The Greenshoots Podcast by Appleyard Lees – episode 36 – the UP and UPC: considerations for European patent owners

Transcript: 

Welcome to The Greenshoots Podcast by Appleyard Lees, a conversation for those who own, manage, or protect intellectual property.

Adam: Hello, I’m Adam Tindall, partner and patent attorney at Appleyard Lees in the UK, and I’m joined today by my fellow partner and patent attorney, Howard Read.

Howard: Adam, great to chat with you.

Adam: So we’re now firmly into the sunrise period before the launch of the Unitary Patent system here in Europe, which is going live in June 2023. And so, it’s now more crucial than ever that European patent owners and people with European patent applications understand the nitty-gritty of what they should be doing at this time. So I thought today we’ll, maybe if we approach this from thinking about the Unitary Patent system as with three phases may be. So the first phase of what do you do with European patents that you have, which are granted already; what to do with European patents, which are going to grant before the entry patent system goes live, and what to do after it’s gone live and the years ahead.

Howard: Adam, very much, so, yes. And in all of this, we got to think about what is the Unitary Patent system. It’s composed of two parts. We have the Unitary Patent or properly known as European patent with unitary effect, and we have the Unified Patent Court. Now, the Unified Patent Court may handle both European patents with unitary effect as we better know them, Unitary Patents, as well as European patents that is without unitary effect, those which are as customarily validated [00:02:00] today.

Adam: Yes, okay, right. So if you’re a patent holder, and you’ve got one or more granted European patents, what are they – what should you be thinking about now? What should you be – what decisions do you need to make?

Howard: Well, so now as a proprietor of European patent, you need to be thinking about whether or not you want to make use of the new Unified Patent Court, which comes into force from the 1st of June of 2023. And the question is how do you make that decision of whether or not you want to make use of the UPC, the Unified Patent Court. And it is not a straightforward answer, necessarily.

Adam: No.

Howard: Because you have to think about how you intend to, or, if you intend to search going forwards; or if you’re thinking about being defensive and protecting your granted European patent. So generally, and this should really be done on a case by case, and patent by patent basis, you have to consider the history of your patent application as well as the patent, and then, how you have been commercialising the product or method that’s covered by the patent, and where. So I think the first part I’m going to start is, if your European patent has been opposed, and maintained in opposition, either as granted or in amended form, or it’s further gone on to be maintained inand appeal either as granted or in amended form, then probably, you will want to opt out of the Unified Patent Court, [00:04:00] because there is a risk that having been challenged first before the European Patent Office, the EPO, there may be subsequent challenge before the UPC. Why is this important? Because challenge of your European patent before the UPC could result in revocation of those validations of that European patent in the contracting member states of the UPC. So if you want to protect what you’ve got, having already been attacked once, then probably you want to opt out.

Adam: I think that maybe even to have going back a step, and this was a point that confused me for a while was, in Europe, one has granted European patent but it’s validated in different countries. So one is opting out the patent, not the – all the validations themselves.

Howard: Correct, yes, so you opt out a European patent. And in so doing, you opt out all of the validations, including actually those that have expired.

Adam: Okay.

Howard: Or no, for which you’ve no longer paid renewal fees, ultimately, because you could always bring an action in respect of an expired or terminated or not granted patent.

Adam: So not all countries, which are European Patent Convention states have signed up to the Unitary Patent. So what effect is opting out on those countries?

Howard: So in those countries, so we can actually be more specific here, so there’s some 17 now countries that are contracting member states of the UPC. The others, and [00:06:00] we have to think about, yes, we’ve got 39 contracting states of the European patent convention, some 17 contracting states of the Unified Patent Court, so not all of the member states of the European Union are within or members of the Unified Patent Court. So, for example, Spain, Poland, Croatia are not. At the same time, countries such as the UK, Switzerland are not members of the European Union, but you could have validated your patents in these countries. As it stands, and as we best understand, the Unified Patent Court does not have a direct effect; in fact, it cannot have direct effect on countries outside of the European Union. It may have a long reach. It is more likely to have a long reach into countries of the European Union that are not currently contracting states of the Unified Patent Court, so potentially into Spain, Croatia, and Poland.

Adam: But what might be the benefits of not opting out and letting the patents stay under the jurisdiction of the Unitary Patent Court.

Howard: So if we think about opting out, then the aim is to maintain the status quo that the patents cannot be subject of action before the Unified Patent Court, either revocation or indeed, action for infringement. So you’d continue as today with actions before national courts of the validator’s European patents individually on a country by country basis.

Adam: So if I want to enforce my [00:08:00] German-European validated patent to the minute, I know that I need to get in touch with a German patent attorney, and we know what that team of people would look like, and we kind of know what the process would be in Germany. What kind of, if you wanted to enforce your Unitary Patent in the future, what extra things are what different things might you have to do or what might be different about the team of people you need to pull together to do that?

Howard: That’s very interesting, Adam. So just sticking with Germany for a moment, and suppose you’re to bring your action before local division in Germany, the one of four, so there’s potential there for even court for shopping, I will start with the – it has always been built at the Unified Patent Court will be a more economical way. It better serve more cost effectively, particularly, SMEs throughout Europe – SMEs, in fact, make up 99% of really all employment in Europe anyway. It is debatable at this stage whether the cost is actually going to be any less than bringing multiple actions in multiple countries.

Adam: It’s quite fascinating, isn’t it? You’d have thought those things would be feel quite central to finding a system. So from a patent owner’s point of view, if you’re thinking about, if you want to enforce your rights, then, so it could be a lot more expensive than you might expect if it was a national court, especially if you’re only interested in the activity in one country or a couple of countries. If you’re defending your Unitary Patent against another party, is that equally complicated or?

Howard: Yeah, so let’s think about the revocation. I suppose what we should always remember is that the opposition procedure before the EPO remains unchanged. So if you wish to challenge eligibility of a patent, that [00:10:00] is really the first port of call. And then, seeking revocation before the UPC would only be as a subsequent action and potentially very useful, particularly, in view of the relatively new rules of procedure, the boards of appeal, which limit the appeal to being a legal review of the first instance, the opposition division decision. So if you have, for example, new data, new evidence that was not admitted, or you have since found, since the proceedings before the EPO, then there’s potential to bring that to the UPC instead, and you have a [inaudible 00:10:55] a second bite at the cherry. But it is a relatively more expensive process at the UPC compared with at the EPO, even just thinking about the court fees versus the official fees at the EPO.

Adam: Yeah, I’m thinking, in particular, if the European patent is granted already, if it’s been granted for several years, then, opposition won’t be an option. Just sort of thinking about it from the point of view, if you’re trying to decide whether to opt in or opt out, it sounds like it’s a bit more expensive than…

Howard: It is a bit more expensive. Even if you are successful, of course, it’ll only affect, directly affect those contracting states of the UPC provider, that is what you’ve requested, though the decision of the UPC may be persuasive if you were to bring actions in courts of other states outside of the UPC contracting states, where the patent has been validated. So if a patent presents, for example, a freedom to operate risk, and [00:12:00] perhaps licensing group has been so far not possible, then this is an option. But again, I will say, you know, even in the early days, and that’s two to three, three to five years, it’s not certain how you are to challenge the validity.

Adam: So a couple of quick-fire questions before we sort of – before we move onto sort of the next phase. So I have a European patent, it’s been granted for a couple of years, it’s validated in five states. If I opt in, do I get coverage in more countries in Europe?

Howard: That’s good question. I’ll say there’s no such thing as opting in, okay? You can only opt out. So by default, on the 1st of June 2023, every European patent and patent application that has not been opted out, will, by default, fall under the competence of the UPC.

Adam: Okay, yeah.

Howard: Okay. Right. Now, you’ve got a granted European patent, it’s been validated in some states, you keep exactly those. There’s no extension or protection in territory or scope of the claims, for example. For your validated European patent, exactly the same, no change at all. You continue to pay renewal fees to the national officers exactly as you’ve always done.

Adam: Yeah, okay. All right. So next phase, right. So I have a pending European patent application, I’ve had the Rule 71(3) that says I’ve got a deadline to respond to, what do I need to be thinking about now? Should I rush ahead and get that paid and follow my translations and pay the grant fees, or what else do I need to think about?

Howard: It depends what you want to do, because at this stage, even before the 1st of June 2023, there is the option to [00:14:00] have, after the 1st of June 2023, a European patent with unitary effect, a.k.a., a Unitary Patent; or, you can validate as normal, and I will emphasize that if you were to request a Unitary Patent, then you would still be looking to get validations in those countries that are not part of the UPC system. So, for example, in Spain or Poland, or the UK, or Switzerland, as currently. There’s a mechanism that’s enabled by the European Patent Office currently that allows you to delay grant until after the 1st of June 20203. In fact, grant would be, if you were to request delay now, will be on the 7th of June, simply because, that is the first Wednesday after the 1st of June, which is when the European patent bulletin is customarily published.

Adam: So if you want a Unitary Patent, you have to delay grant until 1st of June?

Howard: Correct, yes. Because it is the date of grant or, in fact, the date of publication mentioned grant that is determinative. Okay.? So it has to be granted or not after the 1st of June 2023 in order to get a Unitary Patent, and the first date that we can do that is the 7th of June.

Adam: So if I have a Rule 71(3) intention to grant communication from the EPO, and that’s got a deadline of next week, what do I do?

Howard: So the first thing you can do is simply file a request to delay grant, okay, if you either want a Unitary Patent, or, if you’re still thinking about applying for a Unitary Patent, and you don’t want to make the decision just yet.

Adam: Right, yeah.

Howard: Okay, so it’s not a requirement to [00:16:00] necessarily have or request a Unitary Patent, if you delay grant.

Adam: Okay.

Howard: So we can delay grant through to the 7th of June, and you’ve got two options, you can, in advance or the 1st of June, request early, as an early request for unitary effect, which means that your European patent gets granted on the 7th of June, and your Unitary Patent will arise shortly thereafter as possible. You have to complete the requirements, which includes paying fee for Unitary Patent as well as filing a translation, full translation of the application into another language, and it depends on what language, the current language of the proceedings.

Adam: But if you don’t request, they – if you don’t make that request for unitary effects, then it will still have unitary effect. It’s just that it might be later on in June or?

Howard: No, if all you’ve done is requested a delay in grant, then the grant will be on the 7th of June. And then, you can decide what you want to do, because you’ve still got a month in which to request unitary effect. And then, you, within that month, pay the fees, and file the translation. And so, if your patent application is in English, you can file the translation into any language of the European Union, okay, which includes then language of those countries that are not UPC contracting states. So indeed, you can file a translation, Spanish or Polish or Croatian.

Adam: So with this phase I think the decision gets a bit more complicated for someone with a pending patent application than perhaps for a granted patent, because you not only have the, [00:18:00] whether you want the validated, you know, you want protection in lots of validated states, and/or whether to have the Unitary Patent and a handful of other Unitary states, but there’s the massive cost difference in validation as well. I mean, I had this for a client the other day, that if there were, say, 16 states that you want – that you normally validate in, it does seem to be vastly cheaper to go for the Unitary Patent option.

Howard: It does, indeed, and the renewable or annuity costs are significantly cheaper for a Unitary Patent compared with individual countries. But what we have to remember is that most proprietors do not validate in many countries. So effectively, by requesting a Unitary Patent, you are getting additional countries almost for free on your four or five, remembering that still, UK being one of the major validation, currently validation states, you’ll still be validated for the UK. Now, organisations that may be interested in having coverage across all the UPC contracting states are also, you know, who traditionally would validate in those, are also those organisations that are issuing the UPC. So, for example, if we’re taking – if we’re thinking about pharmaceuticals, pharmaceutical products, and you’ve got a patent towards an active pharmaceutical ingredient, it is highly unlikely that any of the, say, pharmaceutical innovators will be making use of the UP system of the Unitary Patent. They will instead do as they do today, and sandbox protection in each [00:20:00] of the contracting states individually.

Adam: Why is that?

Howard: Because of the potential risk of loss of patent protection for that key active pharmaceutical ingredient across all the contracting states of the UPC. In contrast, of course, as we have today with individual validations, if somebody was, you know, say generics company wishes to seek revocation of that patent, they have to do so in each of those countries. On the other hand, if you are, say, a start-up and you’re trying to build, or you’re building a portfolio of patent protection for your growing organization, and you want to have coverage in as many countries as possible to attract investors, for example, then you may seek the UP. Plus it has the additional benefit that the renewal fees are about the same as, what, four or five current contracting states.

Adam: Yes, it’s substantially less, I think over 20 years, it’s – yeah, you save tens of thousands of pounds, don’t you, and that’s what, yeah.

Howard: You do. You do. I will highlight here that even though you’ve got the saving of tens of thousands, and, in fact, it could even well be approaching a 100,000ish pounds over the lifetime of the patent, there are very, generally, very few proprietors who maintain their patents in force in all of the countries in which they validate it for the lifetime of the patent, over the potential lifetime of the patent, because of market forces.

Adam: Right, yes, and with the Unitary Patent, you’re stuck with it for the entire duration. You can’t drop case, as you can’t reduce your renewal fees.

Howard: You can’t drop countries, [00:22:00] no, a single, indivisible patent.

Adam: And one last question on this phase.

Howard: Of course.

Adam: So I get my Unitary Patent in June, and there are some countries which haven’t signed up for Unitary Patent, but might do in the future. So when those countries, when other countries sign up to the Unitary Patent system, does my Unitary Patent that I get now, does that come into force in those new countries that sign up in the future?

Howard: The Unitary Patent that you get in June of this year will be limited to those countries that were part of the UPCD when the European patent was granted.

Adam: Okay, the last phase now, so, in the future, right, where after June, what do patent holders have to think about different to now? And it seems like it gets a lot more straightforward, because they’re not having to worry about delaying grant or decisions about such like now, it’s just a simple decision between whether to validate in multiple countries or whether to have UP and validate in those countries which haven’t signed up to the UP. It feels like there’s nothing else to worry about until we get to the end of the transitional period, which is, maybe if you could explain what the traditional period is.

Howard: Yes. So, I mean, the UP-UPC, particularly the UPC brings in a new legal system. And, generally, whenever a new legal system is introduced, there is a transitional period in which the status quo may be, at least, maintained in part, but after which we move on to full application of the UPC, which, in full application of the UPC, every European patent, with [00:24:00] or without unitary effect, would fall under the UPC – the UPC will be competent for all of those, so that’s after the transitional period of seven years, which may be delayed for up to another seven years, unless an action has been taken, that action being to request, to opt out that patent or patent application, one month before the end of the transitional period.

Adam: Right, so at the end of that traditional period, and whether it’s seven years or longer, the only choice will be Unitary Patent and validate in the countries which aren’t part of the Unitary Patent.

Howard: So no, you still have the choice of Unitary Patent, plus validation in those countries that are not members of the UPC, or just validation as we have today.

Adam: Oh really? Even after the transitional periods?

Howard: Even after the transitional periods, there’s always going to be thate option to have validations exactly as we have today.

Adam: Okay.

Howard: Except that unless you’ve opted out, those validations in the UPC contracting state countries will now fall under the competence of the UPC.

Adam: Right, that’s it, yes, that’s the difference.

Howard: Yeah. So thinking about transitional period, if you’ve got a pending application that’s coming up too, and it doesn’t meanstill hasn’t been granted by the end of it, or one month before the end of the transitional period, and you don’t want to be under the exclusive competence of the UPC, then you would request to opt out of that European patent application so that when it does grant, the granted European patent is also not under the competence of the UPC.

Adam: Okay.

Howard: But that’s looking far into the future.

Adam: It is looking far into the future.

Howard: 2030 and beyond.

Adam: Not that far.

Howard: Adam, it has been a delight to talk with you today, lots to explore, lots for us to still learn about the UP and the UPC going [00:26:00] forwards, there’ll be many more questions. I look forward to discussing this with you next time.

Adam: Absolutely. Thank you, Howard, I’ve learned quite a lot just talking to you today about it.

Thanks for listening to the Greenshoots Podcast by Appleyard Lees. If you have a question or issue you would like our IP specialists to discuss on the podcast, then tweet us @AppleyardLees or email us at ip@appleyardlees.com.