The Unified Patent Court: Also an Attractive Jurisdiction for SMEs

Background and SME Interest in the Unified Patent Court

The UPC and the unitary patent were created at the request of European industry in order to benefit from a single title (the unitary patent) covering the territory of several European Union Member States (18 states to date), for a cost corresponding to the price of validating a European patent in around four countries, and to be able to enforce European patents and these unitary patents on all the territories covered by these titles, by means of a single procedure, before a single jurisdiction (the UPC) common to the EU Member States participating in this system. The unitary patent and the UPC came into force on June 1, 2023, and the number of participating Member States, 18 to date, is set to increase to a possible 24.

A year and a half after these two systems came into force, we can see that companies, including SMEs, have taken full advantage of these two tools. Almost 30% of newly granted European patents are in the form of unitary patents, and the number of actions brought before the UPC in the first 17 months of activity exceeds the court's forecasts (538 cases to the end of October 2024).

In addition, more than 30% of unitary patents applied for by European companies were filed by SMEs, and around 20% of actions brought before the UPC were filed by SMEs—the European Patent Office itself has emphasized this very marked trend: "Particularly noteworthy is the uptake rate of 35.5% Unitary Patents registered by SMEs among the European proprietors in 2023, showing their awareness of the benefits in terms of reduced costs, broader country coverage, and simplified procedures." 

Finally, all the infringement seizure orders (known as "orders to preserve evidence" before the UPC) issued so far by the UPC have been granted to SMEs: SMEs have therefore benefited from and fully appreciated the benefits that this powerful evidentiary measure can have for them, enabling them to efficiently gather evidence of a suspected infringement.

The success of the UPC and the unitary patent is all the more significant given that companies are not obliged to adhere to these two new systems: Recourse to the unitary patent remains an option in addition to European and national patents, and these different titles can be cumulated in certain territories, such as France and Germany. Similarly, companies that do not wish their patents to be submitted to the UPC can withdraw their European patents from the UPC's jurisdiction—by opting out, which is free of charge—and thus reserve litigation for national jurisdictions.

Reasons for Success

The interest shown specifically by SMEs shows that they see this new jurisdiction and title as an opportunity rather than a risk.

Several factors may explain this interest:

• The speed of proceedings before the UPC (12 months on average) confers an unquestionable advantage on the claimant, whatever its size, and reduces the insecurity and cost resulting from longer proceedings sometimes conducted in several countries in parallel; the average time taken to obtain a judgment on the merits being around 12 months, as provided for in the UPC Agreement;
• The quality of UPC decisions, thanks in particular to the presence of judges specialized in patent matters and of judges with technical qualifications, should ensure greater predictability in the outcome of proceedings, and provide a guarantee that even the most complex and/or technical points will be thoroughly analyzed;
• The UPC's extensive territorial coverage (18 States to date) means that infringement can be brought to an end throughout the territory covered by the title invoked, by a single decision and at the end of a single legal proceeding; it also multiplies the damages that can be expected, and gives the plaintiff considerable leverage to negotiate a possible settlement during the course of the proceedings; for certain industries, the territorial scope covered by the UPC is a decisive factor in initiating legal proceedings, as litigation in one country is sometimes insufficiently dissuasive or profitable;
• The cost of proceedings before the UPC is generally higher than the cost of litigation in a single country, but lower than the cumulative cost of several national proceedings;
• The option of choosing the language of the proceedings is also a major advantage for an SME initiating proceedings, as it enables it to conduct the litigation in the native tongue of its management and its usual counsel, which it will not be able to do in the event of multiple litigation initiated or suffered before several national jurisdictions;
• The UPC has dedicated rules providing for the reimbursement by the losing party of part of the legal costs incurred by the winning party; SMEs can thus hope to reduce the costs of legal action, in addition to the expected damages, in the event of recognition of infringement.

Prospects and Challenges

The benefits of the new system extend beyond Europe's borders. Indeed, all patent owners, whatever their nationality, have taken the measure of the potential of the unitary patent and the UPC, are interested in them, and are integrating them into their strategy, thus increasing the relative importance of the EU in global filing and litigation strategies.

Specialized lawyers and patent attorneys are fully aware of the new system and can help companies assess the advantages and disadvantages in order to build effective filing and litigation strategies tailored to the varied needs of their clients.

UPC case law, which is building up, will undoubtedly play a decisive role in fine-tuning strategies and making them even more effective and predictable, according to the needs of each individual, including SMEs.

It is therefore likely that the interest of companies—particularly SMEs—in the UPC will continue to grow, as the UPC's practice and case law develop and reinforce confidence in this new court.

However, the pace at which the UPC is issuing its rulings—which is continuously increasing—and the nuances that already characterize its case law depending on the local divisions concerned, mean that SMEs and their legal decision-makers need to take a sustained interest in this new tool, if they wish to take advantage of it and avoid being surprised if they are sued.

This investment is all the more necessary as, at the end of the so-called "transitional" period due to end in 2030, the UPC will have sole jurisdiction for unitary and European patents (opt-out will no longer be possible), with national courts retaining jurisdiction only for national patents.