Gordon: Let's get underway then. Good day to you all, wherever in the world you may be watching or listening to this webinar. My name is Gordon Harris and I want to welcome you to the latest and, in many ways, the most specific of our long running IP focus webinar series, The Life Cycle of a Smart Idea. We have followed our smart idea from its inception through choices about the best protection, branding and advertising of the invention and we've looked at its enforcement and commercial exploitation. For today's discussion we start from the assumption that the invention has been protected by obtaining patents under the European Patent Convention. This means that our proprietor owns a number of patents, prosecuted through the European Patent Office, which have been granted and have then, in the usual way, become a series of national patents in EPT Member countries through the designation process. We also assume that our inventor has not finished innovating and there will be more patents to come. As most of you will surely by now know, in the biggest changes to the European patent world for 50 years, a whole new patent system is arriving in Europe this year. I will leave the details to the panel but, in short, the opportunity will exist for Pan-European litigation and enforcement and alongside that the opportunity to acquire the first genuine Pan-European patent, a single right, covering most of the territory of the European Union. Our aim today is to give you real practical advice about what to do in response to this major change. We'll look at the basics of the new system, the first key decisions to make as a patent owner, the impact on the commercialization of European patents, strategic decisions regarding patent management and enforcement and whether the new unitary patent system is the right solution for new patents. Now, before we start let's find out a little bit about what we're dealing with in terms of material here. How well informed do you consider yourselves to be, as an audience, about the unified patents court and the unitary patents. So there's a poll coming up to you now. Are you: very well informed, quite well informed, not very well informed or do you feel as a thick as a whale sandwich about this topic? How we're doing? Good to see some admission of whale sandwich thickness there. But the majority of people feel quite well informed or not very well informed. Only a couple of people have the confidence to say that they're very well informed. So there we are. Then we have definitely got something to teach this afternoon. Right. Let's move on then.
By the end of this session our aim is that you will understand and the new system, have a good idea about the decisions which need to be made and some ideas on the best strategies to use under the new opportunities. The decisions required are not just for those in Europe to consider, they apply to everyone anywhere in the world who owns a European patent, or is considering applying for one. To help me guide you through the details of the new system I'll be calling upon a panel of experts from the UK, Europe and Canada, each taking a slightly different perspective on the questions we will consider. So let's hear from the panel with a short introduction. Panel introductions. Michael, you go first.
Michael: Hi everyone. My name is Michael Carter and I'm a patent litigator based in the UK with a particular focus on the automotive and engineering sectors. I'm also one of our FRAND specialists, having been involved in some of the leading SEP FRAND cases in the UK in the past few years, including a recent 5 week High Court FRAND trial.
Gordon: Seiko.
Seiko: Hi. I'm Seiko Hidaka. Like Michael I'm also UK based and work on technical matters which usually means patent litigation and also sometimes trade secret misappropriation disputes. Now most of these matters that I have had the pleasure of working on have had cross-border elements which really makes the topic of UPC really interesting. I feel very lucky to be practicing at this exceptional time.
Gordon: Thanks, Seiko. Clemence.
Clemence: Hello everyone. I'm Clemence Laportre. I'm based in France in Gowling Paris office. I'm specializing in intellectual property law with 10 years of experience as an associate lawyer, covering patent litigation in complex and multi-jurisdictional disputes. I advise patent holders in various industries including tech and software sectors, pharmaceutical and chemical industries, electrical and scientific equipment of food processing. I am a member of the UPC Working Committee at Gowling, of course, but also at the AIPPI Association.
Gordon: Thanks very much, Clemence. Now, across the Atlantic to Canada and Anthony.
Anthony: Hello everyone. I'm Anthony Dearden. I'm a Canadian patent agent in the European patent attorney. I practice out of our firm's Vancouver office on the Canadian West Coast. My practice if focused around patent drafting and prosecution for clients in the tech sector, with a particular emphasis on computer implemented and software technologies. A lot of my clients do file in Europe so I certainly have been keeping a keen eye on developments relating to the UPC and unitary patent.
Gordon: Thanks very much, Anthony. Finally, last but not least, Edith.
Edith: Hi. I'm Edith Penty Geraets. I'm a qualified UK and European patent attorney and I work primarily in the bio-technology and pharmaceutical sectors. I spent the first 6 years of my career prosecuting patents in Europe, and then in 2019 I moved to Canada to join Gowling WLG's Vancouver office, where I work with a range of North American clients to protect their intellectual property in Canada and across the world.
Gordon: Thanks very much indeed. Thank you, panel. Right. I'm going to lead our panel through the issues by posing a series of questions to draw out the details and strategies that you need to understand. Please feel free to add your own questions using the chat box button at the bottom of the screen and our panel will be keeping an eye on that and we'll try to deal with some of those questions as we go along. If we do not get to them all we will circulate answers after the webinar. Also remember that we are having, after the presentation portion of the webinar, we will be opening breakout rooms where you will have the opportunity to speak in smaller groups to our presenters about specific questions you may have. So please do stick around and follow the instructions at the end to join one of those breakout groups. Right. Let's get started.
Michael, can you set the scene for us. What is this new system and how has it come about?
Michael: Thanks, Gordon. I will try my best because the concept has quite a history, stretching back to the introduction of EPC in 1973. Since this date, as most of you will know, patentees have been able to file a single application of the EPA for patent protection in all EPC Member States. But because a European patent is a bundle of national rights, these patents need to be maintained separately in separate proceeding required in each country to either enforce or revoke them. There've been many complaints over the years that this increases renewal costs, enforcement costs, and of course, creates a risk of different courts reaching different outcomes in respect of the same invention. This was considered highly inefficient by many who contrasted it with the successful integration of Europe wide system for enforcing European trademarks. Therefore, in 2013, agreement was reached on the Unified Patent Court and the European patent with unitary effect, or UPC and unitary patent for short. So taken the unitary patent first, this is brand new. It is a single indivisible patent right that will cover all participating Member States. In this sense it is similar to the EU trademark and Anthony will be saying more about this new right and its pros and cons later on. But I think it's fair to say that if the measures agreed in 2013, most attention has been focused on the UPC, due to its impact on existing European patents. Clemence will be speaking about some of the detail later on but, in brief, the UPC is a new patent specific court system for litigating both the newly created unitary patent and, subject to the opt out which we will cover later, new and existing European patents. It will enable a patentee to obtain by a single action an outcome that applies in all participating EU Member States. In a sense it brings the fragmented approach to patent litigation in the European Union into closer alignment with the approaches taken in other major economies, such as the USA and China, where issues relating to a patent may be determined in a single local court, where the results apply across the entire country. In the UPC, a judgment from any one division of the court in any of the Member States will apply in every other participating States, for which the EP is designated. So, that's the what and the why but before we turn to the detail I also wanted to briefly summarize who is involved, because it is not every country covered by European patent.
First, only EU Member States can participate. As a result EPA Members who are not part of the EU, such as the UK, Iceland, Switzerland and Norway, cannot be part of the UPC or unitary patent. Even then, not every EU Member State is participating. Croatia, Spain and Poland are not taking part, each for their own reasons. Then there is another layer of complexity because EU Member States who do wish to participate need to have both signed the agreement and ratified it. Although they've had nearly 10 years to do so, a number of EU Member States who signed the agreements in 2013, are still to ratify. Most, including Ireland, are expected to ratify at some point but the Czech Republic, Slovakia and Hungary may have reconsidered due to concerns regarding the impact of the system on their economies.
Gordon: Thanks very much indeed, Michael. That's a really sound foundation for the rest of this session. So let's move onto Clemence now. Clemence, how are things progressing in terms of the time scale? When is all this going to happen?
Clemence: Given the long way that Michael told us about the progress of the UPC is now ..., Gordon. The key date to be mentioned here is January 18, when Austria ratified the protocol on provisional application of the UPC agreement. So, such ratification triggered on the following day, on the 19, the first of the UPC as an international organization, the coming into force of the protocol on provisional application of the UPC agreement and the start of the provisional application period. The provisional application period should last 8 months during which the preparatory work of the UPC will be conducted. So the main tasks are recruitment of judges, testing of IT system and early registration of altered requests. We will speak about that later. Inaudible meetings of the governing bodies of the courts that are namely the Administrative Committee, the Advisory Committee and the Budget Committee have seen them adopt their respective rule of procedure and hence set their own legal frameworks. With regard to the forward looking timetable, we can say that following the adoption of the budget by the relevant committee, Member States will be called to make their first contribution. Money is indeed the crux of the realization of the UPC. At the end of March, recruitment of the UPC judges will start. In this respect we can specify that the Advisory Committee, whose task is notably to interview and to train UPC judges, include judges from the French Supreme Court but also from Paris Court of First Instance. German ratification is expected for June, which is quite soon, and the start of the 7 year transitional period during which the UPC and national courts will have shared jurisdiction is expected for October of this year.
Gordon: Thanks very much, Clemence. So there we are. Obviously things have been fairly fluid on timing but October of this year is the expected start date, as things stand. Right. Before we get into the detailed issues, let's nip across the Atlantic for a first view from outside Europe. Anthony, you said you'd been following all this fairly closely so what are the questions which have occurred to you as you looked to advise your clients about this new system?
Anthony: Thanks, Gordon. So as Michael explained, the UPC is a brand new court system and it's going to impact anyone who has an European patent, or anyone who is thinking of applying for a European patent. Even from a North American perspective, there's really no hiding from the UPC and it's critical to be prepared when the UPC eventually comes into force. In fact I think all European patent owners are going to need to develop some kind of IP strategy for dealing with the UPC. Generally that strategy is going to involve taking some proactive measures before the UPC goes live. So one of the main questions on my mind is, what actions are my clients going to need to take before the new system comes into force. Now, as Seiko will be explaining shortly, there's an important opt process for those who want to delay being drawn into the UPC system and I think that properly managing and taking advantage of this opt process is going to be a central feature of any UPC strategy. Another question on my mind is how to advise clients on whether or not they should be taking advantage of the new type of patent that's going to be introduced later this year. This is the unitary patent as we've heard. As most of you probably know, traditional European patents upon grant split into a bundle of national rights that can only be challenged or defended on a country by country basis. On the other hand, the new unitary patent is a single patent right that covers multiple European jurisdictions. So an important consideration is whether this new type of patent is actually the right fit for your European IP strategy. Now, yes, with the unitary patent you will soon be able to get cost effective wide ranging European coverage. But is that by its own enough to justify the fact the unitary patent is vulnerable to a central revocation actually? And how did the nature and commercial value of the technology that's protected by the patent, how do these play into the decision making process? Another obvious issue with the unitary patent is that, as Michael explained earlier, while it provide some fairly broad geographic coverage at an attractive price point, there are also some fairly big gaps in the protection that it does provide. So I'm thinking, in particular, of the UK, Norway, Spain, Switzerland, these are all countries that aren't covered by the unitary patent. Now while you can add these on via traditional European patent validations, the fact that these countries aren't covered by the unitary patent could well mean the difference between opting for or avoiding unitary patent. So I think with that in mind, where a company usually validates its European patents, it's going to strongly affect the decision on whether or not to opt the unitary patent. Lastly, let's remember that the UPC is a completely untested court system. So for a North American company, or any company whose operations are focused in North America, an important consideration is that company's risk tolerance to a European patent litigation. This risk tolerance should be balanced against the main advantage of the unitary patent which is wide cost effective coverage. I think that these are two of the main factors that should be front and center when it comes to building the unitary patent into your European IP strategy.
Gordon: Thanks very much, Anthony. We're going to come back to the unitary patent again later. Now let's get into the detail. Just because you own a European patent does not mean that you are absolutely obliged to be drawn into the new system. There is an opportunity to opt out your patents. Before we look at the practicalities of that process, let's first look at the strategic considerations which might affect the choice. Seiko, can you walk us through the sorts of issues which might affect the decision to remain in or opt out of the UPC?
Seiko: Thanks, Gordon. Well first of all, just on the practical side, opting out might be a hassle because it essentially requires you to input the relevant data into the UPC case management system, which is still being developed as we speak. We hope it will end up being a very user friendly process, but in any event efforts will need to be expended to make sure that all your patents are opted out, if that's what you wanted to do. But putting aside the practical elements of it, the headline point I have for you on this topic is unless you intend to sue on day one of the UPC system coming into play, there really isn't any merit in not opting out in the majority of the cases. That's to say the best course for any patent holder is to opt out your patents, at lease this which are enforced. I'm about to explain why and there's a slide to help me show you what I'm trying to say. Now, the one points I'd like to drive home by this slide, is that if you don't opt out then the European patents will be within the UPC system by default. Which means that a third party has a choice of venues from which to attack the patent. So if the third party wants to revoke all your parallel European patents in one hit, or make a declaration of non-infringement of those parallel patents, then it can do that by starting an action in UPC which, Anthony has emphasized is an untested court. The third party can also, if it wants to, apply to centrally attack in the usual manner in the national courts. Now, opting the patent out of the PAC system means that the UPC choice is removed and you force the third party to litigate in the national courts. Essentially removes the ability of the third party from going to the UPC to make a central attack on the patent and there is no way to force a third party to initiate an action only before the UPC unless you obtain a unitary patent. As Anthony and Edith will shortly explain, the decision on whether to obtain a unitary patent will generally be led by patenting costs considerations. But the same doesn't hold true for patent holders. Opting out doesn't mean less choice for the patent holder, generally speaking, because if the patent is opted out the patent holder still can withdraw that opt to sue before the UPC. The one exception being where the third parties already initiated a national court action, in which case, a patent holder has no option but to battle the case out in that national court. But if the patent holder is not in the driving seat, then the patent holder might prefer to have a country by country battle anyway rather than defend a central attack. So that's why, overall, a patent holder would be advised to opt out of its patent, unless of course, the patent holder wants to start an action as soon as the UPC opens its doors. What I do want to emphasize here is that we're not recommending that parties should not sue before UPC, although wanting to sort of highlight here, is that opting out the patents first will remove the choice of venue for third party aggressors without too much drawback for the patent holders.
Gordon: Thanks very much indeed, Seiko. Now you talk about hassle. Let's assume you do decide to opt out, I can assure you the process is not as straightforward as you might think it should be, or as it seems. Michael, can you now attempt to navigate the complexities of the opt out system? Where do you start?
Michael: Well, Gordon, let me start by saying where you finish because the opt out is not a permanent feature of the UPC. It's only going to be available during the first 7 years which is the transition period as we've heard. Unless the period is extended, and all European patents and applications have not been opted by this date, will forever be part of the UPC. On the other hand, patents and applications that have been opted out will remain opted out for the remainder of their term. So turning back to where to start, and I think this is as Seiko mentioned, to recognize that a European patent is opted in by default. Doing nothing means the patent can be litigated in either the relevant national court or the UPC, as soon as the UPC goes live. Some patentees may wake up to a nasty surprise on that day, particularly if they haven't taken steps to properly prepare. So the good news is that before the court goes live there will be a similar rights period of 3 months for patentees to record their opt outs. We do not yet know when the sunrise period will start but if the Preparatory Committee sticks to the likely timetable, outlined by Clemence, and Germany ratifies the agreement before the summer, then it could be as early as June of this year. 3 months is not really a very long time and companies that are not sufficient and prepared to file their opt outs early in the sunrise period, are taking almost as much of a risk as those who fail to make a positive decision one way or another. This is because an opt out is not effective until it is recorded at the registry. As a result, any unforeseen delays in registration, caused by the errors in the application or the registry being overwhelmed by the sheer volume of applications, could expose a patent to a Pan-European validity attack when the court goes live. So preparation's key in two areas. First, thought needs to be put into whether to opt out in the first place, and Seiko has already explained some of things that need to be considered when formulating this strategy, and why the safest route for most companies will likely be to opt their whole portfolio. But for some patentees it maybe appropriate to pursue a more nuanced strategy. They may, for example, have the resources and motivation to try to influence the court's approach on key issues. So may want to leave patents in to try that out at an early stage. Or they may wish to become familiar with the court's approach and procedure before they're left with no option when the transition period comes to an end. Regardless of which ever strategy is ultimately chose, these discussions and decisions take time, and will have long lasting consequences for the enforcement, licencing and value of the patents. Really, those discussions should be well underway by now. Second, the rules on opting out require patentees to be familiar with the detail of their EP portfolio because applications must be filed by the patent owner, or owners, in order to be valid. This would be particularly complex where the bundle is owned and managed by different companies and, where ownership is split, discussions will be needed to reach consensus on how to proceed. Edith and Anthony will be explaining how one might go about gathering and checking this information and formulating the strategy in a few minutes.
Gordon: Thanks very much, Michael, but before you go, don't back away yet. One quick further question. We know that you can opt back in again by removal of the opt out that you've made. Can you then opt out again?
Michael: No. So, once you've chosen to opt back into the system, that is it. You cannot change your mind again. So we will not see any UPC hokey-cokey, and the fact that patentees can only change their mind once I think should be factored into any opt out strategy, and then that strategy should be monitored and updated on an ongoing basis.
Gordon: Thanks very much indeed. Right. Let's have another poll now. Let's get back to the audience again. Before we look at some of more issues, what is your first impression? If you own European patents, or you advise people that do, how likely would you be to opt out from what you know so far? Would you very likely to opt out, quite likely, not likely at all or you're thinking let me at it, I can't wait to get started in that UPC?
<laughter> Right, I'm watching the results come in here, guys. I think we're very likely to opt out. Yeah, that's up in the mid-70 to 80% range. Quite likely covers quite a big range as well. Maybe 7 people, 10%, 9% saying not likely and nobody seems desperate to get to it. So, I think we're going to be seeing quite a bit of opting out going on. Right. Let's press on. Let's nip back over to Canada here for first impression of what you'll need to discuss with your European patent owning clients, if they decide to use the opt out process. So, Edith, what will you be recommending to your clients by way of managing this process?
Edith: Thanks, Gordon. Well as we heard from the panel already, there's a lot of information to unpack here and a number of different factors that patent owners will need to look at to make an informed decision, whether to opt out or stay in the UPC. So not only for my North American clients, but for anyone who owns or is involved in managing European patents, my main recommendation really is to start reviewing your portfolio as soon as possible. Strategic decisions you make now could well affect portfolios for years to come and will shape your future IP strategy. So, first of all, I'll be encouraging and helping my clients to make a list of all of their European patents, both granted and pending and then start having some meaningful discussions as to what value each patent has their business and what the commercial aims of each patent are. For patents of high commercial value, for example covering a client's core technology, the most risk adverse choice will be to opt out of the UPC to avoid risks of central revocation. At least in the early stages of the UPC until any administrative wrinkles have been ironed out and we have more understanding of how patentee friendly the court might be. On the other hand, perhaps the patents covering more peripheral aspects of technology or product, clients might want to have the option to pursue central infringement proceedings and take advantage of the cost savings and procedural benefits involved in that. But I do agree what Seiko said earlier, that the safest option really is going to be opt everything out and then, of course, you can opt to select patents back in when your ready to start a central infringement action, for example, or to test out the court system as Michael mentioned. The actual act of opting out itself is relatively easy. You file a request, and there's no fee involved, but what's really important is that the opt out request is valid and this is where the audit comes into play again. Only the owner of a European patent can file the opt out validly. Also, subject to any contractual agreements, it might be necessary to obtain consent from any licencees, particularly exclusive licencees because, and I know Michael's going to touch on this in a bit more detail next, but by default exclusive licencees have the right to initiate action at the UPC so they're likely going to have their own ideas about litigation strategy. So if you have any patents that are jointly owned with another party, or have exclusive licencees, these really need to be identified as soon as possible and discussions started to make sure that all parties are in agreement on the opt out strategy. Finally, I'll mention that all designations of a European patent must be opted out together. So you can't decide, okay I'd like France, Sweden, Switzerland to be under jurisdiction of the UPC but maybe Germany to only be under jurisdiction of the German national courts. This is where it can get more complicated. I'm particularly thinking about a situation that was mentioned earlier where national validations are held by different parties or subsidiaries. In a more complex ownership structure like that, again, you're going to need to get all parties to agree and file the opt out together.
Gordon: Thanks very much indeed, Edith. There's a very clear message coming here. The opting out decision and practice is crucial. It must be addressed now. Before we start looking at the court system and how to use it, the opt out process throws up a lots of interesting challenges for owners. Particularly those who licenced their patents. As we've seen, only the owner of the patents can use the opt process. But in most jurisdictions an exclusive licencee has the ability to enforce a patent or defend an invalidity action. So what challenges does this pose for the creation and management of licenced documents? Michael, can you take us through this particularly tricky issue?
Michael: Yeah, so this is an issue we've been speaking about for a few years now. Ever since we first raised it in an article for MIP in January, 2015, and unfortunately, despite our best efforts, our experience is that very few people have taken the steps needed to ensure that they are properly prepared from this perspective. This is a concern because it is an issue that every patentee that grants licences, and particularly exclusive licences under its patents, will need to address and it arises because most licence agreements are unlikely to have the necessary terms for dealing with the control of opt outs or who controls the ability to bring proceedings in the UPC. So take the example of the patentee that is granted an exclusive licence under its European patents to a single licencee who happens to be an SME. Whilst the patentee may wish to opt out, for reasons Seiko explained earlier, the licencee may have the opposite view, particularly if it is facing widespread infringement issues. The fact that an exclusive licence can issue proceedings in UPC means there is a risk that if the patentee does nothing, they will be locked into the system by virtue of litigation commenced by their own licencee. The situation gets even more complicated where a patentee grants multiple exclusive licences by field of use or geography. So to cater to the risk of disputes arising, which may then delay the opt out being filed, patentees and licencees should be having conversations about the UPC now and, if necessary, adjusting existing licences or agreements to ensure that the matter is properly addressed. Although the issue is particularly relevant to licencing arrangements, I think the same applies to companies involved in joint ventures, collaboration agreements and those who use their patents for security. They will need to think carefully about the impact of UPC on their arrangements and who controls whether the patent should be opted out. For those who want to know more about this issue, I believe a link to our blog post and which links through to the MIP article, is in the chat or you can join me in one of the breakout rooms after the webinar.
Gordon: Michael, as if by magic it has appeared in the chat line, the link to that article. Thanks very much indeed. Okay, now let's take a look at the court system itself. Clemence, can you take us through the structure of the court and the options available for starting proceedings?
Clemence: So first concerning the court's framework, the UPC is a common court for participating Member States which consist of a Court of First Instance and the Court of Appeal. It also includes a patent mediation and arbitration center and a training facility for judges. The Court of First Instance is composed of local divisions, regional divisions and a central division. So, as a general rule, any participating Member can set up a local division, it being specified that additional ones can also be established depending on the volume of patent cases. This is why, for example, Germany has four local divisions. As for regional divisions, they can be set up by participating Member States that do not wish to create a local division. The first Member States to announce the establishment of a regional division was Sweden, Estonia, Latvia and Lithuania, thereby creating the Nordic-Baltic division based in Stockholm. So sometimes division will be based in Paris with a section in Munich, following Brexit we all know that further there will be no third section in London. So here you can see a map showing the UPCs different divisions and jurisdiction, EU wide. Second, concerning the functioning of the UPC, individual cases will be distributed amongst local and regional divisions, made from the place of infringement or the diffidence address or domicile. Within the centralized division, cases will be attributed according to the subject matter of the patent, based on WIPOs classification. So Paris will be competent for patents relating to performing operations, transportation, textile, paper, construction, physics and electricity. Munich will be competent for patents relating to mechanical engineering, lighting, heating and weapons. The procedure before the Court of First Instance will consist of a written, an interim and a no hold procedure as Seiko will explain it with more detail later. The UPC comprise only one Court of
appeal, based in Luxembourg, and only one level of appeal. So it is throughout the Court of Appeal decisions that uniformity and consistency will be imposed on the First Instance Davison's case law. First Instance decision may be appealed, in whole or in part, within 2 months. Appeal will have no suspensive effect unless the Court of Appeal orders so. So the result is certain procedural matters, for example, decision in relation to interim measures will follow an accelerated timetable. Now we can move, I think, to the material competence. So local and regional divisions will hear infringement claims and grant provisional and protective measures. The central division will handle revocation action and declaration for non-infringements. So the result is, however, an invalidity action can be brought before a local or a regional division as a counter-claim. In such case, the local division will have three options. So I think that's a new slide. First, it may, with the parties agreement, refer both actions to the central division. Second, it may proceed with the infringement action but refer the counter-claim for revocation to the central division, then the infringement proceeding will be stayed pending the outcome of the revocation action, but only if there is a high likelihood of revocation. Third, it may proceed with both actions, infringement and revocation. In practice, many cases are expected to be handled as such, and this approach is common for French lawyer since in France there is no bifurcation system in patent litigation.
Gordon: Thanks very much, Clemence. Now, while Brexit may have deprived the UPC of the participation of the UK, it's influence is certainly going to be felt in the rules of the court. Seiko, could you just give us a bit of a guide to some of the key rules in the Unified Patents Court and how litigation will be conducted there?
Seiko: Sure, Gordon. The point being like a key guide, really. The actual rules of procedure is relatively longer in detail as you might expect. But a good foundational grasp of the new UPC procedure may be had by bearing in mind that there are three stages to it. In the written procedure, interim procedure, oral procedure as set out in the slide there. Basically they can be translated into exchange of pleadings, case management conference and trial. So going onto the written procedure, one characteristic of the UPC procedure is the requirement that the party really fully set out its position right up from the start. So that means setting out the facts that they're going to rely, identifying the evidence in support, and critically also, parties expected to elaborate on claim interpretations and reasons why claims are to be interpreted in that way. The parties then have the option to respond to each other's statements. This will really significantly front load the costs of the litigation. But perhaps, also, may lead to early settlement discussions. Now following the closure of the written procedure we move onto the interim procedure, where the case management takes place at the interim conference, and the court decides how the case will be managed. Clemence earlier explained how the infringement and validity parts of the case may be progressed up together, or separately, depending on the facts surrounding the case. The courts will also determine what the main issues are, and when the oral procedure will take place, and the deadline for all the other steps to trial; to the filing of evidence, what sort of evidence, having regard to the main issues. Essentially what the court is trying to do is really streamline the case appropriately. There is no US style discovery, such that it is possible to ask the court to inspect certain documents which the opponent might hold, and the court will also explore whether there is anyway of settling the dispute without going further. If that can't be done and the interim procedure is over, and the parties submit the required evidence at the right time points, the proceedings will move onto the oral procedure which is essentially the trial. Another characteristic of the UPC court procedure is that it's speedy. What the courts will try to do is to aim to get to trial within 1 year of commencing proceedings and in most cases that trial is expected to take no more than 1 day. So parties will really need to focus what the main issues are and representations will need to be really quite pithy. There will be cross-examining witnesses and experts by the court and the opposing party. Use of this expert evidence and the cross-examination possibility very much comes from the UK practitioners desires, albeit cross-examination will be under the control of the presiding judge and decisions are expected within 6 weeks of the hearing. They're really ensuring that the court, at least to the First Instance, the decision comes very, very quickly after issuing the proceedings. There's some fiddly details on cost recovery which depends on the value of the case but, in principle, the loser pays the winner's reasonable costs up to a maximum of $100,000 Euros.
Gordon: Seiko, I think, did you just say $100,000 because of the figures.
Seiko: Sorry, $600,000 Euros. Sorry.
Gordon: I was going to say, short changing people a little bit there. Anyways, good to see the improvements of the common law extending into such a civil law dominated court, even if Ireland and Malta may be the only common law countries in the final mix when it happens. Michael, can we come back to you here, just to add a few points about a couple of issues that particularly patent attorneys and lawyers have been watching out for and what the position might be for some very, very commonly controversial patent issues, like supplementary protection certificates and standard essential patents?
Michael: Of course. I'll just set out the three areas that I think I'm going to be focusing on in particular when the court gets underway. The first area is jurisdiction. The reason for this is there will be a wide choice of potential forums, particularly during the transitional period of the UPC. The patents that have not been opted out there is likely to be a race to seize either the jurisdiction of the UPC or the relevant national court, as appropriate. But even within the UPC there will be considerable scope for foreign shopping. So the extent to which these issues are managed, and how the court applies the rules on jurisdiction where there is a parallel action in another State, are likely to come to the fore quite quickly and something that everyone will need to have an eye on. The second area, which I expect companies to be paying particularly close attention to, is the court's approach to interim or preliminary relief. So a real advantage of the UPC for patentees is that some of the interim measures that were only previously available in certain European countries, will now be available throughout all participating Member States. I'm thinking in particular of interim measures such as the French Saisie-contrefaçon. I'll apologize to Clemence later for the pronunciation. I wouldn't also be surprised to see potential defendants make use of the ability to file protective letters with the registry in order to protect against possible preliminary injunctions. The third area is how the court approaches practical issues such as service, confidentiality and disclosure. As all of us litigators know, often from painful experience, those less glamorous aspects of the proceedings can sometimes be the most important and can be contested. Confidentiality and disclosure will, of course, be of particular interest to SMP owners who are involved in FRAND disputes. But obviously the biggest issue driving their choice of forum will be how the court approaches the availability of injunctive relief and to the extent to which FRAND issues are taken into account. Although the court has quite a wide range of remedies available to it, its power to issue declaratory judgments is far more than limited than that of the English and US courts. For this reason I expect the approach the court takes will be closer to that of the German courts than the UK. But even so, how will the case law of the UPC develop alongside pending FRAND matters in the English, French and German national courts and, not forgetting, the role of the CJU might play will be particularly fascinating. Just to briefly mention SBCs, there is not currently a concrete proposal for unitary SBC and this may obviously affect the attractiveness of the UPC system. But I understand the commission is focused on this issues and has recently opened a call for evidence that might see things change in the near future, so that is something to watch out for.
Gordon: Thanks very much, Michael. You touched in an earlier paragraph there about the CJU, the Court of Justice of the European Union. Now, earlier on talking about the structure of the courts we said there was only one Court of Appeal, and that is right. The role of the CJU, however, will be to answer particular questions raised by the court in the way that it already does, from national courts and Member States and, of course, it was that role of the CJU that was the final nail in the coffin as far as the United Kingdom remaining in the system was concerned. So the CJU is there and will have a part to play in this. Right. One last point then, but a very important one. On the very same day that the Unified Patents Court comes into operation, possibly October this year, so does the unitary patent system. Now we all know, and we've heard already, that up to now the European Patent on grants splinters into a series of designated national patents. Some titles like EPUK or EPDE. When the dawn breaks on the first day the UPC operates, an additional designation will be available, called EPUP. This will be a single patent which covers all the European Union Member States which have ratified the UPC agreement. Obviously that does not include non-Member EPC countries like the UK or Norway, nor Member States which have chosen not to ratify, like Spain and Poland, but as things stand it would cover around 15 countries and a very large economic block. So, would you want to designate EPUP and go for the first truly Pan-European patent or stick with the classical model and designate it only chosen national States. I'm going to hand over to Anthony and Edith, generally here, because they're the experts in this field. Between the two of you, can you talk through some of the issues which will implement that decision?
Anthony: Yeah, absolutely, Gordon. So as I mentioned earlier, cost effectiveness is probably going to be the main deciding factor around opting for unitary patent or going for the traditional European national validations. Now the early modeling is suggesting that the cost of renewing a unitary patent is going to be priced at about 5 or 6 times the cost of renewing your average national validation. So as far as renewal fees are concerned with the unitary patent, you could get coverage in up to about 14 countries for the price of 5 or 6. Not only that, but the translation requirements for the unitary patents have been simplified, and what this means is that you may be paying less in translations with the unitary patent than if you were to instead opt for multiple national validations, especially in countries with generally stricter requirements. Having said that, renewal fees for the unitary patent do tend to climb steeply after the patent's tenth year so while it may be possible to benefit from some costs savings, or even substantial cost savings earlier on in the lifetime of the unitary patent, it's also possible for those savings to effectively be wiped out should you choose to maintain the unitary patent towards before the end of its 20 year term. Also, because the unitary patent is a single right you can't elect to decrease the scope of protection that it confers, with the aim of trying to reduce the amount of the renewal fee that you pay on the unitary patent. Now on the other hand, that is something that you can do with your group of national validations where as the patent term progresses you can cost control those renewal fees that are payable by selectively abandoning certain patents, certain national validations to cut back on those renewal fees. Now clearly each individual case is going to be different and it's important to carry out the number crunching when your European patent grants in order to get the full picture of the potential cost savings that are on offer. So that was renewal fees. In terms of litigation costs, the UPC court fees are set to be higher than the fees that would be incurred at the national courts. So litigation by the UPC may cost slightly more when compared to litigation at a single national court or for a relatively lower value case. But when you consider the costs of litigating national validations across multiple jurisdictions, I think that's where the cost effectiveness that the single forum provided by the UPC is going to be held more strongly. Also, as Seiko I believe explained earlier, remember that the UPC sets a relatively short timeline between the filing of the claim and the rendering of the decision by the courts, should be about 1 year. So what this means that the costs of litigating a patent at the UPC are going to be much more compressed than if you were to pursue the same litigation by the national courts. Edith is now going to take us through how the unitary patent affects licencing considerations.
Edith: Thanks, Anthony. Yes, well the fact that the unitary patent is a single asset and can't be split up is quite important because it means that unlike traditional European patents it won't be possible to have an ownership structure with one owner in one country and another owner in another country. So it means it will need to be a bit more creative of licence agreements, the unitary patents, to resemble that of different owners in different countries. For joint applicants, the order in which the applicants are named on a unitary patent is also significant, because it determines what laws are applicable to the unitary patent as an item of property. So for licencing and transfers. Generally the applicable law is going to be the country of the first named applicant's place of business on the date the patent was filed, or if that determination is unclear, German law will apply by default. So the relative advantages of going down the unitary patent route, rather than the traditional European patent route, as Anthony said, will of course be different for different patent applications in a portfolio. Actually many of the pros and cons of pursuing unitary patents are similar as for deciding whether to opt out of the UPC or not, which were discussed earlier. Bearing in mind the fact that quite a few European patents actually are litigated during their lifetime, I do expect that the majority of applicant's costs will be the key deciding factor in choosing the unitary patent or not. From a practical point of view, I know a question that a lot of clients will be asking is, how can you position yourself now to take advantage of the unitary patent? We know that once the sunrise period has begun there's going to be two ways to do this. So one route, you'll be able to file an early request for unitary effect, once the sunrise period's begun, and the other way is that you'll be able to request delayed grant of a past application until the UPC is in force, and then you'll have a further 1 month to file the request for unitary effect. Although in the lead up to the sunrise period there won't be any formal mechanisms for delaying grant, there are informal ways to delay prosecution. So if you have any European patents in the late stages of prosecution then I do suggest talking to a patent attorney to discuss ways, or whether it's possible, to slow down prosecution in any way until the option for unitary patent is available.
Gordon: Right. Well, thanks very much to all the panel. There we have it. A brand new court system and the first Pan-European patent. These are pretty significant changes, offering a range of options and some key decisions for European patent owners and prospective owners. This has all been about genuinely practical advice so I want to give our speakers one more chance to give you their favourite key piece of advice about how to respond to the impending system. So over to you, Michael. Can you keep it fairly quick please, speakers, because we're on time.
Michael: This is slightly self-serving but I think during the early years of the courts, the composition of the legal team would be key. As we know the UPC's a product of multiple legal system and judicial panels will be multi-national to a greater or lesser degree. With this in mind, I think my advice would be to strive to build a legal team that can draw on the experience of lawyers from a range of legal traditions, so that they can game out what arguments may be made and how they might be received by this new court.
Gordon: Thanks very much indeed. Anthony.
Anthony: I'm generally of the opinion that a better safe than sorry approach is probably preferred. No one really knows how the UPC is going to play out in practice so you might want to consider an across the board opt out strategy for your entire European patent portfolio to shield it from the UPC. Remember that just because you opt out of a given patent from the UPC does not mean that you can at a later point regain access to the UPC by withdrawing that opt out and you can take advantage of that rule. But absolutely start auditing for the opt out process. You don't want to be caught out a few weeks or even days before the UPC goes live and not have that opt out strategy finalized.
Gordon: Thanks very much. Very sound advice. Edith.
Edith: Yeah, I think I'd reinforce what Anthony said and that patent owners should really be proactive in the opt process. So take the first step to contact your patent attorney or lawyer. Get your list of European patents in your portfolio and start the discussion. I'd also recommend keeping an eye on your opponents activities in opting out and filing unitary patents, just to understand their strategy, but also be aware they'll probably be keeping an eye on your actions too.
Gordon: Certainly will. Clemence.
Clemence: Yes, I would advise anticipating the possibility of bringing or defending actions by familiarizing oneself with the UPC rules of procedures and, as related by Seiko and Edith, the UPC coming into force calls for an audit of one's own patent portfolio but maybe auditing competitors patent portfolios in order to assess the risk of revocation infringement action at the UPC. Such diligence would allow to ascertain whether the filing of a protective letter is worthwhile or even if the strategic filing of an action, at national court, to block any UPC central attack could be relevant.
Gordon: Thanks very much indeed. Seiko.
Seiko: So we all know how much businesses spend and invest in trying to get to really innovative inventions and hiring skilled people or providing expensive infrastructure and I think that's why it's really important that patent holders can feel that their patents are examined carefully before the UPC. The interesting thing about the UPC is that there'll be oral evidence, as I described, and there also be technical judges and also a possibility of having court appointed experts. At the moment it seems to be a bit like a black box. We just don't know how they will interact. So I think what we'll want to be doing is to watch, with interest, how the quality and the consistency of judging across the board is like and really looking at the quality of all those recent decisions. If they could achieve a very consistent view across the board it becomes very predictable, then UPC has, I think, every reason why it will be successful.
Gordon: Thanks very much indeed, Seiko. Just an ... see if I can catch up with the panel here with a couple of questions that have been raised on the chat line. Edith, I think it was you that said that the applicable law was going to be down to the nationality of the first named applicant. What is they're not European? Someone's asked me the question here which I throw at you. What if it's Canadian?
Edith: Yeah, I think they'll look at the first named applicant's place of business and then they'll look at any co-applicants and then, if not, German law applies by default.
Gordon: Wow. Okay. So the Germans have done well there. Another question, maybe for you or someone else, I don't know. Seiko, maybe. Can you opt an expired patent?
Seiko: Yes, you can. There probably isn't much reason why you'd want to opt it out because it is unlikely that a third party is going to revoke it, because it's already expired, nor would it apply for a declaration of non-infringement. It might do. I mean the chances of them making central attack is unlikely. So it's probably a rare instance where it doesn't really matter whether you opt out or you don't. As I say, you can always withdraw the opt out if you want to enforce the patent in the UPC. So it doesn't really matter for the expired ones. It's possible if you want to do that.
Gordon: There's one other question I'm not going to get to now because I want to ask the audience a question before we go and break into the chat rooms. Third poll question then. Now you so much more about the system, how it works, how to opt in or out of it, potential of the new Pan-European designation, how do you feel about this new system? Do you feel positive? Do you feel very positive? Do you feel quite positive? Are you indifferent to it or will you be avoiding it like the plague? How are we looking?
<laughter> We have got a few people saying they will avoid it like the plague. Somewhere between quite positive and indifferent seems to be the bulk of the answers. Though kudos to the 2 people who have weighed in with very positive. Thanks very much for your enthusiasm. We value it. But there are 9 people saying they will avoid it like the plague. So, there we are. Right. Thank you very much indeed to our panelists for today. I hope you all feel suitably well informed and ready to go off and plan your strategy for the forthcoming UPC. That marked the end of the formal panel and we will open our breakout rooms very shortly, where you have the opportunity to chat with the panelists in a bit more detail. To join breakout room, just click on the breakout rooms button on the bottom of your screen, and the meeting controls, and click on the room you would like to join. They're divided up by topics. You'll then be automatically brought into that room. If you need any assistance please indicate the breakout room you would like to join in the chat function. A full video of the webinar will be posted on our website within the next week, if you want to hear it again, or to share it with colleagues within your organizations.
Next time in the series we'll be looking at the very tricky question of legal privilege. So look out for that invitation coming your way soon. Thank you very much indeed for your kind attention today and taking the time to join us as we continue to explore The Life Cycle of a Smart Idea. Thank you very much indeed.