Opting out – now’s the time to get prepared

Opting out – now’s the time to get prepared

If you have not already done so, the time has now come to start considering whether or not you should opt your existing European patents, applications and SPCs out of the Unified Patent Court (UPC) system. The final stage of the preparatory work for establishing the UPC is underway and recent estimates place the Sunrise Period beginning as early as mid-2022, with the UPC commencing operation three months later.

The UPC will have jurisdiction over European patents, i.e. European patents that have been validated in the traditional manner, and SPCs relating to those patents, insofar as they are in effect in states participating in the UPC1. This means that, with respect to the states participating in the UPC, infringement and revocation actions relating to a European patent will be heard before the UPC and not before a national court. 
However, for a transitional period, European patents and SPCs will not be bound to the UPC system with this level of exclusivity. During the transitional period, with respect to those states participating in the UPC, patent proprietors will have the choice of bringing an action for infringement or for revocation of a European patent, or an action for infringement or for declaration of invalidity of an SPC, before either (i) the UPC or (ii) the national courts. 
Additionally, during the transitional period, it will be possible to opt European patents, applications and SPCs relating to those patents, out of the UPC system altogether. Once opted out, the patent/application/SPC is removed from the jurisdiction of the UPC, and, e.g., infringement and revocation actions in states participating in the UPC will be heard before national courts only. So what do you need to know about opting out?

The basic rules of opting out are:

  1. the option is only available during the transitional period (which is seven years from the date of commencing of the UPC and may be extended);

  2. an opt out is not allowed if an action has already been brought before the UPC in respect of the patent/application/SPC (thus an earlier UPC revocation action against a European patent will have the effect of keeping that patent in the UPC system permanently);  

  3. the opt out will last the lifetime of the patent/application/SPC but it can be withdrawn as long as an action has not already been brought before a national court in respect of the patent/application/SPC; and

  4. once a patent/application/SPC has been opted back in, a further opt out is not allowed.

Of course, the UPC will also have jurisdiction over Unitary Patents; the option of opting out of the UPC system will not be available to Unitary Patents.

Reasons to opt out

The UPC means that a centralized validity attack can be made at any time during the lifetime of a patent. Therefore, opting a patent out of the UPC system eliminates the risk of that patent being centrally revoked in all states participating in the UPC. However, if the patent is still in the opposition period, it may well be opposed instead (the European Patent Office opposition procedure covers more jurisdictions than the UPC - 38 EPC states versus the potential 24 EU states participating in the UPC).
An opt out also eliminates any uncertainties associated with a new untested court such as the UPC will be. Thus opting out could help safeguard high value “crown jewel” patents and “weaker” patents, once they are outside of the opposition period in particular. Should the litigation strategy change, then there is always the possibility of opting the patent back into the UPC system for enforcement, assuming no action has already been brought before a national court.    
Additionally, opting out a patent can serve to protect a litigation strategy that involves litigating in certain national courts; for example, a strategy involving taking advantage of bifurcation before the German national courts. 

Reasons to not opt out

One of the advantages of the UPC is that each of its decisions will have effect in all of the states participating in the UPC. Therefore, if the intention is to enforce a European patent, and central revocation is not considered a high risk (e.g. the patent has already survived an opposition at the European Patent Office), it may seem a good option to remain in the UPC system and take advantage of its territorial effect. It is worth noting that the UPC intends to provide a decision on infringement and validity within 12 months, as this may be a factor in choice of litigation forum. 
Also, it may be of interest to stay within the UPC system so as to have the opportunity of shaping the case law. After all, the intention is for the UPC is to eventually be the only competent court for settling patent disputes for European patents (with respect to the states participating in the UPC).  
An alternative reason to stay within the UPC system is simply to avoid the administrative burden and likely associated costs of opting out.

The process for opting out

Opting out requires filing an online request via the UPC website. The request can be made in respect of a European patent application, a European patent or an SPC associated with a European patent. If an opt-out has been requested for a European patent application, the opt-out will continue to apply to the relevant European patent, once granted. There is no official fee payable and it will be possible to file multiple opt outs in one step.
Requests for opting out can be filed from the start of the Sunrise Period to 1 month before the end of the transitional period. If a request for opt out is applied for in the Sunrise Period, it will come into effect the date on which the UPC is operational. Using the Sunrise Period to file an opt out request avoids the possibility that a central revocation action is filed against a patent on the first day the UPC is operational, rendering an opt out impossible (see point (ii) of the basic rules above).
The request can be filed by the applicant(s)/proprietor(s) of the application/patent/SPC or their patent attorney representative. The opt out must be authorised by all of the applicants or proprietors; if there are multiple applicants/proprietors, they are required to act in common to exercise an opt-out. To ensure that the opt out is filed correctly it is important to check the ownership of the applications/patents/SPCs that are being opted out and that the required authorisations are in place. 
It is possible that another party may file a request to opt out a patent/application/SPC without having authority to do so. As the UPC has no way of knowing the current ownership status of a patent/application/SPC, it cannot check for unauthorised opt out requests. The only way to police this is to keep a watch of the opt out requests which will be published in the UPC’s website. There will be a mechanism in place to correct unauthorised opt outs before the UPC starts accepting requests for opt outs. 

What to do now

The following are actions that you could take now so that you are ready when the Sunrise Period begins:

  1. develop a strategy for your patents/applications/SPCs and decide which you want to opt out of the UPC system (some questions to ask are: do you envisage litigation, how important is your patent, and how strong do you think your patent is?);

  2. check the ownership of those patents/applications/SPCs you want to opt out and make sure you have the necessary authorisations from all owners in place;

  3. review any agreements you have in place with licensees, joint ventures and co-owners to check that an opt out will not breach the agreements and to ensure the agreements cover new options arising due to the existence of the UPC, including control of the opt out procedure and the decision of where to initiate proceedings (in the UPC or national courts); and

  4. prepare to set up a watch of the published list of opted out patents/applications/SPCs on the UPC’s website for any unauthorised opt outs of your applications/patents/SPCs.

The decision of whether to opt your patent out of the UPC depends on many different factors and therefore the answer will vary on a case by case basis.

If you want our help opting your patent, application or SCP out of the UPC or you want to discuss your options in more detail, don’t hesitate to contact us.

1By states participating in the UPC is meant EU member states that have ratified the Agreement on a UPC. 24 out of the 27 EU countries are signed up to the Agreement (Spain, Poland and Croatia are not signed up - Croatia acceded to the EU on 1 July 2013, after the agreement was signed, but is expected to participate in the future). To date, 17 of the 27 EU member states have ratified the agreement.   

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