So You Think You Can Opt Out

The unification of the European patent system has been on the political agenda since about 1949, but since yesterday (6 October) there finally is a proper date for the opening of a common Unified Patent Court, shared by at least 17 EU countries. According to the official UPC Preparatory Team, the new court will open its doors on 1 April 2023. Of course, one or two (or more) months of additional delay cannot be ruled out, but the times of indefinite postponement appear to be over.

In the profession (i.e., IP lawyers and patent attorneys), the imminent start of the UPC is met with a mixture of excitement and concern. Excitement about the new opportunities to efficiently deal with semi-pan-European patent disputes, and concerns about the legal foundations and practical implementation of the new system.

For the more cautious patent owners, Article 83 of the UPC Agreement provides a transitional provision that allows them, during a period of at least 7 years, to opt out their classical European patents (as opposed to the newly available Unitary Patent) of the UPC system. When opting out of the UPC system, the validity and infringement of the opted-out patent are dealt with by national courts.

As your e-mail inbox will have taught you, opt-out systems are more difficult to avoid than opt-in systems. The UPC team knew this too and designed an opt-out system and procedure that will make it a lot easier to be in than out. The fewer patents are opted out, the more cases will be dealt with by the UPC. This will ensure a proper basis of case law to be formed quickly, and enhance everyone's familiarity with the new system.

The procedure for opting out classic European patents is worked out in detail in Rule 5 of the recently finalised Rules of Procedure of the Unified Patent Court. In short, you can opt out your patent if:

• it is not or has not been subject of any legal action at the UPC, and
• an application to opt out is submitted by the owner of the patent (if the patent has multiple owners, which may be different for different states, all owners need to jointly file the application to opt out).

An application to opt out can be withdrawn, but no new application to opt out can be filed thereafter. To avoid a competitor starting a revocation action at the UPC before you have had a chance to opt out, applying to opt out is possible while the patent application is still under examination at the EPO, or during a 3-month sunrise period before the UPC opens it doors.

So far, so good. A new system is starting and the Rules of Procedure favour participation in the new system over clinging on the old one. However, when you think that subjecting your valuable patents to an untested new legal system is too scary, a transitional provision allows you to stick with what you know and to observe how the new system evolves before you get actively involved yourself. Unfortunately, the opt-out system does not come without problems.

Practical issues

An online system called CMS (Case Management System) will be the only possible way for patent owners to submit their applications to opt out. Assuming the system works as planned and you have a properly trained and authorised attorney, each application to opt out will take you about 5-10 minutes (excluding preparing and checking the relevant documents). Doable if you own a few patents and have a good record of who its owners are, but challenging and time-consuming when you own hundreds of European patents in a complex network of interrelated companies. Also patent firms representing large numbers of patent owners can expect a very busy sunrise period.

An API is promised, that should allow companies and patent firms to bulk opt-out large numbers of patents. However, it looks like the API will process each application to opt-out separately and sequentially and will still need about a minute per application. When trying to go any faster, all kinds of errors occur and the CMS may suspect a DOS attack. For big patent portfolios, the API may still need to run for at least a full working day at some point during the sunrise period. Just try to imagine how the CMS needs to be able to cope with hundreds of IP firms and companies trying to do this within a period of a few weeks.

And then there's the authentication issue. Although, the current FAQ on the official UPC website still suggests that a combination of SMS and e-mail will be sufficient to ensure that only authorised legal representatives submit the opt-out applications, recent communication by the UPC team makes clear that a far more stringent authentication process will be implemented. The now required electronic IDentification certificates and physical secure devices (smart Card or token) is not just difficult to obtain. Even professional e-signature service providers have no idea what it exactly is, and I still have not have heard of any first-hand anecdotal evidence of someone who actually managed to make it work in combination with the currently available CMS test system. While this practical problem may be solved before the sunrise period starts (1 January 2023 according to the current prognosis), it may be unrealistic to expect thousands of authorised legal practitioners to manage to obtain the required certificates and secure devices before the official UPC starting date.

Although discussions regarding the issues linked to the CMS appear to be growing in recent weeks, the Preparatory Committee has seen fit to set out their preferred timetable. Let's hope that IP practitioners are given ample time to acquaint themselves with the CMS and acquire the appropriate authentication requirements before the sun rises on the UPC era.

Legal issues

More interesting than the practical problems, are the legal problems. When patent owners apply for an opt-out, they probably expect to be safe from the UPC system. Unfortunately, this is not the case. A competitor who decides to start a central revocation action at the UPC against a correctly opted-out patent may still succeed. As The Eagles used to sing, "You can opt out, but you can never leave".

Of course, nothing stops a party from trying to start an action at a court that does not have jurisdiction over the matter. Normally, you would expect the court to quickly dismiss the case on formal grounds. Not in the UPC though. According to Rule 19.1(a) of the Rules of Procedure, the patent owner needs to lodge a Preliminary objection within a 1 month period of receiving the Statement of claim. According to Rule 19.7, a failure to meet this deadline will immediately be considered "as a submission to the jurisdiction and competence of the Court". Considering that the Statement of claim first needs to arrive at the correct desk and the responsible people need to be present and available to lodge the Preliminary objection, 1 month is not a very long period for enabling a patent owner to avoid ending up in the system he explicitly opted out of.

Even more interestingly, there appears to be no Rule in the Rules of Procedure that suspends the requirement for the patent owner to submit a full Statement of defence within a period of just 3 months (Rule 23) after the servicing of the Statement of claim. Rule 19.6 even explicitly prescribes that: "The period for lodging the Statement of defence [Rule 23] shall not be affected by the lodging of a Preliminary objection, unless the judge-rapporteur decides otherwise". As a consequence, the owner of an opted-out patent has no other choice than to actively participate in the revocation procedure initiated at the Unified Patent Court he didn't want to be part of.

So, we appear to be heading full steam ahead for the Age of UPC. Will it be smooth sailing or are we heading for some choppy waters...?