Europe 23 Feb 2022

European patent system makes progress

After a long time, a unified European patent is starting to become a reality. Germany’s constitutional court is now giving the go-ahead for Germany to ratify the Unified Patent Court Agreement, thus enabling the entry into force of the unified patent system. This entails the possibility of applying for one patent for all its member states, as well as the introduction of a new court. There are both opportunities and risks here.

After Germany has ratified the agreement, it will take three to four months before the system can enter into force. It could be as early as October 2022, but a realistic estimate is probably early 2023.

When the system enters into force, 17 of the EPO’s 38 Member States will be part of the co-operation for unified patents.

The introduction of the unified patent system entails two major changes in comparison with the current system:

1) the introduction of unitary patents (UPs), and
2) the introduction of a so-called “Unified Patent Court” (UPC).

“UP and UPC can mean great opportunities for companies, but it also entails risks. The advantages include a considerably larger European market for one and the same patent at a much lower cost, at the same time there is the risk that the patent can be invalidated in one process for the entire market instead of as today for individual European countries. Companies that have an understanding of the advantages and disadvantages of the system can strategically and proactively use the system in their operations to improve the effect of their IP investments. We at Groth & Co will therefore contact our clients during the spring and have a dialogue with them regarding this issue”, says Mathias Loqvist, Managing Partner and Head of Patent Department.

The application process for unitary patents (UP)

What is unique about UPs is the possibility of obtaining a single patent for the, at present, 17 member states. This differs from the traditional European patent (EP) which is centrally tried and granted by the EPO, but then needs to be validated in each Member State within three months of the grant. The new system enables a simpler and cheaper process.

The application process for a UP is the same as for an EP with the addition that once the EPO has approved the EP application, the applicant has one month to apply for the UP. It is therefore a shorter deadline for applying for a UP compared to the deadline for validating the European patent (currently three months from granting). Note that it will be possible to both apply for a UP and validate the EP in countries that are not currently part of the new unified patent system (e.g. the UK).

EPO has also enabled early application of UP. This means that you who have an ongoing EP application but have not yet received “Intention to Grant” will have the opportunity to file an early application by UP after Germany has ratified UPCA.

The big difference between UP and the traditional EP is the costs for validation and renewals (annual fees). In a UP, the patent owner does not have to pay annual fees in each Member State in which he wishes to have protection, it is instead only a central annual fee must be paid to maintain the patent. Translation costs and validation fees are also reduced as validation does not have to take place in each Member State.

This means that costs are reduced if protection is desired in several Member States, where the breaking point for when a UP is assumed to be cost-effective is about four Member States. For more information on annual fees (EPO) please click here>

If the application for UP is approved, it falls under UPC’s jurisdiction. Jurisdiction under the UPC may mean a more effective protection of the patent. At the same time, it also entails a risk that competitors may, through a single action for annulment, have a UP declared invalid or restricted in all Member States (which currently amount to 17), even after the patent has been granted.

Unified Patent Court (UPC)

All holders of European patents need to consider the advantages and disadvantages that it would entail for them that their patents fall under the jurisdiction of UPC. Passivity of EP holders means that their EP initially falls under UPC and national jurisdiction, and after a transitional period lasting at least seven years, these patents fall exclusively under UPC’s jurisdiction.

Opt-out and Opt-in system

An EP owner who wishes to retain his existing patents under national jurisdiction (status quo) must request a, at no fee, a so-called “Opt-out” for his patents during the transition period. An opt-out means that national courts, as now, have exclusive jurisdiction over the patents. During the transition period, the owner cannot request an Opt-out if a claim has already been brought against the current patent with UPC. This means that another actor can force the patent under UPC’s jurisdiction. To prevent this from happening against the owner’s will, the entry into force of UPC will be preceded by a three-month so-called sunrise period during which the owner has an unconditional right to request an opt-out for his EP.

An EP that is requested as Opt-out  may, during the transition period, be requested as Opt-in again. However, this does not apply if the claim has been brought against the patent in a national court after Opt-out.

Advantages and disadvantages with UPC

Jurisdiction under UPC comes with both opportunities and risks for patent owners. An important consideration is the possibility of effectively enforcing patent infringement proceedings based on a patent in several countries against the risk that the patent may be restricted or invalidated in a central action for invalidity.

An advantage of UPC is that it is more efficient, not least in terms of time and cost, to initiate infringement proceedings against other actors when UPC has jurisdiction over the patent. It is of great importance that UPC possesses several sanctions that are probably as important as damages, such as interim decisions regarding preservation measures and interim prohibition decisions. The holder can then apply for an interim ban in all Member States of the UPC, alternatively the states in which the EP has been validated, and thereby quickly end an ongoing infringement. Promptly concluding an ongoing patent infringement and securing evidence is often of great value in the event of patent infringement.

A disadvantage of UPC is that previous EPs for which the holder did not request an opt-out, as well as future UPs, risk being brought before an invalidity action before UPC. This means that traditional EPs will now be able to be declared invalid in the UPC Member States in which the patent has been validated through an invalidity action before the UPC, instead of having to bring an action for invalidity before the national courts of each Member State. Thus, there may be a significant risk for a patent owner that UPC has jurisdiction over the patent as the patent may be restricted in one go.

The structure of the UPC system

UPC consists of two courts where the European Court of Justice will have the power to give prior notice in both instances. The first instance consists of local divisions, regional divisions and central divisions. Sweden, Lithuania, Estonia and Latvia, for example, have an agreement on a joint Nordic-Baltic division in Stockholm. There will be three central divisions where the location of two of them is determined – Paris and Munich – while the location of the third division that would be located in London has not yet been determined. Each division will focus on patents in different industries. The second instance consists of a Court of Appeal located in Luxembourg.

As a starting point, local and regional divisions will handle infringement processes, while central divisions will have exclusive jurisdiction over, among other things, invalidity processes. If an action for annulment is brought in response to an action for infringement before a local or regional division, the court has four options:

a) deal with both infringement and invalidity proceedings in the same process, when an appropriate technically competent judge has been assigned the process;

b) refer the counterclaim to the Central Division and deal with infringement proceedings;

c) as “b” but declare the infringement action stayed;

d) refer the whole process to the central division, however, both parties need to agree to this.

Summary questions for patent holders to ask themselves in relation to UPC

Important questions to ask if UPC jurisdiction is desirable are:

1) Is there a great risk that the patent will be restricted in a trial?
2) How important is the patent for the business?
3) What territorial protection do we need at present and in the future?
4) Is there a great risk that other players will infringe the patent?
5) To what degree are actors in your industry inclined to litigate?

EPO and UPC Member States can be found here>

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