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New R 5(1,b) RPUPC – Why has the opt-out to be so complicated? “Zombie” states? Automatic opt-out?

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To opt-out or not to opt-out, that is the question

The proprietor can decide, at least during the transitional period, to opt-out or not from the competence of the UPC.

With or without opt-out the granted EP remains a EP, the only difference being that it may produce either

  • unitary effects in contracting states of the UPCA
  • effects only in contracting states in which it has been validated, cf. Art 63-70.

If there are different proprietors for different EPC contracting states, all the proprietors have to agree with the opt-in or opt-out, cf. Art 118 EPC. This makes all actions around opt-in or opt-out more complicated.

The question of property law applicable is dealt with in Art 7 of the Council Regulation (EU) No 1260/2012 of 17 December 2012. See especially Art 7(3) for proprietors not having a residence, principal place of business or place of business in a participating Member State. Nothing quite simple by the look of it. I wonder how for instance US proprietors will react.

No opt-out

Without opt-out, the granted EP becomes, after a corresponding request and registration, a patent with unitary effect.

The UPC has exclusive competence for actions based on the UP or against it. National courts in the UPC contracting states lose competence to decide upon a UP.

Opt-out

If a the proprietor decide to opt-out, he also has to file a corresponding request, and following registration, its patent will not be submitted to the competence of the UPC.

After opt-out, the granted EP can be equated, like presently, to a bundle of national patents as it will only produce effects in the EPC contracting states in which it has been validated.

Any action based on the granted EP or against it, can, in its equivalence with a national patent, only be started before a national court in which the EP has been validated.

R 5(1,b) RPUPC

It happens that R 5(1,b) has been amended by the Administrative Committee of the UPC. At a glance, the change might appear minor, but has far reaching consequences.

R 5(1,b) RPUPC, 18th draft reads;

1. The proprietor of a European patent (including a European patent that has expired) or the applicant for a published application for a European patent (hereinafter in this Rule 5 an “application”) who wishes to opt out that patent or application from the exclusive competence of the Court in accordance with Article 83(3) of the Agreement shall lodge an Application (hereinafter in this Rule 5 an “Application to opt out”) with the Registry.

 (b) The Application to opt out shall be made in respect of all of the Contracting Member States for which the European patent has been granted or which have been designated in the application.

According this version, the opt-out is only to be requested with respect of UPC Contracting States.

The new version of R 5(1,b) RPUPC reads:

1. The proprietor of a European patent (including a European patent that has expired) or the applicant for a published application for a European patent (hereinafter in this Rule 5 an “application”) who wishes to opt out that patent or application from the exclusive competence of the Court in accordance with Article 83(3) of the Agreement shall lodge an Application (hereinafter in this Rule 5 an “Application to opt out”) with the Registry.

b) The Application to opt out shall be made in respect of all of the Contracting Member S states for which the European patent has been granted or which have been designated in the application.

Consequences of the change in R 5(1,b) RPUPC

The mere deletion of the Contracting States of the UPC does a priori might appear as a minor change, but it has far reaching consequences.

The reason for the change is explained as follows:

“This wording [i.e. the original one] is inconsistent with the indivisibility of the application to opt out. It implies that the UPC solely has jurisdiction over UPCA Contracting Member States, which is not the case”. 

This reason actually boils down to specify that the UPC may decide not only over the fate of the patent in UPC states but also over non-UPC participating EU states and even over non-EU states. This is known under the “long arm jurisdiction of the UPC”.

Authorities in the UK will be happy to realise that in spite of their withdrawal of the UP/UPC system they will be submitted to EU law.

From the “signatories” states, Poland and the Czech Republic announced that they will not ratify the UPCA as the UP/UPC system is detrimental to their industry. Those countries will also be happy to realise that not ratifying the UPCA will not allow their industry to escape the system.

That the proponents of the UPC would like to see the long arm jurisdiction of the UPC to extend well beyond the UPC contracting states goes without saying.

In view of the fact that the conformity of the UPC/UPCA with EU law has never been tested, we can still be in for surprises.

Whether such a long arm will be valid for countries neither contracting states of the EU, nor contracting states of the UPC will have to be seen.

For instance, there could be problems when a proprietor wants to see a decision of the UPC to be executed in one of those states.

In spite of the Brussels regulation, it can also be doubtful whether a decision of the UPC can be executed in a contracting state of the EU as the legitimacy of the UPC within the EU is anything but sure.

It has never been tested, as Me Véron once said that nobody thought of it!

At least the EPLA was vetted by the CJEU, which resulted in the famous Opinion C 1/09 which was the death knell for EPLA.

Forced intervention under the UPC

One question which comes to mind is whether a forced intervention according to R 316(1) RPUPC, which has not been amended, applies exclusively within the UPCA contracting states or can also apply outside those contracting states in view of the long-arm jurisdiction theory expressed when amending of R 5.

It will thus all depend on how far the long arm jurisdiction of the UPC will reach.

Here again, we can be in for some surprises.  

States to be considered in case of opt-out – Zombie states

Following successive amendments of the Implementing Regulations of the EPC, the designated states do not have to be decided at filing or when paying the designation fee.

For quite a while now, there is only one designation fee due when entering examination before the EPO and all EPC contracting states are automatically designated.

This way of doing has the great advantage to simplify the handling of European interfering applications under Art 54(3) EPC. There is not any longer a different set of claims and description for different EPC contracting states.

According to Art 79(3) EPC, it is however open to an applicant to withdraw certain designations before grant. Presently this happens quite rarely.

As a consequence, and unless designations have been withdrawn, a granted EP designates all contracting states of the EPC.

The proprietor can then decide “à la carte” on the number of validations that is the number of countries in which the granted EP will produce effects.

This was one of the great advantages of the EPC from the beginning: offering the greatest flexibility to a proprietor in modulating the number of designations or validations. In any case, the decision on validation could be postponed until the EP was granted.

The average number of validations lies around 3 to 5. One notable exception being the pharmaceutical industry, especially for the so-called blockbusters, which are in general validated in a maximum number of countries.

Having a quasi-automatic designation of all the EPC contracting states turns now to be a disadvantage of the EP system as it makes an opt-out from the UP/UPC system unduly complicated.

According to the new wording of R 5(1,b) RPUPC the opt-out has to be declared for all designated states, that is for quasi all contracting states of the EPC, irrespective of whether the granted EP is validated in all designated states or not.  

“Zombie” states

The direct consequences for the proprietor of a granted EP seems to be that as long as there is a window in which the granted EP can be validated and the translation filed under Art 65 EPC in a contracting state of the EPC, the proprietor has to declare the opt-out for all EPC contracting states, even for those in which he does not wish to validate his granted EP and this whether such state is a contracting state of the UPC or not.  

In the absence of established case law of the UPC I take here the analogy with G 1/09, OJ EPO 2011, 336. An application is valid and alive as long as the time for filing an appeal is running. It is only if no appeal is filed that the application dies at the end of the period for filing an appeal and no divisional application may then be filed.

Once an EP has been granted, the validation is potentially possible until the end of the period for filing a translation, should one be required or until the end of the window allowed by the states not requiring a translation or only of some parts of the granted EP. The latter is dealt with in the London Agreement on the application of Art 65 EPC. Whether the translation requirements in order to obtain after registration a patent with unitary effect is compatible with said London Agreement also remains to be seen.

Those potential validation EPC states, but for which no validation is eventually thought, can be considered as “Zombie States”. I take this expression from a representative I know.

Is it really reasonable to require an opt-out declaration for such “Zombie” states?

I would think not! The declaration of opt-out should at minimum only take into consideration the contracting states of the EPC in which the EP has been validated.

The original version of R 5(1,b) RPUPC was taking this indirectly into account as the opt-out had only to be declared for UPCA contracting states.

It is only the greed of the proponents of the UP/UPC system which has made things unduly complicated.

Two time limits collide here:

On the one hand, the time limit to request a patent with unitary effect is in accordance with Art 9(1,g) Regulation (EU) No 1257/2012 or R 6(1) UPR is one month from the mention of grant in the European patent Bulletin.

There is up to at least three months for a proprietor to decide in which EPC contracting states the granted EP should produce an effect.

It would have been by far preferable to have one and the same time limit for applying for a patent with unitary effect and for validating a patent in non UPC contracting states.

On top of it, there is a period of uncertainty as the opt-out (and its withdrawal) is only effective from the time it has been registered. The same also goes for requesting a patent with unitary effect.

Deleting designations

According to the EPO Guide to the Unitary Patent, B I., it is “important not to withdraw the designation of any of the 26 participating Member States because this would rule out obtaining a Unitary Patent”.

Considering 26 states as “participating member states” is somehow strange as participation can only become effective after ratification in all those “participating member states”.

From the 26 “participating states” which have signed the UPCA, at least two, Poland and the Czech Republic, have decided not to ratify as participation to the UP system would be detrimental to their industry.

At the moment there are only 13 “participating member states”, which is the minimum necessary for the UPCA to enter into force.

I would thus say that it is only for the participating states having ratified the UPCA that no designation should be withdrawn in order to obtain a patent with unitary effect. With new ratifications, the number of states would increase, without however reaching in the end 26.

As an aside, the situation of the UK and of Art 7(2) UPCA is far from clear and properly settled. This could complicate matters.

By removing one of the designations of any of those 13 presently participating or one of the future participating states, an opt-out should therefore become automatic as there would be no possibility to obtain a patent with unitary effect. There is thus no need for a long and complicated procedure as envisaged in the latest version of R5 RPUPC.

Withdrawal of the designation of a participating state having ratified would thus be one easy way of not obtaining a patent with unitary effect.

Prior national rights and national rights arising on the same date

They represent a challenge to the uniform character of the granted European patent and especially to the Unitary Patent.

Prior national rights and national rights arising on the same date have also to be taken into account when dealing with the validity of the patent, cf. Art 139(1 and 2) EPC as well as R 138 EPC.

In presence of a national right of an earlier date, the consequences might be multiple:

1) The applicant may withdraw that designation from his application for the contracting state of the national right of earlier date. As we have just seen above, withdrawal of one designation of a UPCA contracting state would remove the possibility of requesting a patent with unitary effect.

2) For such state, the applicant may file claims which are different from the claims for the other designated states, see Guidelines H‑II, 3.3, and H-III, 4.4. This would thus be a priori be in conflict with the uniform character of the UP.

3) The applicant can limit his existing set of claims in such a manner that the national right of earlier date is no longer relevant. This means that the applicant/proprietor would have to restrict the scope of protection to take into account the national prior right irrespective of the fact that it is not required by the EPC.

In case of post-grant limitation the can also request a different set of claims and a different description under R 138EPC. See also Guidelines D-X, 10.1.

For the search see the present Guidelines B-VI, 4.2.

The effect of prior national rights and national rights on a UP

According to the same EPO Guide to the Unitary Patent, B I., in order to be eligible for registration as a Unitary Patent, a European patent must have been granted with the same set of claims in respect of all 26 participating Member States (Rule 5(2) UPR; Article 3(1) in conjunction with Recital 7 Regulation (EU) No 1257/2012).

As far as the 26 participating member states are concerned, see above.

The question of prior national rights has not yet been decided as neither by the preparatory committee of the UPC nor the select committee of the EPO have published their conclusions. Both instances have not decided on the matter. The Administrative Committee of the UPC cannot decide in this matter as it has no competence for such a move.  The select committee of the EPO seems wanting to wait for case law of the UPC….

Search for national prior rights at the EPO

The EPO has wowed in view of the UPC to extend the search to national earlier rights so that the applicant is informed of potential national interfering applications on top of European earlier rights under Art 54(3) EPC.

A European applicant/proprietor is not obliged to take into account national earlier rights, but can request a different set of claims and a different description under R 138EPC.

According to Art 3(1) of the Regulation No 1257/2012 of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection a UP is a EP granted with the same set of claims in respect of all participating Member States. Rule 5(2) UPR says the same.

According to Art 3(2) of the same Regulation, a EP granted with different sets of claims for different participating Member States of the UPC is not a UP.

In order to obtain or to maintain a EP, an applicant/proprietor can choose the solution he considers best for his interests.  

In order to keep the unitary character of his patent, the applicant proprietor would be obliged to exclusively choose solution 3 above.

As there is no obligation in order to obtain or to maintain a EP, to limit its claims in order to take into account national earlier rights, why should an applicant chose this solution which could be a severe limitation?

Conclusions – Possible ways to force an opt-out

There are thus two ways open for an applicant proprietor to escape the competence of the UPC

  • Remove one or more designations of UPCA participating member states shortly before grant
  • In case of earlier prior national rights be it before grant, or when seeking maintenance in amended form or limitation, file a different set of claims under R 138 EPC.  

In both situations the opt-out should be automatic in view of the impossibility to request a EP with unitary effect.

Be it when maintenance in amended form or limitation is final, there does not appear to exist any obligation for a proprietor to continue with the patent having effects in the EPC it had been previously validated. The validation cannot be extended to new contracting states of the EPC not validated earlier, but in states in which the necessary new validation is not carried out, the patent will cease to produce effects.

Comments

The aim of the new R 5(1,b) RPUPC is manifestly to make the opt-out as complicated as possible so that to forcibly have more EP patents to deal with from the beginning. Waiting to the end of the transitional period would delay the UPC putting his fingers on granted EP independently of the UP system. 

The present ruling on the opt-out is anything but user friendly, but the reasons are quite manifest. At least there no fee for the opt-out as suggested in the early days.

As far as the long-armed jurisdiction of the UPC is concerned we will have to wait how decisions of this rather strange court will be enforceable. The last word on this has not yet been said.

On the other hand, if there is no UP possible, for instance due to the removal of a designation of one of the UPC participating states, or by requesting different sets of claims for different contracting UPC states, the opt-out should become automatic.

The easiest solution is deletion of designated states. Probably not of the major ones, but some participating member state of the UPCA in which the proprietor of an EP would not have validated the granted EP.

In any case requiring an opt-out declaration for all EPC states in which a proprietor would never validate a granted EP is simply ludicrous.

At least R 5(1,b) UPCA should be drafted in such a way that the opt-out is only to be applied and hence necessary in EPC contracting states in which the patent has been validated. However, the three months’ time limit for validation should be respected in the RPUPC.

The UP/UPC system cannot impose its views in procedural matters on the EPC and on EPC contracting states which are not at the same time contracting states of the UPCA.

It is not the vocation of the UPC to deal with national patent rights or in which a granted EP has not been validated.

I might be completely wrong in my assumptions, and I am prepared to be challenged.

What do you think?

Important notice:

In previous posts on LinkedIn I had already shown that there were a lot of open issues with the UP/UPC system. Here is a further one.

However, I am by no means against European integration, but the UPC is for me the wrong answer to a noble aim.

It should not be forgotten that barely a third of the patents granted by the EPO are held by applicants having their seat in UPC contracting states and the average number of validations lies between 3 to 5. The conclusion as to which players will benefit the UP/UPC system is easy to take.

It favours much too much large internationally active industries and litigation firms. The deleterious effects on European industry and especially European SMEs have been amply demonstrated by various authors and have found their confirmation in the refusal of the ratification by Poland and the Czech Republic.

Last but not least, like for the European trademark, it opens one single door for attacking European patent rights holders. Is this really a progress?

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2 replies on “New R 5(1,b) RPUPC – Why has the opt-out to be so complicated? “Zombie” states? Automatic opt-out?”

Lennard Mooijsays:

You write: “There are thus two ways open for an applicant proprietor to escape the competence of the UPC:
Remove one or more designations of UPCA participating member states shortly before grant
[…] In both situations the opt-out should be automatic in view of the impossibility to request a EP with unitary effect.”

I don’t see how this will help for opting out of the UPC. It would only cause the proprietor not to have the option of filing a valid request for a UP, since in that case all contracting member states should have been designated.
The UPC will still be competent, however, on all European patents valid with the contracting member states regardless of whether they have not designated some other contracting member state where the European patent is not validated. Proprietors who don’t want to submit to the UPC will have to actively opt-out every previously granted EP as well.

I agree with you that the mentioned reasons are peculiar. To me it seems like the reason should just be that it’s way more practical when proprietors have to opt-out once only, even for future contracting member states.

DXThomassays:

Dear Lennard,

Thanks for your comment.

I can agree with you that the removing a designation or having different claims for different UPC contracting states boils down for the proprietor not to have the option of filing a valid request for a UP.

If no request for a UP can be filed why the proprietor would then be forced to opt-out for each designated state? The equation is very simple: no UP possible so no competence of the UPC at least in the transitional period. The logic behind it is quite clear, force proprietors to be submitted to the UPC.

The competence of the UPC, even after the end of the transitional period should at least be limited to the UPC contracting states in which a granted EP has been validated. But this would not be conform to the wished “long arm jurisdiction” of the UPC.

When looking at Art 82(1) UPCA first sentence: “Decisions and orders of the Court shall be enforceable in any Contracting Member State”, I wonder what will be the legal basis for this so-called long arm jurisdiction of the UPC at least during the transitional period.

Forcing to opt-out for all designated states makes the whole procedure unnecessarily complicated and is absolutely not user friendly. It could even imagine that some applicants will even revert to national filings. This is the more so since some countries allow the parallel existence of a national patent and of a UP, e.g. FR and DE. This is what should be allowed in all contracting states of the EPC and of the UPC.

That proprietors who don’t want to submit to the UPC will have to actively opt-out every previously granted EP as well is for me not acceptable, especially when it comes to states in which the granted EP has not been validated. Why should the UPC have competence for non-validated and non-contracting states?

On the other hand, we all know why the ruling has been made so complicated.

By amending the Rules of Procedure of the UPC which have never been communicated to the national parliaments before ratification, it allows the proponents of the UPC to extend their grip in what I would call a non-democratic way. This is particularly manifest when it comes to have to declare an opt-out for countries in which a granted EP has never been validated.

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