UPC: Patentees No Longer Locked Out by Pre-Transitional Period National Litigations

In a November 12, 2024, decision, the CoA of the UPC holds that, under certain circumstances, a European patent can be asserted before the UPC even if it has been opted out and is or had been the subject of legal proceedings before a national court. This is considered one of the most important decisions of the UPC so far and may have profound practical implications for both patentees and third parties.

In order to allow a gradual transition from the national systems to the UPC system, two mechanisms are provided within the first seven years of the UPC (due to end in 2030), the so-called "transitional period:"

• A concurrent jurisdiction: European patents can be litigated before both national courts and the UPC, subject to EU rules that govern parallel actions in particular in terms of litis pendens (e.g., Brussels I Bis Regulation);
• A possibility of opt-out: Patentees who do not wish their patents to be submitted to the UPC are able to withdraw their European patents from the jurisdiction of the UPC by opting out and thus reserve litigation (including enforcement actions) for national jurisdictions.

Many patentees have made use of this possibility of opting out in order to observe the new court without participating before possibly withdrawing the opt-out, which is allowed at any time, however, with a caveat as explained below.

The possibility of opting out of the UPC system is provided by Article 83(3) of the Agreement on a Unified Patent Court ("UPCA"), while Article 83(4) UPCA specifies that the opt-out can be withdrawn at any time, "[u]nless an action has already been brought before a national court." This proviso is critical and is sometimes referred to as the "lock-out rule," whereby a patentee can no longer withdraw its opt-out if it, or a third party, has already initiated national proceedings regarding the opted-out patent.

On October 20, 2023, the Helsinki Local Division ruled—in the AIM Sport Vision AG v. Supponor Oy et al. case (UPC_CFI_204_2023)—that the lock-out rule applied regardless of when the national action had been initiated. In this case, the patentee opted out its patent prior to the entry into force of the UPC (i.e., during the "sunrise period") when national proceedings regarding said patent were already pending. The Helsinki Local Division ruled that said national proceedings prevented the patentee from withdrawing its opt-out.

The CoA has now overturned this prior ruling and decided that the lock-out rule only applies when the national action has been initiated during the transitional period, i.e., after the entry into force of the UPC on June 1, 2023, and does not apply when the national action had been initiated before June 1, 2023. The readers are reminded that as the UPC will have exclusive jurisdiction over European patents after the transitional period, national proceedings concerning such European patents can no longer be initiated. Opt-out will also no longer be possible after the end of the transitional period.

One of the key aspects which the CoA relied upon is the purpose of the lock-out rule that restricts withdrawal of opt-outs. Contrary to the theory put forward by Supponor that the lock-out rule would intend to limit the possibility of parallel litigation and reduce the inherent risk of divergent claim interpretation, the CoA holds that the rationale of this rule is to prevent an abuse of the opt-out system by the patentee. According to the CoA, the lock-out rule is made to prevent the patentee from subjecting its patent again to the jurisdiction of the UPC after it has opted out and a third party has been required to initiate—possibly several—national proceedings to invalidate the patent.

As a result of the new case law, patentees are not locked out and can validly withdraw an opt-out and bring a UPC action even if the patent is or had been the subject of a national action initiated before the transitional period.

This should particularly concern some high-value opted-out patents, often referred to as "crown jewels." Due to their importance, these patents often are or had been the subject of national revocation or infringement proceedings initiated before entry into force of the UPC.

Patentees that thought to be locked out due to national litigations initiated before June 1, 2023, may now reassess their UPC litigation strategy and consider withdrawing the opt-out and initiating UPC proceedings.

Comparing the current speed of UPC proceedings (12 months on average) with that of many European national jurisdictions, a patentee lodging a UPC action now could still in some cases expect to obtain a decision on the merits from the UPC before the outcome of a national action initiated before June 1, 2023. 

In addition to speedy proceedings, the patentee could also benefit from:

• The highly qualified panels of UPC judges specialized in patent matters and with technical qualifications; and 
• The UPC's extensive territorial coverage (a single decision for up to 18 Member States).

On the other hand, third parties assuming to be shielded from UPC actions should now closely monitor opt-out withdrawals on a relevant selection of patents.