While the UPC offers economic efficiencies, and its decisions have broad geographic reach, the UPC is not without risk to patent owners. In particular, patents litigated at the UPC are subject to a single revocation (invalidity) action, while patents that are not within its jurisdiction would need to be challenged in separate national actions. Therefore, one of the key decisions that patent owners have been faced with is whether to “opt out” of the UPC system during the court's seven-year transitional period, which ends in June 2030.
Prior to the UPC opening and continuing during the early months of its existence, many patent owners elected to opt out of the UPC's jurisdiction. In fact, at the end of June 2023, patent owners had opted out over 530,000 patents and patent applications,12 which patent owners considered to be a conservative, wait-and-see approach to the new court. However, in the past year, opt-out rates have decreased, and some patent owners have withdrawn prior opt-outs. As of June 2024, a total of 616,532 patents remain opted out,13 while approximately 24% of newly issued EPs are being issued as UPs, and more than 10,000 UPs have been issued in the first year.14 Now a year into the system, all trends suggest that confidence is building in the new UPC and UP regime, and that confidence is expect to grow over the coming year.
Moreover, as the past year has demonstrated, opt-out strategies are not without their own set of risks. First, while a patent owner has one opportunity to opt out of the UPC jurisdiction, it may be precluded from opting back into the UPC's jurisdiction. For example, in AIM Sport Vision, the Helsinki Local Division found that the claimant was unable to proceed at the UPC because it had filed a national action prior to the UPC's existence, which under the court's interpretation of the UPC Rules of Procedure precludes withdrawal of the opt-out. AIM Sport Vision AG v Supponor Oy, UPC_CFI_214/2023 (Aug. 28, 2023).
In addition, license agreements entered into prior to the UPC's existence are unlikely to address how the patent owner plans to handle UPC opt-outs, which could lead to potential disputes between licensors and licensees. For example, a licensee may prefer that the patent owner maintain a traditional EP that is validated in multiple states to achieve even broader protection, while a patent owner seeking to minimize costs may seek UPC protection that does not include other key jurisdictions such as the United Kingdom. Because UPC rules empower only the patent owner to make an opt-out decision, a licensee who enters into a license agreement with the patent owner has no rights to the decision-making process absent a contractual provision requiring the patent owner to adhere to certain demands from a licensee. Indeed, even an exclusive licensee is not a patent owner and therefore would not be able to affect opt-out decisions under current UPC rules.15
Furthermore, patent owners should scrutinize whether any interest of their patent is owned by another party (e.g., joint ownership) and whether such party has also filed an application to opt out. If a patent owner decides to opt out a patent, it is critical that all patent owners do the same, as failing to do so will render the opt-out ineffective and subject the patent to the UPC's jurisdiction. For example, in a recent UPC court of appeal decision, not all patent owners had filed an opt-out. Neo Wireless GmbH & Co. KG v. Toyota Motor Europe NV/SA, UPC_CoA_79/2024 (Apr. 11, 2024).16 Specifically, one patent owner had opted out certain national rights of an EP, but the patent owner of the German part failed to opt out the German counterpart. This omission then allowed a patent challenger to file a central revocation action at the UPC.17 Therefore, patent owners should ensure that all patent owners are aligned on opt-out decisions.
The UPC remains an active forum for patent infringement claims and preliminary injunction requests. Entities with a robust patent portfolio looking to continue or even expand their IP activities in Europe should remain informed of developments at the UPC in order to best leverage the UP and UPC as part of a European or global IP strategy, while avoiding the unique risks posed by this new framework. For example, in the patent ownership and licensing context, parties should understand that UPC rules limit decision-making authority and require agreement among all patent owners in the opt-out context.
Footnotes
1. Case load of the Court since the start of operation in June 2023 updated end of May 2024 https://www.unified-patent-court.org/sites/default/files/upc_documents/Case%20load%20of%20the%20Court_end%20May%202024_final.pdf.
2. Id.
3. See EPO – The benefits of the Unitary Patent https://www.epo.org/en/legal/guide-up/2022/uppg_a_v.html.
4. Patent Litigation 101 https://legal.thomsonreuters.com/blog/patent-litigation-101/.
5. https://www.ropesgray.com/en/news-and-events/events/2023/10/6th-annual-international-ip-summit#eu.
7. Rule 190 – Order to Produce Evidence https://www.unified-patent-court.org/sites/default/files/upc_documents/rop_en_25_july_2022_final_consolidated_published_on_website.pdf.
8. Rule 191 – Application for order to communicate information https://www.unified-patent-court.org/sites/default/files/upc_documents/rop_en_25_july_2022_final_consolidated_published_on_website.pdf.
9. See 10x Genomics, Inc. v. NanoString Techs. Inc., UPC_CFI_2/2023 (Sept. 19, 2023) (“possible financial damages in particular can justify an injunction”).
10. See https://www.law360.com/articles/1703264 for further discussions of myStromer AG v. Revolt Zycling AG.
11. Rule 207 – Protective Letter https://www.unified-patent-court.org/sites/default/files/upc_documents/rop_en_25_july_2022_final_consolidated_published_on_website.pdf.
12. https://patentblog.kluweriplaw.com/2023/07/02/upc-opt-outs-statistics-and-trends-one-month-in/
13. According to Docket Navigator UPC statistics (last accessed on June 27, 2024).
14. https://www.epo.org/en/about-us/statistics/statistics-centre#/unitary-patent (last accessed on June 27, 2024).
15. Rule 5 – Lodging of an Application to opt out and withdrawal of an opt-out, https://www.unified-patent-court.org/sites/default/files/upc_documents/rop_en_25_july_2022_final_consolidated_published_on_website.pdf.
17. Id.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.