The UPC could have a significant impact on agreements relating to patents in R-MS.  Businesses should include a review of agreements relating to patents that could fall within the UPC’s jurisdiction ahead of the launch of the UPC.  This will allow you to take action early if required.

This would include collaboration agreements, co-ownership agreements and patent licences but also, includes material transfer agreements, research and contract services agreements, manufacturing agreements or development and commercialisation agreements.

The Opt-out

Currently, very few agreements dealing with European patents refer directly to the decision to file an application to opt-out or to withdraw that opt-out.  The impact of the UPC should be addressed in all agreements relating to patents and included in any due diligence assessment of IP assets that are being evaluated for in-licensing or acquisition.

Co-ownership / joint ownership

Patents under joint ownership or co-ownership (i.e., where different validations are owned by different owners) create their own issues in relation to the UPC.  The immediate concern is exercising the opt-out.

if there is an agreement, a detailed review of it should be carried out to see if there are any clauses which may help clarify responsibilities. In the absence of any helpful terms, it would be worth considering opening a dialogue as soon as possible with the party with whom you have jointly owned or co-owned EPs.

Absent any agreement to the contrary, if an EP is under joint or co-ownership it can only be opted out of the jurisdiction of the UPC if all the owners of the EP agree to the opt-out. If there is no agreement then the opt-out cannot be exercised validly.

Licensees

Licensees, even exclusive licensees, have no automatic right to be involved in the decision of whether the patent rights should be opted-out.  Absent any agreement to the contrary, patent owners, could make their own decision on whether or not to opt-out.

In many cases, the interests of the licensee and patent owner will be aligned.  There may, however, be a difference of opinion between the patentee and licensee, or even between different licensees.  Opening up discussions about the opt-out, might be used as an opportunity to renegotiate other terms of a licence.

Many patent owners, particularly those with exclusive licensee(s) will seek the views of their licensees.  Licensees should review the terms of the licence, and where they have a preferred opt-out strategy, communicate this to the patent owner as early as possible.  If agreement can be reached, this should be recorded and possibly formally agreed as a side-letter or amendment.

Read our UPC Licensees Guide 

Addressing the UPC in IP Agreements

Any new agreements containing clauses that regulate the ownership and use of patents within R-MS need to take the impact of the UPC into account. In particular the following issues should be addressed:

• If multiple parties are involved, what process will be used for agreeing whether to opt‑out EP patent(s) from the jurisdiction of the UPC in a timely manner?This could include agreeing, which party will be deemed the “common representative” for effecting the application to opt-out.
• If there are any EP applications covered by the agreement should these be opted out now or at grant or should they remain subject to the jurisdiction of the UPC?
• Will unitary protection be obtained for any future granted patents or should the traditional EP route be followed?
• For future EP applications, consideration should be given as to how applicable law would apply, if the EP was validated as a UP. If there is more than one owner, the order of the co-owners and impact on applicable law should be considered.
• Once the transitional period (at least 7 years) ends there will be no ability to withdraw an opt-out. Who will decide whether the opt-out should be withdrawn before the end of the transitional period?
• Who will take the decision whether to litigate before the national courts or before the UPC and who will be responsible for leading and funding such litigation? Should the rights of exclusive licensees to bring proceedings before the UPC be limited or managed (e.g., costs, indemnities)?
• If there is an actual or threatened infringement of the patent, who will make the decision on whether to withdraw (or not) any opt-out in order to centrally enforce the patent before the UPC?

It is also important to consider the above issues during any due diligence assessment of IP assets that are being evaluated for in-licensing or acquisition. The due diligence process and subsequent contract negotiation often present a good opportunity to ensure any opt-out issues are resolved and future difficulties are avoided.

In terms of future proofing your portfolio, for any pending EP applications in joint names, consideration should be given as to the order in which the joint applicants are listed.  Under the UP Regulation, the order and “nationality” of those applicants will fix the relevant law that governs the treatment of a unitary patent as an object of property.  If the EP is validated as a UP and litigated, then this national law will be applied by the UPC in relation to certain issues.  The applicable law for a UP, could therefore, be significant in both transactions and litigation.

Applicable law and unitary patents

Applicable law is fixed from the date of application and the UP’s governing law is not affected by subsequent transfers of ownership.

Under the UP Regulation, where there is a sole applicant, the applicable law will be the law of the participating EU Member State (R-MS) in which the applicant has either its residence or principal place of business on the date that the application was filed.

If the applicant has neither a residence nor a principal place of business within a R-MS, the applicable law will be the law of the R-MS in which the applicant has a place of business on the date that the application was filed.

If there is more than one applicant, the same criteria as above are applied, in the order of entry of the applicant names.

Where no applicant has a residence, principal place of business or place of business in a R-MS in which the patent has unitary effect, the applicable law for the UP as an object of property, will be that of the state where the EPO is headquartered, i.e., German law will apply.

Up until the point that the UP is granted, the relevant law as applied to the European patent application remains for each designated state, the law of the designated contract state that applies to national patent applications.

Where a UP has been designated, it is treated as a unitary, non-divisable right.  This means, that transfers, limitations, renewals or surrender take effect in respect across all of the R-MS that the UP covers.

The applicable law could have a significant impact on the UP rights, as there are variations in the laws across R-MS.  Particularly where the UP is co-owned, checks should be carried out to determine the relevant national law and its impact on e.g., transfers of ownership, taking security or licences.