Aspects of the UPC (1): Transitional Scheme and Opt-Out

The new European patent system will provide two concurrent routes to patent protection on the continent, (i.) the classical EP bundle patent, “which does not benefit from unitary effect by virtue of EU Reg No 1257/2012” and thus has to be validated in each EPC member state where protection is sought and (ii.) the European Patent with unitary effect effective in all ‘contracting member states’ that have signed and ratified the Unified Patent Court Agreement (UPCA) at the time of grant.

While Unitary Patents are mandatorily subject to proceedings and lawsuits before the Unified Patent Court (Art 3 (a) UPCA), this is not the case for classical EP patents (cf. Art 3 (c), (d) UPCA). For EP patents and applications pending at the date of entry into force of the Agreement, Article 83 UPCA defines a rather liberal transitional scheme allowing EP patent proprietors and applicants to make use of the present European post-grant patent system for many years to come. This transitional scheme consists of two basic elements, a transitional period and an opt-out mechanism.

Transitional period.  According to Art 83 (1), actions for infringement or revocation may still be brought before national courts during a transitional period of seven years after the date of entry into force of the Agreement.

Art 83 (5) allows for prolonging the transitional period to a total of fourteen years if, based on broad consultations and a related survey to be carried out five years after the Agreement entered into force, the Administrative Committee (Art 12 UPCA) should gain the impression that system users still prefer  the present system and avoid the new system. 

Opting out and opting back in. Initially, all pending applications and granted EP and Unitary Patents are subject to the new system. However, according to Art 83 (3), applicants and proprietors of EP patents (but not proprietors of Unitary Patents) can opt out “from the exclusive competence of the Court” during the transitional period.

As some observers have asked whether opting out from “exclusive competence” means opting out from the agreement as a whole, we tend to think that Art 32 sufficiently defines this term, as it provides an exhaustive lists of those legal actions for which the UPC has “exclusive competence” and which will fall back into the competence of national jurisdictions upon opt-out, especially

• actions for infringements, including counterclaims concerning licences; 
• actions for declarations of non-infringement;
• actions for provisional and protective measures and injunctions; 
• actions for revocation and declaration of invalidity;
• counterclaims for revocation of patents;
• actions for damages or compensation derived from the provisional protection;
• actions relating to the prior use rights. 

Complementary thereto, Art 83 (4) enables patent applicants and proprietors to withdraw opt-out anytime, i.e. even after the transitional period has expired.

If the transitional period is still running after withdrawal of opt-out, there is no reason why another opt-out should not be possible. If the transitional period, however, expired, any withdrawal of out-out will be final, because another opt-out will not be possible any more.

Limitations of opting out and in. By the limitation “unless an action has already been brought before the Court/a national court“, Art 83 (3) and (4) grant the right to request/withdraw opt-out only for such applications and EP patents that are not involved in a legal action before a competent court. As soon as an infringement, revocation or other action given in Art 32 (1) is pending, the applicant/proprietor is stuck with that jurisdiction.

This opens tactical options especially to possible infringers, as a revocation action filed with the UPC will block the patent proprietor from opting out and by this forcing the infringer to revoke the patent separately in each validated state.

That is, if an applicant or EP patent proprietor wants to opt out, it is recommended to do so as soon as possible  in order to prevent third-parties from filing an action under the Agreement and blocking opting out.     

Temporal effects. An opt-out which has been requested at a certain point during the transitional period will be effective until either the opt-out is actively withdrawn or the patent expires.

That is, the present national post-grant patent jurisdictions will remain available for the full lifetime of all applications pending or EP patents being in force at the end of the transitional period, which will last between seven and fourteen years as of entering into effect of the Agreement.

If we may assume that the Agreement enters into force in 2014, the present national patent jurisdictions will continue to handle patent cases until somewhen between 2040 and 2047, depending on the duration of the transitional period.

Practical aspects. Opt-out and the withdrawal thereof shall be notified to the Registry until one month before the end of the transitional period and will take effect upon entry into the register. Rule 5 (4) of the Rules of Procedure emphasises this point by clarifying that any legal action pending before entry of an opt-out/withdrawal into the register will render such request ineffective. 

Rule 5 RoP regulates further formal aspects of lodging a request for opt-out and withdrawal of opt-out. For instnace, Rule 5 (3), (5), and (6) require that an opt-out or withdrawal shall be entered into the register and notification of the EPO of such entries as soon as practically possible.