UPC — three key considerations before ‘staying in’ or ‘opting out’

Uniform patent protection in Europe will finally see the light on 1 June 2023 in the form of the Agreement on a Unified Patent Court (UPCA). This has the potential to radically change the European IP landscape and make it the most attractive jurisdiction in the world. At the same time, the race to opt-out of the Unified Patent Court (UPC) has seen incredible momentum (as foreseen by Art 83 UPCA). So why this sudden panic? Is the a priori opt-out really the right thing to do? Here, our expert Simone Giacobbe explores.

The UPC crossroads

Let’s be honest — we all have a ‘status quo’ bias when faced with change. In my native country (Italy), we say that “he who leaves the old road for a new one knows what he leaves but not what he encounters”. Indeed, it takes a certain amount of courage and energy to overcome this uncertainty.

If you are clear-headed enough to try to answer the question that Art 83 UPCA poses to every patent owner — do I stay with the known jurisdiction of the national courts (the old road) or trust the unitary jurisdiction of the UPC (the new road).

In or out? Three key considerations

Every rights holder wants to make informed decisions about their IP. However, where the UPC is concerned, any decision depends intimately on your unique circumstances and business objectives. Here are three key considerations to help you reach the ‘right’ decision.

1. What are your patents for?

Not all patents are made equal. Some may cover the core of your business, others could project into the future while more could be designed to keep your competitors at bay. Your strategy should be different for each of them.

2. Which territories do your patents cover?

Hand-in-hand with the function of each patents is the issue of geography. In how many territories are you active? Where are your competitors? Do you need specific protection at Europe’s borders to ensure that your rights are enforced at customs? This determines how many validations you need and consequently whether (and by how much) you can profit from the validation regime of the unitary patent.

3. How well can you enforce your rights?

Sooner or later, you may need to enforce your rights. A patent creates a monopoly for a limited amount of time and with limited resources, you will want to enforce your rights in the most efficient way. Five factors determine whether an enforcement system is efficient:

1. Duration of proceedings
2. Costs and rewards
3. Quality of the decisions
4. Territorial scope of the decisions
5. Legal certainty

Choosing the right path

Each of these three considerations are impacted by your decision on the UPC, and where the UPC is concerned, it’s impossible to look at each of them individually — tweaking one will impact the others.

The UPC is set to deliver its decision in first instance for both infringement and counterclaim of invalidity within one year. Even if this turns out to be too optimistic in reality, particularly for complex cases, this timeframe can only be dreamed of in most (if not all) of the (presently) 17 national courts of the Member States that are party to the UPC.

This, of course, comes with a price — you will lose all the tactical tools in your present armoury (like the injunction gap in bifurcated jurisdictions and torpedo actions in slower jurisdictions). Yet overall, the UPC will provide a much better balance of duration and legal certainty.

The costs side is difficult to evaluate a priori — comparing costs with the UPC against the present system depends heavily on the total number of jurisdictions that you need to address. On the other hand, the calculation of any reward will be based on a much larger consumer market (17 EU Member States) and improved legal certainty.

Thankfully, we already know exactly what to expect in terms of the quality of UPC decisions — you can simply scroll through the list of judges that have been nominated to the UPC. The only issue here is the fact that the technical judges are taken from the profession and nominated only on a part time basis. Will they be able to separate their professional activities from their roles as UPC judges?

The argument against blanket opt-outs

This analysis would be incomplete without addressing the common objection that is being raised to justify a blanket opt-out — the fact that a key patent can be killed in one go in all 17 Member States by a preventive invalidity action.

This is a reasonable objection, but must be weighed against two counter arguments:

1. Is it realistic to assume that someone will invest a substantial amount of money in a preventive invalidity action without having a good reason? If there is a good reason, they must be a potential infringer — so you should know this ahead of any action on their side, enabling you to take preventative countermeasures. At any rate, if this doesn’t look to be the case now, then why should it systematically happen under the UPC?
2. It’s true (at least in theory) that the invalidation of a national branch of a European patent (EP) in one jurisdiction doesn’t prevent enforcement of another national branch of the same patent in a different jurisdiction. But will this remain the case once the UPC starts handing down decisions? This will create case law from which the national courts will have increasing difficulty in distancing themselves from.

There is also one false myth that needs clearing up — that if you opt-out now, you can always opt back in later.

This isn’t always correct — if a competitor blocks your ‘opt in’ by bringing an action against you in front of a national court, you would lose the possibility of suing them centrally for infringement and be forced to go in front of the Courts in multiple jurisdictions.

In fact, if you ‘stay in’, you will have the flexibility to go the national route using the double jurisdiction foreseen by Art 83.1 UPC. Opting out right away could leave you stuck outside of the system.

Another benefit to staying in is the possibility of shaping case law for a Court that you will need to use at some point in the future. Do you really want to leave this to your competitors, who could eventually use such case law against you?

In or out? The verdict

At the climax of this short and undoubtedly superficial analysis, the UPC does look prima facie attractive — or at the very least, not unattractive. Certainly, it would not be in your best interests to do a blanket opt-out solely for the false sense of security this provides.

If you have questions about the UPC and how it affects your IP, get in touch with your usual Murgitroyd advisor or contact me directly at simone.giacobbe@murgitroyd.com. If you haven’t worked with us before, talk to our specialist UPC team at unitarypatent@murgitroyd.com.