Is Unitary Patent protection a silver bullet for securing value of IP rich businesses?

Increasing the effectiveness of patent protection across multiple jurisdictions

The value of the intellectual property in IP-rich businesses is a key consideration in any proposed deal. But is the new Unitary Patent protection system preferable over existing national patent rights for protecting IP value? The answer is not a simple one but what is clear is that investing time and resources into a Unitary Patent protection strategy could have a significant pay-off for a patent-rich business.

Background

The monetisation of patents is also a crucial factor in developing licensing and other revenue generation strategies.

Patents are typically a critical asset in a business plan and future revenue generation. As mentioned in an earlier article, in transactions involving tech companies, IP often underpins the value of a target. Therefore, their status, including enforceability and infringement risk will be relevant when valuing a patent for a deal. The monetisation of patents is also a crucial factor in developing licensing and other revenue generation strategies. So is the new Unified Patent Court (UPC) regime, which came into being in June of this year, going to be the go-to option for patent rich businesses?

The New Regime

The new UPC is a single forum for patent litigation covering all UPC member states (currently 17 EU member states). It is possible to opt existing European patents out of the jurisdiction of the UPC but, if left alone all European patents are automatically within the new system. In any proposed acquisition or investment, legal advisors should check whether patents are opted out on the UPC’s publicly available database. In any case, disclosure of any documentation outlining reasons why patents were opted out (or, alternatively, left within the jurisdiction of the UPC) should be sought. 

The Unitary Patent is a new single patent right which covers all UPC member states – this includes most EU members, although Spain and Poland are notable exceptions, and does not include non-EU members like the UK.

What are the benefits of Unitary Patents and the UPC more generally?

1. A one-stop-shop. The new regime means businesses can enforce all patent rights they hold in those jurisdictions through the UPC, compared to the costly and time-consuming previous system whereby litigation was required in each individual member state. The possibility of obtaining a single injunction covering all UPC countries puts pressure on defendants driving favourable settlement opportunities. 
2. Uncertainty creates opportunity. The infancy and accompanying uncertainty of the UPC may drive defendants to reach more favourable settlements, creating a strategic advantage for savvy businesses. 
3. Speed and efficiency. Decisions in the UPC are expected to be obtained within a year of commencing proceedings. With this, there is a greater emphasis on frontloading arguments and evidence which will benefit claimants, who will have potentially unlimited time to prepare their case before issuing proceedings. The time pressure this will put on defendants may impede their ability to develop strong evidence and sound arguments.
4. Reduced costs. The costs and logistical effort in maintaining patent protection will likely be reduced, making this an attractive prospect for businesses that are currently faced with multiple fees to maintain bundles of rights across the EU.

The unitary protection system will make effective patent protection easier to obtain by providing a one-stop-shop across multiple EU jurisdictions. But the advantages of the new system do need to be weighed against the risk of a central revocation.

There are, of course, downsides to Unitary Patent protection and some of the benefits can be a double-edged sword. In particular:

1. The stakes of litigation in the UPC are higher. If a defendant is successful in invalidating the relevant patent(s), it could significantly disrupt a claimant’s business. Analysing the patents held by a company will therefore be more critical than ever when carrying out due diligence in relation to a proposed acquisition and/or investment. 
2. Greater uncertainty. It is presently unknown whether the UPC will be considered a patentee-friendly jurisdiction and as a result suggested benefits (such as quicker decisions) may not materialise.

The unitary protection system will make effective patent protection easier to obtain by providing a one-stop-shop across multiple EU jurisdictions. But the advantages of the new system do need to be weighed against the risk of a central revocation. 

We will wait to see how the UPC operates over the coming months and whether the one-stop-shop delivers on increased efficiencies, decreased costs and streamlining patent protection across its jurisdictions.