May 2016

Danish businesses will find themselves dealing with a very different legal system once the long-awaited Unified Patent Court (the "UPC") opens, vested with exclusive jurisdiction to pass judgment in disputes relating to European patents and the newly-created European patents with unitary effect. Expectations are that the UPC will open in late 2017 or early 2018.


For businesses used to patent litigation in the Nordic countries, the UK and a range of other countries as well, the changes will be drastic, not least in terms of deadlines, the discretionary powers afforded to the judges, and the importance of written pleadings over oral proceedings. In anticipation of the new regime, Danish businesses will have to significantly readjust their litigation capabilities, not least to be able to defend themselves in infringement actions brought against them (whether rightly or wrongly).


HOW CAN YOUR BUSINESS PREPARE?

Kromann Reumert advises that your business already now starts thinking about how best to prepare for the new regime and how to enforce your rights or defend yourself under it. The following four main areas merit special attention:

1. Short deadlines and front-loaded system

Deadlines for written submissions will typically be one to three months, much shorter than in national Danish patent infringement actions. Also, the exchange of pleadings will be limited. Each party must present its ‘entire case’ in its first written submission. After that, subsequent pleadings may, in principle, only respond to new matters raised in the opponent’s latest submission. In contrast to a Danish lawsuit where the parties continuously obtain and produce the relevant evidence, etc., the parties will be expected under the new regime to have everything prepared and ready from the beginning, including all relevant evidence, statements by experts, etc.

2. Forum shopping and language

Patent infringement actions may be brought either at the defendant's residence or principal place of business or at the place where infringement has taken place or might potentially take place, as the case may be. If sales and marketing takes place over the Internet, a patent proprietor wishing to bring infringement proceedings before the UPC will be nearly free to choose at which local or regional division of the UPC he wishes to bring the case. The language of proceedings will as a starting point be the language of the Member State in which the relevant local or regional division is located and where the case will be heard. Thus, a Danish company sued before a local or regional division of the UPC in Germany would generally be obliged to defend itself in German. 

3. Opting out / opting in

Proprietors of a European patent or of a European patent application filed before expiry of a seven-year transitional period will be able to, within that same transitional period, opt out of  the exclusive competence of the UPC. A proprietor wishing to do so must notify the Registry thereof not later than one month prior to expiry of the transitional period. It will also be possible for proprietors to subsequently opt in patents if the access to opt out has been used.

4. Existing contracts

Licence agreements, R&D agreements and co-ownership agreements may affect the option to opt out. Only the proprietor of a patent (or all proprietors, if a patent is owned by two or more proprietors) may lodge an application to opt out a specific patent. Also, the parties to the agreement should know that the UPC has special rules for who may initiate and conduct proceedings before it. This will be especially relevant in relation to licence agreements.



STRUCTURE OF THE UNIFIED PATENT COURT

Overall, the UPC will consist of two instances: A Court of First Instance (UPC-CFI) and a Court of Appeal.

The UPC-CFI will consist of a central division as well as local and regional divisions across participating Member States. It is envisioned that Denmark will set up one such local division in Copenhagen.

The central division, shared geographically between Paris, London and Munich, will be divided into technical areas. The Court of Appeal will sit in Luxembourg.

PHASES OF THE UNIFIED PATENT COURT

Procedures at the UPC will fall (generally) in three phases:


Figure 1. The three phases of the UPC.

 

WRITTEN PROCEDURE 

  • The claimant’s lodging of a Statement of Claim 
  • The defendant’s lodging of a Statement of Defence
  • The claimant’s lodging of a Reply to the Statement of Defence (optional)
  • The defendant’s lodging of a Rejoinder to the Reply (optional) 

Statement of Claim

The Statement of Claim must contain an indication of the facts relied on, information about the patent, evidence of infringement (in the case of infringement proceedings), arguments of law and, where the claimant is a licensee, evidence to show that the claimant is entitled to commence proceedings.

Statement of Defence

The Statement of Defence must be filed within three months of service of the Statement of Claim and must contain an indication of the facts relied on, including any challenge to the facts relied on by the claimant, the evidence relied on, the defendant's arguments of law and, where appropriate, a counterclaim for revocation of the patent (in the case of infringement proceedings). 

The defendant only has three months to mount its entire defence, including every detail in its invalidity defence. Anyone who has ever been involved in a patent action, whether as a claimant or defendant, will know that this is a very short period of time. In addition, it must be the defendant's entire invalidity defence that to be presented. Thus, as a starting point it will not be possible to subsequently file additional briefs regarding the question of invalidity, including filing additional experts declarations, prior art etc., unless the claimant's Reply specifically merits this.

Reply

The claimant’s Reply must be filed one month after service of the Statement of Defence. If the defendant brings a counterclaim for revocation, the time limit will be extended though to two months. Two months is a very short time for the claimant to respond to a counterclaim for revocation which may encompass a wide range  of different invalidity challenges and pieces of prior art because the defendant - in a first round - on his side has to mount and present everything he might need to rely on later. Accordingly, the defendant has no incentive to limit and focus its defence from the beginning of the proceedings. Similarly, the patent proprietor/claimant on his side has to - in the Rejoinder - submit its full and comprehensive response to all alleged grounds for revocation, including all evidence and statements by experts relied on. This could well prove a daunting, perhaps even an impossible task if the proprietor has not made preparations before the grounds for revocation are submitted during the proceedings.

Rejoinder

Defendant's potential Rejoinder must be filed within one month of service of the Reply. If a counterclaim for revocation has been filed, defendant's Rejoinder must also contain defendant's potential response to claimant's countering of the counterclaim for revocation.

Lastly, the claimant has one month (from the date of service of the Rejoinder) to respond to defendant's potential response in the Rejoinder to claimant's countering of the counterclaim for revocation.

Thus, in infringement proceedings where a counterclaim for revocation is brought, which is standard procedure, the exchange of written pleadings will typically take seven months (five months if no counterclaim for revocation is made). 

The overall objective is to have a written procedure of no more than six months on average and to have cases tried and closed with oral proceedings not later than one year after commencement. 

Figure 2. In infringement proceedings where no counterclaim for revocation is filed, the written preparation of the case will take in total five months to complete. 



Figure 3. Thus, in infringement proceedings where a counterclaim for revocation is filed, the written preparation of the case will take in total 7 months to complete. 

INTERIM PROCEDURE
During the interim procedure, a phase intended to bridge the written and oral proceedings, a preliminary hearing may be convened. It will give the judges and the parties a chance to make sure the facts of the case are sufficiently established prior to the oral proceedings and to resolve any questions outstanding. As an exception to the rule, the interim procedure may also allow, under certain conditions, the obtaining of additional evidence or the submission of further pleadings. 

The interim procedure can extend for a maximum of three months.

ORAL PROCEDURE

  • Oral hearing
  • Decision of the court
  • Interim award of damages (if any)

The oral hearing, as a general rule, should be no more than one day. That is a very short period of time, as compared against the oral hearing in a typical Danish patent action, which often lasts for days or, in large and complex cases, extends over up to two weeks. The parties will be allowed a short oral submission but may not reiterate their views on the case a whole, nor will they be allowed to present documents and facts of the case relied on by the parties. The judges may permit the parties to put questions to witnesses or experts during the oral procedure, to such extent and in such manner as the judges may allow. Procedures at the UPC will not allow for the obtaining of an expert appraisal such as is common in Danish court cases, nor for an extensive questioning of the parties' own experts.

The UPC will strive to render its (oral) decision as soon as possible after the oral procedure. The written decision must be available not later than six weeks after the oral proceedings. The system is akin to the EPO system, with an oral decision to be rendered in connection with the oral proceedings and the written judgment to follow a little while later.


FOR THE CLAIMANT TO CONSIDER

The claimant will need to consider initially:

  • What type of action to bring
  • Where to bring it
  • Which language to choose

All of the questions are interconnected: The type of action matters to determining where the action can/must be initiated, which in turn affects which language can/must be chosen.

Infringement actions

Infringement actions may be started at the local or regional division of the UPC in the State where the defendant is based or where the actual or threatening infringement is taking place. 

Revocation actions

Actions challenging the validity of a patent will be heard by the central division. The same is the case for actions for declaration of non-infringement. 

Language of proceedings

As a general rule, the language of proceedings in actions before a local or regional UPC division will be the official language of the State in which such division is located, unless it has been decided by that State that the language of proceedings must be either English, French or German. At the central division, the language of proceedings will usually be the language in which the patent was issued - either English, French or German.


FOR THE DEFENDANT TO CONSIDER

The defendant, upon receipt of a Statement of Claim, will need to consider initially the following:

  • Are there grounds for contesting the UPC’s jurisdiction and competence in relation to the patent (for example, is it covered by an opt-out)? Any such objections must be raised within two weeks of service of the Statement of Claim.
  • Are there grounds for contesting the jurisdiction of the UPC division (for example, should the action be heard by the central division)? Any such objections must be raised within two weeks of service of the Statement of Claim.
  • Are there grounds for submitting a counterclaim for revocation (in the case of an infringement action)?


OPTING OUT OF THE EXCLUSIVE COMPETENCE OF THE UPC

The proprietor of a ‘traditional’ European patent (or an SPC issued on the basis of such patent), or the applicant for a European patent, may choose to opt out of the exclusive competence of the UPC effective from the date of the entry into force of the agreement for the establishment of the UPC. Any such opt-out will be effective for a transitional period of seven years. 

One of the key issues for businesses with these kinds of patent rights, therefore, will be whether to make use of the option to opt out or not. And, if deciding to opt out, then to decide which patents or applications to opt out. For example, should you opt out all your patents and patent applications or just one or a few of them? Below is a run-down of pros and cons.

Central revocation

Among the primary reasons for opting out of the UPC’s competence could be the desire to avoid the risk of a central revocation of the patent effective in all participating Member States. If, for example, your patent is very weak, you may well be better off being able to defend it country by country under a ‘win some, lose some’ strategy, which might be better than to lose all. On the other hand, of course, you will not enjoy the advantage of being able to enforce your patent centrally and with effect for all countries. 

Opt out - opt in if sued in national proceedings

The proprietor of (or applicant for) a European patent which is subject to an opt-out may choose, at any time within the seven-year transitional period (which may be extended for another seven years), to withdraw that opt-out (and thus, effectively, to opt in its patent or application). Only one opt-out per right will be allowed, so an opted-out patent or patent application that is subsequently opted in will be ‘locked’ as opted-in under the new regime.
 
Also, proprietors should be advised that if national proceedings are commenced in respect of an opted-out European patent, there can be no opting in of that patent. This applies irrespective of the outcome of the case and whether the case is closed with no possibility of appeal, is settled or withdrawn.

Fees

It is envisioned that any opt-out and opt-in of a patent or patent application will be subject to payment of a fee, but no final decision has been made on this yet. 

Choosing your venue - UPC or national court?

During the same transitional period, i.e. for a period of seven years from the entry into force of the agreement for the establishment of the UPC, the proprietor may choose, in respect of rights not opted out, whether to bring an action for infringement with a national court or with the UPC. However, if an action over a European patent is brought with a national court that same patent cannot subsequently be the subject of UPC proceedings between the same parties.

Co-ownership

Where a right is owned by more than one person or company (co-ownership), any opting out or opting in requires agreement between all the owners. In such cases, discussions should be initiated in good time.


DUE DILIGENCE ON EXISTING CONTRACTS

Most of the patent licence and R&D agreements currently in force were not drafted to take into account the establishment of the UPC and thus do not consider, for instance, the question of opting out. Agreements typically afford quite extensive powers to an exclusive licensee in relation to the application and maintenance strategy for the licensed right. Patent proprietors are advised, therefore, to go over their contracts, especially exclusive licence agreements, to see if they entitle the licensee to impose on the proprietor a decision to opt out or opt out. 

If you are currently in the process of negotiating patent licences, you should make sure the agreement addresses the issue of an opt-out and clearly stipulates who has the right to decide whether the licensed patent is to be opted out or not. 
The parties to the agreement should know that, as a general rule, only the proprietor and an exclusive licensee will be entitled to commence an infringement action with the UPC. 

Finally, you should check that the choice-of-law clauses in your existing agreements comply with the agreement for the establishment of the UPC.


KROMANN REUMERT RECOMMENDS

Kromann Reumert recommends that your business already now start up the following initiatives:

1. Deciding your strategy and establishing necessary capabilities if your business expects to be going to need to enforce its rights through the UPC. 

Important questions you should ask yourself:

  • How would you handle a central challenge to the validity of one of your key patents? Do you currently have the resources necessary to adequately defend the validity of your patent within the very short deadlines, and do you currently have an overview of the likely invalidity challenges and prior art in that regard?

2. Deciding your strategy and establishing necessary capabilities if your business might potentially - rightly or wrongly - be the target of a patent infringement action before the UPC.

Important questions you should ask yourself:

  • How do you make sure your business is capable of mounting a full defence? Including against extensive attacks on the validity of your patent - all within the very short deadlines prescribed under the new regime?
  • How do you make sure your business is capable of defending its rights in the proper language - again, not least in light of the short deadlines?
  • Do you have your adviser structure in place?

3. Ensuring sufficient knowledge about the UPC and the new system among those responsible for handling and safeguarding your business' patents to make sure you will not lose valuable time because you do not know the formal and legal requirements.

4. Reviewing your patents to consider possible opt-outs: Would you wish to opt out? If yes, in relation to which rights?

5. Due diligence on existing contracts

Important questions you should ask yourself:

  • How do your existing contracts stand in relation to the possibility of opting out or opting in?
  • How do your existing contracts stand in relation to the right of a licensee/licensor to enforce the licensed rights, and do they comply with the new UPC rules?
  • What are your choice-of-law provisions and how do they fit with the UPC and the new regime?


KROMANN REUMERT’S ADVICE

Kromann Reumert has in-depth knowledge of the structuring of the UPC and the new system. We can enable your business to confidently meet the challenges that will occur with the introduction of the UPC. 

Kromann Reumert's team of experts has in connection with the establishment of the UPC authored the book "The Unified Patent Court - The administration of justice under Europe's new patent court" (Only available in Danish).
How do