The new unitary patent system: making it work for your business
By Clare Tunstall and Helen Cline
The new unitary patent system will change the strategic behaviours of both patentees and their competitors. In the run up to the new system, businesses should be reconsidering both offensive and defensive strategies around registration, prosecution, challenges, enforcement and commercialisation. These decisions are critical and will affect the long-term value of businesses. In this Insight we outline some of the key decisions that need to be considered.
The value of many businesses today is dependent upon the strength of its patent portfolio. A businesses’ strategy around these key assets is fundamental to protecting investment, securing market positions and maintaining its market valuation.
The pending revisions to the patent system in Europe will have major implications for all companies, even those companies that currently do not have patents.
The new unitary patent system will change the strategic behaviours of both patentees and their competitors. To ensure that the new unitary patent system works for your business, reconsider both your offensive and defensive strategies around registration, prosecution, challenges, enforcement and commercialisation. These decisions are critical. They will affect the long-term value of your business; action needs to be taken now.
This is the first of a series of Insights in which we will discuss the increasing range of options open to organisations and businesses who have patents asserted against them or own or plan to apply for patents in Europe, and the need to reposition patent enforcement and challenge strategies in the run up to and following the launch of the unitary patent system. In this Insight we outline some of the key decisions that need to be considered now. We will expand on these themes in our later Insights.
Unitary Patent System
- The unitary patent system consists of two interconnected parts – the unitary patent and the Unified Patents Court (UPC). Although each member state of the European Union (EU) can independently decide whether to take part, the unitary patent system is open to companies worldwide.
- Unitary patents are likely to become available, and the UPC operational, in 2017 but exact timings remain unclear. From this date, unitary patents and non-opted out traditional European patents will be subject to the jurisdiction of the UPC.
- Although the application process will be unchanged, the new unitary patent system offers applicants new patenting alternatives and choices. As now, patent protection for inventions in Europe will be obtained by either filing nationally, at the European Patent Office (EPO), or under the auspices of the Patent Cooperation Treaty (PCT). The current centralised administrative opposition procedure for European patents and, in the future, unitary patents will remain the same.
- The unitary patent system brings with it different rules on the rights of patentees and licensees. Only the patentee (or co-patentees) can notify a decision to opt out, although this can be circumvented by giving a licensee the contractual power to require a patentee to do so. Patents under the jurisdiction of the UPC will allow exclusive licensees, such as those licensees benefiting from licences on a territory by territory basis, to bring actions unless the licence agreement provides otherwise. A non-exclusive licensee may also bring proceedings if the agreement expressly provides for it. Any counterclaim for invalidity must however involve the patentee.
- The unitary patent will make it possible for businesses to obtain patent protection for their inventions in participating member states (currently 25) through a single patent registration without the need for national validation.
- Unitary patents are not mandatory and are not expected to replace European patents. The unitary patent will co-exist with, and be an alternative to, national patents and European patents.
- The unitary patent will only extend to those EU member states participating in the unitary patent system so, when broader protection is required, the granted patent will need to be separately validated in the other relevant European Patent Convention (EPC) member states.
- After the unitary patent system comes into force, the UPC will have exclusive jurisdiction to decide on infringement and validity of unitary patents. National courts will retain exclusive jurisdiction for handling cases concerning national patents.
- The choice of applicant (or first applicant) may impact the value of a patent or patent portfolio. The unitary patent in its entirety will be treated (as an object of property) as a national patent of the EU member state participating in the unitary patent system in which the applicant (in the case of joint applicants, the first named applicant) resides or has a principal place of business or, if the applicant has no such location in one of the participating EU member states, the German law of property will apply. The governing law is fixed at the date of the application and is not affected by a later transfer of ownership.
- European patents granted before the entering into force of the unitary patent system cannot be retroactively converted into unitary patents – they will remain as nationally validated European patents in countries where they have been entered into force by the patentee.
- The UPC will also be the forum for most disputes concerning European patents, unless businesses actively opt out their current and future European patents from the jurisdiction of the UPC.
- The opt-out option is available as part of an extendable seven year transition period. European patents that have been opted-out will fall under the exclusive jurisdiction of national courts.
- The UPC Registry will accept applications to opt out (made possible by the Protocol on the Provisional Application of Agreement on the Unified Patent Court and current draft of the Rules of Procedure) during the provisional application of the UPC Agreement – the sunrise period. The start date of the sunrise period has yet to be announced but expectations are that it will be in mid-2016.
Filing and prosecution
In the early years of the new unitary patent system and with the existing uncertainties, we expect some organisations to adopt a “wait and see” approach until they have developed confidence in the system. For many organisations, a mixed portfolio may be the less risky option. However, the best choices will depend very much on business strategy and how an organisation plans to utilise its patent portfolio.
What to consider:
- Do you need to adjust your filing strategy? Filing and prosecution strategy should be reviewed in good time before filing the priority document.
- Should your business strategically incorporate companies in certain EU member states participating in the unitary patent system to ensure that the law of property that applies is the most favourable?
- Who is the most suitable applicant or first applicant?
- What protection is required in those countries that are not part of unitary patent system? Where broader protection than a unitary patent is required in Europe, a number of options will exist; apply to the EPO and post grant register as a unitary patent and validate the European patent in the other relevant EPC jurisdictions. Alternatively, organisations may question the value of a unitary patent and elect instead to validate the European patent in all relevant EPC member states.
- Is a PCT application appropriate if you are considering national patents?
Enforcement and challenges
Analyse your strategic options. Broader monitoring of competitors’ patent positions is advisable and, as necessary, challenge patents at the EPO and through the courts. The broader jurisdictional protection offered by a unitary patent may impact your business. Traditionally, with the exception of the pharma sector, European patents are only validated in key jurisdictions. The monopoly offered by a unitary patent will extend to all participating jurisdictions (at least 13). This could potentially limit a competitor organisation’s freedom to operate. An increase in patent infringement cases is also a possibility, as the jurisdictional scope of a patent’s monopoly increases. Consider what your preferred forum for litigation is. If the preferred patent litigation system is the national courts, consider filing nationally for patents around key technologies and products.
What to consider
- Whether to carry out a risk-benefit analysis to establish which patents to elect to opt out during the sunrise period.
- Do you need a contractual agreement between co-owners around opt-outs?
- Weigh-up the benefits of multi jurisdictional injunctions under the UPC with the risks arising from potential centralised revocation.
- Does the unified patent system provide the opportunity of taking out a competitor by having its ‘crown jewel’ patent centrally revoked?
- Consider where to issue proceedings (in either the UPC or national courts), where there is a choice. Would the uncertainty of the UPC be better than the national options available?
For example, if a competitor’s key European market is in a patentee friendly territory then launching a central attack on a non-opted out European patent in the as yet untested UPC could provide a better alternative. This will require businesses (patentees and competitors) to balance the potential benefit of reducing competition and gaining of market share with the risk of a counterclaim for invalidity/infringement.
- Do you want to lock a competitor into a particular court system?
Exploitation – maintaining control
Audit existing licences and collaborations to establish if it would be prudent to renegotiate, where possible, any critical unsatisfactory clauses in advance of the unitary patent system becoming operational.
What to consider
- An audit of existing agreements to identify any potential exposure. Existing European patents and European patent applications are subject to the jurisdiction of the UPC unless opted-out. Consider contractually controlling the ability to opt-out and who can bring proceedings – opt-out is prevented if proceedings are on-going.
- Who do you want to be in control of litigation?
- Do you license your patents to others in Europe? Is the risk of revocation a real concern and do you want to have the final say on any prospective action by a licensee that could affect your patent?
- Who is best placed to control litigation proceedings? Which party has the most to lose? Is each party equally invested? Who has the most resources?
- Establish if you have any exclusive licences or any non-exclusive licences which could confer a right on the licensee to bring proceedings?
For example, agreements often stipulate which party has conduct of litigation.
- Do arbitration clauses in existing licences imply that actions can or must be brought before the Patent Mediation and Arbitration Centre instead of the intended arbitral body?
Consequences of no action
Businesses that do nothing now could find their European patents governed by the UPC and vulnerable to central attack from as early as next year. They could also loose control over any potential litigation both in terms of choice of forum and who has the right to bring proceedings.
Confidence is key to the success of the unitary patent system. The key challenge now is getting the endgame right and to address some of the remaining uncertainties which may make organisations nervous of participating. The European commission is currently exploring recalibrating other aspects of existing patent law in Europe to help ensure that the unitary patent system achieves the promised benefits for businesses operating in Europe.
The planned UK referendum on the UK’s membership of the EU, now possibly in summer 2016, is an additional uncertainty, as the result will determine if the UK can ultimately be part of unitary patent system. Although a UK exit from the EU will not necessarily torpedo the unitary patent system – neither the unitary patent nor UPC requires UK participation – the traditional minimal validation would no longer be covered by a unitary patent. The full implications of a UK exit will depend on what replaces EU membership but there is a need now for companies to make contingency plans and adopt strategies to ensure patent rights are protected in both the EU and UK.
17 Feb 2020