Law360, London (June 6, 2023, 8:31 PM BST) --

Henrik Holzapfel

Chuck Larsen

Diana Pisani

The Unified Patent Court officially opened for business on June 1. The UPC now has exclusive jurisdiction over new and existing European patents in respect of the participating countries

This powerful new forum for patent litigation provides cross-border remedies effective in up to 17 countries initially, with more countries expected to join in the future. The UPC also provides an opportunity to revoke patent protection in those countries through a single procedure.

Taking into account the size of the market in the UPC's jurisdiction and the court's incentives, we expect the UPC to become the most important forum for patent litigation in Europe, if not worldwide.

As much has been said about the UPC over the recent past, this article does not summarize the entire system in detail, but rather focuses on the system's incentives and provides practical guidance for how to prepare for it.

Opt-Out Limitations

While a company might opt out its own European patents from the UPC, litigation before the UPC might be unavoidable. In particular, a party does not have the choice of opting out of being sued in the UPC for infringing on another's patent in the European Union. So, it is important to be familiar with the new court system.

A Leap Into the Unknown?

UPC actions are heard by a multinational panel of judges in a local, regional or central division. The panels include two judges drawn from respective local courts and, in some cases, a technically qualified judge, such as a patent attorney or litigator.

There are currently 13 local divisions spread across 10 countries, and one regional division covering Nordic and Baltic countries. The central division has sections in Munich and Paris, with cases divided between them according to the field of technology.

Infringement cases and counterclaims for invalidity will usually be heard in the local or regional divisions, unless there is a related matter in progress before the central division, such as an action for revocation or a declaration of non-infringement regarding the same patent and between the same parties.

Although national patent law among the participating countries is largely harmonized, there are some differences in the way it is applied in local courts.

For example, UPC divisions are expected to consider infringement matters and counterclaims for revocation together in most cases. While such combined proceedings are normal in many of the participating countries, certain national courts tend to bifurcate proceedings and hear infringement and validity separately.

Other differences include the procedures for considering infringement by equivalents, processes for gathering evidence, claim construction approaches and the role of file-wrapper estoppel.

Given the uncertainties of the new, untested court, it is not surprising that there is apprehension toward it. However, experience suggests that a new litigation forum is likely to grow in popularity as it delivers on its foundational objectives.

In 2012, the U.S. launched the Patent Trial and Appeal Board to hear challenges to the validity of U.S. patents. Its mission was to provide a fast, relatively inexpensive tribunal for resolving invalidity issues as compared to using the normal, expensive and time-consuming litigation route. The PTAB has largely delivered on that mission, and in doing so its utilization surged, as shown in the graph below.[1]

Table 1: Trials Started Per Year



As seen above, the early PTAB utilization was low, as the market waited for the initial decisions and faced initial skepticism regarding the risks of estoppel for later litigation, speculating that few cases would be brought to that tribunal.

But after the first key decisions were issued, largely in favor of patent challengers, the number of filings at the PTAB increased dramatically — more than doubling in number from 2013 to 2014 and have since remained at that level.

The UPC has a similar utilization incentive, albeit in favor of the patent owner. It seems likely that the present apprehension toward the UPC will diminish as the UPC develops a body of its own decisions and case law.

Potential Advantages and Incentives of the UPC

The UPC aims to provide an efficient forum for enforcing a European patent, with the real possibility of obtaining a cross-border injunction. As explained in more detail below, keys to the efficiency will be the centralization of patent infringement actions across the participating EU countries in a single procedure, resolving both invalidity and infringement and ruling on injunctions and damages.

Further, the UPC proceedings will occur at a very fast pace — the target for the hearing is to take place within 12 months of an action being initiated, with a written decision following within six weeks, although initial cases may take longer. This means that the UPC is likely to provide time and cost savings, as well as providing consistency between the participating countries, when compared with multiple parallel national actions.

The UPC will also allow for centralized revocation of a European patent in the participating countries, regardless of whether the opportunity to file a European Patent Office opposition has expired. It can also provide an opportunity to challenge a patent even if a previous EPO opposition was unsuccessful.

The UPC has an incentive to be favorable toward patent holders, at least in its initial stages. It was first proposed many years ago and great effort across the EU has been expended to bring it to fruition.

Its objective is to provide faster, more efficient and less expensive patent litigation as compared to the existing national and international courts, and it will involve most, if not all, of the best, experienced patent judges in Europe who will hear cases at least part time.

Its success will ultimately depend on its utilization, and given its history and objectives, that utilization will likely depend on how well the venue treats patent owners, analogous to the PTAB in the U.S.

UPC Litigation vs U.S. or EU National Litigation

The UPC is poised to offer a more attractive solution in Europe, addressing infringement and invalidity in the same proceeding.

The following table sets out some differences between litigation in the UPC and litigation in U.S. court or German national court, including the panels, bifurcation or nonbifurcation of proceedings, timelines, costs and other issues.

Table 2: Local v. UPC Litigation
As highlighted above, a key difference between the UPC and EU national litigation is bifurcation and timing.

In a German court, infringement and invalidity issues are bifurcated and heard before separate tribunals that operate independently and on different time scales. While infringement can often be decided in around 14 months, a related invalidity action may continue for years.

Corresponding litigation before other national courts in EU countries proceeds without bifurcation, on their own independent time scales and according to respective local rules, so the outcomes can vary by country.

The UPC purports to combine infringement and invalidity into a single proceeding, as in non-German EU jurisdictions, but using a procedure that is otherwise similar to German infringement litigation and on a similar timescale.

Also highlighted above, the UPC may offer advantages over U.S. court for certain cross-border cases. Historically, the U.S. has been viewed as the gold standard, particularly for large, multinational disputes, given the size of the U.S. market, experienced judiciary, and its attendant high damages awards.

However, U.S. litigation has become extremely expensive, particularly because of the discovery process and its separate inter partes review procedure. Cases may take several years to resolve, with overall relief by injunction becoming more complicated to achieve.

The UPC is poised to offer a more attractive solution across the participating EU member states — faster, cheaper and more streamlined, without the extensive discovery used in the U.S., and with more opportunity for patent owners to obtain relief, including injunctions.

Until the UPC has built up a body of its own decisions and case law, there will be open questions over how the UPC, with its mix of judges from different courts, will assess scope of protection, infringement by equivalence and so on.

Other questions relate to the use of file wrapper estoppel, standards for gathering evidence, assessment of contributory infringement, and issues involving licensing of standard essential patents.

What You Need to Do Now

As the UPC has opened, the market will be keen to know what parties elect to use it, how it addresses the various unknown questions about its law and procedure and whether it delivers on its overarching aims. Its early decisions, roughly a year from now, will be particularly important to watch as parties consider the UPC's effectiveness, and whether and how those early decisions drive its utilization.

As the system is geared toward patent owners, parties should become familiar with it, evaluating its potential opportunities for enforcement or challenging patents, identifying and triaging potential freedom to operate risks posed by third party patents and evaluating their licensing and other relevant agreements to ensure that appropriate contractual provisions are included for addressing prosecution, opt-out, inventorship and ownership, enforcement, valuation and risk sharing.

If you have not done so already, you should review your patent portfolio to identify whether any patents are being infringed by competitors and assess whether any enforcement action is justified.

As part of that exercise, consider whether any patents or patent applications need to be opted out, taking into account whether any of your European patents have previously been attacked by a competitor in opposition or other proceedings, or whether there are any other reasons to opt them out. Any opt-out requests filed now might be blocked by another party bringing an action before the UPC.

You should also, as soon as possible, review your competitors' patent estates to assess whether they present an infringement risk, and whether action needs to be taken to help mitigate that risk.

For example, if there is interest in seeking revocation of a competitor's patent, consider whether an EPO opposition has been brought and whether or not that patent is opted out of the UPC's jurisdiction at the UPC and could be challenged by central UPC revocation.

Remember that the UPC might provide an opportunity for centralized revocation of a patent in multiple countries, even if the patent has previously been unsuccessfully opposed.

In regard to licensing agreements and other transactions, consider whether or not you have appropriate contractual rights to direct the EU prosecution, opt-out decision and enforcement processes, whether your representations and warranties are sufficient to properly allocate the heightened risk of infringement and injunctions in the EU, and whether or not your overall transaction valuation appropriately accounts for those heightened risks.

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Henrik Holzapfel and Chuck Larsen are partners, and Diana Pisani is a European patent attorney, at McDermott Will & Emery LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] https://law.lexmachina.com/court/ptab, 2023.

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