The impact of the Unified Patent Court and the Unitary Patent on SPCs
The biggest changes to the European patent system for a generation are finally around the corner – how will they affect SPCs?

The Unified Patent Court (UPC) could open its doors later this year after many decades of discussion and anticipation, triggering a revolution in the European patent system. This new regime will immediately affect SPC practice, as discussed below, but the European Commission also has plans for sweeping changes specifically for SPCs once the UPC is up and running.

By way of background, the arrival of the UPC will mean that the EPO can start granting single patents which cover all ratified Member States of the European Union (EU) that have agreed to participate in the UPC. These Unitary Patents (UPs) will be available as an alternative to the existing European Patents (EPs) in those states. EPs are currently granted by the EPO as a “bundle” of national patents which must be validated at the national patent offices at the grant stage. Doing away with the costs of this validation process is one of the advantages of obtaining a UP. A similar rationale may lead to the introduction of a Unitary SPC in the future.

The opening of the UPC will impact how SPCs are enforced and challenged from day one, while more extensive changes to the SPC system could be on the horizon too. In this article, we provide an overview of the changes for SPCs that we expect to encounter after the introduction of the UPC. We also discuss the possibility of opting out of the UPC’s competence during the transitional period and the risks associated with applications to opt out where there are SPCs involved. Finally, we consider possible future changes for SPCs in view of the European Commission’s recent announcements.

How will SPCs be dealt with in the UPC?

As soon as the UPC opens its doors it will be able to make infringement and validity decisions in relation to SPCs, provided that the associated basic patent falls within the UPC’s jurisdiction (e.g. any EP without an opt out request). National patent offices will continue to examine and grant SPC applications as they do today. This will result in a split where national patent offices continue to grant SPCs, refusals to grant an SPC will be litigated in the national courts, but litigation in relation to granted SPCs will potentially occur in the UPC, instead of exclusively the national courts (as happens today).

At present, SPCs are granted and enforced nationally by the national patent offices and courts respectively. Innovators must apply for SPCs at the national patent office of each state in which they desire extended protection. In order to apply for an SPC, innovators require a patent which is in force in the state (the basic patent) and a valid authorisation to place the product on the market in the state. Where an SPC is granted, it can be enforced or revoked in the corresponding national court, and where an SPC is not granted by the national patent office that decision can be challenged through the national courts.

Article 32 of the UPC Agreement provides a list of actions that will fall within the UPC’s jurisdiction. Actions relating to infringement and validity of SPCs are included in Article 32, so these matters can be brought before the UPC (unless there is an opt out in place). Therefore, the UPC provides a new option for disputes involving SPCs instead of the national courts. The high value of SPCs means that many of the basic patents on which they are based may be opted out of the jurisdiction of the UPC (to avoid the risk of central revocation). It will therefore be interesting to see whether or not the UPC will hear many SPC cases in the first few years.

Decisions taken by the UPC shall be based on, inter alia, Union law (Article 24 of the UPC Agreement). Therefore, we can expect decisions from the UPC regarding the interpretation of the SPC Regulation. The UPC will also have the power to refer questions regarding SPCs to the CJEU. The UPC will, we hope, gain a large amount of SPC experience over time. Having a new source of case law from an international court on matters of interpretation of the SPC Regulation may provide a significant amount of de facto harmonisation in the long term.

It will be possible to opt out of the Court’s jurisdiction during a seven-year transitional period following the opening of the UPC. The effects of the opt out will last for the duration of the patent and SPC term. Therefore, it may be a while before the UPC has heard many SPC cases. However, it will not be possible to opt out of the UPC’s jurisdiction after the expiry of the transitional period, which might run for only seven years. Afterwards, the UPC will be competent for infringement and validity matters for all SPCs in ratified EU Member States (as long as the basic patent was not opted out during the transitional period). Therefore, innovators will eventually be required to use the UPC. Given this, innovators may want to use the UPC early to influence its developing case law and build confidence in the new system.

Practice will resume unchanged if an SPC is opted out, with matters of infringement and validity being handled by national courts. By opting out, innovators will be opting all of their SPCs associated with the basic patent out of the competence of the UPC. It will not be possible to pick and choose the states in which the opt out has effect. In view of the all-or-nothing nature of the opt out, it is important that innovators consider whether they wish for the UPC to handle enforcement of all their SPCs in ratified EU Member States for a given SPC family.

The arrival of the UPC also means the EPO can start granting UPs. The expectation is that UPs can be used as the basic patent for separate national SPC applications, as a UP is a patent within the meaning of Article 1(c) of the SPC Regulation (given Article 2(1) of the European Patent Convention). It will not be possible to opt out of the UPC’s competence for a UP, and so SPCs based on a UP will also be litigated at the UPC only. Innovators should therefore take particular care over their choice of basic patent. Irrespective of the type of basic patent (UP, EP opted out, or left in), the grant procedure for SPCs will remain unchanged when the UPC arrives. The UPC Agreement does not mention oversight of the grant process for SPCs, so national patent offices will continue to handle all matters prior to grant.

To summarise, many changes can be expected to the enforcement of SPCs under the new system once innovators trust the UPC to rule on their basic patents, but the UPC alone does not generate any significant change for the SPC grant procedure. Despite the upcoming changes, it may be a while until the UPC handles many SPC cases given the opportunity to opt out of the UPC’s competence, but eventually the UPC will be the only court for many SPCs based on EPs and so will provide a significant degree of harmonisation.

SPCs and applications to opt out

Filing an opt out during the seven-year transitional period removes the EP and any SPCs based on that EP from the jurisdiction of the UPC for the life of the patent (unless that opt out is invalid or withdrawn). Innovators may wish to opt out in order to avoid having an untested court handling infringement and revocation actions regarding their SPCs. So, it seems likely that many basic patents will be opted out of the UPC’s jurisdiction. Unfortunately, applying to opt out will not be a trivial process, as shown by the complexity set out in draft Rule 5 in the UPC’s Rules of Procedure.

Draft Rule 5 states that an application to opt out will require the true legal owner and SPC holder for all granted SPCs to be identified. In addition, a declaration will be made to show that both the true legal owner and the SPC holder agree to the opt out request. To ensure this has happened, it appears there is an obligation to notify the UPC Registry of the “details” of any granted SPC based on the patent being opted out. If a mistake is made when filing the opt out, the opt out will be effective from the date of correction only. Therefore, applicants should take particular care to check that the SPC information provided to the Registry is complete and correct.

Draft Rule 5 requests details of the granted SPCs, which makes sense as it is only after grant that the ownership of an SPC and the basic patent seems likely to diverge. However, it may also be prudent to specify all SPC applications based on the patent in the opt out application for the avoidance of doubt. This could prevent an application to opt out being deemed incomplete due to an SPC application granting before the completion of the opt out process.

Given these extra complexities, it makes sense to start work now selecting which cases to opt out ahead of the sunrise period later this year or early next year.

Possible future changes to SPCs

In addition to those changes that are inevitable after the UPC opens, further changes to SPCs could be on the horizon. The European Commission is considering the introduction of a centralised system for granting SPCs and the creation of a Unitary SPC (uSPC) to complement the UP. This would allow for an SPC to be obtained in several EU States through a single procedure, providing considerable simplification for innovators.

The European Commission’s intellectual property action plan and evaluation of SPC legislation highlighted several issues with the current SPC system. The Commission’s evaluation identified several shortcomings in the current system, including divergent outcomes during the grant procedure across EU states, a lack of legal certainty due to national discrepancies, high costs and considerable administrative burden.

The Commission’s initiative on medicinal and plant protection products aimed to identify options which might address the shortcomings it had identified while promoting innovation in the EU. Several options are being considered by the Commission. Of these, legislative changes proposed by the Commission, possibly combined with some other non-legislative changes, are thought to provide the best solution to the identified issues.

The Commission specifically suggests the creation of a centralised system for granting SPC protection to complement the option of having SPCs granted nationally. This centralised system could involve a unified procedure for granting “bundles” of national SPCs. Alternatively, it could involve a single European SPC application being granted by an international body and validated in the desired states to give national SPCs in a manner akin to EPs. Another option suggested is for an international body to grant a single Unitary SPC, an option favoured by the Max Planck Institute in its study on the legal aspects of SPCs in the EU.

Creation of a uSPC has also been supported by EU associations of pharmaceutical industries in a Joint Position Paper from the ECPA, EFPIA and IFAH-Europe. EFIPA considers it important that the body granting Unitary SPCs should have the necessary expertise, that decisions made by the body should be appealable within a pan-European court system, such as the UPC, and that it must be possible to refer points of law under the SPC Regulation to the CJEU to ensure consistency between the various systems for obtaining SPC protection. EFIPA suggests that such a body could be implemented with a minimal administrative burden by creating a virtual granting authority composed of SPC experts from national patent offices.

In contrast to obtaining and maintaining national rights which requires a large administrative burden and payment of fees for each state, the UP and uSPC would be obtained through a single procedure and require payment of a single set of maintenance fees. As a result, we expect that they should lead to significant cost and time savings for innovators. It seems unlikely that it would be possible to obtain a unitary right, such as the uSPC, based on non-unitary rights, such as national patents, although we have yet to see detailed proposals.

In view of these endorsements and suggested benefits, we may see the implementation of a uSPC soon after the UPC becomes operational. We will be monitoring the situation to see whether any of the Commission’s proposals come to fruition. In the meantime, we recommend SPC holders review their SPC portfolios and consider whether opting out of the UPC’s jurisdiction might be right for them.