UPC OPT-OUT: all for one, not one for all

Author: Anna L. Hatt
IP News

It has been confirmed by a recent Decision of the Court of Appeal of the Unified Patent Court in Neo Wireless v Toyota that, as expected, for an opt-out to be valid it is necessary for the application to be made by or on behalf of (i.e. with the consent of) all of the proprietors of all national parts of a European patent.

In the case at issue, Neo USA was the proprietor of EP 3876490 for all states, and later transferred the German designation (only) to Neo DE. Shortly after, Neo USA filed an opt out for “all EPC states”. Neo USA did not lodge the opt out application on behalf of Neo DE, nor did Neo DE file an opt out itself.

Toyota requested revocation of the German designation of EP 3876490 before the UPC. Neo objected that the Court lacked jurisdiction and was not competent to decide on the issue, on the basis of the opt-out application. The first instance judge held that there had been no valid opt out of the patent from the jurisdiction of the UPC. Neo USA appealed.

Neo USA tried hard, but failed, to persuade the Court of Appeal that the opt out was valid. Neo USA’s arguments were based on the wording of Article 83(3) of the UPCA, which referred to “a proprietor” of or “an applicant” for a European patent. Further, Neo USA argued that the requirement for all proprietors to consent cannot be the correct one, since lacking consent from all proprietors, a proprietor would be prevented from making an opt out application and would be forced into UPC system against its will.

The Court of Appeal rejected Neo’s arguments, pointing to the need to interpret Art. 83(3) UPCA in context, including its object and purpose and to the default position (the ‘new status quo’) being the jurisdiction of UPC (and an opt out application being referred to as an “exception” by the Court of Appeal).

Interestingly, the Court has accepted that the literal wording of Art. 83(3) is unclear, i.e. it could be understood to mean either only one or all proprietors, however, based on the jurisdictional regime chosen for the UPC, there can only be one meaning. The default position chosen by the legislator is that the UPC is the default forum for legal proceedings concerning European patents, so the only possible interpretation is that all proprietors of all national parts must file the opt out application for it to be valid. Without such an agreement, the default position should remain, as consistent with the legislators’ intention.

The other possibility, which Neo argues is the correct interpretation, allows one proprietor to opt out a European patent for all national parts, including those he does not own, and would result in the other proprietors being ‘deprived from enforcing their national parts of the European patent before the UPC’, which is against the default position, and therefore cannot be the meaning of Article 83(3).

Thus, the appeal failed as the opt out was invalid. As such, the revocation action is set to continue, with a hearing scheduled for September 2024. If Neo’s patent is later revoked, it will be a stark reminder of the opt-out risks that European patentees need to bear in mind.

It is important to get minor formalities right, in particular managing opt-outs under the UPC framework when several national parts of a European patent are not held by one and the same proprietor.

As Neo has learned, an opt-out must be filed by, or with the consent of all proprietors of all national parts of the European patent or application to be valid.

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