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Potential users of the unitary patent system should be actively considering its impact on their business now, says Richard Willoughby of D Young & Co

The unitary patent and Unified Patent Court (UPC) will bring the biggest change in the patent landscape that Europe has seen since the European Patent Convention (EPC) of 1973. This will have significant implications for all IP rights holders that should be actively considering the impact on their business and patent portfolios.

What is the new system?

The new system comes in two parts: a European patent with unitary effect (known as the unitary patent) and the UPC. The unitary patent will be a single patent right that will be effective in up to 25 member states of the EU (possibly more over time). The EU already has community trademarks and designs—the unitary patent adds a similar patent right to that list.

Unlike community trademarks and designs, however, unitary patents will not be enforced in national courts. The unitary patent will be enforced in a new international court, the UPC. The UPC will also have jurisdiction over conventional European ‘bundle’ patents, subject to an opt-out during a transitional period. That opt-out will be particularly important for the pharmaceutical industry.

How will I obtain a unitary patent, and should I do so?

Unitary patents will be obtained in the same manner as conventional European patents, with unitary protection in participating member states being an option to select within a month of grant. In the early days, coverage will be less extensive since not all participating member states will have joined the system from commencement.

A unitary patent provides the advantages of pan-EU patent coverage with the convenience of central renewal and the ability to enforce it in a single court, the UPC. It will be significantly less expensive than pan-EU patent protection via conventional European patents or national patents.

On the down side, a unitary patent will be subject to central revocation proceedings in the UPC, with no possibility to opt out. It is likely to prove more expensive over the life of the patent than conventional European patents if you typically seek, or keep, protection in only a small number of countries. This is because the renewal fees are relatively high, in this scenario, compared to conventional European patents in particular. In theory, it should be attractive to the life sciences industry because it typically validates protection in multiple countries, but the risk of central revocation is a very substantial one. You should seek advice from your patent attorneys and legal advisers as to whether the unitary patent is a suitable option for your business, and what the alternatives are.
How will the UPC work?

The UPC will be a two-instance court, comprising local, regional and central first instance divisions, and a single Court of Appeal. The Court of Justice of the EU should have very limited involvement since its role in all patent cases is restricted to interpretation of relevant EU law (in the case of patents, this is limited to the Biotech Directive and Supplementary Protection Certificate Regulation).

The jurisdictional arrangements for the first instance divisions are complex but the basic rule is that infringement cases will be dealt with in the local or regional division(s) where the defendant is domiciled or based, if an EU-domiciled or -based defendant, or where infringement occurs. If the defendant has no place of business in the EU, the case can be brought in the central division. Counterclaims for revocation can be brought before the local and regional divisions in which an infringement claim is brought.

The central division will have jurisdiction for revocation actions and declarations of non-infringement, as well as limited jurisdiction for infringement actions (such as the situation noted above for non-EU defendants or where there is no relevant local or regional division).

The language regime has also been the subject of much discussion. Claimants will typically have the choice between the local language of the division in which the claim is brought, or a substitute language. English will be widely used as either the main or alternate language, although it will probably be a better choice in some locations than others. In the central division, it is the language of the patent that applies.

The initial language can possibly be changed where, for example, a wholly inappropriate language for the parties results from the basic rules.

Representation before the UPC

In the UPC, parties must be represented by a qualified representative. The rules are quite liberal and will allow both lawyers and many patent attorneys, including the majority of UK qualified European patent attorneys, to represent clients before the UPC.

When it begins, the UPC will be an entirely new patent litigation forum, with procedures and law deriving from multiple influences, including the different court and legal systems of the participating member states, as well as the EPC and European Patent Office (EPO). It will likely attract a huge range of cases, involving many different technologies and legal issues. Some may be comparatively straightforward, involving infringement and validity issues only. Others will be much more convoluted, with complex issues of law extending beyond patents into jurisdiction, liability, contract, competition, remedies and evidence, for example. All cases will require highly detailed statements of case (both technically and legally) to be prepared at an early stage of the case.

It will also have elements of EPO-like practice about it, with technical judges being appointed in most cases. As a result, mixed representation by lawyers and patent attorneys is likely to be appropriate in most cases.

Where will the UPC be located?

The UPC will have multiple locations. There will be local and regional first instance divisions in many participating member states. The central division will have three locations: London—for pharmaceuticals and chemicals; Munich—for mechanical engineering, lighting and heating; and Paris—for the remainder, including electronics. The Court of Appeal will be in Luxembourg.

In August 2015, the UK government announced that it had taken a lease in a new building in Aldgate, in the Eastern end of the City of London. It is significant that the UK government has decided to locate the UK branches of the UPC in a brand new building, in a central London location.

When is the new system likely to come into effect?

In theory, the system comes into force three months after the thirteenth ratification of the agreement establishing the UPC (so long as that includes ratification by the UK, France and Germany).

However, the fact that the UPC would not be formally in existence before that time has been causing a few practical headaches. One of the most important is the administration of the opt-out procedure for conventional European bundle patents. A significant body of users of the European patent system, especially in the life sciences sector, are concerned about the risks of central revocation of their extremely valuable and business critical European patents, something that is a possibility in the UPC. With an untried and untested new system, that risk is even greater.

Accordingly, they wish to ensure at least some of their conventional European patents are opted out of the new system well before it commences. This in turn requires a sunrise arrangement whereby pre-commencement opt-outs could be applied for and made effective from day one. One proposal was for the EPO to administer the pre-commencement opt-outs, but that has not proven to be possible.

On 1 October 2015, the Competitiveness Council of the EU announced the signing of a Protocol to the UPC Agreement. The protocol will allow the UPC to come into partial effect in the interim between the thirteenth ratification of the UPC Agreement (or indication that the thirteenth ratification has been approved by the relevant member state’s parliament), and the expiry of the three-month period provided for in the UPC Agreement. This will in turn enable the UPC Registry to come into existence and thus administer opt-outs in the pre-commencement period. Users should therefore keep an eye out for details as to how and when they can apply for opt-outs pre-commencement.

D Young & Co will be doing the same and will publish the details on our website when we know them. We already know that there will not be any fee for opting out, and that it will be possible to do so in bulk, so users will only have the internal (or possibly external) administrative costs to deal with. It will also be possible to opt back in, if desired.

The UPC preparatory committee has also announced its own commitment to complete its preparatory work on the UPC by the end of June 2016. This neatly coincides with the UK referendum on membership of the EU (EU membership is necessary for participation in the unitary patent and UPC). Assuming that results in a ‘remain’ vote, which is likely, then there is unlikely to be any further effect on UPC timing. Commencement is expected sometime between January and July 2017, with the provisional period commencing about six months before that. This is therefore nearly upon us and users should be actively considering the impact on their business now.
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