Who controls your opt-out?

The impact of the UPC on existing and future commercial arrangements

As the commencement of the Unified Patents Court looms larger, we are turning our thoughts to some of the really practical issues which need to be addressed with a degree of urgency now. We will be looking at the question of “opting out” of the UPC jurisdiction in a sequence of blog posts to follow, but we thought we would start by looking at some of the non-contentious issues which can arise as a result of the coming of the UPC and the Unitary Patent.

More than six years ago this firm published an article in Managing Intellectual Property entitled “The Unitary Patent for non-litigators“.  One of the points we made then was the need for companies who enter into commercial arrangements relating to patents (licences, security etc.) to carefully consider the impact of the UPC opt-out on their existing arrangements.  In particular, we noted that:

• Patentees should check their EPs are registered with the correct details and whether the ownership of different designations of the same patent are owned by different companies, something which might then require agreement prior to deciding whether to opt-out;

• Patentees should consider whether their existing licence agreements contain appropriate provisions to deal with the control of the opt-out decision and litigation.  At the very least, patentees should consider discussing whether to opt-out with their licensees to ensure they are aware of the decision and the reasons for it, and have clarity as to the circumstances in which the patentee may choose to opt-out, or to opt back in. These negotiations could take time and raise difficult issues, particularly given the risk/benefit analysis that needs to be undertaken when deciding whether to opt out.

• Parties should review existing development agreements to ensure there is clarity over the opt-out treatment of any patents generated pursuant to that agreement; and

• Parties should consider whether failing to opt patents out of the UPC has an impact on their value as security, and discuss with lenders if appropriate.

Whilst the UPC was effectively placed on hiatus (following the Brexit vote in the UK and constitutional challenges in Germany) companies could be forgiven for not taking steps to address these matters.  Certainly our experience is that very few companies have done so.  However, with the period for opting out expected to commence at some point in the first half of next year, the time available for these discussions to take place is now very limited and there is considerable scope for disagreement if perspectives on the opt out differ.