UPC Weekly - Opting-out from the UPC: the Who, the When and the Why

2024 Week 24

It seems like a long time ago now, but from March to May 2023, the “sunrise period” of the UPC was in full swing and European patent firms were busy filing UPC opt-outs. Patent proprietors were deciding whether to opt-out their European patents from the jurisdiction of the Unified Patent Court. If you’re wondering what an opt-out is, take a look at the expected pros and cons of the UPC here.

Now seems a good moment to revisit the question: should you opt-out your European patents from the UPC?

When the UPC opened for business on 1 June 2023, about 420,000 opt-outs had been filed. About 6 months later, that total number of opt-outs filed had grown to about 540,000, up to today where we see that the number stands at about 600,000. The current rate seems to be about 10,000 per month. In total, about 2300 opt-outs have been withdrawn.

Back in the sunrise period, a significant factor in deciding to file opt-outs was a sense of the unknown – no-one could say for sure that the UPC would be a success. There was also a feeling amongst patent proprietors of being bounced into a new court system for which that they had not necessarily signed up. This may explain the apparent contradiction between, on the one hand, many European patents being opted out from the UPC and, on the other hand, a relatively high proportion of Unitary patents being requested since the UPC started. The Unitary patent offers a broad geographical coverage at low cost, and importantly the proprietor can freely choose the Unitary patent route or the conventional national validation route. The Unitary patent is locked into the UPC with no possibility of opt-out, and yet is proving increasingly popular. To date, about 30,000 requests for Unitary patents have been filed, with a steady 2000-3000 requests being filed per month.

Who should file the opt-out?

On the face of it, opting out from the UPC is straightforward. A UPC representative can opt-out their client’s European patent or European patent application by filing a simple signed form at the UPC. As explained in Network System Technologies vs. Volkswagen et al., a UPC representative does not need to show a power of attorney or any other authorisation for filing the opt-out. Note that any other person filing an opt-out must file a mandate from the proprietor(s) to show that they are authorised for this.

But where there is more than one owner of the patent, special care is needed. In Neo Wireless vs. Toyota Motor, the European patent was owned by more than one party. Specifically, there were different proprietors for different EPC states. But only one of the proprietors filed the opt-out. Simply because of this, the UPC Court of Appeal decided in June 2024 that the opt-out was not effective and the UPC had jurisdiction over the patent. According to the UPC Rules of Procedure, all proprietors of the European patent, for all EPC states designated in the patent, must file the opt-out.  Note that we say all EPC states, not just all UPC states.

When to opt-out, and when to withdraw the opt-out?

It is interesting to see many pending European patent applications being opted-out from the UPC. Before the start of the sunrise period, we discussed the rationale for this here, including the (maybe hypothetical) possibility of pre-grant litigation at the UPC, mirroring remedies available in some EPC states. So far, there have been no reported cases of pre-grant UPC proceedings. However, if this is possible for the patent proprietor, then by symmetry there may be ways for third parties to attack pending European patent applications at the UPC. For example, where a European patent application has been allowed but not yet formally granted, the scope of protection is settled. Therefore a third party may try to file a revocation action at the UPC. The question is whether this would be deemed inadmissible for being filed too early, or merely stayed pending the grant of the patent. If the latter, then a subsequent opt-out may not work.

Opting-out from the UPC can be done only providing that there have been no UPC proceedings on the patent. Also, an opt-out can be withdrawn, thereby restoring the jurisdiction of the UPC over the patent, but only provided that there have never been national proceedings in any UPC state. This was confirmed in AIM Sport vs. Supponor.

In CUP&CINO vs. Alpina Coffee, an application for an interim injunction was filed on 27 June 2023. The patent was opted out later, on 6 July 2023. The UPC Local Division concluded that the opt-out was not effective because the application for an interim injunction counted as “proceedings” before the UPC.

Why should proprietors (still) opt-out from the UPC?

For many patent proprietors in the sunrise period, a decision to opt-out from the UPC seemed the most sensible and conservative approach. Especially for the “crown jewels” patents, those considered the most valuable to the company, it was thought best to file opt-outs. In principle, the opt-out could be withdrawn later in order to use the UPC to enforce the patents. However, such patents are at risk of being locked out of the UPC if a national action is started in a national court of the UPC state on the same patent. Therefore enforcement of these patents in the UPC states would need to proceed country-by-country.

During the sunrise period, there was significant uncertainty about how the UPC would go about its business and therefore concern about entrusting valuable patents into its jurisdiction. Admittedly we are still waiting for the first UPC decisions on the merits of infringement and validity, as we discussed in our previous UPC Weekly. But it seems clear from this first year of operation that the UPC is procedurally sound, fast and succeeding in attracting business.  

The UPC will develop its substantive case law on infringement and validity and will show whether it lives up to its promise as a convenient international patent litigation forum. And then we can all judge the UPC on its record, when advising and deciding on filing opt-outs.