Litigating patents under the UPC system
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The EU unitary patent system entails two novelties: a new property right – the European patent with unitary effect (‘unitary patent’) – and a new court system – the Unified Patent Court (UPC). This means that in Europe, three different patent rights will coexist:
- national patents;
- conventional European patents; and
- unitary patents.
In principle, both conventional European patents and unitary patents will be litigated before the UPC. Importantly, UPC rulings will have effect for all UPC Agreement member states where the patent in suit is in force.
This chapter explores the issue of forum shopping within the UPC regime from the perspectives of both the patentee and the alleged infringer, as well as the transitional opt-out provision from a litigation strategy standpoint.
The UPC is organised into the court of first instance – which comprises local and regional divisions and a central division in Paris, with branches in Munich and London – and a court of appeal in Luxembourg. The manner in which the divisions of the court of first instance will handle cases may vary; some will be more experienced, some faster and some more cost efficient than others. Both patentees and alleged infringers can potentially take advantage of these differences.
In many patent infringement cases the alleged infringement will occur in the entire territory (eg, with products sold online and EU-approved pharmaceuticals sold throughout the territory), allowing the patentee to choose its forum according to its needs.
Different aspects should be considered when choosing a forum to ensure a positive litigation outcome. It is advisable to choose a forum with a panel of skilled and experienced judges, who are expected to be more predictable. Moreover, patentees should try to select a patentee-friendly forum.
The level of experience of the judges may vary significantly between the divisions. Some judges will be veterans of busy national patent courts, while others may have no experience in patent law other than having taken a course at the training facility in Budapest. This should be a key factor when choosing a forum for patent litigation. For example, in the German local divisions, two of the three judges on the panel will be from Germany and will thus likely be experienced judges, due to the high volume of patent litigation in Germany.
Speed can be another vital factor. In this regard, three factors come into play:
- From the perspective of a patentee seeking an early injunction, a forum should be chosen that tends to refer the counterclaim to the central division without staying the infringement proceedings.
- Cases involving complex technology may entail the appointment of an expert witness. Some forums will be more likely to appoint expert witnesses than others. While involving expert witnesses often leads to more predictable rulings, it slows down the proceedings and incurs greater expense.
- The speed of forums may change over time. The better and faster the forum, the more infringement actions will be brought before it and the slower it might ultimately become. Therefore, it is advisable to reassess even an established forum from time to time. If there has been a stark rise in the number of received and pending cases and if speed is an issue, it may be advisable to choose a different forum.
The costs of proceedings naturally play an important role, too. Costs will depend mostly on whether evidence (eg, from expert witnesses) is collected.
The upshot is that the patentee will typically have numerous options as to forum and the choice will be driven by a host of factors. If a predictable outcome is more important than costs and speed, a forum with a panel of experienced judges that more often than not appoints expert witnesses may be preferable. If speed and costs are an issue, a forum that tends to refer the validity case to the central division and proceed with the infringement action without a stay and without appointing an expert witness may be preferable. While the language of the division may also be an issue, the factors relating to chances of success, speed and cost should drive most litigation strategy decisions.
Alleged infringer’s perspective
Given the expected differences between the divisions of the court of first instance, the question arises as to whether the UPC Agreement and the Rules of Procedure provide a way for the alleged infringer to proactively choose a forum less favourable to the patentee. The answer is: only to a degree. If there is a risk that a patent infringement action will be brought before a patentee-friendly local or regional division, the alleged infringer can try to draw the proceedings away to the central division.
For instance, the alleged infringer can pre-emptively bring an action for declaration of non-infringement before the central division. However, the patentee can counter this move by bringing an infringement action before a local or regional division within three months of the date on which the action was initiated before the central division. This means that if the patentee wants to remain in control and choose a forum other than the central division, it should be ready to file within three months after approaching an alleged infringer with a warning letter or licence offer.
Further, the alleged infringer can pre-emptively bring an action for revocation before the central division. This does not prevent the patentee from bringing an infringement action before a local or regional division; if the patentee does so, the action for revocation does not necessarily remain with the central division. This is because the local or regional division has the discretion to proceed with both the infringement claim and the claim for revocation.
Strategic considerations for opting out/opting in
The UPC will have exclusive jurisdiction for European unitary patents and there is no possibility of opting in or out. However, for a transitional period of seven years (extendable to 14 years), the UPC will share jurisdiction over conventional European patents with the national courts and the parties will have a choice of forum.
Article 83(3) of the UPC Agreement allows the patent owner to opt out of the exclusive jurisdiction of the UPC over conventional European patents for their lifetime. By means of the opt-out, jurisdiction over conventional European patents will remain essentially as it is now, before the UPC has opened its doors for business.
An opt-out becomes effective as of the date on which it is registered with the UPC registry. However, an opt-out request will not become effective if an action is already pending before the UPC. In order to avoid disadvantaging patent owners should a third party file a central revocation action on the UPC’s first day of business, a sunrise period will be available during which patent owners can request an opt-out which will become effective on the UPC’s first day of business. We recommend taking advantage of the sunrise period once the decision to opt out has been made.
Article 83(4) of the UPC Agreement allows the patent owner to withdraw from the opt-out of a previously opted-out conventional European patent in order to place it under UPC jurisdiction. This is possible only if no action has been brought before a national court. An opted-in patent cannot be opted-out again.
Notably, a potential adversary might want to bar the conventional European patent from being opted-in by filing an action before a national court.
When deciding whether to opt in to or out of the UPC’s exclusive jurisdiction for conventional European patents, a balance must be struck between the opportunity of obtaining a pan-European infringement verdict for all member states in which the patent has effect in a single court action versus the risk of losing the conventional European patent in all member states in a central revocation action (ie, a ‘central attack’). The following aspects are worth considering.
The UPC is an untested forum. In contrast, with the national courts in the main litigation forums, a rich body of case law is available and the judges are usually well known. However, this will have less impact after a few years, as the UPC gains in standing and experience.
Further, the cost risk of litigation must be balanced against the expected business opportunities. According to the existing proposal, the court fees for initiating infringement actions at the UPC will be €11,000 plus a scaled fee based on the value of the action (between €0 and €325,000). The unsuccessful party must also bear the costs of the successful party up to a certain amount (ranging from €38,000 to €2 million, depending on the value of the action). Accordingly, the cost risk can be precisely determined, which might not be the case for some of the national courts.
Another consideration is the speed of litigation at the UPC, which aims to issue a first-instance decision within 12 months of the action’s commencement. This is considerably faster than in some national courts.
Depending on factors such as the territorial coverage of the conventional European patent, the location of the potential infringement and the patent owner’s industry, the following case scenarios are worth considering.
Coverage of many or all member states/products of low complexity: In certain industries (eg, pharmaceuticals) it is common practice to validate a conventional European patent in virtually all member states in order to be in a position to enforce the patent in the entire territory. The same portfolio decisions are often made in industries producing products of low complexity where production sites can easily be shifted.
Accordingly, from a cost perspective, filing a single infringement action with the UPC in order to obtain a pan-European infringement decision appears to be attractive – particularly where an infringement is present beyond any doubt, such that a positive pan-European decision can be expected.
However, the risk of having the conventional European patent revoked for all member states in a central attack remains a primary concern for this group of patents. If the validity is not beyond any doubt, this risk might outweigh the attractive cost regime of the UPC. Certainly this is a concern for the pharmaceutical industry in relation to key patents protecting a pharmaceutical product (especially for those patents that serve as a basis for a supplementary protection certificate).
Further, the cost advantage must be balanced against the risk of a potential negative pan-European decision if it is not as certain that the UPC will find the infringement to be present. In such cases, filing separate infringement actions in several member states provides the chance to obtain a number of positive decisions.
Transnational markets and homogeneous or standardised products: In other industries, homogeneous or standardised products are offered on a transnational market. This might be the case for many complex consumer products (eg, consumer electronics or automobiles). In these industries it has become common practice to validate a conventional European patent only in a few select member states. An injunction in one of the most important markets of the transnational territory might be sufficient to effectively exclude a competitor from acting in the entire transnational market, because it would be too complex or cumbersome to shift production sites or change the product.
Accordingly, the cost of litigating before the UPC might be higher than litigating nationally and a national decision should suffice, since economically it has a pan-European effect.
Limited number of target markets or production sites/unique or customised products: In other industries, the products are unique or customised and the main competitors produce in select member states only, or the products are sold in a limited number of member states (eg, industrial goods, special machinery and basic or semi-manufactured goods). In these industries it has become common practice to validate European patents only in the member states which represent the target markets and/or in which the seat or production sites of the main competitors are situated.
Accordingly, a national infringement action at the infringer’s seat or production site would be effective to bar the infringer from manufacturing and selling the product even worldwide.
Potential infringement in member states without specialised and experienced patent courts: If an infringement is expected to take place in member states where the national courts seldom deal with patent infringement actions, or where specialised patent courts are unavailable, it might be attractive to start an infringement action before the UPC even in its early days.
Desired result: Another consideration is whether the patent owner intends to exclude the potential infringer from any market activity by means of an injunction or rather to obtain a favourable settlement and collect royalties.
If the owner intends to exclude the infringer from any market activity, the UPC regime provides for pan-European preliminary injunctions as well as injunctions in all member states with a single action. However, the issuance of injunctions is not granted by right in certain member states and is at the discretion of the national courts. Accordingly, the UPC is attractive for achieving this goal.
If the owner is more interested in collecting royalties, a national litigation approach might be advisable, as potentially diverging decisions of national courts open up more leeway for negotiations.
Desire to shape the UPC system: As tremendous public attention and weight will be placed on the first few decisions issued by the UPC, some patent owners might want to shape the future of the UPC system by litigating in this new venue.
Evidence and preliminary injunctions: An opt-in might be particularly attractive in order to obtain evidence by means of provisional measures even without the other party being heard, as stated in Article 60(5) of the UPC Agreement.
Accordingly, it appears that general advice cannot be given and the decision to opt out can be taken only on a case-by-case basis.
The UPC brings both opportunities and challenges. Once it is in action, patent owners and alleged infringers will have more choices for patent litigation in Europe, including the ability to enforce and invalidate a patent with effect in all countries where the UPC Agreement is in force. However, more choice adds complexity and the new court will remain unchartered territory for many years to come. Forum shopping – not just within the UPC system, but also in relation to national patent litigation and European Patent Office oppositions – is expected to play a role in litigation strategy. The opt-out practices of patent owners during the transitional period are further expected to affect the power and success of the UPC, especially in relation to key patents and in certain industry sectors, such as the pharmaceutical industry, which is expected to opt out ‘crown jewel’ patents.
df-mp Dörries Frank-Molnia & Pohlman
Patentanwälte Rechtsanwälte PartG mbB
Tel +49 89 2102 960
Fax +49 89 2102 9633
Sandra Pohlman is a co-founder and partner at df-mp. She heads the firm’s large and diversified biotechnology and pharmaceuticals practice group, together with co-founder Ulrich Dörries. Ms Pohlman has specialised in intellectual property in the biotechnology and pharmaceutical fields since 1992.
Ms Pohlman advises domestic and foreign clients on all aspects of intellectual property in her field, with a particular focus on molecular biology, immunology, blood products, pharmaceutical agents and formulations, gene therapy, chromatography, diagnostic assays and medical applications. Consistently (from 2013 to 2017), Ms Pohlman has been recommended for her expertise in patent prosecution and invalidity actions in the IAM Patent 1000. Managing Intellectual Property magazine listed her as an IP Star and Top 250 Woman in IP for 2016 and 2017.
Philipp Nordmeyer is a partner at df-mp and has specialised in intellectual property since 2001.
He advises domestic and foreign clients on all aspects of intellectual property in his field, with a particular focus on optics, semiconductor technology, electronic components, photonics, optoelectronics, lasers and acoustics, as well as in the technical fields of mechanics, medical devices, automotive technology, paper technology, electro acoustics and hygiene products.
Dominik Ho is a partner at df-mp. His background is in physics and his practice focuses on contentious proceedings that involve complex technology, such as mobile communications and medical technology. He has appeared in numerous prominent proceedings concerning standard-essential patents. With his experience in enforcing and defending patents, Dr Ho assists clients with drafting and prosecuting patent applications as well as with assessing and evaluating patent portfolios.