The Unitary Patent (UP) system and the Unitary Patent Court (UPC) are finally up and running!
The entry into force of the UP and UPC was celebrated on the first of June of this year, after many years of preparations, legal debates and substantial discussions.
Applicants have been able to obtain broad coverage spanning most European countries by way of a centralized examination procedure before the European Patent Office (EPO) since 1974, and this system has in the meantime become well-established. One limitation of this system however remained that after grant (and possibly opposition), the patent must be validated and becomes, subject to the choice of the patentee, a bundle of national patents which must be enforced or challenged before each national court. While over the course of time several countries have forsaken the requirement to provide a complete translation upon validation, the added cost of the maintenance fee for each state implied that Europe-wide validation was only practiced by larger entities. At the same time the enforcement/validity proceedings running in parallel before different national courts also required high budgets and sometimes led to conflicting decisions and legal uncertainty for third parties.
The unitary patent and the Unified patent court
The option of validating the patent granted by the EPO as one unitary patent valid in a number of countries aims to simplify the administrative burden and reduce the cost for validation. The yearly maintenance fee is also paid centrally to the EPO (and in part distributed to the UP contracting member states).
At the same time, a new international Court system was set up to make it possible to rule on patent cases with binding consequences across all participating member states. The Unified Patent Court (UPC) will have, in addition to a central division, local and regional divisions in the different member states, and for each case a panel of judges will be set up to have a multinational composition. The rules of procedure of the UPC provide for short time periods so as to ensure a decision within 12-18 months, which is faster than many European national courts. The aim is to have a highly effective and cost-efficient system which generates consistent decisions.
Competence and Opting out
In order to further the implementation of this Court system it was decided that the competence of the UPC would include European patents granted prior to the entry into force of the UPC. Thus, previously granted patents that were traditionally validated can also be enforced or invalidated before the UPC. A transitional period has however been put into place which allows patent holders to opt-out their patents from the competence of the UPC (by filing an opt-out request). While the procedure is relatively straightforward it does require that, where there are co-owners, all of the co-owners agree to file this request. As long as no action is started before the UPC, it is moreover possible for the patent holder(s) to withdraw the opt-out request, should the UPC forum become attractive during the life of the patent. This transitional period has been set to seven years but extension at fourteen years is in principle possible.
An important limitation to both the UP and the UPC is that not all signatories of the European Patent Convention have/could also become a contracting member state (CMS) of Unitary patent or the Unified Patent Court Agreement (UPCA). First, the Agreement establishing the UP and the UPC is an EU-initiative which thus excludes non-EU member states such as Switzerland and the UK. Spain has from the beginning indicated to disagree with the language provisions of the system. Poland and Croatia, while not officially withdrawing from the enhanced cooperation mechanism, have not yet signed the agreement. Cyprus, Czech Republic, Greece, Hungary, Ireland, Romania and Slovakia are Signatories to the agreement but have not yet ratified the UPCA, so it is not yet in force in these countries. Accordingly the system is now in force for only 17 countries and must be combined with classical validations in non-participating countries if European-wide protection is of interest. Still this covers around 80% of the EU’s GDP and includes the three largest EU economies. Moreover, further member states are expected to join in the future.
Will the UP and UPC live up to the expectations?
The cost-advantage of validating a European patent as a unitary patent will depend on your perspective. The yearly increasing maintenance fee has been set such that it is slightly less than the sum of the maintenance fees that would be payable upon selecting validation in France, Germany, The Netherlands and Italy. Thus, for about the same amount a patent owner can benefit from protection in 17 states instead of 4 states. The one-stop validation principle does not allow for a trimming of the countries where the patent is maintained over the years (which tends to be an important part of portfolio management) and that may to some be seen as a disadvantage. The absolute value of the maintenance fee however becomes significant only after 10 years, while statistics show that there is a high percentage of patents for which all national maintenance fees stop being paid after 10 years. Thus, the cost-advantage is definitely there for patent owners seeking broad coverage of their patents.
Whether or not patent owners will make use of the option to validate as a Unitary Patent will however also depend on the envisaged implications of necessarily falling within the competence of the UPC. A central court decision on validity for all contracting member states has the advantage of legal certainty but for the patent holder entails the risk of losing everything at once, which may be a concept that European patent holders will have difficulty of getting used to.
Cost could also play a role in the popularity of the UPC. Again, for small players an action before the UPC could be more costly than national litigation only in their home country. Larger organizations that have in the past asserted their rights in multiple different European states should see litigation costs go down. The compact procedure may also be more favorable to larger entities with more flexibility in their resources.
There is also of course for everyone the uncertainty of a new system, where none of the procedures have been tested and there is no case-law to rely on. How strict will the judges be on claim amendments? What will be their position on infringement by equivalence? Will the combinations of judges envisaged by the system ensure that there is no influence of their established national practice? The questions will only be answered over time by actual cases, and thus requires that the system is put into practice. In this regard it is noted that it was reported that 18 cases were lodged with the UPC within the first week. At the same time the EPO registered about 500 000 opt-outs of classical patents from the system before the entry into force. It is too early to get an indication of the percentage of granted patents for which unitary effect is being requested.
One thing that is clear is that the judges that have been selected for the pool of judges include some of the best judges from the national courts and that their involvement in different panels in different countries should result in harmonized decisions.
Changes in the patent landscape
The entry into force of the UP and UPC will change the patent landscape. Whether or not you choose the new court system for your own patents, you may still be confronted by third party patents that are enforced or can only be invalidated before the UPC.
There is also likely to be an effect on territorial scope of patents in general. Patent owners that typically only validated in a the top three (Germany, France, UK) may now consider a unitary patent valid in 17 countries. This may mean a limitation of freedom-to-operate for some companies established in countries such as Belgium and Poland, where patents were not always validated.
With respect to Belgium, it is important to note that with the entry into force of the UPC on June 1st, 2023, also a change in the national law relating to the research exemption was implemented. This exemption, which previously exempted third parties from patent infringement for research that was carried out “on or with” a patented invention, is now in line with the provision in the UPCA and limits the exemption to acts done for experimental purposes relating to the subject matter of the patented invention. Thus, it appears that the exemption will no longer cover the use of patented inventions as research tools in a commercial environment.
What does not change (for now)
Two aspects of patenting that have not been taken up by the agreement on the UP and the UPC, and thus remain under the competence of the national courts are the granting of Supplementary Protection Certificates (SPCs) and compulsory licensing.
SPCs allow for an extension of patent term for patents on human or veterinary medicaments and plant protection products, where the date of the first market authorization of a product covered by the patent is more than 5 years after the fling date of the patent application. While granted SPCs fall within the competence of the UPC, also for unitary patents such extensions still need to be requested before the different national patent offices of the member states.
Compulsory licensing provisions make it possible for a government to allow a third party to produce a patented product or process without the consent of the patent holder, in specific circumstances and under specific conditions. These circumstances and conditions vary significantly between national laws but typically include situations of a national health crisis or the blocking of an important technological advance.
As the European Commission recognizes that these are both important aspects of the legal framework of patenting, it proposed, on 27 April 2023, measures to complement the Unitary Patent system, namely new rules related to standard-essential patents (SEP), compulsory licensing of patents in crisis situations, and a reform of the legislation on supplementary protection certificates (SPC), including the creation of a unitary SPC.
There are aspects of patents which will remain under the competence of national law. For instance, disputes on ownership of IP will not be handled by the UPC. Relevant in this context is that the unitary patent as an object of property will be considered under the laws of the state where the first named applicant resides or has his principle place of business at the date of filing. This may be relevant for deciding on the order of the co-applicants in inventors resulting from international collaborations.
The aim of the UP and UPC is to reduce cost and administrative overhead for patent owners thereby fostering innovation and to ensure a greater harmonization, efficiency and legal certainty in the European patent landscape. It appears that any initiative that will help make Europe a more competitive business environment should be welcomed.
Like every new system it will take some time before the system is widely adopted. The key is understanding how it works and the opportunities it provides.
De Clercq & Partners considers it important that this information can be brought to our clients such that informed decisions can be taken. To this end, many of our European patent attorneys have taken the necessary training to become Certified European Patent Litigators before the UPC. We look forward to assisting you with any questions you may have on how these new systems can be used to your advantage; you can contact us at email@example.com.