt-outs will be permitted to be withdrawn.

Conclusions

The UPC patent reforms will introduce new options for patent proprietors.

Broadly patent proprietors will face three decision points.

First, proprietors must choose between filing at the national patent offices or via the EPO. The additional choices the reforms introduce will only be available for patents prosecuted via the EPO.

Then, when a patent application is granted, proprietors must choose between converting their European patent application into a bundle of national rights or a Unitary Patent. If protection is sought in four or more countries, protection via the Unitary Patent is likely to be cheaper but choosing this option will make a patent vulnerable to central attack. Also choosing a Unitary Patent will exclude the possibility of enforcement in the national courts.

Finally, if a patent proprietor wishes to enforce bundle patents obtained via the EPO, the proprietor will have the choice during the transitional period of either choosing to enforce the patents via the UPC or via the national courts.