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Jurisdiction of the UPC

8. September 2022/in Unitary Patent Court, UPC Overview

With regard to jurisdiction of the Unified Patent Court (UPC), a distinction must be made between the international jurisdiction of the UPC, the subject-matter jurisdiction, the jurisdiction in relation to courts of Member States with regard to non-unitary European patents, and the jurisdiction of the individual chambers of the Court of First Instance among themselves.

International jurisdiction

With regards to international jurisdiction, the most important aspect in practice is that a potential defendant does not have to be domiciled in a contracting member state in order to be brought as a defendant for patent infringement (Unitary and non-unitary European patent) before the UPC. Instead, it is also sufficient that the patent infringement has occurred or has an effect in the territory of a contracting member state.

Subject-matter jurisdiction

With regard to subject-matter jurisdiction, the most important aspect in practice is that the UPC has jurisdiction for infringement actions, provisional measures (in particular injunctions, preservation of evidence, etc.; see the corresponding overview), actions for declaratory judgment of non-infringement and nullity (revocation) actions arising out of or against Unitary Patent(s) and non-unitary European patent(s) as well as SPCs relating thereto (however, with exceptions for non-unitary European patents during a transitional period, see below). The UPC also has jurisdiction if the defendant asserts the FRAND objection in infringement proceedings (in which case however the UPC must apply EU law and the case law of the ECJ and, if necessary, also refer questions on EU law thereto if necessary).

The UPC hears counterclaims for revocation regardless of whether an opposition to a (non-)unitary patent has been filed with the EPO. The UPC may conduct the revocation action in parallel or suspend the proceedings. However, if the EPO declares a patent invalid (with binding effect), this is also binding on the UPC.

Jurisdiction within UPC

All actions have to filed with the Court of First Instance. The decisions of the Court of First Instance may be appealed to the Court of Appeal. The Court of Appeal is also the last instance. The Court of First Instance is divided into the central division and the so-called local and regional divsions. The contracting member states each have one (or, in the case of Germany, four) local chamber(s); several contracting member states can also join together and form a joint regional chamber instead. As a rule, infringement actions have to be filed with the local or regional chambers and can only be filed with the central chamber in certain constellations. See the article on forum shopping for the options available.

Relation to national courts

National courts, on the other hand, will continue to have jurisdiction over disputes concerning the ownership of both Unitary and non-unitary patents and employee invention rights thereto. Apart from that, national courts of course continue to have jurisdiction for actions re national patents and utility models.

In the case of non-unitary European patents, the patent proprietor can declare the so-called “opt-out” three months before the UPC starts its operation (so-called “sunrise period”) until presumably seven years after this date (provided that the patent was also granted or applied for at least within this period and provided that no action concerning this bundle patent is pending before the UPC). If the opt-out is declared and not withdrawn, this patent is permanently withdrawn from the jurisdiction of the UPC. As before, infringement proceedings and (after expiry of the opposition period) opposition proceedings are then to be conducted in the countries where the bundle patent is validated.

If the opt-out is not declared, plaintiffs have a right of choice with respect to bundle patents whether to go before a national court or before the UPC. At present, it is still disputed in the literature to which types of proceedings this right of choice extends (only infringement and nullity actions or also negative declaratory actions and provisional measures) and to what extent the exercise of this right of choice blocks the possibility to go before the respective other court. It is predominantly assumed that subsequent proceedings which territorially do not have the same subject matter as earlier proceedings remain possible or that the respective territory is to be excluded (e.g. if an infringement action is brought before the UPC, invalidity counterclaims can still be brought before national courts; if an infringement action is brought before a national court, an infringement action concerning the remaining validations can be brought before the UPC, etc.). However, it remains to be seen how the UPC and the national courts will position themselves in this regard.

 

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Applicability and enforcement of decisions of the UPC

8. September 2022/in Unitary Patent Court, UPC Overview

Decisions of the UPC are directly applicable in all contracting member states. Decisions based on non-unitary European patents are of course only applicable in member states in which the patent is validated at the time of the decision. Still, in both cases, the territorial applicability goes beyond individual states, making cross-border injunctions the norm.

Provisional enforceability

Furthermore, already decisions of the first instance of the UPC are enforceable and their enforcement can only be predicated on a bond. The appeal court can stay the enforceability at its discretion. However, it has to be noted that enforcement of first instance decisions can incur claims to damages for the defendant, in case the decision is overruled on appeal.

A decision can be enforced as soon as it has been served to the defendant (and enforcement has been formally announced).

Delivery by email

Service delays are not to be expected as defendants have to supply an email address for service (and risk a default judgement if they fail to do so).
Translations are only required insofar as enforcement measures have to be taken by the authorities of the member states (see below). However, in this case translations have to made for every respective state.

Penalty payments

In case the defendant does not comply with an injunction or an order to render information, the UPC can impose penalty payments (which are to be payed to the UPC). The collection of such payments and other monetary claims (in particular damages and reimbursement of costs) however has to be done nationally together with the competent authorities in the respective states, and under the applicable national rules with regards to scope. For example, Germany allows for seizure of property, bank accounts and claims against third parties.

 

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Forum Shopping

8. September 2022/in Unitary Patent Court, UPC Overview

In the context of actions for infringement before the Unified Patent Court (UPC), forum shopping means the possibility for a plaintiff to choose a particular division out of several competent divisions for his action.

Reasons for forum shopping

Reasons for choosing one division over another are based on the wiggle room and discretion that the rules on procedure and material laws governing the UPC provide the judges with, which can result in (statistically significant) differences between the divisions in how they decide on various issues and how they conduct the proceedings. Examples would be: win/loss ratio; how often court experts are appointed; how often counterclaims for revocation are referred to the central chamber and a corresponding infringement action is stayed; how often infringement actions are stayed in light of pending opposition proceedings before the EPO; how often local chambers request technically qualified judges in infringement actions; chances for success of applications for provisional measures.

Forum shopping at UPC

The rules governing the UPC allow forum shopping to a certain extent. Actions for infringement can be brought before a local and regional division of a contracting member state if infringement takes place in said state (e.g. sale of goods). Further, actions for infringement can be brought before a local and regional division of a contracting member state if defendant has its seat in said state. In case the defendant does not have its seat on the territory of any contracting member state, the action can also be brought before the central division. In case a contracting member state has several local divisions (for now only Germany, with four divisions), an action can be brought before any of these divisions (in case infringement takes place on the territory of that state).

For example: a defendant has its seat in Austria, infringement takes place in Germany, Italy and France. The action for infringement can then be brought be before the one of the local divisions in Vienna, Munich, Dusseldorf, Mannheim, Hamburg, Milan and Paris.

Since the divisions of the UPC, in principle, render decisions for the territories of all contracting member states (see the corresponding article), plaintiffs can take advantage of the peculiarities of the divisions in cases where several divisions are competent (as in the above example).

 

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Provisional measures and orders

8. September 2022/in Unitary Patent Court, UPC Overview

In patent infringement proceedings before the Unified Patent Court (UPC) a claimant can, in particular, be awarded claims to injunction, information and damages as well as recall and destruction. However, the rules governing the UPC provide provisional measures and orders which can be applied for before or besides main infringement proceedings. “Provisional” means that decisions of the court can be obtained quicker than in main proceedings, but are only preliminary, meaning that they can be overruled in case of a differing result in the main proceedings.

Provisional measures and orders can be put in three categories:

Categories of provisional measures

1st Category – temporary order regarding main suit

The first category would be measures which preliminary and partially award claims, namely an injunction (with the respective consequences in case of a breach) and seizure of potentially infringing products.

2nd Category – order preparing main proceeding

The second category would be orders which allow a potential claimant to assess the chances of success of an infringement action, namely orders for inspection, e.g. the inspection of a potentially infringing machine together with a court-appointed expert.

3rd Category – safeguards for monetary claims

The third category would be measures with which monetary claims from an (future) infringement proceeding, in particular claims to damages and reimbursement of costs, can be secured through the seizure of assets.

Provisional measures and orders can be applied for before or besides main infringement proceedings. However, if no main action is initiated, defendant can demand that a main action is initiated or provisional decisions by the court be lifted alternatively.

Timeline of the procedure

The duration of the proceedings re provisional measures and orders can vary between hours or days and weeks or months. This primarily depends on whether the court gives the defendant the possibility to reply to an application for such measures in writing and whether an oral hearing is scheduled. This in turn is primarily dependent on the degree with which infringement and validity can be assumed and how urgent the measures are for the applicant (can he e.g. claim that without a quick decision he would incur heavy and irreparable damages?).

Protective letters

Potential defendants can deposit a protective letter at the court, meaning a written summary of their presumed defense. A protective letter thereby ensures that the court hears the defense and thus rejects the application (or at least gives the defendant the chance for further submissions) if a defendant assumes that such an application could be filed.

 

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UPC: Case management and proceedings

8. September 2022/in Unitary Patent Court, UPC Overview

The written procedure of the, in practice, most important proceedings, actions for infringement of patents together with counterclaims for revocation and applications to amend, is illustrated in the Rules of Procedure:

Graphic

 

 

The following additions should be noted:

Other procedures

Preliminary objections regarding competence of the court and procedural language must be raised within one month after service of the infringement action.

The chart further does not show the ability of the court to stay proceedings. In practice, relevant grounds for a stay of the proceedings can be separate actions for revocation before the central division (for which the three-month deadline, which applies to counterclaims for revocation, does not apply) and/or opposition proceedings before the EPO. Also of relevance are cases in which a local division refers a counterclaim for revocation to the central division and stays the infringement action (instead of continuing it).

Deadlines

Furthermore, the deadlines shown in the chart are not binding, but can be extended given a respective application from a party. One example would be the case where defendant argues that he cannot meet the three-month deadline for the counterclaim for revocation (e.g. because the prior art search is extensive) and does not want to be referred to a separate claim for revocation.

The written procedure is followed by the interim procedure, which is scheduled to take three months. The oral hearing shall be held after the interim procedure is closed. Ideally, the whole proceedings will take no longer than 9 to 11 months.

Interim Procedure

In the interim procedure, the court prepares the oral hearing. Together with the parties it discusses whether witnesses or court experts should be summoned. Regarding the latter, the parties can make suggestions on whom to choose and what questions to ask. After the written expert opinion has been issued, the parties can also make comments thereto.

During the written procedure, the court can manage the case, e.g., by ordering the parties to submit relevant evidence.

Decisions by the court can be appealed. The appeal proceedings mirror the proceedings in first instance, with the main difference being that for the most part no further facts re infringement and prior art can be submitted. The parties therefore have to rely on the facts and prior art presented in the first instance. Consequently, in the written procedure, each party can usually make only one submission (instead of two or three). Ideally, the appeal proceedings will therefore also take no longer than one year, meaning that a final and binding decision can be expected no later than two years in total.

 

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The Unitary Patent in contractual practice

1. September 2022/in Unitary Patent, UPC Overview

New aspects requiring regulation for existing and future contracts

A topic that does not immediately come to mind in relation to the Unitary Patent System is whether the introduction of the Unitary Patent is to be taken into account in the context of negotiating patent-related contracts. This includes classical license agreements as well as R&D agreements, consortium agreements and other agreements comprising provisions on the creation or use of patents.

In fact, the introduction of the Unitary Patent System brings up new aspects in the context of such contracts that need to be regulated and which are often not yet sufficiently taken into account in existing contracts. In particular the following aspects need to be considered when negotiation future contracts and revising existing contracts.

Choice of law by application

Pursuant to Art. 7 of Regulation 1257/2012, the law applicable to a Unitary Patent as an object of property in all participating member states is determined by where the patent applicant is domiciled or has his principal place of business at the time of filing an application for a Unitary Patent. Where two or more persons are entered in the European Patent Register as joint applicants for a patent, the domicile or place of businsess of the first-mentioned applicant shall be decisive. Accordingly, in the case of a joint patent application, the question of which applicant is to be designated first may gain considerable importance in the future and should be considered contractually with respect to Unitary Patents.

Opt-out requests

A quite complex aspect arises in relation to the possibility to file opt-out requests with respect to European patents granted or applied for prior to the expiration of the transitional period.

The right to opt-out generally belongs to the owner or applicant of the patent, which can lead to conflicting interests, particularly in the context of exclusive license agreements. Thus licensors and licensee may well come to differing conclusions when weighing the advantages of a uniform enforcement of rights against the disadvantages of the risk of a central attack against the European patent. The competences regarding the filing and timing of an opt-out request should therefore be contractually regulated.

In this context, it is also significant that, for example, the holder of an exclusive license is in principle independently entitled to file an action under the Agreement on a Unified Patent Court. If the (exclusive) licensee brings an action before the Unified Patent Court before an opt-out has been declared, the patent proprietor loses the possibility for an opt-out. Thus, there may also be a need for new contractual provisions regarding the enforcement of patents. Conversely, this also applies to the possibility of withdrawing from an opt-out once it has been declared, which is only possible as long as no action has been brought before a national court.

As regards granted EP patents, it should also be noted that an opt-out request can only be filed uniformly for all validated parts, which always leads to a need for regulation if the different parts are not held by the same proprietor. In the case of joint ownership, it should also be noted that the opt-out must in principle be declared jointly for all applicants or owners, which requires prior clarification between joint-owners.

Summary

The introduction of the Unitary Patent gives rise to a whole series of new aspects, which should be taken into account when negotiating patent-related contracts. On the one hand, this applies to future contracts. On the other hand, since this topic will generally not sufficiently be taken into account in existing contracts, existing contracts should also be reviewed in order to discuss open issues requiring regulation between the contracting parties at an early stage. Since opt-out requests should preferably be filed during the sunrise period in order to avoid the risk of losing the option through a lawsuit before the Unified Patent Court, this topic should be addressed as early as possible.

 

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UPC: Enforcement possibilities for right holders

29. August 2022/in Unitary Patent Court, UPC Overview

The UPC system offers a variety of enforcement measures, including the issuance of preliminary and permanent injunctions, damage awards and orders to render information and account. The following provides for a short overview of some o these available measures:

1. Injunctions

 Where there is infringement, and where the patent is found to be valid, the UPC will have the competence to grant a permanent injunction, which (in the case of a Unitary Patent) then covers the territory of all UPC member states at the time the Unitary Patent has been granted. In case of a bundle (EP) patent, which has not been opted-out of the system, the injunction will have a more limited effect, namely in those countries, where the EP patent has been validated and maintained. Unlike in some EU states, such as Germany, the UPC are likely to exercise some limited discretion whether to grant an injunction in each individual case, in particular with regard to the principles of proportionality. There likely will be differences between the local divisions as to what extent such discretion will be applied, so that forum shopping is likely to be driven by this factor, at least in the initial phase of the system.

The UPC can grant the possibility to provisionally enforce the injunction even while an appeal is still pending. For this, the UPC may order a security to be provided by the right holder prior to enforcement of any parts of the first instance decision, including the injunction. In any case, a preliminary enforcement will subject the right holder to possible damage claims, if the decision is later revoked on appeal. 

2. Damage Claims

While the availability of an injunction will likely lead to many settlements, which may include damages, after a successful trial, the UPC also has the competence to grant damage claims and to set out a damage award that covers all sales in the territory of all UPC member states.

The UPC has the possibility to decide on infringement and damages in the same judgement, or to rule on damages at a later stage, either based on the parties’ submissions, or after defendant has laid open its books. Damages will be oriented at economic factors such as lost profit and unfair profits made by infringer, but also other factors such as the moral prejudice cased to the injured party by the infringement. It can be expected that an appropriate royalty payment, set out as a lump sum for the past infringing use, will be the most common method of calculation. 

3. Evidence Proceedings

The UPC agreements stipulate that a party alleging a statement of fact that is contested by the other party, must produce available evidence. Conversely, a statement of fact that is not specifically contested by any party shall be held to be true as between the parties. To bring the necessary evidence, the UPC allows for a large variety of means, including a hearing of the parties and/or witnesses, requests for information, production of documents, opinions by experts, inspections, comparative tests or experiments and affidavits. 

While it is generally upon the parties to obtain and produce the required evidence, the UPC may order the adverse party or a third party to produce evidence, provided that evidence lies in the control of the other party or third party and that their confidentiality interests are acknowledged and safeguarded. 

The UPC may also issue an order to inspect premises and to gather evidence. Such measures may include the physical seizure of the infringing products, and, in appropriate cases, the materials used in the production and/or the distribution of those products and the documents relating thereto as well as the inspection of premises. To obtain such order, the right holder has to present reasonably available evidence to support its infringement claim. In order to guarantee the full effectiveness of this measure, and if necessary, the order can be obtained ex-parte (i.e. without hearing the other party first). 

4. Provisional Measures

 The UPC may grant provisional injunctions to prevent any imminent infringement or to prohibit the continuation of an alleged infringement. The UPC may also order seizure or delivery up of allegedly infringing products and precautionary seizure of the alleged infringer’s property.

To grant any such measures, the UPC may require the right holder to furnish reasonable evidence to demonstrate with a reasonable degree of certainty that the patent is valid and infringed. It is not clear yet, whether the UPC will apply a presumption of validity or what is required to rebut such presumption. In general, the UPC will weigh up the interests of the parties prior to granting or refusing injunctions and will deny the measure if there is unreasonable delay in seeking the provisional measures.

The UPC may invite the defendant to object to the application for provisional measures and it may hold an oral hearing to which it may summon either both parties or only the applicant. If necessary, and particularly where any delay is likely to cause irreparable harm, the UPC  may also order provisional and protective measures ex parte, i.e. without hearing the defendant. If the UPC rejects ex parte measures, the applicant may withdraw the application and request that it remains confidential. To mitigate the risk of ex parte measures, defendant may file a protective letter. A protective letter is valid for an extendable period of 6 months and shall be forwarded to the panel or judge appointed to decide on provisional measures in relation to the patent covered by the protective letter.

 

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UPC: Defence possibilities for defendants

29. August 2022/in Unitary Patent Court, UPC Overview

1. Formal Grounds for Defence

 As a formal ground for defence, defendant may challenge the jurisdiction and competence of the UPC, as the competence of the national courts continues to apply for all actions that are not listed in the UPC agreements, such as any actions based on opted-out EP patents.

2. Non-Infringement

For any infringement claim to succeed, claimant will need to show that defendant has used the invention, or that such use is imminent. Defendant, on the other side, may show that no such use has occurred, either for a lack of any reserved act of use (such as making, offering, placing on the market) in the relevant territory, or for the accused product or process not being subject matter of the patent in suit. For the latter, defendant may show that one or more features of the asserted patent claims are not realized in the accused product or process.  The UPC agreements provide for certain limitations on the effect of a patent, such as acts done privately and for non-commercial purposes, acts done for experimental purposes, or various other acts that are in the public interest and/or are exempted from patent protection by international treaties. If any of these situations apply, defendant may also establish a sound non-infringement defence.

3. Revocation (counter-)action

One of the most common defenses against a claim for patent infringement is the challenging of the patent’s validity. For the UPC system, there are two different options to challenge a patent that is being enforced in a pending infringement case: First, defendant may file a separate revocation action with the competent division of the UPC, or an opposition with the EPO, which then remains separate from the infringement case. Secondly, defendant may file a revocation counteraction, which will then be part of the infringement case and will be dealt with simultaneously.

In case of a separate revocation action, defendant will usually request that the infringement case is being stayed until a decision on the patent’s validity, or that any decision on infringement is made subject to the condition subsequent that the patent is not held invalid. The UPC courts have discretion to grant these requests.

There will be (and are already) numerous strategic considerations for a defendant in an infringement case at the UPC whether to file a separate revocation action, a revocation counteraction, or both. Some of these considerations include the question of which division may best decide on the patent’s validity (as a separate revocation action filed by  non-party to the infringement case can bring this case to the central division), which division should be handling the infringement case, the question of when relevant prior art will become available, and whether the infringement case has been brought by the patent proprietor or a licensee.

4. Entitlement to Use 

Defendant may further raise a defence concerning its entitlement to use the patented technology, which can be based on (a) defendant’s co-ownership of the patent, (b) a license which allows defendant the use of the patent, and/or (c) defendant’s prior use rights.

5. Antitrust Defense 

While the UPC agreements do not set out any antitrust defenses itself, it explicitly allows to apply EU law, so that the general restrictions on antitrust and anti-competitive behavior are likely to apply also in front of the UPC. Consequently, it is expected that the UPC courts will apply the framework set out by the ECJ in relation to anti-competitive behavior by the enforcement of standard essential patents (“SEP”), including the necessity for an SEP holder to make a fair, reasonable and non-discriminatory (“FRAND”) offer and for an implementer to appropriately respond thereto.  It is unclear, however, whether the UPC courts will assume the task of setting a FRAND rate for a potential license on a SEP, if the antitrust defense is being raised, noting that courts of the participating EU member states have been reluctant, so far, to engage in such calculations themselves.

6. Exhaustion of Rights

Exhaustion occurs if a product has been placed on the market in the EU by or with the consent of the patent proprietor, which provides for a EU-wide (regional) exhaustion and a corresponding defence in front of the UPC.

7. Limitations and Forfeiture 

The UPC agreements set out a five-year period after which actions “relating to all forms of financial compensation may not be brought”. Forfeiture is not explicitly mentioned in the UPC agreements, but the UPC must apply all rules, procedures and remedies in a “fair and equitable manner”, which may include the possibility to defend against a claim being brought extremely late (and against the justified expectations of the defendant) based on good faith considerations.

8. Entitlement Suits 

Another possible defence is to claim ownership rights to the patent in suit. Such entitlement suits however fall outside the jurisdiction of the UPC courts. They still need to be filed with the competent national courts, most often at the place of domicile of defendant; the UPC is then likely to stay its proceedings.

 

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