What is “Opting Out” and why does it matter?

The introduction of a new jurisdiction is rare enough, but the advent of a new court system that allows for litigation concerning valuable property assets across a multi-national market of over 450 million people and over 20 separate nations is a big event. That is what the Unified Patents Court system in Europe amounts to – it is the biggest change in the world of patents for over 40 years.

It is no surprise then that the planners of the new system have built into the rules the option for current patent owners, and people/businesses looking to commence new patents in the medium term, to “opt out” of the system, and to take a look to see how it works, before deciding whether it is something with which they want to engage.

This is the first in a series of blogs in our build up to the commencement of the UPC dealing with various issues around the “opt out” process and the strategic issues involved.

The Legal Basis

The Unified Patents Court Agreement (UPCA) says, at Article 83(3):

“Unless an action has already been brought before the Court, a proprietor of or an applicant for a European patent granted or applied for prior to the end of the transitional period under paragraph 1 and, where applicable, paragraph 5, as well as a holder of a supplementary protection certificate issued for a product protected by a European patent, shall have the possibility to opt out from the exclusive competence of the Court. To this end, they shall notify their opt out to the Registry by the latest one month before the expiry of the transitional period. The opt out shall take effect upon its entry on the register.”

Let us look at the highlighted words/phrases in turn.

The Court means the Unified Patents Court in any of its many forms – a national division, a regional division or the central division.

The transitional period means the period of seven years after the commencement of the UPC jurisdiction during which any owner of a patent within the system already has the choice of whether to use the UPC, or to use the previous system of litigating separate designations in their appropriate local courts.

What is the effect of an Opt Out?

The effect of a successful opt out is that the patent in question cannot be the subject of litigation in the UPC jurisdiction, either in respect of an action for infringement or a petition for revocation. All litigation relating to an opted-out patent must, as previously, be conducted in the national courts of countries where the patent has been designated.

For a patent owner, to opt out means that they cannot commence a single pan-European action to enforce the patent across the scope of the UPC jurisdiction. However, importantly, whether as a counter-claim to such an action or by separate petition, the patent will also be safe against being invalidated across the whole of Europe in one action. Until it becomes clear how the new court system works and, for example, whether it is “patent friendly”, owners of valuable patents may well think that it is the safer bet to opt-out of the UPC jurisdiction and wait to see how things evolve for a while.

How do you Opt Out a patent?

There are many factors to consider in making this decision and these will be the subject of later posts. In our next post on this topic we will look at when the process of opting out becomes available and the importance of timing.

Meanwhile, Austria has put in place a motion in the parliamentary process to become the 13^th UPC Signatory State to ratify the PAP-Protocol. Once completed, the PAP-Protocol comes into force and practical steps to prepare for the implementation of the UPC can begin, as explained in our previous blog.