Should I file an infringement action with the UPC or stick to national courts?

A comparison of UPC infringement proceedings with national patent infringement proceedings

When the Unified Patent Court starts operation in June 2023, patentees will have more forum options for patent infringement actions against alleged infringers in Europe than ever before. The first question for the patentee will be: Go UPC or go national?

First of all, a patent infringement action requires a suitable patent for the respective court system. National patents and national parts of European Patents can be asserted before national courts. The UPC decides infringement of Unitary Patents and European Patents (in this case all national parts of that European Patent of UPC territory), while the patentee can “opt-out” a European Patent from the UPC system before an action is filed there according to Article 83 (3) UPC Agreement. An opt-out can be withdrawn, if the patentee decides to litigate before the UPC and if the patent was not yet made subject to national proceedings.

The choice between UPC and national litigation is not binary: There is also the (new) possibility of double patenting (lodging identical patent applications with the EPO and a national patent office), allowing the patentee to decide the venue at a later point in time. It remains to be decided if the UPC will allow “carve-outs”: If a national part of a European Patent is already subject to national court proceedings it may be possible to then litigate the entire European Patent except for this “carved-out” national part before the UPC. However, the defendant, too, can influence the venue decision for example by filing a national or UPC nullity action (where possible).

The decision for or against the UPC obviously depends on the circumstances of the case. The following comparison of UPC infringement proceedings with German and Dutch patent infringement proceedings compares advantages and disadvantages. The United Kingdom, which is not a UPC venue, remains a further litigation venue beside those within the UPC territory, in any case.

UPC: Mighty one-stop shop or unpredictable and risky new court?

The UPC’s key promise is the possibility to obtain one judgement in a single expeditious court proceeding, which is then enforceable in a multitude of jurisdictions. The UPC is expected to live up to this promise, making it an interesting litigation strategy particularly if enforcement is desired in many European countries. Compared to a multitude of litigation proceedings in different national jurisdictions, this single powerful judgement can come at a lower total litigation cost in a shorter period of time. In some constellations, the UPC costs can be lower than even one single national proceeding. The geographic scope of a UPC judgement can even go beyond the territory of UPC member states and include claims regarding non-UPC but EP member states for damages claims and interim measures (see details in our article on the "long-arm” rule of Art. 71b Brussels Ibis Regulation).

However, not all EU member states participate in the UPC system – each litigation case requires aligning the target markets with UPC territory. If, e.g., the litigation target markets are the non-UPC members Spain, Poland, Switzerland and/or the United Kingdom, then this requires national litigation in these jurisdictions.

Going UPC means putting all eggs in one basket. The patentee has the risk of having the patent nullified in a multitude of jurisdictions by a single judgement. The alleged infringer has the risk of losing access to many markets at once and facing respectively high damages claims.

This may put pressure on both parties of UPC proceedings, given high uncertainties at the start of this system: The UPC is an entirely new court system with freshly drafted procedural and substantive law that currently leaves many open questions and controversies to eventually be resolved by case law.

The expeditious time schedule of UPC proceedings may put further pressure on the parties. The UPC Rules of Procedure (RoP) aim at a first instance judgement within one year (for all types of proceedings!), which is faster than many current national patent proceedings (see below). The schedule’s tight deadlines for both parties to generally present all facts, evidence and arguments well before the oral hearing will be challenging for the court and both the defendant and the plaintiff. Also, the procedural options (including forum shopping) and possible scenarios within UPC litigation can increase litigation complexity. From the patentee perspective, a surprising infringement action can be a dangerous weapon as it is difficult for the defendant to rebut adequately within the tight deadlines.

The UPC offers additional forum shopping possibilities with regard to the UPC venues (multiple divisions of the Court of First Instance to choose from, also in different member states if the infringement takes place in different participating states of the UPC) Forum shopping furthermore plays a central role where it concerns the applicable law (by choosing an applicant with respective residence by selecting the first-named applicant in the patent application with corresponding place of business or residence) and where it concerns forum combinations of UPC internal and external litigation (see above options of double patenting and national “carve-outs”).

Comparison with German proceedings: Efficient, low-profile and reliably patentee-friendly?

Patent infringement proceedings before German courts will certainly remain a relevant option for the next years. Several arguments may convince patentees to litigate before German courts instead of the UPC.

First, several of the German courts have a strong reputation of patentee-friendly and high quality decisions. Several German infringement courts are known for broad claim construction. This currently comes with less uncertainty compared to the UPC’s initial lack of case law (see above).

Second, some German infringement courts are several months slower than the planned UPC time schedule, while the long duration of German nullity proceedings comes to the patentee’s advantage. German first instance infringement proceedings can be completed within one year, although some courts empirically take several months longer. Nullity proceedings with the German Federal Patent Court, however, can take more than two years. This may lead to the so-called injunction gap: If a patent is nullified eventually but the defendant earlier on fails to convince the faster civil court deciding on patent infringement to stay the case until the slower Federal Patent Court decides the nullity case, there is the possibility that the first instance injunction is enforced for many months until the Federal Patent Court finally nullifies the patent. Even though the Federal Patent Court meanwhile issues a preliminary opinion within six months (which is generally before the civil court will decide whether or not to stay the case), this injunction gap may be an argument in favor of national German proceedings from a patentee perspective.

Third, German proceedings may in many cases suffice to end an international dispute and thus come at a lower litigation cost. Also, the cost reimbursement risk of German proceedings can be anticipated based on the value in dispute, while for UPC proceedings, the plaintiff can anticipate only the comparatively high ceiling values for reimbursement costs.

Fourth, confidentiality: The files of German infringement proceedings are generally not publicly accessible, except for the oral proceedings and occasional (mostly anonymized) judgement publication. Case inspection is possible only to a limited degree (Section 299 German Code of Civil Procedure). This will be different for the UPC, where generally all decisions are made publicly available, with further possibilities of file inspection upon request (Rule 262 RoP).

Comparison with Dutch proceedings: A valuable alternative for cross-border measures

Patent proceedings in the Netherlands will prove to remain relevant as well. As with the German courts, the Dutch courts have the international reputation to be generally patentee-friendly and to give high quality decisions. A notable difference with proceedings in Germany is, however, that Dutch courts decide on validity and infringement in the same judgement.

In turn, the Dutch courts have always been an attractive venue for patentees due to the fact that Dutch courts grant cross-border injunctions in preliminary relief proceedings. Although courts in other EU member states should have the ability to do so too if international jurisdiction is assumed on the basis of article 4 of the Brussel Ibis Regulation, albeit in connection with article 8 of the Brussel Ibis Regulation (Court of Justice of the European Union 12 July 2012 (Solvay v Honeywell), C-616/10, ECLI:EU:C:2012:445, par. 29 and 30.), for some reason the same practice has never really been adopted by courts outside the Netherlands. Nevertheless, this practice will not change with the entering into force of the UPC. With many undertakings having a significant part of their European distribution operations located in the Netherlands, the Dutch courts shall be able to maintain this practice as it continues to have jurisdiction pursuant to article 4 of the Brussel Ibis Regulation in cases which are not subject to the exclusive jurisdiction of the UPC.

This for instance becomes clear from the Novartis v Pharmathen judgement (Court of Appeal of The Hague of 15 November 2022 ECLI:NL:GHDHA:2022:2327, par. 5.10.) of the Court of Appeals of The Hague of 15 November 2022. In this judgement the court established international and cross-border jurisdiction on the basis of article 4 of the Brussel Ibis Regulation. The court then held that pursuant to article 8 of the Rome II Regulation, the question whether the patent is infringed is governed by the laws of the countries for which protection is sought. Although this meant that not only Dutch law applied, the court affirmed that (informal) harmonisation of the rights attached to a European patent has been far-reaching in the member states of the European Patent Convention. Accordingly, the court assumed that those rights are the same in all countries, while taking Dutch law as a starting point for assessing infringement. The laws of other legal systems were subsequently discussed only insofar the parties argued that a different rule applied under a specific legal system.

Although this doesn’t necessarily have to mean anything, it may be worth to point out that the composition of the court in this case comprised of two judges whom will also act as judges to the Court of Appeal of the UPC. With the Court of Appeal of The Hague now having affirmed the existence of this (informal) harmonisation in EPC member states, this could be an indication that the UPC may eventually decide in a similar manner when a comparable matter is brought before it.

In any case, like the UPC on the basis of Article 71b of the Brussel Ibis Regulation, Dutch courts too will remain able to grant judgements and injunctions covering EPC member states both inside and outside the EU such as the United Kingdom and Turkey. It goes without saying that the threat of such cross-border injunctions (also for opted-out patents) will remain an import means for patentees when deciding on their European strategy. Especially since these injunctions are provisionally enforceable and the Dutch courts do not hesitate to uphold the awarded penalty payments. In the case of Novartis v Pharmathen, the court for instance imposed penalty payments of EUR 100.000 per day with a maximum of EUR 25 million. Acting in violation of the injunction led the District Court of Amsterdam to awarding penalty payments of EUR 7.5 million by judgement of 12 December 2022 (Provision’s Judge of the District Court of Amsterdam 12 December 2012, ECLI:NL:RBAMS:2022:7514.).

Although (follow-up) proceedings on the merits in the Netherlands will be several months slower than the planned schedule for UPC proceedings, the threat and possibility of cross-border injunctions in swift preliminary relief proceedings warrants that the Dutch courts are certainly not to be neglected. With the Dutch system furthermore providing for various means to warrant confidentiality of submitted procedural briefs and exhibits, commencing proceedings in the Netherlands remains a trusted and meaningful alternative to proceedings before the UPC.

Conclusion

In sum, the mighty UPC system offers both chances and risks. Especially at the beginning of UPC operation, patent litigation parties will carefully decide for or against this system. Awareness of the system’s currently hardly predictable risks is certainly indicated for important patents.

The tried-and-tested German infringement proceedings have several advantages: They can be just as fast as UPC proceedings and are currently more reliable, with a reputation for patentee-friendly claim construction. The Dutch system remains an important alternative with cross-border measures possible outside the UPC system or outside the UPC territory. Both systems can also be cheaper and more confidential than UPC proceedings.