The role of the UPC

News has emerged from the July 10 meeting of the Unified Patent Court (UPC) Preparatory Committee that it is considering a ‘provisional operation’ period for the new court, starting in January 2016.

The provisional period would allow appointment of a registrar and other key roles, and further ratifications of the UPC agreement by contracting member states. It would also allow the recording of opt-outs of European (‘classical’) patents, instead of the earlier proposed sunrise period.

The period would run until a formal start date for the court, in autumn 2016 at the earliest. The formal start date would then allow for the lodging of the court’s first cases. The provisional operation period is yet to be confirmed officially, but it would bring forward the date at which European patents can be opted-out, compared with the previous estimates of sometime in 2017–2018.

This article looks at what will happen after the transitional period, which is scheduled to last seven years—if it is not extended.

After the transitional period expires (and article 83 of the UPC agreement no longer applies), the UPC will be (exclusively) competent to hear cases relating to European patents, as well as unitary patents.

Its specific competence is listed in articles 32(1)(a) to (i) of the UPC agreement, with the prefix that this is “exclusive” vis-à-vis national courts.

For all other actions not listed in the exclusive competence, the national courts of the contracting member states “remain competent”—however not with the prefix “exclusive”. A competing non-exclusive competence of the UPC with the national courts outside of the exclusive scope of article 32(1) of the UPC agreement is therefore suggested by the wording of articles 32(1) and (2) of the agreement.

Also the fact that this may require the UPC to base its decision on national law does not exclude such a co-competence: in accordance with article 24 of the UPC agreement, the UPC shall base its decisions—where required—on applicable national law.

If correct, this broader competence has significant potential for avoiding multiple actions between the UPC and the national courts. Examples of where this would be relevant are as follows.

Take, for instance, disputes concerning patents as ‘objects of property’. Article 7 of the Unitary Patent Regulation provides that matters concerning a unitary patent as an “object of property”—meaning entitlement to the patent—must be treated as if the patent is a national patent of the participating member state. The law that applies is determined by the formula set out in article 7of the regulation.

An exclusive forum?

But does it follow that the member state whose law applies, must also be the member state that provides the exclusive forum for an entitlement dispute?

This would be an inconvenient conclusion, because it would require that any defence to infringement based on entitlement has to be decided in a national forum, prior to or in parallel with the proceedings in the UPC. If the dispute concerned more than one classical patent validation, a multitude of actions may be needed. This is a result that undermines the purpose of the UPC as a single forum in patent actions.

Similarly, rights to an invention of an employee and compensation for employee inventors are matters of national law, linked to national territories. But there is no apparent bar on the UPC as a forum for such actions provided the appropriate national law is applied.

Where non-exclusive competence of the UPC could prove most important is for actions concerning patent licences. Disputes concerning the existence and terms of patent agreements, such as patent licences, are not included within the list of matters for which the UPC has exclusive competence.

Patent agreements are based on contract law. The contract law applicable, as well as the forum in which disputes concerning the agreement are to be heard are usually determined by a governing law and jurisdiction clause.

A claim for a breach of a patent agreement (whether in regard to a unitary patent or a European patent) would accordingly be brought in the country contractually agreed upon in that licence. In the absence of such a clause indicating a specific national court for disputes, it could be argued that also the UPC would be competent. The same would apply if the parties would specifically choose the UPC as a forum in which disputes concerning that agreement are determined.

Indeed, this is consistent with the fact that the UPC does have exclusive competence for counterclaims to infringement involving licences. This requires the relevant UPC panel to apply the law agreed in the licence—but the application of foreign law is not usual in patent actions.

A further issue that can arise in the context of licence disputes is the claim scope or validity of one or more of the patents licensed. If these are put in issue in a national action under a licence—for example, in a dispute about whether royalties on that patent are due—in which forum must they be determined? Is it the court that has jurisdiction for the licence under the contract terms, or the UPC? It is clear from article 32(1) UPC agreement that the UPC has exclusive jurisdiction for disputes relating to validity and infringement of patents.

Hence, if a licence provides that the governing jurisdiction is a country other than the UPC, these specific matters concerning the patent must be split off and dealt with in separate proceedings in the UPC. A simple way to avoid such a split jurisdiction, and the complexity and cost that could arise, is for the parties to agree that the UPC will have exclusive jurisdiction for disputes concerning the agreement.

Compulsory licences

A rarer area of dispute, which is among the actions for which the UPC has exclusive competence, is compulsory licences. The unitary patent regulation states that compulsory licences for unitary patents should be governed by the laws of the participating member state where the licence is sought. Hence, compulsory licences are governed by the law of the country in which they are granted.

However, there is no obvious reason why disputes regarding such licences should not be heard in the UPC on the same basis as other patent agreements, with the UPC applying the relevant national law. Furthermore, unitary patents may be made available for licences of right, by the filing of a statement with the European Patent Office to this effect.

Article 8(2) of the Unitary Patent Regulation states that a licence obtained under this provision is to be treated as a contractual licence. Compensation actions for such licences of right are among the matters on which the UPC has exclusive competence. It would therefore be an odd result if the UPC were able to determine compensation actions based on licences of right but not the terms and existence of those licences.

Another area of potentially split jurisdiction concerns raising prior use and rights of personal possession as defences to infringement of a unitary patent or European patent. According to the UPC agreement, article 28, these defences apply if they would be available as a defence in a dispute concerning a national patent, and they are available only in respect of an infringement in the relevant member state.

However, while actions relating to prior use are within the exclusive competence of the UPC, actions based on the right of personal possession (entitlement, co-ownership, contractual rights, etc) can only be matters of non-exclusive competence. Hence, simplicity is introduced into the system, if both matters are heard in the UPC, using the appropriate national law, rather than in two or more separate courts.

If the UPC uses the non-exclusive jurisdiction described, a number of actions in which issues would otherwise be split off for decision in national proceedings—contractual matters in a licence, defences of personal possession, the terms of licences of right, the claims for compulsory licence—can remain in the UPC together with actions for infringement, validity and other matters.

On the face of the UPC agreement, the court has such a competence. Nonetheless, it is likely to be the UPC’s exclusive competence for infringement and validity that is at the top of a patentee’s considerations.

Paul England is a senior associate at Taylor Wessing in London. He can be contacted at:  p.england@taylorwessing.com

Christof Höhne is a partner at Taylor Wessing in Düsseldorf. He can be contacted at:  c.hohne@taylorwessing.com