Momentum is clearly building towards the day when the UPC will open for business. Therefore, it is imperative that patentees and their competitors now begin to assess the approach they wish to take to unitary patents in their businesses and how to deal with European patents ("classicals", to distinguish them from unitary patents) in the UPC. In particular, this means addressing the issue of opt-out. To assist, we have prepared four articles this month addressing different aspects of opt-out.
This article deals with the issue of who has responsibility for opting-out.
Co-proprietors of a patent
By whom must the Application to opt-out a classical European patent / application from the UPC be made? The opt-out procedure set out in Rule 5 of the draft Rules of Procedure (see the procedure for opting-out and withdrawal) states that the application to opt-out must be lodged by the "proprietor" of a granted patent or application. If the application or granted patent is owned by two or more proprietors "all proprietors shall lodge the application". In practical terms, this means that co-owners of a patent must agree between themselves whether they wish that patent/application to be opted-out and therefore need to collaborate on their opt-out strategy from an early stage.
Designations with different proprietors
The wording in Rule 5.1(c) in the 16th draft of the Rules refers to an opt-out application being made in respect of "all of the Contracting Member States for which the European patent isdesignated" (emphasis added). This makes it clear that a classical European patent must be opted-out across all the designated Contracting Member States, or none at all.
Can the patentee of one designation opt-out all designations in circumstances where the ownership of different designations has been assigned to third parties? The requirement for "all proprietors" to lodge the Application1 means it cannot be intended for this to be possible. Consequently, agreement must be reached between proprietors where one or more designations of a classical European patent have been assigned after grant. This includes the proprietors of designations of the patent in contracting Member States that have not ratified the UPC Agreement at the time of the opt-out.
Status of an exclusive licensee
Both the UPC Agreement and the Rules of Procedure are silent on the status of an exclusive licensee in the decision to opt-out. However, Article 47(2) of the UPC Agreement, which deals with parties to an action, confers essentially the same rights to the patent proprietor and an exclusive licensee:
Unless the licensing agreement provides otherwise, the holder of an exclusive licence in respect of a patent shall be entitled to bring actions before the Court under the same circumstances as the patent proprietor, provided that the patent proprietor is given prior notice.
Should an exclusive licensee therefore be treated like a "proprietor" who must give its consent to opt-out? There is an argument that a party who has bargained for exclusive rights and has the power to enforce them subject only to giving notice to the patentee, ought to be able to choose the jurisdiction in which they do so. On the other hand, there is good reason to argue that the right to decide on opting out from the UPC was deliberately limited to patent proprietors, as ownership can easily be proven based on the patent register. Extending this right to exclusive licensees is hardly practicable, as patent licences are often not registered, and there may be more than one exclusive licence granted under the same patent or designation. If an exclusive licensee wishes to make the decision on opt-out instead of the patent proprietor, especially in a situation where the exclusive licensee enforces the patent in its own name, the parties can provide for an obligation on the patent proprietor to consent to such a decision in the terms of the licence agreement. In other situations, providing for an unanimous decision may be appropriate. In any event, well advised parties to an exclusive licence should consider the issue of decision making and consent before entering into the agreement.