Applications in the Sunrise Period: to Opt Out or Not to Opt Out?

The UPC sunrise period is well underway and several thousand opt outs have been filed. The focus during the sunrise period has been on opting out European patents. For long-granted patents, the opening of the UPC on 1 June 2023 presents competitors with the opportunity to file a central revocation action effective in up to seventeen countries covered by a European patent. Comparisons can be drawn with an effective re-opening of the opposition period, although it should be remembered that - unlike an EPO opposition – a central revocation action at the UPC has significant court fees, allows for a counterclaim for infringement, could land the competitor with a substantial legal bill if the revocation action is not successful, and only affects the patent in those countries taking part in the UPC (and not all states as for an opposition). Nevertheless, there are clear advantages to opting out granted European patents during the sunrise period. An opt out removes the patent in question from the jurisdiction of the UPC and, absent initiation of an action at a national court, an opt out can be withdrawn at a later stage should the patent holder wish to enforce the patent through the UPC.

But what about pending European patent applications? Is it necessary to opt important European patent applications out of the UPC before the end of the sunrise period (i.e. by 31 May 2023)? On the face of it, the answer is no: the UPC is concerned with European patents (“A Unified Patent Court for the settlement of disputes relating to European patents and European patents with unitary effect is hereby established.” (Article 1 UPCA)). It could therefore be argued that there is no need to take action to file opt outs for European patent applications during the sunrise period. While a European application is pending, it should not be subject to infringement proceedings, declarations of non-infringement or revocation actions, as those are actions which apply to patents. A pending European application is arguably “safe” from UPC proceedings until grant, and should not be at risk of a UPC action when the UPC opens on 1 June 2023. Under this view, any opt outs for pending applications could be filed in the normal course of prosecution, for instance after receipt of a Rule 71(3) EPC communication.

However, some commentators have expressed a concern that pending European applications are vulnerable to actions at the UPC. In particular, it has been suggested that a party could initiate an action before the UPC against a pending European application, and in doing so lock the application and any resulting patent into the UPC by blocking a later opt out. This issue arises primarily because of the broad wording used to discuss opt outs in the UPC Agreement. Article 83(3) UPCA explains:

Unless an action has already been brought before the Court, a proprietor of or an applicant for a European patent granted or applied for prior to the end of the transitional period […] shall have the possibility to opt out from the exclusive competence of the Court.

A proprietor or an applicant cannot opt out a given patent or application if “an action has already been brought before the Court”. It is not clear what would amount to an action having been “brought before” the UPC. This could in principle be the filing of any action or statement of claim, including spurious or vexatious claims: a broad interpretation of Article 83(3) UPCA means that the initiation of any action (regardless of whether it is thrown out or found inadmissible, or indeed made without payment of the necessary court fees) could prevent a later opt out being filed. By filing, e.g., a revocation action against a pending application, the applicant/proprietor could be prevented against ever filing an opt out, even if the action is immediately rejected on the basis that it is, say, levelled at an application rather than a patent. Furthermore, there are also legitimate actions relating to pending applications which have been considered by national courts (notably Arrow declarations), and which in principle could be handled by the UPC.

Until we have confirmation from the UPC regarding whether or not they will entertain such a strategy, it is not possible to ignore the possibility that a competitor could file some action against a pending European application to block an opt out being filed at a later stage. Filing opt outs for the most important European patent applications in a portfolio before the end of the sunrise period might therefore be considered. Similarly, for important applications after the sunrise period, applicants may consider filing an opt out as early as possible in prosecution (i.e. on or shortly after the publication date for the application).

However, there are several factors which mean that, in practice, the risk that a party will file an action against a patent application at the UPC to block an opt out at a later stage is likely to be low. Firstly, even if it is possible in principle, we do not know what level of action against a pending application would be considered necessary to block an opt out in practice. It may be that an action has not been “brought before” the UPC before court fees have been paid. The court fees are far from trivial (EUR 20,000 for a revocation action at present). There may also be questions around the consequences for a party filing a potentially spurious action at the UPC for the sole purposes of blocking later opt outs, particularly if that party is planning to start another action at the UPC at a later stage in relation to the same patent.

Ultimately, by far the most effective way to challenge a pending application at the EPO will continue to be through third party observations while it is pending and the filing of an opposition within the nine-month opposition period after grant. These approaches are available regardless of whether or not an opt out has been filed, and if successful, can result in refusal or revocation for all designated states, not just those covered by the UPC.

In any event, for high value applications, a simple remedy if someone does seek to block an opt out should be to file a divisional application. The original application could be abandoned and the divisional application opted out on the day it publishes. Careful consideration would need to be given to the consequences (and costs) of that strategy, but for many this fall-back option may provide sufficient comfort as a solution to the risk (that cannot in any event be quantified until the UPC develops a body of case law) that further consideration of opting out pending applications during the sunrise is not required.