In 2016, proposals crystalized that will bring significant changes to the European Union (EU) patent system and the patent litigation system. Despite the Brexit, the United Kingdom (UK) has announced that it too will ratify the new European patent and patent court system so that the new system can take hold in late 2017 or in early 2018. This will require all companies holding patents in the EU and/or doing business in the EU to adjust to these changes. Below we review the impact of these upcoming changes.

The new unitary patent

The new European patent system will permit companies to obtain a single patent that is valid in all participating EU member states. The unitary patent will be a European patent, granted by the European Patent Office. Upon request of the patent proprietor, unitary effect will be given to an European patent for the territory of up to 25 EU Member States.1 The unitary patent will co-exist with national patents and classic European patents, i.e., it is an additional option for applicants. This gives companies the option to obtain patent protection throughout the EU at significantly lower costs than under the current system, which requires European patents to be validated for each country individually.

Currently, all EU Member States except for Spain, Poland, and Croatia have indicated they will participate in the unitary patent. The system will only be implemented after the UK, Germany, France plus 10 more EU Member States have ratified the unitary patent and Unified Patent Court scheme.

The annual fees for a unitary patent will be significantly lower than the fees to maintain an European patent or national patents in each participating EU Member State. The maintenance fees will be equivalent to the maintenance fees payable for European patents valid in the four states of Germany, the UK, France, and the Netherlands. Thus, applicants seeking protection in more than four countries may save significant costs under the new system.

The new Unified Patent Court

The new system will also establish a Unified Patent Court (UPC), which will be a single court with jurisdiction in patent disputes for the entire territory of the EU.2 The UPC will have jurisdiction for all newly granted unitary patents and for existing and newly granted classic European patents.3 In this respect, the UPC will have exclusive jurisdiction for infringement proceedings, preliminary injunctions, actions for revocation of patents, and claims for damages.4

The UPC comprises a Court of First Instance and a Court of Appeal.5 Its judgments concerning infringement and validity of unitary patents and European patents will have a direct effect in all participating EU Member States,6 which may help to avoid litigation in multiple countries. The proceedings will probably be less expensive than proceedings in multiple states, but more expensive than proceedings in a single country. In particular, the agreement on the UPC provides for a "loser pays" rule obliging the unsuccessful party to bear the attorney's fees of the prevailing party.7

Getting prepared: Obtaining unitary patents, classic European patents, or national patents?

Under the new system, patent owners have the option to either acquire the new unitary patent, a classic European patent, or national patents for their inventions. Since double protection for the same invention will be essentially excluded, this will require patentees to decide which type of patent protection to obtain for their inventions.

While the unitary patent grants protection for all participating EU member states at relatively low costs, the unitary patent is subject to the exclusive jurisdiction of the UPC, which may make enforcement against small competitors more expensive. A unitary patent may also be eliminated by a single revocation action. On the other hand, classic European patents and national patents provide protection only in a limited territory, but at a lower cost. These patents cannot be eliminated by a single revocation action and they permit more tailor-made litigation strategies.

Thus, the new unitary patent provides patentees with an additional option for their patent portfolios, but companies need to carefully consider how to establish the right mixture of unitary patents, classic European patents, and national patents for their own patent portfolio.

Getting prepared: Optional opt-out for classic European patents

The new EU patent system will permit patent holders to declare that they want to opt-out from the jurisdiction of the UPC for individual or all of their classic European patents, which currently exist, or which will be granted during a transitional period of at least seven years.8

With respect to such opt-outs, several procedural rules and time limitations need to be considered. These include the application of a sunrise period before the new system starts. Once proceedings have been initiated before the UPC relative to a patent, an opt-out is no longer possible. On the other hand, the new system also allows companies to withdraw an opt-out declared for a patent, unless proceedings have already been brought before a national court.9

Therefore, patentees should take action early in 2017 to review their patent portfolios and determine whether they want to keep their patents in the existing court system or allow them to transfer to the UPC. This will require a thorough review of a company's patent portfolio and litigation strategies.

Getting prepared: License agreements

The new system will also affect the relationship between licensor and licensee with respect to patent license agreements.

Points to consider with respect to patent license agreement will include inter alia:

— Is the licensor free to decide whether he wants to transform a newly granted European patent into a unitary patent?

— Is the licensor free to declare an opt-out for licensed European patents? This will affect, in particular, those license agreements, in which the licensee has a right to sue for infringement.

— In the UPC, the exclusive licensee has a right to file suit against infringers, unless the license agreement provides otherwise.10 Thus, existing license agreements should be reviewed as to whether this is desired.

— In cases of multiple patent holders, all of the patent holders have to declare an opt-out in order for the declaration to be effective. Therefore, the joint owners of European patents should consider how they want to deal with the option to declare an opt-out.

In view of the above, all existing patent license and co-ownership agreements should be reviewed in order to verify whether the above (and other) issues demand changes to the agreements.