IP litigation and Brexit

Giovanni Guglielmetti and Marco Blei discuss how the outcome of the referendum could affect the new EU-wide patent system

The outcome of the UK referendum on the EU will have a significant impact on many areas, including on a key competitive business tool: intellectual property (IP). This will be even more evident in light of the upcoming Unified Patent Court (UPC) and associated unitary patent (UP) systems, which will allow businesses to obtain a single, EU-wide UP and enforce it together with (non-opted out) European patents on a pan-European basis in a common European patent court, whose Central Division will be located in Paris, Munich, and London.

If the UK votes to leave the EU, it will not be able to ratify the UPC and, therefore, will not be part of the new patent system.

Although Brexit would not necessarily cause the UPC to fail, and other countries (most likely Italy or the Netherlands) would take the UK's place in the process, it would at least significantly delay the process. The countries adhering to the UPC would need to negotiate the necessary adjustments and the negotiations for the UK's exit from the EU would also take time. Moreover, the UPC would become less attractive to businesses, and if the London branch of the Central Division was moved to another location, the question of whether countries that had already ratified the current UPC would need to ratify a revised version post-Brexit would also arise.

Regardless of the UK's role, when the new system comes into force businesses will have to thoroughly assess whether to opt out their European patents from the UPC. The UPC Agreement provides a transitional period (seven years plus a possible extension of up to an additional seven years) during which time patent owners will be able to opt out from the UPC non-unitary existing and future European patents.

By opting out, patent owners will avoid the risk of being attacked centrally before the Central Division and having their patents revoked for all the designated countries in one go. At the same time, opting out will prevent patent owners from benefitting from the stronger protection available by enforcing their European patents before the UPC, with a single decision having effect in all UPC countries.

The expected widespread opt-out would sterilise certain benefits of the UPC in the short term, such as lower costs compared to some jurisdictions, the sense of authority and consistency that will be attached to UPC decisions, and the central attack that will be a powerful device to increase competition by revoking worthless patents with less effort and expense. Businesses may adopt the tactic of opting out at the outset and then possibly opt back in if they need to enforce a European patent in many countries. However, owners would be better off carrying out a case-by-case assessment of each of the patents in their portfolio, as the advantages and disadvantages of the opt-out may vary depending on several factors, such as the patent's value and strength, the nature of the market, and the technical background of the product or process covered by the patent. Stronger and niche patents would generally be the best candidates to opt in to the UPC from the very beginning, whereas weak and blockbuster patents should be opted out. 

Giovanni Guglielmetti, pictured, is a partner, and Marco Blei a senior associate in the IP team at BonelliErede