Briefings

UPC: IMPACT ON LICENSEES

This is part of our series of articles on the UPC.  Elsewhere, we have outlined the new system, including the automatic jurisdiction of the new court over current granted European patents. We’ve also discussed the availability of the “opt out” for the patentee to avoid this.  

Here, we look at the position of licensees under the new system. Early discussion with the patent proprietor will help to smooth the transition when considering the pros and cons of allowing existing European patents to be subject to the jurisdiction of the Unified Patent Court (UPC). As licensee, do you want to make use of the option to opt out? 

Exclusive licensees can bring infringement proceedings … 

Exclusive licensees do have the right to bring infringement actions under a classical European patent before the UPC, assuming the patent has not been opted out of the system. It is necessary to notify the patent proprietor if such an action is started. 

… but licensees can’t opt out 

Only the patent proprietor (or multiple proprietors acting together) can opt a patent out of the UPC system. If you’re a licensee, even an exclusive licensee, you do not have the right to opt a patent out. If you are in this position, you will need to negotiate with the patentee as to whether to use the option to opt out.  

Such a negotiation may take time. Some patentees have large portfolios of granted patents and large numbers of licensees. The time required to reach agreement for each case and/or each relationship may be significant. With the new system taking effect as early as September 2022, negotiations should begin now. 

Multiple licensees 

The need to begin discussions soon is particularly acute if there are different licensees under a patent for different countries and/or different aspects of the technology – different parties may have different preferences and/or different commercial priorities. As well as the decision on whether to opt out, each licensee will want to be able to prevent their position being harmed by the actions of another licensee.  

For example, one licensee may wish to bring infringement proceedings at the UPC, but if the defendant files an invalidity counter-claim, the whole patent could be found invalid, to the detriment of the other licensees. Ideally, there should be arrangements in place for the form and period of any notice to be given to the involved parties, if any action is contemplated. 

Consider assigning licensed patents 

For some companies, especially those at a fairly early stage, important IP may be licensed in, for example from a university. Again, discussions should begin soon regarding whether to make use of the opt out. In some cases it may be worth considering assignment of the patent(s) at this point, to reduce the number of parties which need to be involved in deciding on the opt out strategy. Time will be required, however, to negotiate the required agreements and fee payments.  

Negotiating future agreements 

If you’re in the process of negotiating a licence agreement, or will be doing so in the future, it will be important to build in provisions on who makes decisions. For example, does the patentee need to consult the licensee on whether to select a Unitary Patent when a European application is granted, or when and whether to opt a classical European patent out of the UPC’s jurisdiction? A licensee may prefer to have the power of veto over the decisions. Certainly, there should be expressly stated provisions in the licence agreement as to how each decision will be reached, including (when relevant) how the patentee will interact with and inform multiple licensees. Contractual disputes arise most frequently when there is a lack of, or ambiguity in, provisions which control how actions are taken. 

If you would like support in relation to any aspect of the UPC, please contact us. This article should not be taken as legal advice, it is for guidance only.