The Court of Appeal of the Unified Patent Court (UPC) has issued an Order in the case of Neo Wireless GmbH & Co KG v Toyota Motor Europe NV/SA, which clarifies a discrepancy between the Rules of Procedure (RoP) and the Agreement on a Unified Patent Court (UPCA) relating to who must be named in an opt-out application. The decision highlights the crucial importance of implementing a co-ordinated strategy for opt-outs when an assignment of a national designation has taken place.

The relevant law

The two main provisions addressed by the Court of Appeal in its decision are:

Rule 5.1(a) RoP: “Where the patent or application is owned by two or more proprietors or applicants, all proprietors or applicants shall lodge the Application to opt out. […]”

Art 83(3) UPCA: “Unless an action has already been brought before the Court, a proprietor of or an applicant for a European patent […] shall have the possibility to opt out from the exclusive competence of the Court.”

Background

In March 2023, Neo Wireless LLC (Neo USA) lodged an opt-out application for all EPC states for EP 3876490. However, prior to the opt-out, Neo USA had assigned the German part of EP 3876490 to Neo Wireless GmbH & Co (Neo GmbH). Neo GmbH was not named on the opt-out application.

Subsequently, Toyota brought a revocation action against the German part of EP 3876490 before the Paris Central Division of the UPC. In response, Neo GmbH filed a preliminary objection which highlighted that an opt-out application had been filed by Neo USA for all EPC states, questioning the competency of the UPC to hear the matter.

At first instance, the Judge-Rapporteur held that the opt-out application in the name of Neo USA was invalid as it had not been lodged in the name of all proprietors of all national parts of EP 3876490, as is required by Rule 5.1(a) RoP. Neo GmbH appealed this ruling to the Court of Appeal.

Parties’ arguments on appeal

On appeal, Neo GmbH argued that the wording of Article 83(3) UPCA requires that only “a proprietor” or “an applicant” (singular) need lodge an application for an opt-out. Furthermore, according to Rule 1 RoP, in the case of conflict between the UPCA and RoP, the UPCA prevails. Therefore, the singular wording of Article 83(3) UPCA should take precedence over Rule 5.1(a) RoP, which requires all proprietors or applicants to lodge the application.

Toyota argued that the singular terminology used in Article 83(3) UPCA should not be interpreted so strictly. Instead, since opt-outs can be filed only for a European patent as a whole, it is necessary that the opt out is filed by all proprietors of the national parts as required by Rule 5.1(a) RoP.

Decision

Acknowledging the conflict between Article 83(3) UPCA and Rule 5.1(a) RoP, the Court cited Article 31(1) Vienna Convention on the Law of Treaties, which states that treaties should be interpreted “with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose”.

The Court considered that Article 83(3) UPCA is ambiguous according to its ordinary meaning and it is therefore not clear from the wording who may or must file an opt-out application.

Next, the Court turned to consider the object and purpose of Article 83(3) UPCA. One particularly important factor in the Court’s decision is the default position chosen by the legislator: that the UPC is to be the default venue for litigating European patents unless they are opted out.

The Court considered the following two possibilities for filing an opt-out, each of which has advantages and disadvantages:

• The proprietor of one or more national parts of a European patent can declare an opt-out for all other parts, including those to which they are not entitled, or
• An opt-out application can only be lodged by all proprietors of all parts of a European patent.

The Court held that first possibility could lead to a situation where a proprietor is deprived from enforcing their rights before the UPC without being consulted or informed by the proprietor(s) of the other national parts of the patent. Such an interpretation would clearly be at odds with the object and purpose of the UPCA given the legislative decision to make the UPC the default venue. Conversely, the second possibility is in line with the default position of the legislator because, if not all proprietors of all parts of a European patent file the opt-out, the ‘default position’ will remain.

On this basis, the opt-out declared by Neo USA is invalid because it was not lodged on behalf of Neo GmbH. Therefore, Neo GmbH’s preliminary objection was rejected by the Court of Appeal and Toyota’s revocation action has been allowed to proceed.

Impact

This is a well-reasoned decision from the Court of Appeal that provides clarity on the seemingly conflicting wording of Rule 5.1(a) RoP and Article 83(3) UPCA and sets a clear precedent for interpreting these two provisions – for an opt-out application to be valid, all proprietors or applicants for all national parts of a European patent or application must be named. This certainty is especially important to have for a new court such as the UPC.

The decision indicates that scrutinising opt-outs is still a way in which parties could either avoid an action brought against them at the UPC, or in which they could lock another party’s patent into its jurisdiction. This is a stark reminder of the importance of taking a careful and co-ordinated approach to opt-outs, particularly in the case of joint and partial ownership of an application or patent.

Carpmaels & Ransford offers a full auditing service for rightsholders wishing to verify the status of opt-out requests – whether in the context of their own opt-outs, or third party opt-outs. More detail on this service can be found here.