Unified Patent Court (UPC) – Opt-Out

When the UPC enters into force it will assume shared jurisdiction with national Courts during the initial seven year transitional period. During that period patents granted by the EPO can be litigated (either in infringement or revocation actions) in both the UPC and national Courts. This applies both to patents granted after the UPC enters force, and those already granted. An exception is Unitary Patents which can only be litigated in the UPC. The UPC has no jurisdiction over patents granted by national patent offices.

A key advantage of the UPC is that a single Court action has force in all UPC countries in which the patent is in force. However, this presents a potential risk for patentees as it exposes patents to a single point of attack which could lead to revocation in all countries. This may be a concern to patentees if they think a more favourable outcome would be achieved in national Courts, or they think being able to challenge a patent in all countries in one action will make their patents a more likely target.

To mitigate this perceived risk, during the transitional period (initially seven years), patentees will be able to opt their European patents out of the UPC so that they can only be litigated in the existing national courts. An opt-out can be filed at any time, provided the patent has not been litigated in the UPC, lasts for the life of the patent (and any SPC) even after the transitional period expires, and covers all countries. An opt-out can subsequently be withdrawn, provided litigation has not been commenced in national courts.

Arguably the safest option is to opt everything out of the UPC as this avoids any possible risk from the new system. The patentee’s options are not reduced as they can withdraw the opt-out if they subsequently decide the UPC is the best forum for them. However, there will be a significant administrative and cost to opting out large portfolios which must be balanced against the advantages.

An opt-out is only effective if it is filed by an authorised person, in the name of the correct legal owner, and with permission of all relevant co-owners in all countries covered by the patent. Although an administrative task verifying this data and correctly completing the opt-out will be time-consuming and costly. If applicants are considering opting out, they should review all aspects of the patent’s ownership in detail.

The risk of not opting a patent out is that a third party will issue a revocation action in the UPC and that this leads to a single finding for all UPC designations which is worse than would have been expected in national courts. In many technical areas, for example electronics, this risk may not justify the cost of opting out as unprompted revocation actions are rare and individual patents carry lower values. However, where a single patent is related to large revenues and revocation actions are more common (principally pharmaceuticals or biotechnology) even a small risk has sufficient consequences to make the cost of opting out worthwhile.

The opt-out provisions will become active in the ‘sunrise period’ that starts three months before the UPC Agreement enters into force (so that opt-outs can be effective on day 1 of the Court). The current expectation is that the sunrise period will start on 1 December 2022 with the Court opening on 1 March 2023.

The most important point is that patentees make themselves aware of the advantages and risks presented by the Court and take a reasoned decision regarding the opt-out. We expect to see a range of approaches from leaving everything in, a granular consideration of individual cases, through to opting everything out.

This article is a part of our EPO Practice and Peculiarities series. Click here to explore.