To the surprise of many, the UK is expected to soon ratify the Unified Patent Court Agreement (UPCA), despite the ‘Brexit’ vote last June.

Providing that Germany also ratifies it in the near future (which is highly likely), the agreement will probably come into force in 2017. Patent owners and applicants therefore need to start to think soon about whether to opt their patents in or out of the system.

The constitution and operation of the UPC after the UK leaves the EU (probably in 2019) are still uncertain, but we expect the system to continue after then, with the UK remaining a part of the system.

So what’s new?

On 28 November, Baroness Neville-Rolfe, the Minister of State for Energy and Intellectual Property, announced to the EU Competiveness Council that the UK is intending to ratify the Unified Patent Court Agreement (UPCA), paving the way for the creation of the Unitary Patent and Unified Patent Court (UPC) in 2017, with the UK a leading member, and London as the host of one of the Central Divisions of the Court.

In a statement, Baroness Neville-Rolfe made clear that “the UK will continue with preparations for ratification over the coming months. It will be working with the Preparatory Committee to bring the Unified Patent Court (UPC) into operation as soon as possible.”

In making the announcement, Baroness Neville-Rolfe also stated that the announcement “should not be seen as pre-empting the UK’s objectives or position” in forthcoming Brexit negotiations.

It is difficult to escape the conclusion that this announcement is against the grain of the rhetoric emanating from the UK government ahead of Brexit negotiations next year, which perhaps bodes well for a more pragmatic and business-focussed approach, but more importantly has potentially significant, far-reaching and imminent implications for patentees.

If the UK parliament ratifies the UPCA in late 2016 or early 2017, only Germany will need to ratify it in order for the Unitary Patent and UPC to come into existence, which is likely to happen within months.

Patentees with European patents will therefore need to respond quickly to this development, and to the unitary patent system.

What action is needed in 2017 by patent owners and applicants?

Shortly after the new system comes into effect, existing European patents will become subject to the new system unless they are opted-out. Patents that are newly granted after the new system comes into effect can be opted-in to the system, or not, as part of the granting process.

In the light of the background information that we set out below, our advice is that patentees should be cautious, with a default approach of opting-out existing and new EPs, at least to begin with (of course, with exceptions where appropriate). We will work with our clients to help them make sensible, commercial decisions about how best to position for their patent portfolio for the arrival of the Unitary Patent and UPC.

Patent owners and applicants therefore need to start to think fairly soon about whether to opt their patents in or out of the system.

What does the future hold?

As for the long term, and the UK’s long-term role in the new system, of course much depends upon the Brexit negotiations, and almost certainly there will need to be amendment to the UPCA to keep the UK within the system upon departure. However, importantly, the UK is likely to be part of the system for the first two years, and this makes its extraction much more difficult, and much less likely, both technically and in terms of the effect it will have upon the unitary system and its attractiveness to patentees.

Therefore, it is our view and prediction (although 2016 has perhaps not been a good year for predictions) that this significant announcement will not only enable the creation of the unitary patent system (Unitary Patent and UPC), but will keep the UK within the new system for the long term.

A Reminder of the background

The Unitary Patent will result in no change to European patent applications pre-grant. European patent applications will still be prosecuted through the European Patent Office, and importantly all qualified European Patent Attorneys (including those practising in the UK) will continue to prosecute European patent applications in the same way as before.

However, there will be some significant changes post-grant. The new system will enable uniform patent protection across “member states”, via a single Unitary Patent encompassing a single set of claims (granted by the EPO), under the jurisdiction of a single body (the UPC), and renewable through a single annual renewal fee (with a six-month grace period available for missed renewals) to maintain a patent across “member states” (payable to the EPO).

Unitary patents will be reviewed & granted by a single body (the EPO) for all member states. All claims must be translated into English, French and German before grant (an English language version will always be available).

The Unitary Patent system also will cause post-grant amendments, transfers and revocations to apply automatically across all member states.

Patents granted by the EPO can be opted in or out of the UPC system. In terms of procedure, it is likely that a request for Unitary Effect will need to be filed within one month of date of grant, with re-establishment possible up to three months after grant.

Registration for Unitary Effect will be available to EP applications that are pending when the new procedure starts, or EPs that are filed after the new procedure starts.

On the up side, the unitary patent should be less expensive to maintain and manage than the present bundle of ex-EPC patents (lower validation and renewals fees). It will be simpler to record assignments/licences, and of course it will be subject to a single court system (the UPC). It should (eventually) lead to more uniform application of law throughout the EU, and will allow parties to litigate in just one court to achieve an EU-wide result, e.g. EU-wide injunction and/or EU-wide damages, or EU-wide invalidation, even after expiry of the EPO opposition period (which makes it all the more surprising that at this time the UK Government has indicated it will ratify).

On the down side, there is a risk of losing all EU protection if one revocation action is successful, and costs may be higher if only a few European countries are of interest. The current system allows parties to manage renewal costs because they can abandon patents in chosen countries without affecting the others. This will not be possible with a Unitary Patent.

There is also the uncertainty of using the UPC. The court is at present completely untested (although the expectation is that the court will be pro-patentee), and patentees will have difficult strategic decisions required during the transition period, e.g. whether to opt-out previously granted patents, and thereafter whether to opt-in or opt-out in relation to future applications.

As regards the operation of the UPC, there will be three central divisions in Paris, Munich and London (and the agreement by the UK to ratify should ensure London remains a central division location in the short term, and indeed may have been a key reason that the UK agreed to ratify). Additionally, “local divisions” and “regional divisions” can be set up throughout Europe, and local/region divisions are where most of the litigation of infringement issues is likely to take place. There will be a requirement for judges to be from multiple jurisdictions in local/regional divisions. Therefore, the UPC will be very much a European melting pot, including in the UK, at a time when the UK is planning its departure from the EU.