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A guide to opting out of the UPC

Is it better to stay in the Unified Patent Court or opt out? Niels Hölder and Morten Garberg of Hoffmann Eitle provide answers to the most common questions

After many years of speculation, it finally looks like the UPC will become a reality. All that stands in the way is ratification by the UK and Germany, both of whom have indicated that they want to ratify, and will do so soon. It is expected that the UPC Agreement will come into force still in 2017. The UPC will hear actions for infringement or revocation not only of European patents with unitary effect, but also of traditional European patents.

A key decision for owners of European patents is whether to opt out of the new litigation system, and if so for which patents. Opting out removes jurisdiction from the UPC and effectively maintains the status quo – litigation in national courts. This has certain advantages and disadvantages.

The opt out decision is an important one for companies with valuable patents in Europe. If patents are to be opted out, this should ideally be done before the new system comes into effect. After that, it may be too late. Decisions need to be made this summer.

The following answers to frequently asked questions are aimed to inform users of the patent system what the opt out procedure is, how it works, why it matters and which factors to take into account when deciding.

Q&A on opting out


What does the opt out do? Opting out removes the UPC's jurisdiction over a given European patent so that the national courts retain sole jurisdiction over it. In other words: compared to today, the litigation options for that patent remain the same.

What happens if I do not opt out? The UPC will acquire joint jurisdiction over your European patent, together with the national courts. This means that the patentee can choose whether to enforce its patent in the UPC or in one or more national courts. Such forum shopping can be very valuable. Third parties have the same flexibility and similar forum shopping opportunities for (for example) revocation actions and declarations of non-infringement.

What can be opted out

Can I opt out any existing European patent? Yes, you can opt out any European patent that has already been granted by the EPO.

Can I opt out European patents granted in future, after the UPC system comes into force? Yes, except if you select to have a European patent with unitary effect. Unitary Patents cannot be opted-out. If in future you choose to validate your European patent in the current way, country-by-country, then an opt out will be possible.

Can I also opt out European patent applications? Yes, this is possible. When a patent application is opted out, this will continue to apply also when the patent is granted.

Can I opt out a supplementary protection certificate (SPC)? An SPC can be opted out if the patent on which is it based is opted out. If the patent has expired, it is still possible to opt it out for example in order to be able to opt out the SPC.

Change Of mind

If I opt out, is this a final and permanent decision? The opt out will be effective for the lifetime of the patent – that is, even after the end of the transitional period – if you take no further action.

If you opt out and later change your mind (for example because you wish to use the UPC for patent enforcement), then you can withdraw the opt out. Withdrawing the opt out restores joint jurisdiction of the UPC and national courts. However: once the opt out is withdrawn, no further changes regarding jurisdiction can be made – a second opt out is not possible.

A withdrawal of the opt out is not possible if there is ongoing national litigation. So if you opt a patent out, you run the risk that a competitor starts a national revocation action, thereby locking your patent into a national enforcement regime.

Opt out practicalities

When can a patent be opted out? At any time as long as there is no ongoing UPC litigation at the time the opt out application is registered.

Before the UPC enters into force, there will be a sunrise period during which patents can be opted out. The sunrise period offers patentees a head start to opt out a European patent before any competitors have a chance to initiate UPC litigation in respect of that patent.

When will the sunrise period start and end? The sunrise period is a three-month period between the final ratification needed to bring the system into force, and the actual coming into force of the new system. The sunrise period is predicted to fall in the second half of 2017.

Will I always be able to opt out my European patents? No. The opt out provisions are transitional, and will only be available for the first seven years in which the new litigation system is in operation, optionally extensible by a further seven years.

Where and how is the application for an opt out submitted and registered? Opt out applications are submitted to the UPC registry using an online procedure. A beta test site of the UPC case management system has been made available which, after creating a personal account, allows a user to see how the procedure will work.

Who can perform an opt out declaration? The proprietor of a European patent or the applicant for a published European patent application is entitled to opt out. In practice, the person preparing and submitting the opt out application, for instance a European patent attorney, needs to submit a so-called mandate proving that he is authorised to act on behalf of the proprietor/applicant.

What documentation will I need for an opt out application? Since the opt out can be validly performed only at the request of the owner(s) of the patent or application, a signed mandate form needs to be submitted along with the application. According to the template for a mandate available on the beta test site, it is required to list not only the patent/application number but also the proprietor/applicant. This is not necessarily the owner registered before the EPO or the national patent offices but the person entitled to be registered as proprietor under the law of each contracting member state. Accordingly, it would appear that this mandate will also serve as basis for the declaration of proprietorship required according to the Rules of Procedure. The preparation of a correct mandate will be decisive for the acceptance of the opt out application and the validity of the opt out declaration after its registration.

What about co-owners and licensees? Licensees will not be able to apply for an opt out. This applies even to exclusive licensees. Therefore, if a licensee has a preference for opting out, he should take this issue up with the patentee in good time. Also, licence agreements should be checked as to whether a right of the licensee to enforce a patent or similar rights may result in a contractual obligation for the patentee to respect the licensee's preference with respect to whether or not to opt out.

Co-owners must opt out jointly/in agreement. This applies also where different designations in UPC signatory states are owned by different legal entities.

As a result, it is crucial to approach other co-owners in time to seek their approval if an opt out is desired, to collect relevant documentation, and to prepare a jointly signed mandate for the person submitting the opt out application.

If an SPC and a patent on which it is based are owned by different entities, then the opt out must be done by both entities together in order for it to apply to the SPC.

When is the opt out effective? The opt out is in principle effective from the date of entry in the UPC register – provided that all requirements are duly observed, in particular that the person performing the opt out is authorised to do so. In case of doubt, the UPC decides for itself whether an opt out has effect for the patent concerned.

Can a list of patents or all of my patents be opted out in one go? The UPC only accepts opt out declarations for individual patents that have been identified by means of their publication number. Therefore, the patents have to be opted out one at a time. However, the mandate form can refer to multiple patents, and that mandate form used for multiple opt outs.

Is there an official fee for opting out? No, but your attorney may charge a fee for performing the opt out process.

Deciding what to do

What are the main advantages of opting out? The main advantage of opting out is that your patent is protected from central UPC revocation actions.

Why might I want to avoid a UPC revocation action against my patent? The UPC revocation action will constitute a new and powerful tool, and a basic understanding of this is certainly important when you come to make your opt out decisions.

The UPC revocation action is the first procedure whereby a third party can request revocation of a European patent (for all of the UPC-participating countries) at any time during the lifetime of the patent.

Without going into too much detail about UPC revocation actions, it is useful to look at some of its key characteristics. They will be fast, effective over a large and commercially valuable territory. The UPC revocation action can be filed at any time, and reimbursement of the patentee's legal costs in case of an unsuccessful attack is capped, albeit at a relatively high level. It may be possible to initiate a UPC revocation action with moderate costs (as compared to for example multiple national revocation actions).

Thus, the UPC revocation action will share some traits with US inter partes review (IPR) proceedings. On this basis, it is possible that the impact of the UPC revocation action in Europe will be similar to that of the IPR proceedings in the US when they were introduced some years ago.

At present, central revocation of a European patent is only possible via the EPO opposition procedure; however, this procedure must be initiated within nine months of grant of the patent.

The only procedure available after the expiry of the nine-month opposition period is to initiate national revocation actions. However, these are only effective for one country, and these procedures are generally time-consuming and expensive if several revocation actions are to be run in different countries.

Patentees must expect that individual patents which have become highly valuable may well be targeted by competitors through UPC revocation actions and should give serious thought to opting out such patents.

What are the main downsides of opting out? If the patentee is the one initiating litigation, there is no downside because the patentee can withdraw the opt out if he wants to use the UPC as a litigation venue.

If the adverse third party initiates litigation, he can effectively trap the patent in its opted out state, so that the patentee is prevented from using the UPC.

Thus, in relation to an individual patent, the downside is that it is possible that a competitor can block this patent from UPC enforcement. How much of a loss that is depends on how useful UPC enforcement is in the individual case. UPC enforcement will be a very useful and powerful tool for some patents in certain scenarios, opening up new avenues for forum shopping and for cross-border litigation. On the other hand, litigation in the national courts has been working now for many decades, so the worst-case scenario of being forced to use national courts to enforce patents is perhaps not so bad.

Why might I opt out some of my patents? On what basis will I decide? This is a complex question. By opting out, you make sure that your competitors cannot centrally attack your European patent before the UPC. At the same time, you risk being excluded from making use of UPC enforcement. So, you need to assess and balance the risks of a central attack against the advantages of UPC enforcement availability – ideally for each individual patent. This depends on many factors including structure and strength of the portfolio, nature and characteristics of products concerned, market and competition, logistics and budget. Many questions have to be considered: How vulnerable am I to a central attack? Could I deal with several revocation actions at once under a new regime with strict and short deadlines? How useful is cross-border enforcement, including the new inspection proceedings? Where do the competitors manufacture, where do they sell? How adequate is the alternative to UPC enforcement, to how many and which courts would I have to go to achieve my commercial objectives? In some industries, an injunction in one important market (such as Germany) will effectively block competition Europe-wide; in other industries an injunction in multiple countries is needed. In situations where it is difficult to prove infringement, patentees will like the idea of a local division ordering the inspection of a foreign factory. Patentees relying on indirect infringement will benefit from the larger territory. An overview of some criteria to be taken into account is given in the figure above.

Should I not just opt out everything (at least at first)? Some of our clients are concerned about UPC revocation actions and consider simply opting out all their patents. At first sight, this looks attractive – it maintains the status quo, which is usually considered a safe option. The UPC revocation actions are avoided. And by opting everything out, one can side-step the potentially burdensome exercise of deciding which patents to opt out.

Taking this approach however has some drawbacks too, both in the short term and the long term.

Short term, you risk being prevented from using the UPC for exactly those patents where UPC enforcement will put you in a stronger position. If you opt everything out, then it is possible that competitors will lock those patents out that would have been most suitable for UPC enforcement. This will effectively decrease the value of those patents. For this reason, it is likely that there will be some who regret their decision when they are stuck enforcing patents in national courts in cases when they would have had a better chance in the UPC.

Long-term, it may be a problem that companies who opt everything out give up the opportunity to influence UPC case law. This could in particular become a problem if the majority of big players in certain industry sectors all opt out all their patents.

Can the old and the new system be combined? Yes, in many ways. If a patent has not been opted out, it can be enforced in the UPC against one defendant and in national courts against other defendants. Also, the patentee can file divisional applications and opt out some of the resulting patents to make sure that it can choose the right venue in any event, while having at least one part which is protected from the UPC revocation action. Negative precedents can be avoided by waiving patents under attack if need be. Another option is to have co-existing national and European patents. In Germany, the new rule on double-protection will be that double protection of a European and a German patent is normally possible, unless the applicant or proprietor of the European patent has opted out from UPC jurisdiction. If so, the previous rules prohibiting double protection continue to apply. If the patentee does not opt out, he has the choice to either enforce his German national patent or his European patent or both (but not against the same defendant).

Does Brexit influence my decision whether to opt out? In principle, only EU members can be part of the new system. For this reason, no one seriously expected that the UK would ratify the UPCA even though it will leave the EU on March 29 2019. However, the UK would not do so if it did not intend to stay within the UPC system even after having left the EU. While it is at present uncertain whether this plan will actually materialise, there is a strong political will to do so. The uniform enforcement is far less attractive without the UK, where patent litigation is very expensive. Also, as the UK hosts a part of the central division, it is not an easy member to exclude. Still, there is the possibility that the UK is only a temporary member. This makes no difference for those who want to opt out anyhow. However, those that consider staying in the new system in particular for using it for the UK market need to factor in the possibility that this strategic consideration may turn out to be moot.

Will availability of the UPC revocation action lead to increased troll activity in Europe? It has been speculated that the UPC system and its effective enforcement mechanisms may increase the activity of non-practising entities (patent trolls). The larger territory and the greater number of users potentially affected by one action with a lower budget seems attractive to NPEs relying on a strong impact and seeking high damages or settlements , even though the possibility of central revocation actions and counterclaims may, depending on the nature and structure of their portfolio, in some cases weaken their position. This will be interesting to follow – but of course the opt out procedure cannot afford protection from conventional patent trolls.

However, an opt out may offer some protection from so-called reverse patent trolls. A reverse troll is a non-practising entity who attacks important patents belonging to large corporations for a direct or indirect financial gain. So far, there has been little or no reverse troll activity in Europe and for European IP attorneys, it is a phenomenon which we have only observed from across the Atlantic.

Leaving aside the question of whether reverse trolling practices would be legal in Europe (as this requires analysis of issues not related to IP law), it is believed that this business model came about in the US as a consequence of the IPR action becoming available. The basic features of the IPR action that make it so attractive for reverse trolls (including limited cost recovery, large & commercially valuable territorial scope, fast decisions) are ones which largely apply also the UPC revocation action.

Niels Hölder
Niels Hölder, attorney at law and certified IP specialist lawyer, is a partner in Hoffmann Eitle’s patent litigation group. He holds an LL.M in intellectual property (Exeter/Dresden) and earned his doctoral degree in the field of cross-border patent enforcement. For many years, he has been representing and advising clients in international patent disputes in all fields of technology with a focus on medical devices and biotechnology. Before joining Hoffmann Eitle in 2008, Niels worked in the litigation and IP practice groups of an international law firm in Berlin, Frankfurt, London and Chicago. He has published numerous articles in the field of intellectual property and regularly gives lectures on patent and civil procedure law.

Morten Garberg
Morten Garberg graduated from Oxford University with a master’s degree in Chemistry in 2002. After qualifying as a British and European patent attorney while working in the firm’s London office, he transferred to the Munich office in 2006, where he is now a partner. Morten advises clients in the areas of patent prosecution and litigation, and has particular expertise with EPO opposition practice, frequently presenting cases at oral proceedings. Technically versatile, he has experience not only in the field of pharmaceuticals, but also food science, materials science and polymers to name but a few. He frequently presents on topics related to European patent law at international conferences, especially in the US and in his native Scandinavia.

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