Two years after it launched, Europe’s Unified Patent Court has become a significant forum for global patent disputes and its popularity on the rise – something that businesses cannot afford to ignore.
After many years of delays, the Unified Patent Court (UPC) opened on 1 June 2023. In just two years, it has already received a total of 883 cases at first instance, including 320 infringement actions.
These cases have covered a wide range of technologies and industries, from pharmaceuticals and medical devices to semiconductors and sports equipment.
In its first two years, the UPC has become an attractive forum for patent disputes and all signs are showing that this popularity is only set to grow – competing with courts in the US, UK and Asia. It has demonstrated it can process cases quickly and efficiently and has shown a willingness to uphold patents and find them infringed – granting interim and permanent injunctions and opening the door to substantial damages awards.
What is the UPC?
The UPC was set up to provide a single forum for owners of European patents to enforce their rights. It currently has 18 member states including major markets such as France, Germany, Italy and the Netherlands. More EU member states are expected to join in the next few years.
The Court has jurisdiction over all European patents with unitary effect, and European patents validated in the participating states (unless they have been opted out of the system). It can rule on whether patents are valid and infringed, among other matters, and its decisions apply across all participating states.
This means that the remedies available at the UPC span a territory with a population of about 400 million people, giving patent owners considerable leverage in multi-national disputes. For comparison, there are approximately 340 million people in the US. With similar population numbers at play, the EU and the UPC is becoming a more and more attractive place for patent owners (or for plaintiffs) to take action.
Plaintiffs – normally patent owners – also have influence over where to bring their action. The UPC has three central divisions in Paris, Munich and Milan and 14 local and regional divisions in various cities. In many cases, the party bringing the case can choose which division to bring the action in.
While it is too early for full data to be available, early indications show that plaintiffs are successful in more than 50% of cases at the UPC. Notably, in more than half of cases where a preliminary injunction has been requested, it has been granted. This gives patent owners more leverage than they have in most other jurisdictions, such as the US.
The UPC is also becoming the home of a number of high-profile cases, which have settled after proceedings have been initiated. For example, one of the highest-profile cases at the Court was settled in May this year. After the UPC granted a preliminary injunction, Bruker (formerly NanoString) agreed to pay 10x Genomics and Harvard University $68 million as well as ongoing royalty payments on sales of its spatial biology products.
The UPC in Practice
The popularity of the UPC is changing the global patent litigation landscape, and all businesses need to be aware of it. In particular, any company that does business in any of the 18 participating member states could be sued in the UPC, even if they are based in North America or Asia. The Court’s jurisdiction covers both actual and threatened patent infringement. The UPC has already heard cases involving multiple patents, standard-essential patents and complex disputes that involve both infringement and validity.
One question that has not yet been answered concerns damages. The UPC Agreement provides that “The injured party shall, to the extent possible, be placed in the position it would have been in if no infringement had taken place. The infringer shall not benefit from the infringement.” This could lead to significant damages awards.
A sign of things to come may be the landmark judgment in the UK (which is not part of the UPC) ordering Apple to pay patent owner Optis $502 million plus interest for a license to use the latter’s portfolio of Standard-Essential Patents (SEP). The decision is a warning to all technology implementers about their potential exposure, particularly in SEP cases.
Conclusion: Five Key Takeaways for Businesses
The number of cases at the UPC is expected to continue to increase. With tight and strictly enforced deadlines as well as operating in multiple locations and languages, litigation before the UPC can be an uncertain and risky endeavour – especially for those facing allegations of patent infringement. Two years on from its launch, here are some clear takeaways for businesses that may be on the receiving end of a patent infringement suit:
- Identify potential risks: It’s important to be aware of relevant patents that might be asserted against a business’ products or services, and what impact a UPC case could have on its activity – including business disruption, litigation costs and the possibility of royalty payments.
- Expenses can be high: UPC litigation is likely to be more expensive than national litigation in Europe. As a front-loaded system with tight deadlines, many costs are incurred at an early stage and can escalate quickly which can lead to cash flow challenges, especially for smaller businesses. Having protections in place, such as insurance to cover litigation costs are critical to ensure day-to-day cash flows remain unaffected during patent disputes.
- Injunctions (both interim and permanent) are a very real possibility in the UPC if the Court considers that the patent is valid and infringed. Injunctions also have teeth: the court can order daily penalty payments and an appeal does not automatically have suspensive effect. It is vital to review what impact an injunction would have on an organisation’s revenues and consider having business interruption insurance to cover the injunction period.
- Damages awards: If a patent is found valid and infringed across the 18 participating states, damages awards could be large. This could encourage even more patent owners to bring cases at the UPC, where the pool of damages is also attractive to litigation funders.
- Transfer the risk to insurance: With patent litigation in Europe only expected to increase, businesses should consider how to transfer the costs of professional fees and expenses, liability costs and business interruption incurred as a result of patent litigation through adequate IP insurance.