The new unitary patent and related court (Unified Patent Court, UPC) is expected to go into effect on 1 June 2023. The new unitary patent and UPC rules directly affect existing and new license agreements. It is important to review your license agreements (or have them reviewed). We briefly list the most salient points of attention below.
Under the new rules, holders of exclusive licenses of both European and unitary patents can now initiate infringement proceedings before the UPC. An exclusive licensee instituting an action must inform the patent holder in advance, but the patent holder cannot stop the licensee. If it is not the intention that an exclusive licensee can initiate proceedings independently, this can be agreed upon in the license agreement. Non-exclusive licensees cannot institute infringement proceedings before the UPC unless otherwise specified in the license agreement.
Under the new UPC rules, the patent owner can always join a proceeding initiated by a licensee. If the contracting parties want to exclude that possibility, it must also be specified in the license agreement.
Withdrawal of jurisdiction UPC (Opt-out)
The patent holder, as well as the co-owner of a patent, has the right to apply for an opt-out. The effect of such an opt-out is that any proceedings relating to existing European patents cannot be handled by the UPC; only the national courts would then retain jurisdiction. The opt-out applies in principle for the entire term of the patent, but can be revoked later. If the patent holder makes an opt-out request, an exclusive licensee under Dutch law – contrary to the above – can no longer initiate proceedings independently. This is regulated differently in other countries. Under German and Belgian law, exclusive licensees would still be allowed to initiate proceedings independently in the event of an opt-out.
An opt-out is no longer possible if proceedings have been instituted at the UPC.
In summary, to avoid unwanted situations, parties should review their license agreements now and include clear rules for the future regarding the choice of the owner or co-owner of a patent to request an opt-out, and regarding the licensee’s ability to initiate proceedings independently.
Parties to a licensing agreement should also be aware that a unitary patent – competition law barriers aside – can be licensed for the entire territory, or only part of it. Moreover, a unitary patent cannot be transferred for only some countries.
Also under the new UPC rules, parties can choose the law applicable to the license agreement. However, the validity and legal effect of the license, as well as whether the license continues if the patent is transferred, will be determined by the law applicable to the patent under the new law. That is the law of the contracting state in which the patent applicant is domiciled or has its registered office on the date the application is filed. If that is not clear, or if the country in question is not within the territory of the unitary patent, German law applies.
In summary, parties who have concluded a license agreement should consider whether they want to change the territory and carefully consider which law will apply to the (unitary) patent, whether that law will (also) apply to the license, and whether any additional requirements must be met, such as, for example, the obligation to register the license.
Also read our Dossier on UPC and UP.