The previously contemplated fee for opting out of "classical" European patents from the Unified Patent Court ("UPC") system has recently been abolished by the UPC Preparatory Committee. This development should assist companies in preparing their budgets for 2017. The UPC Case Management System will allow for lodging multiple opt-out applications at once, thus facilitating the procedure.
February 2016 marked a significant milestone in turning the UPC Agreement into a functional court as the UPC Preparatory Committee made some of the last key framework decisions to shape the court. The most notable decisions concerned the final schedules for court fees and recoverable costs and a fee-less opt-out for existing European patents. Agreement was also reached on the extent of privileges and immunities for the court and judicial salary levels. This Alert focuses on the opt-out aspect in view of its importance for companies' timely assessment of their IP rights and prospective budgeting.
The UPC Agreement stipulates that the UPC will have jurisdiction not only over Unitary Patents, but also over existing "classical" European patents and Supplementary Protection Certificates ("SPCs") issued for a product protected by a European patent. During the transitional period of seven years, patent holders can choose to opt their European patents, patent applications, and SPCs out of the regime. An opt-out will require a notification to the Registry by no later than one month before expiration of the transitional period. The opt-out may also be withdrawn at any time unless an action relating to one of the patent designations has already been brought before a national court. If it is exercised after the transitional period has expired, withdrawal will place all the designations of the patent into the exclusive jurisdiction of the UPC.
An opt-out of a European Patent will require an Opt-out Application to be submitted via the UPC Case Management and eFiling System. This system is presently under development, and the beta test site can be accessed by registered users. The updates of the system released in mid March 2016 include a "basket" for lodging multiple opt-out applications at once. Work has also begun on developing application program interfaces ("APIs") to allow users to interface directly with the system, one of which will support bulk opt-out requests.
According to the previous drafts of the rules on fees, €80 would be due for opting out and back in of every European patent, patent application, or SPC. Allocation of a fee to ensure status quo has triggered much of discussion among the stakeholders of the present European patent system. In response to these concerns, the idea of an opt-out fee has been abandoned by the Preparatory Committee, which has removed these fees from the UPC. According to the explanatory section of the rules document, elimination of the opt-out fee was one of the "few areas of clear consensus in consultation responses". The section continues:
We now know much more detail as to how the proposed opt-out process will work and that the administration burden rests almost entirely with the applicant. We also know that any cost to the Court associated with the opt-out is related to processing the fee. There is no additional cost for the Case Management System to process opt-out requests if there is no fee. Requiring people to make payment generates costs for the court which would not be needed if there were no fee. So, removing the fee removes the cost; it also eliminates the problem of how to process payments particularly during provisional application and honours the commitment already made to only reclaim administrative costs for the opt-out.
The knowledge of a fee-free opt-out is of importance for companies with IP portfolios looking ahead at prospective budgeting for the year 2017, when the UPC system is predicted to come into force. While no official cost will be associated with the process as such, opting out will require an affirmative act. Therefore, patent holders are urged to timely analyze their IP portfolios and to decide whether to opt out or not, for each IP right concerned.
This decision will depend on a number of factors, such as the qualities of the patent, including its strength and significance for the business; cost of patent enforcement; industry-dependent geographical scope of patent protection; and business activities, to name just a few. Thus, it can be expected that clients will differentiate between the "crown jewels" of their IP portfolios and the patents of secondary importance. It can also be expected that the pharmaceutical industry will tackle the issue differently than will automotive manufacturers.
When making the decision, understandable skepticism toward an unproven and transformative regime should be weighed against the benefits of a single forum, generally lower costs, and a unique opportunity to shape the case law of the new court. Regardless, the decision on opt-out is due, and it is due soon.