What are the unitary patent and the Unified Patent Court (or UPC)?
The new unitary patent will be granted through existing European Patent Office (EPO) procedures. However, once granted it will cover many countries with a single patent. This contrasts with the current system where a bundle of separate national patents (German, French etc) results from the EPO process.
A completely new court network is being established to deal with patent disputes both for the unitary patent itself and for national patents granted in participating countries. This will have branches around the EU with central divisions for certain situations, such as a non-EU defendant, and a central appeals court.
Note that three EU Countries (Spain, Poland and Croatia) have decided not to participate for political reasons, at least for now. The UK initially planned to take a major role, but has reconsidered that position following Brexit and withdrawn from membership. This leaves the UK as a major European market with no involvement in the system.
The opt out
The first few months before the UPC opens – the “sunrise period” - will provide patentees with an opportunity to opt their existing patents out of the system. A further transitional period of at least seven years will be available for additional opt outs, although this becomes unavailable once litigation has been started. As a result, patentees need to have in place a strategy of “wait and see” or participation for each of their patent families.
For many valuable patent assets, “wait and see” is likely to be the preferred choice. We do not yet know how smoothly the UPC will operate, or what stance it will take on questions of validity and infringement where national courts currently take differing approaches. The early years will no doubt see procedural glitches ironed out, but we expect a body of case law giving a clear pattern of interpretation, and so a predictable legal framework, to take much longer to establish. Different national divisions could take differing positions on the law, ultimately needing to be ironed out at appeal court level. Indeed, it could be a decade or more before litigants (and particularly patentees) can be confident that they know what they are letting themselves in for.
In contrast, smaller and medium sized players (and larger companies in respect of less strategically valuable patents) may wish to opt into the unitary system. Upfront cost savings on translations and national formalities could make a substantial difference to those with less to invest in building a portfolio. Coverage across all of the 24 participating states may be an attractive prospect, especially where a technology is unproven and the cost-benefit analysis for patent protection is less clear.
What do the claims mean? – the bifurcation question
A point of concern for those accused of infringement will be the possibility of bifurcation. Briefly, this means that patent validity and infringement would be addressed in different courts, with the patent owner able to argue for different claim scope in each forum. In the infringement case, the patentee would argue for a broad claim scope encompassing what the infringer does. But when the infringer turns this around to argue for revocation, the patentee could present a narrower claim scope. While many expect this to be rare, it is certainly possible in the system as envisaged. In countries where bifurcated trials are already a feature, the ability to proceed with infringement actions ahead of invalidity proceedings (so that a finding of infringement may be available before a decision on validity) can be seen as a strategic advantage in litigation for patentees.
Will it really be quicker and cheaper?
One of the major selling points of the unitary patent initiative has been speed and economy of dispute resolution. A single set of proceedings for 24 countries could offer good value, although this will of course depend on the efficiency of the process.
It would be rare, however, for a patent owner to bring proceedings in every jurisdiction. What more commonly happens is litigation in two or three significant markets, with a view either to an early settlement or a series of influential decisions from respected courts leading to a wider settlement. It is worth noting that court fees will be substantial and dependent on the size of the dispute, although with reductions for smaller litigants. The rules on costs recovery vary between countries. Awards of costs to the winning party are allowed for in the UPC, on a staged scale for different sizes of dispute. For now, however, it remains unclear as to whether total costs exposure (own costs and adverse costs risk) will be higher or lower in UPC proceedings, as compared to the aggregated costs of separate proceedings in strategically selected jurisdictions. As a result, the UPC has yet to demonstrate the truth of these ambitions as to savings of time and expense.
The potential for insurance and funding of a UPC claim may be limited, particularly bearing in mind the lack of any UPC track record. The experience we have had to date in seeking funding and insurance for national litigation (which is much more of a known quantity for funders and insurers despite their relative inexperience in relation to patent disputes) does not inspire much confidence that insurance or funding would be available for a UPC claim. The higher value of a unitary UPC claim (in comparison to a single national claim) may be more attractive for funders, but the lack of track record and associated uncertainty may make funding and insurance difficult.
Will it really be the same across the EU?
A second key selling point for the unitary patent has been uniformity of outcome. Patentees and litigants, it is argued, will be able to expect a single system across participating countries, with uniform outcomes across the bloc. In reality, however, there are issues that will remain subject to national laws. For example, Article 28 of the UPC Agreement makes it clear that national defences of prior use will apply. This means that there will not necessarily be uniform protection across all UPC states at all, and that the outcome of a UPC infringement claim in respect of a defendant’s activities in country X may be different from the outcome of that claim in respect of its activities in country Y.
Horses for courses
We believe that a tailored strategy is needed to benefit from the addition of the unitary patent. A considered approach is likely to identify benefits and drawbacks for your particular situation, which can then be weighed to help you select the best approach for you.
When might the UPC be the right choice?
We see clear opportunities for making the most of what the UPC has to offer. Where a patented technology has a close connection to the internet, for example, it can be difficult to demonstrate where particular acts take place. Here a multi-national infringement suit has much to offer in terms of efficiency and avoiding evidential pitfalls. While a particular patent may be put at risk, these fields of technology are often covered by a network of patents and losing one may not amount to extreme exposure.
When might national proceedings be better?
Remaining opted out of the unitary system, or using national patents instead, offers distinct advantages in other cases. Pharmaceutical patent litigation, for example, often involves a limited number of valuable patent families covering a blockbuster product. Here, putting the whole territory at risk in a single set of proceedings is unattractive - an adverse decision across Europe could be extremely damaging. A detailed strategy using selected jurisdictions to test the case and provide leading judgments, and picking off important markets, may be well worth the expense and management time.
We do not yet know how the UPC will approach some of the knotty issues that are addressed differently across Europe. Examples here include claim construction and equivalence in relation to infringement, the approach to assessing obviousness in relation to validity, the potential defences of delay and acquiescence. Until this becomes clearer, many will prefer to stand by and let others take the strain.
Parallel UK proceedings?
In either situation, litigation in the UK offers another opportunity to test the arguments. A rigorous jurisdiction with extensive discovery and witness evidence, together with expert judges and legal professionals, the UK can provide a useful test bed to obtain an early decision. Although it can be more costly than other courts, the UK offers streamlined and cheaper options in both the Intellectual Property Enterprise Court and Patents Court.
A tailored approach
Overall, our view is that there are distinct advantages available with the addition of the unitary patent and UPC, but it is important to assess your own situation before committing your organisation to a particular strategic approach.
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