Mayer Brown's Jonathan Radcliffe assesses the advantages and the drawbacks of the new Unified Patent Court

After decades of false starts, European patent litigation is now set to enter the brave new world of the Unified Patent Court (UPC). The UPC has been born from a commendable desire to reduce the cost of European patent coverage, simplify the complex web of enforcement via country-by-country litigation and achieve pan-European harmonisation. 

But the UPC's gestation has been highly controversial. Almost universally condemned in its detail by patent judges and patent bars across Europe, it has been driven forward as an uncompromising old-school grand European project.

This has left potential litigants in a state of uncertainty, as the resulting Euro-compromise incorporates differing national legal traditions wrapped in complex linguistic and jurisdictional rules. So what are the key issues to focus on?

Structure 

The UPC confers pan-European jurisdiction throughout all contracting states on a single court. The UPC court system is highly complex. The central administrative registry is in Paris and the appeal court in Luxembourg. 

There are three types of first instance court. Each country can have between one and four local divisions based on the volume of cases, and smaller countries can group together to form regional divisions.

There are specialist central divisions based on technical subject matter in London (chemical and pharmaceutical), Munich (engineering) and Paris (everything else). Lisbon and Ljubljana host arbitration and mediation centres.

Jurisdiction and forum shopping 

Infringement actions must be brought in the local or regional division of the place of infringement or location of the defendant. The relevant central division has exclusive jurisdiction over all revocation cases and declarations of non-infringement, as well as cases against non-EU domiciled defendants.

It also has jurisdiction over revocation counterclaims bifurcated from local or regional divisions; and infringement cases in countries with no UPC division.

Most patent disputes are international in nature, with potentially many acts of infringement being committed by group companies across Europe. This gives patentees a wide choice of forum, especially if there are internet sales.

Choices will be made based on perceived quality of justice, speed, ease with which interim injunctions are granted, whether a division routinely bifurcates and any perception of pro- or anti-patentee bias. 

Bifurcation 

Patent litigation normally involves the two key issues of validity and infringement. Most countries deal with these together, and this results in strategically important and subtle interplays around the inherent tension between the breadth claimed for the patent and the effect that has on validity (so-called 'squeeze' arguments). 

Austria and Germany are the exception, and bifurcate these issues into separate proceedings. Importantly, this means a party can adopt different patent claim constructions in each set of proceedings, so squeeze arguments cannot be run.

This approach also means that findings of the speedier infringement court can subsequently be nullified by the much slower validity court – one party may be injuncted only for the patent to be revoked years later. 

Unsurprisingly, patentees with patents of dubious validity often choose Germany to get a speedy interim injunction on infringement as leverage in settlement discussions. This is a particularly acute problem in the high-tech arena.

Bifurcation is possible under the UPC rules. It is expected that Austria and Germany will continue to bifurcate. Fortunately, UPC bifurcation will not operate in exactly the same way, but is still likely to be a tactic deployed by patentees. US patent trolls are reportedly gearing up for European forays.

Will the UPC be popular?

The principal attraction of the UPC is a pan-European injunction from a single court, rather than having to enforce via the national route and fight country by country. But the downside is the risk of a pan-European revocation of what may be the core patent crucial to your business.

The new system will stand or fall on the quality of the judges and the judicial process, as well as the consistency of the decision-making process from division to division.

A key factor will be the extent to which competition between divisions – by tweaking local procedural rules to be a shade faster or more inclined to grant interim injunctions, for example – leads to inconsistencies that encourage forum shopping. Who will end up as the UPC divisional equivalent of the Eastern District of Texas rocket docket? 

Will we see the companies relocating to more favourable jurisdictions, as reportedly happened with several high-tech companies relocating outside Germany to avoid bifurcation (notably Microsoft and Nokia, and HTC switching its European import hub to the Netherlands)?

At the SME end of the spectrum, it is common only to patent in a handful of European countries. The same metric applies in sectors where standardisation and/or economies of scale mean that controlling the market in a few countries will control all of Europe.

These companies may choose not to file patents that will be subject to the UPC's jurisdiction, especially as cost/benefit calculus for national versus European patents filings has changed in recent years towards national filings.

Uncertainties over the details of the procedural rules, judicial training and consistency and wanting to see how the system will bed down before risking major patent assets, mean many patentees are likely to stand by the UPC sidelines for the first few years and judge the quality of play and refereeing.

Patentees should start reviewing their filing and litigation strategies, and there are three main areas to consider: what is the optimal bespoke mix of national, European and the new unitary patents? Which of their existing patent estate should be opted out of the UPC under the transitional provisions? And the need to be on heightened alert for litigation by trolls and plan a response strategy now.

Jonathan Radcliffe (pictured) is a partner in the intellectual property group at Mayer Brown.