Key features of the UPC

One of the most interesting aspects of the UPC is its blend of common law and civil law approaches and the extent to which 'local flavour' in particular Divisions may have a significant impact on decision making (subject to the overarching influence of the Court of Appeal). This is likely to be a particular factor in the early days of the UPC.

Bifurcation

One such issue is the possibility of proceedings in the UPC being bifurcated – i.e. infringement and validity being heard separately. The national courts in Germany bifurcate proceedings but other jurisdictions determine infringement and validity together. The concern for defendants is that a patentee will argue its case broadly in order to obtain an injunction, but more narrowly in separate validity proceedings to avoid revocation. Further, under a bifurcated system, a patentee may obtain speedy injunctive relief in respect of a weak patent which is ultimately held invalid. Accordingly, if UPC panels decide to bifurcate, they may become an attractive forum for patentees.

If a defendant to an infringement action in the UPC counterclaims for revocation, the Local / Regional Division may decide to:

Proceed with both the infringement action and the revocation counterclaim (with a technically qualified judge);
Refer the counterclaim for revocation to the Central Division and suspend (if there is a ‘high likelihood’ that the relevant claims of the patent are invalid) or proceed with the infringement action; or
If the parties agree, refer the case as a whole to the Central Division.

Further, if an action for revocation is pending before the Central Division, an action for infringement between the same parties and relating to the same patent may be brought before a Local / Regional Division, or before the Central Division. The Local / Regional Division will then have the discretion whether to proceed with the infringement action or suspend it.

Concerns about the effects of bifurcation may be mitigated to some extent by other provisions in the UPC Agreement and in the Rules of Procedure. First, as panels are multi-national, it is possible that panels in states that have traditionally bifurcated will, in fact, decide to hear infringement and validity together. Further, bifurcation may not always be attractive, as it brings with it the prospect that validity may be dealt with in a different Member State, and potentially in a different language. It is also hoped that the Court of Appeal will instil consistency between Divisions on this question. In practice, bifurcation may, in fact, be fairly rare.

The UPC Rules of Procedure provide that, where an infringement claim is not stayed, the Judge-Rapporteur of the Central Division ‘shall accelerate’ the revocation proceedings before the Central Division. Further, they ‘shall endeavour’ to set a date for the oral hearing of the revocation action at the Central Division before the date set for the oral hearing of the infringement action. It remains to be seen how straightforward this will be in practice.

Applicable law

The UPC bases its decisions on:

EU law, including the Unitary Patent Regulation and the Translations Regulation;
The UPC Agreement;
The EPC;
Other international agreements applicable to patents which are binding on all participating Member States; and
National law (which may include non-participating States).

Whilst issues of patent validity are determined by reference to the European Patent Convention, the UPC Agreement contains provisions relating to infringement and limitations to infringement. The UPC may refer questions to the Court of Justice of the European Union on issues of Union law. Questions relating to ownership issues etc are determined by reference to the relevant national law.

Procedure and costs

The Rules of Procedure govern how UPC proceedings are conducted, comprising written, interim and oral stages.

The rules provide for a decision on validity and/or infringement within one year. This is achieved by a fixed and compressed timetable during the written stage of proceedings. The written stage requires some ‘front-loading’ from patentees as their pleadings must set out their proposed claim interpretation.

The procedural framework is a mixture of both common law and civil law traditions. An extensive range of evidential tools are available including: hearing the parties, requests for information, production of documents, hearing witnesses, expert opinions, inspections, experiments and affidavits. However, there is no general disclosure obligation, and cross-examination of witnesses and experts will be limited. A particularly interesting aspect is the availability of orders preserving evidence (saisie) which may be sought against an alleged infringer even before an action is launched, and potentially on a without notice basis.

In addition to bifurcation and the resulting ‘injunction gap’, there are concerns as to how different panels may approach the award of final injunctions. Whilst an injunction is a discretionary remedy, the UPC Preparatory Committee has suggested that only in “very exceptional circumstances” will the Court decide not to order an injunction. It is inevitable that, even once the Court of Appeal begins to issue clarificatory decisions, there will be variations of approach between different panels in the exercise of their discretion, based on existing practices before national courts.

A patentee may also seek a preliminary injunction which, given the potential geographical scope, will have significant consequences. The grant of a preliminary injunction is also discretionary and judges are given very limited guidance in the Rules.

A party concerned that provisional remedies may be sought against it may lodge centrally at the UPC Registry a protective letter in which it can set out its arguments on infringement and /or validity. The aim of a protective letter is to ensure that these arguments are before the panel on any subsequent without notice application. We discuss the issues to consider in relation to protective letters in this article.

If a preliminary injunction is granted, the UPC may order security for any injury caused as a result. This may be a significant amount given the potentially broad geographical scope of the injunction (however it appears that security will not be granted in favour of third parties).

Court fees comprise a fixed fee, together with a value-based fee above a pre-defined ceiling, based on the German fees model. In relation to costs recovery, the Rules set out a scale based on the value of the dispute. The Court may raise or lower the ceiling of recoverable costs in certain circumstances. Security for costs may be ordered in the Court's discretion.

Guidance has been issued in relation to the scale of ceilings for recoverable costs (including as to the basis for raising/lowering the ceilings) and for assessing the value of a case (both for the purposes of setting the Court fee, and for recoverable costs). The guidance notes that the method of determining a value-based fee should be as simple as practically possible and that, in most cases, the most practicable method will be a valuation based on an appropriate licence fee, though a valuation based on the claimant's loss of profits, or the defendant's profits may be applied (though usually these other options would be too complex to be determined at the beginning of proceedings). The valuation will relate to the summed up values of the main remedies sought (injunction for the future, damages for the past), with specific guidance provided for calculating the value of the various types of claims.

Scale of Ceilings for Recoverable Costs

Value of proceeding	Ceiling for recoverable costs
Up to and including €250,000	Up to €38,000
Up to and including €500,000	Up to €56,000
Up to and including €1,000,000	Up to €112,000
Up to and including €2,000,000	Up to €200,000
Up to and including €4,000,000	Up to €400,000
Up to and including €8,000,000	Up to €600,000
Up to and including €16,000,000	Up to €800,000
Up to and including €30,000,000	Up to €1,200,000
Up to and including €50,000,000	Up to €1,500,000
More than €50,000,000	Up to €2,000,000

Language of UPC proceedings

One of the most significant practical issues for parties and their representatives is the language in which the proceedings take place. In practice, it appears likely that English and German will be the main languages adopted.

Proceedings at the Central Division are in the language in which the patent was granted (i.e., English, French or German).

The language of proceedings before any Local or Regional Division will be determined by the Claimant choosing from the options available within that Division. Whilst this will include an official European Union language which is the official language - or one of them - of the participating Member State hosting that Division (or the official language(s) designated by states sharing a Regional Division), participating Member States may in addition or instead designate one or more of the official languages of the EPO – i.e., English, French or German. All existing Local and Regional Divisions have now designated English as an available language.

The parties may also agree to adopt the language in which the patent was granted (if the panel approves; if it does not approve, the parties may request transfer to the Central Division). Similarly, the panel may decide to adopt the language in which the patent was granted, with the parties’ agreement.

The Court of Appeal has provided guidance as to the relevant circumstances to be taken into account when deciding how to deal with an application by a party to change the language of the proceedings to the language of the patent. Relevant factors include: the language mostly used in the field of the technology; the language the evidence is primarily written in; how a change of language will affect the course of the proceedings; the nationality or domicile of the parties; and the size of the parties relative to each other. Where the balance of interest is equal, the Defendant's position is decisive.