Unitary patent and consequences for licence agreements

The new Unitary patent and the associated court (Unified Patent Court, UPC) are expected to come into existence at the start of 2017.

As explained previously in our newsletter, the current European patent will continue to exist alongside the Unitary patent. The difference between the two is that the European patent is a bundle of national rights, while the Unitary patent is a single right that will apply in all participating member states.

The new Unitary patent and UPC rules will have direct consequences for existing and new licence agreements, and for agreements that regulate the (collective) management of European and/or Unitary patents, and the applications for these.

Below, an overview is given of some of the main changes affecting parties that have entered into a licence agreement or a management/co-operation agreement.

Licence agreements
If a licence has been granted under an existing European patent or an existing application, the patent proprietor can presently choose to either (partly) adopt the Unitary patent rules, or to retain the European patent under the existing rules (i.e. the bundle patent). Careful consideration should be given to this decision, because the applicable law, costs and application and infringement procedures of both systems vary.

The Unitary patent will come under the jurisdiction of the UPC, whereas cases regarding European patents can, for the time being, still be submitted to a national court. For bundle patents, the choice between the two legal systems is at the discretion of the patent proprietor, unless agreed otherwise under a licence agreement, or in the case of an exclusive licence.

This is specified under Article 47(2) of the UPCA (Unified Patent Court Agreement). The UPCA is the agreement that brought the UPC into existence and governs its operation. According to this Article, exclusive licence holders of both European and Unitary patents may now initiate infringement proceedings before the UPC, unless their licence agreement stipulates otherwise. An exclusive licence holder who initiates legal action is obliged to inform the patent proprietor in advance, but the latter does not have the right to stop any proceedings. If a patent proprietor wishes to prevent an exclusive licence holder from taking any independent legal action, provisions should be made for this in the licence agreement.

In principle, non-exclusive licence holders cannot bring infringement proceedings before the UPC, except in situations where the licence agreement specifically grants them the right to do so. If it is agreed between parties that a non-exclusive licence holder should have the right to take action, this should be laid down in the agreement.

Under Article 47(4) of the UPCA, the proprietor of the patent can always intervene in a case that has been initiated by a licensee. In case the parties wish to rule out that possibility, that should also be provided for in the licence agreement.

Another point that requires attention in licence agreements is the right of the proprietor or co-proprietor of a patent to request a so-called opt-out. The consequence of such an opt-out is that any proceedings relating to existing European patents cannot be considered by the UPC; only the national courts will be competent to do so. An opt-out of this type will apply for the entire term of the patent, but it can be revoked at a later time (Article 83(4) of the UPCA). If the owner of the right requests an opt-out, an exclusive licensee in the Netherlands is no longer able to initiate proceedings independently. Accordingly, a licensee’s options to take (independent) action can be curtailed seriously.

Under German and Belgian law exclusive licensees would still be permitted to initiate proceedings independently in the event of an opt-out. Nevertheless, it is still advisable to include such a provision in the license agreement in those countries, too, as the arrangements laid down by the parties in the agreement take precedence over the law.

Consideration should also be given to the fact that an opt-out is no longer possible if proceedings have been brought before the UPC. To avoid any unwanted situations, parties to licence agreements will in future need to set clear rules with respect to the owner's or co-owner's choice to request an opt-out, and with respect to the options for the licensee to take independent action.

Parties to a licence agreement should also be aware that a Unitary patent can be licensed for the entire territory, or only for part of it. In so far as the applicable law for the licence agreement is concerned, the parties can also make their own choice of applicable law under the Unitary regime. However, the validity and legal effects of the licence, and the question as to whether the licence continues to exist if the patent is transferred, are determined in accordance with the law that is applicable to the patent. Under Article 7 of the EU unitary patent regulation, this will be the law of the contracting state where the applicant for the patent is established, or where he has his headquarters, on the date when the European application is submitted. If that is unclear, or if the country in question does not fall under the unitary patent’s territory, German law will apply. Parties that have entered into a licence agreement, or that intend to do so shortly, should therefore take care to check which law is applicable to the (Unitary) patent, whether that law is applicable to the licence and whether any additional requirements need to be met, such as the obligation to register the licence.

Co-ownership
Aside from licence agreements, management agreements should also be looked at more closely. Such agreements are predominantly entered into in situations where European patents are owned by multiple parties.

For Unitary patents, the rights of the different entitled parties, including the right to start infringement proceedings, are determined using the law governing the Unitary patent. Since the rules regarding co-ownership may vary per country, joint Unitary patent proprietors should review the arrangements contained in their management agreement on this point. Possibly, as a result of the new regulations, the applicable law will change. However, this does not solely affect management agreements. Any agreements made at an earlier stage, for example to regulate joint research (an R&D agreement), may already contain provisions that determine the (future) ownership of a patent, and as such, they should be reviewed.

Management agreements should also contain provisions for the opt-out, taking into consideration that this needs to be requested jointly by all owners. Failure to do so will render the opt-out invalid. To avoid any conflicting litigation strategies, European patent proprietors should agree on a common position on their future defence.

Finally, on an administrative note, it is observed that a separate register for transfers etc. will be set up for Unitary patents.

Conclusion
The new regulations regarding Unitary patents mean that proprietors and licence holders of existing European patents and applications should have their licence and co-ownership agreements reviewed and amended as necessary in light of the new legislation. If you intend to enter into a licence agreement shortly, you should also give this your consideration. Attention should be paid in particular to the right to institute infringement proceedings, the law applicable to the patent and the opt-out regulations. Make sure you take the necessary action before the new rules come into effect: as soon as the Unitary patent system comes into force, another party could take action in order to block an opt-out.

See also the webpage Unitary patent
See also the webpage 
FAQs on Unitary patent and UPC