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UPC quick tip 3 - Opt-out or stay within UPC competence

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No. 3  is an attempt to provide some directional ideas to consider when deciding whether to opt-out or stay within competence of the UPC for national bundle patents. Of course, this question implies to speculate about a not yet implemented court, but merely declaring it as complicated or unpredictable would be a too simple excuse.

When the Unitary Patent Court (UPC) opens for legal proceedings and Unitary Patents (UPs) under exclusive jurisdiction of this court can be registered (see previous post), still an EP patent as bundle of national patents can be validated as alternative choice. The jurisdiction of national patent courts remains available for existing and newly granted EP bundle patents even in UPC-participation states (for a transitional period of at least 7 years). Competence is shared with the UPC by legal default, but active “opt-out” from the UPC is possible. A competent UPC will hear both infringement and revocation proceedings with effect in all currently 17 UPC-participating states (see first post). The UPC competence per case is further distributed over various central and local/regional divisions.

Conceptually, decisions of the UPC with its broad territorial effect are favourable for enforcement, whereas national courts are safer for defence as they require separate attacks for each state to revoke a patent. Complication arises in that the jurisdiction has to be chosen for both in combination. Patentees may submit opt-out-lists, earliest in a 3-month “sunrise period” before start and such opt-out decisions may later be reverted by an “opt-in”.

An often-stated warning from staying within UPC competence relates to the higher risk of central revocation attacks at the UPC. However, any fears from this should consider that Opposition at the EPO within 9 months from grant already offers a more effective option for central attacks. The latter is not limited to UPC-participating states only and less expensive when counting cost risks due to low office fees and each party paying for own attorneys.

It is well understandable that there are concerns on predictability of decisions at the still unknown court. From the promoting side, you can hear stories that the judges will be experienced, originate from all over Europe, and be trained to apply carefully drafted rules in harmonized manner. Sounds quite much to be realistic at the same time. I will try to draw a slightly different scenario (without pretending that it is the only one possible).

In practice, most patent disputes start with infringement proceedings, followed by a counterclaim for revocation. In EU-wide infringement cases, the claimants will be able to select their favorite local/regional UPC division for this. Such court can then decide to hear also the revocation counterclaim and treat bifurcation to the central division more as an exception. In the current system of only national bundle patents, Germany is widely considered a patentee-friendly jurisdiction where about two thirds of all European patent litigation cases are heard (see e.g. here). The UPC will have four local divisions in Germany at exactly the locations of current most patent litigation cases – Munich, Mannheim, Dusseldorf, and Hamburg. UPC judges may serve part-time and have parallel judicial functions at national level. They are not yet selected, but it can fairly be predicted that the majority of renowned judges did apply for this, considering also the expectable decrease of relevance of their national courts.

When further considering that IP professionals are not known to change a running system unnecessarily, the majority of patentees might predominantly continue their prior practice by using UPC local divisions in Germany to initiate infringement proceedings. At these divisions, 2 out of 3 or 4 judges must be German1, no matter the distribution of nationalities in the whole pool of judges. The judges are alleged to be trained for harmonization, but I doubt that this can prevent them to start with their used practice from national (German) courts, apart from now additionally ruling on revocation cases if they like to2. The described scenario may not be the cultural diversity suggested by the promoters, but it would lead to a predictability of decisions desired by patent proprietors.

One of the most controversially discussed topics is the various flaws in the legal provisions. This overview post is not intended to discuss them in detail. Critics may be justified that resolving remaining issues by case law is not the proper solution, but overly pessimistic assumptions on the resulting proceedings should also not forget that decisions will still be taken by humans, and the legal provisions are not forbidding them to take reasonable decisions.

The central division appears less important than the name suggests, if more used for exceptional situations (e.g. independent revocation proceedings). Its section in London, which is required by Art. 7(2) UPCA but not to be implemented due to Brexit, may certainly be a reason of legal concern. Temporary re-allocation of cases formerly under competence of the London section (IPC classes A and C) to the seat in Paris and/or the section in Munich is often criticized to lack a legal basis. The losing side of one of the first cases will likely appeal for violation of the lawful judge, and barely anyone can safely predict the outcome. The somewhat childish fight for every little piece of the cake, that might have partly been responsible for the unfavorably draft of the UPCA in this respect, will probably continue at least among DE, FR, IT, and NL. But in the end, it should not really matter for the users of the system where the cases will be heard. As a German patent attorney, I would say there is no need for this to be in Germany again. It is a pity that the last years have not been used to resolve some long known issues. On the other hand, there might currently just not be any integrating power strong enough to properly do so. Still, it appears rather unlikely that the common political will in favor of the UPC would let the whole system die for such drafting issues or the Brexit accident.

As a final point, and without intention to question more risk-averse attitudes, it might be worth to consider that any selection to opt-out from the UPC is also a decision not to gain early experience with the new system. The UPC does create a court which allows to settle litigation disputes for a market comparable to the US, and I doubt that the proceedings will be worse than jury trials.

(previous post of the series)

1 The panel at a local division comprises 3 judges by default, of which 2 must be nationals from the respective state if there are sufficient cases per year as fulfilled by Germany. A 4th technical judge from the pool of judges may be added on request.

2 National litigation proceedings in Germany are subject to mandatory bifurcation with infringement proceedings at civil courts and revocation proceedings at the Federal Patent Court. Rumors tell that civil court judges would often prefer to rule on validity as well, if they were allowed to do so.

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