Europe has had a centralised patent granting system at the European Patent Office (EPO) for over forty years. However there is no equivalent centralised patent court when it comes to enforcing European patent rights. Except for the rare occurrence of a cross-border injunction being issued, patent litigation in Europe almost always requires separate court proceedings in each country of interest. This is a potentially costly process with the added risk of different courts coming to different decisions on issues such as infringement or patent validity. With the goal of reducing litigation costs and harmonising patent law, the EU will be establishing a new patent court known as the Unified Patent Court (UPC).

Within the 27 EU states, Spain, Croatia and Poland have thus far chosen not to sign up to the UPC at least for the time being. Several countries including Ireland have agreed to join the UPC but have not yet ratified the necessary EU legislation. Any decisions of the UPC will only cover the states that have actually ratified and not any non-ratified states. As we get close to the eventual start date of the UPC, it is becoming increasingly likely that some of these states will not ratify in time and so will miss the start of the UPC. For example in Ireland a national referendum will be necessary before ratification may take place.

The UPC will have exclusive jurisdiction for all of the new Unitary Patents and for all Supplementary Protection Certificates (SPC) based on a Unitary Patent.

The UPC may or may not have jurisdiction for the currently available European patents depending on whether the applicant chooses an option to opt-out. For a transitional period of up to 14 years, the proprietor may opt-out of the UPC for European patents, European patent applications, and SPCs based on European patents. If the opt-out is triggered, then the national courts will have exclusive jurisdiction for such a European patent, European patent application, or SPC in a continuation of the current litigation landscape. A major strategic advantage of taking this opt-out route is that it would prevent central revocation of a European patent after the normal 9 month EPO opposition period has expired.

The applicant may request opt-out at any time from publication of a European patent application. There will be no fee required to opt-out. The opt-out would apply for all states of the European patent, and would last for the entire life of the European patent and any SPC. The status of opt-out will automatically apply for a granted European patent if the European patent application has previously been opted-out. However it would not be possible to file an opt-out if proceedings before the UPC are already in process.

The patent owner will enjoy great flexibility with this opt-out option. For example the proprietor could subsequently withdraw the opt-out status if circumstances change and the proprietor wishes to pursue a pan-EU injunction at the UPC, provided that there are not national court proceedings already active. Again there will be no fee required to withdraw the opt-out. After withdrawing the opt-out status, then it would not be possible for another change of mind to opt-out again.

Only the applicant or proprietor may opt-out or withdraw an opt-out. A licensee will not have the right to do so. It will therefore be even more important than the current situation to ensure that the details of the patent owner are kept up to date at the EPO. If the applicant or proprietor is not recorded on the European patent register, then an additional declaration of entitlement to the European patent or European patent application would be required.

If the proprietor does not opt-out, then the UPC and the national courts will both have jurisdiction for European patents, European patent applications, and SPCs based on European patents. In the future after expiry of the transitional period, the UPC will have exclusive jurisdiction for European patents, European patent applications, and SPCs based on European patents. The UPC will have no jurisdiction for national patents.

The jurisdiction of the UPC will cover patent infringement, provisional injunctions with inter partes hearings, revocation, and declarations of non-infringement. Proceedings before the UPC may or may not be stayed in the event of a parallel opposition before the EPO. The UPC will have no jurisdiction for issues of inventorship, ownership, employee issues, or licence disputes. These issues will continue to be handled by the national courts.

The definition of what constitutes an infringing action, the coverage of indirect infringement, the list of exceptions to infringement, and prior user rights will all be facets of the new UPC in terms broadly similar to those already in place in national patent laws across Europe.

In the event of a successful patent infringement case, the remedies available for the UPC to award will include injunctions to prevent further infringing acts and damages to compensate for financial loss. The amount of damages will be calculated to be compensatory rather than punitive. The UPC may also award legal costs to the successful party subject to the court discretion. The legal costs will normally be capped ranging from a ceiling of €38,000 for an action with a value of €250,000 to a ceiling of €2,000,000 for an action with a value of €50,000,000. The ceiling may be adjusted subject to the court discretion. The UPC may also order delivery-up and destruction of infringing goods.

The first instance sections of the UPC will be structured into three central divisions and several local or regional divisions in different countries across the EU. Each case will be heard before three legally qualified or technically qualified judges. The central divisions will deal with revocation and declaration of non-infringement issues, and will operate in whichever language was used during proceedings before the EPO. The central divisions are to be located in Paris, Munich, and a third city. Paris will deal with the technical areas of physics, electricity and civil engineering. Munich will handle patents relating to mechanical engineering, and the third city will cater for medical technology and chemistry inventions. The third location was originally intended to be London but following Brexit an alternative location has yet to be decided. Several countries are lobbying to be the new home, with Milan and Amsterdam prominent candidates, and also with the possibility of Paris or Munich swallowing up the third portion also.

The local or regional divisions will deal with infringement. The local or regional divisions will have the option of handling counter-claims of revocation directly, or alternatively of referring the counter-claim of revocation to the appropriate central division. In the case of a referral the local or regional division may suspend the infringement proceedings or decide to continue. This clearly opens up the possibility of bifurcation with infringement and revocation being considered in separate proceedings. The rules of procedure of the UPC suggest that the central division will accelerate revocation proceedings if there is no stay to hear the revocation action before the corresponding infringement hearing. However how this will work in practice will have to be observed over time.

The local and regional divisions will be located across various countries. Some countries such as Germany will have several local divisions, while other countries may group together to form a regional division, such as the Benelux countries. The country where the infringement is alleged to have occurred or where the defendant is located will determine the relevant local or regional division. If a country has no local or regional division, then the infringement action will be heard by the appropriate central division. The local or regional division will use the local language of the state where the court is located.

The UPC will also have a second instance Court of Appeal in Luxembourg where cases will be heard before five judges. Appeals may be based on points of law or on points of fact, and it will be possible to have new evidence admitted during appeal. The appeal may or may not have suspensive effect at the discretion of the court. The Court of Appeal will operate according to the same language as the first instance proceedings. Questions of law may be referred from the first instance courts or from the Court of Appeal to the EU Court of Justice, with the referring proceedings stayed.

In relation to timeframes commentators are predicting that typical proceedings before the UPC will last of the order of 12 to 15 months. There will be limited discovery of evidence compared to the typical common law litigation in US or UK. The UPC rules will allow for evidence preservation orders and inspection orders, if necessary by way of ex parte hearings. To counterbalance this aspect potential defendants may file protective letters as a pre-emptive action if they anticipate being accused of infringement to prevent ex-parte proceedings. Written proceedings with submission of a statement of claim for action and a response from the opposing party are envisioned to take about 9 months. There are provisions for case management conferences by telephone or video, for appointment of technically qualified judges if necessary, and even for bifurcation if appropriate - all in the form of interim proceedings. Oral proceedings in the form of a trial will be limited and may only last one day due to limited cross-examination of witnesses. As necessary an inquiry into damages and an inquiry into costs may be dealt with by way of subsequent proceedings.

The UPC fees for infringement will be an €11,000 initial fee, plus a value based fee ranging from €0 for a €500,000 value action to €325,000 for a €50,000,000 value action. The UPC fees for appeal relating to infringement will be the same. The fees for revocation will be a €20,000 fixed fee, and for provisional measures an €11,000 fixed fee. To determine the value of the action, the UPC will base the analysis on a licence royalty or lost profits calculation. The UPC will have discretion to reduce fees, for example SME may pay only 60% of the fees, and there may be 25% fee reductions in the case of a single judge hearing. Fees may be refunded at rates of between 20% and 60% if the case is withdrawn or settled depending on the timing.

Final preparations for the establishment of the UPC are ongoing with the appointment of judges and setting up the case management IT system. The UPC is expected to open in late 2022.