How does the Unified Patent Court work?

Structure of the UPC

The UPC will consist of:

• a Court of First Instance (including local, regional and central divisions); and
• a Court of Appeal (based in Luxembourg).

The Court of Justice of the European Union will be able to hear referrals on interpretation of law made by either the Court of First Instance or the Court of Appeal. Its decisions will be binding on the UPC.

The following figure shows the expected structure of the Court of First Instance and the Court of Appeal, and the judicial make-up of each. The list of local/regional divisions below are those which have been confirmed by the UPC. It is expected that there will be more local/regional divisions to be officially confirmed in due course.

This article explores:

• Judiciary
• Where will an action be brought?
• Bifurcation - the possibility of infringement and validity being decided at different times
• Mediation/arbitration
• Other actions

Judiciary

• The UPC will employ both legal and technical judges who must be nationals of a contracting member state, and have proven experience in the field of patent litigation.
• Legal judges will possess the qualifications required for appointment to judicial offices in a contracting member state.
• Technical judges will have a university degree and proven expertise in a field of technology. They will also have proven knowledge of civil law and patent litigation procedure.
• The composition of the panel of the Court of First Instance depends on whether the case is being heard in the central division or a local/regional division, as shown in the figure above.

Local/non-local judges

• As shown above, local and regional divisions will comprise three 'legal' judges. The nationality of the judges may have a bearing on their views, given prior experiences of patent law across different contracting member states will inevitably have differed.
• Where the country hosting the division has significant experience of patent litigation cases (more than on average 50 / year having been commenced in the preceding three years) the panel will comprise two local judges and one non-local judge. Otherwise the panel will comprise one local judge and two non-local judges.
• We expect that German judges will form a significant portion of the pool of UPC judges, and therefore that in many local divisions there will be one (and possibly two) German judge(s). As many patent cases are filed in Germany, it is expected that all of the four German local divisions will have at least two German judges.
• In the central division, the two legal judges will be from different contracting member states and the President of the Court of First Instance will have discretion to choose the allocation of judges depending on expertise, linguistic skills and experience.
• Notwithstanding the rules concerning the allocation of judges, the parties may agree to the appointment of a single legal judge in either the local, regional or central divisions.

Where will an action be brought?

The particular division (local, regional or central) in which cases will be commenced will ordinarily depend on the type of action.

Whether there are divergences in approach in different local or regional divisions or the central division (e.g. in terms of the application or interpretation of the procedural rules) remain to be seen, however parties (patent holders, exclusive licensees or, in some cases, non-exclusive licensees) wishing to assert in the UPC will be faced with decisions concerning which division to choose, as explained below.

In the case of agreement between the parties most actions can be brought in the division of their choice. However in the initial stages of the UPC we do not expect such agreement and we expect that the default rules governing the venue (as set out in Article 33 of the UPC Agreement) will be triggered. These rules are as follows:

Infringement actions

In the majority of cases, infringement actions will be brought in:

1. the local or regional division where the infringement has occurred or may occur; or
2. a local division where one of the defendants has its residence, principal place of business, or failing that any place of business.

Revocation actions

Revocation actions will ordinarily be commenced before the central division unless infringement proceedings between the same parties in relation to the same patent are already in suit before a local or regional division. In this case, the counterclaim for revocation must be brought in the local or regional division in which the infringement action was commenced.

Declarations of non-infringement

Similar to revocation actions, actions for declarations of non-infringement will ordinarily be brought before the central division unless infringement proceedings relating to the same patent are ongoing before a local or regional division. In this case, the action must be brought before the local or regional division.

Bifurcation - the possibility of infringement and validity being decided at different times

Because of the "split" nature of the local / regional divisions and the central division there are instances where bifurcation may arise, with validity and infringement issues being heard by different judges, in different divisions and potentially at different times.

If an infringement action is brought and the defendant counterclaims for revocation of the patent, the local or regional division will consider whether to:

1. proceed with both the action for infringement and the revocation action;
2. refer the revocation action to the central division and stay the infringement action - in such a case, validity will be determined before the infringement issue;
3. refer the revocation action to the central division and proceed with the infringement action - in such a case, infringement may or may not be determined before the validity issue; or
4. provided the parties agree, refer the entire case to the central division.

The UPC Rules of Procedure have been drafted in such a way as to reduce the prospects of an injunction gap (where an injunction is obtained as a result of a finding of infringement before validity has been considered properly, or at all) if the proceedings are bifurcated i.e. in the case of (iii) above.

Particularly, in relation to whether actions (ii) or (iii) above should be taken, the Rules of Procedure dictate that the infringement proceedings may be stayed pending the outcome from the invalidity proceedings and will be stayed in circumstances where there is a high likelihood that the relevant claims of the patent will be held to be invalid (potentially leading to a hard fought interim battle concerning validity in the local / regional division).

Additionally, the local or regional division may make an infringement decision subject to a finding from the central division that the relevant patent is valid and must tell the central division of key hearing dates in the infringement action (so that the central division can take those dates into account when setting the timetable for the revocation action).

A stay of an existing infringement action under (ii) above could be detrimental to the patent holder or a licensee which commenced the infringement action. It remains to be seen how often that action will be taken by the local or regional division panel, and the sorts of arguments which the panel will be receptive to when making such a decision. Arguments to be made might relate to the potential costs of proceeding with parallel revocation and infringement actions (one or other of which might prove to be redundant), or concerning the commercial situation and need for the alleged infringer to achieve commercial certainty quickly.

An infringement action can be brought in response to a revocation action either before the relevant local / regional division (in which case the division will take one of the actions set out above at (i) - (iv)) or before the central division.

Declarations of non-infringement / infringement actions

Importantly, if an infringement action relating to the same patent is brought in a local / regional division within three months of commencement of an action for a declaration of non-infringement (brought before the central division), then the action for the declaration will be stayed - the panel will not have discretion to deal with the declaration action in the same way as for revocation actions.

As a patent holder, using an infringement action as a counterattack to a declaration of non-infringement could therefore be an effective way of slowing down a finding of non-infringement for up to three months, as the proceedings will effectively start afresh.

Similarly, a patent holder could severely disrupt a party's efforts to seek a declaration of non-infringement in respect to a product which that party does not yet market (containing, for example, elements A, B and C) by bringing an infringement action against a product which is currently marketed (containing, for example, elements A, B and D). In that case, the infringement position in relation to the product containing A, B and C could be put on hold, at least on a literal interpretation of the UPC Agreement.

That being said, judges will be bound by general principles of case management, for example to consider whether the likely benefits of taking a particular step justify the cost of taking it and to give directions to ensure that the hearing of an action proceeds quickly and efficiently. The Rules of Procedure also need to be applied and interpreted on the basis of the principles of proportionality, flexibility, fairness and equity . It remains to be seen the extent to which these principles would govern the action a panel would take in the example set out in the paragraph above.

Mediation / arbitration

• A UPC patent mediation and arbitration centre will be established with seats in Ljubljana and Lisbon. The centre will be governed by its own rules.
• A UPC judge will be obliged to explore, during proceedings, the possibility of settlement, including through the use of the mediation and/or arbitration centre.
• A patent may not be revoked or limited in mediation or arbitration proceedings, although parties could agree to do so as part of a settlement (potentially arising out of a mediation or arbitration).

Other actions

A full list of actions over which the UPC will have exclusive competence are below. The UPC Agreement dictates which divisions such actions should be brought in, in the absence of agreement between the parties:

1. actions for actual or threatened infringements of patents and supplementary protection certificates and related defences, including counterclaims concerning licences;
2. actions for declarations of non-infringement of patents and supplementary protection certificates;
3. actions for provisional and protective measures and injunctions;
4. actions for revocation of patents and for declaration of invalidity of supplementary protection certificates;
5. counterclaims for revocation of patents and for declaration of invalidity of supplementary protection certificates;
6. actions for damages or compensation derived from the provisional protection conferred by a published European patent application;
7. actions relating to the use of the invention prior to the granting of the patent or to the right based on prior use of the invention;
8. actions for compensation for licences of right; and
9. actions concerning decisions of the European Patent Office in carrying out tasks concerning the administration of unitary patents.

There is no explicit reference in the UPC Agreement to the Court's competence to hear disputes concerning declarations of standards essentiality and FRAND issues. However, we will cover these topics in future articles.