Why you should NOT opt out of the unitary patent system — UPC perspectives

You may have heard much about the need to ‘opt out’ of the unitary patent system — but such a one-size-fits-all approach might not be suitable for every portfolio. Here, our expert Barry Moore gives his perspective on why patent proprietors should consider staying in as opposed to opting ‘out’ ahead of the UPC’s proposed implementation date of 1 June 2023.

The unitary patent and UPC — a quick overview

The European unitary patent system comprises two components: the unitary patent (UP), which enables patent proprietors to bring patents granted by the EPO into force in multiple contracting states and maintain those patents as a single right — and the Unified Patent Court (UPC), which enables proprietors to enforce (and third parties to revoke) European patents through a common court.

According to the implementation roadmap (published by the preparatory team), 1 March 2023 will be the start date of a ‘sunrise period’ in which patent owners can elect to opt their rights ‘out’ ahead of the 1 June 2023 — the date on which the UPC Agreement is currently planned to enter into effect.

All future UPs will be subject to the jurisdiction of the UPC, and the default position is that that all ‘classic’ granted European patents will become subject to the jurisdiction of the UPC when it comes into effect — unless active steps are taken to file an ‘opt-out’. By opting out, a patent proprietor can maintain the status quo of litigation options and remove their classic European patents — as well as their future European patents, which may be validated in UPC countries without using the UP system when it comes into effect — from the UPC’s jurisdiction.

Opting out — the ‘consensus’ view

Right now, the consensus seems to suggest a preference for opting out, so that proprietors remain in the same position as before the advent of the UPC. The rationale is that since we don’t yet know the approach of the UPC to patents — specifically, whether it will be ‘patent friendly’ or not — sticking with what you know is the sensible and pragmatic option.

Supporting this viewpoint is the fact that if a proprietor files an opt-out and later changes their mind, they can withdraw the opt-out to restore the UPC’s jurisdiction.

With this in mind, the opt-out approach is being lauded as the only logical approach — irrespective of the size of your portfolio or the nature of the technology that underpins it. However, this is a one-sided argument.

Staying in — the ‘contrarian’ view

In a similar fashion to leaving money on deposit in a time of inflation, or the ‘Parable of the Talents’, the active use of resources prevents them from being wasted. European industry and the users of the European patent system have long argued that post-grant activities in Europe are complex and expensive. The UPC was designed to address this and provide a streamlined approach through centralised enforcement and attack procedures.

Having now been granted their longstanding wish, it appears counter intuitive that most users of the system are saying, “it is great — just not for our portfolios”. How likely are we to get future patent reform in Europe if the system that is designed to address the problems identified isn’t used?

Centralised attack and revocation risks

While it’s true that centralised attack against a patent is more cost-effective for a third party than having to seek revocation in each national state, this won’t necessarily lead to widespread use. Seeking revocation through the UPC will still expose the third party to cost (the official fee alone is €20,000) but perhaps more fundamentally it exposes the interest of that third-party to the patent in suit. Parties — at least to my mind — will not randomly initiate revocation actions against competitors’ patents. A primary reason to seek revocation is to clear the field — the action (in itself) identifies the patent as commercially problematic. Will third parties wish to create this awareness?

In the past, the very necessity of having to take revocation action in slow, expensive and potentially unpredictable national courts — where often, local judges may not have been technically qualified — will have been sufficient to deter many third parties from attempting to revoke national validations of European patents. Instead, they may have been willing to risk continuing to quietly infringe on the basis that they could counterclaim for revocation — and any damages that might be secured by a patentee who was willing to attempt to enforce their patent through national courts might not be all that greater than the cost of taking a revocation action.

An unsurprising consequence of the cost and complexity of traditional contentious actions in Europe it that the level of litigation is not as high as in other regions (notably the US). So, is the general concern that keeping a portfolio under the jurisdiction of the UPC will increase the risk of attack (and perhaps loss of a valuable asset)? For the sake of argument, this could be a risk in the pharma sector, where individual patents have significant value and the loss of a single patent can have a material effect on profitability. The same risk doesn’t necessarily apply in other sectors — like electronics or software — where products are often covered by multiple patents, so clearing the market is more complex.

The ability to use centralised attack to revoke patents will of course reduce the complexity of revocation actions across Europe — but will this flush out third parties through the bait of this newly available centralised attack? Even if it does, is it necessarily a bad thing? While centralised attack identifies the asset as being commercially problematic for your competitors, this doesn’t necessarily mean that it will be invalidated.

Experienced judges and passing the ‘UPC test’

When we look at the judges that have been selected to sit on the UPC, there is a significant weighting of technically qualified judges — many are among the most experienced and knowledgeable patent practitioners in Europe.

While it may be an unfair observation, perhaps putting the validity of a patent before a panel that includes technically qualified and experienced patent attorneys could well be a better option than having validity tested using one of the many national systems currently available.

If a patent is tested centrally — and passes the test — the proprietor is in a much better position. They will have an identified third party with an interest in the patent as well as a granted patent whose validity has passed the test of the UPC — both immensely important weapons in their IP arsenal.

Don’t follow the herd

Considering these arguments, there is merit in veering from the whole-scale adoption of the opt out process. To coin a phrase: don’t hide one’s patent light under a bushel. If you believe that your patents are valid, you could benefit more from having them ‘in’ than ‘out’.

For all questions about the UPC and what it means for your IP, we recommend speaking to your usual advisor to receive professional advice tailored to your portfolio and business goals. Alternatively, get in touch with our dedicated unitary patent team at unitarypatent@murgitroyd.com.

This article was edited on 5 December 2022 to update the references to the UPC’s proposed start date from 1 April 2023 to 1 June 2023, as per the UPC website.