What is the difference between a classical European Patent and a Unitary Patent?

A classical European Patent is the currently existing European patent which becomes – upon grant by the European Patent Office (EPO) – a bundle of individual national patents (e.g. German part of the European Patent, French part of the European patent etc.) for the territories of those EPC member states which the patent owner designates (which currently includes up to 38 contracting member states). After grant, the European patent has the effect of a national patent in each of the contracting member states for which it has been granted and validated. In fact, the granted European patent is a bundle of national patents which have to be individually enforced and which can (save for the opposition proceedings before the EPO) be challenged in each of the individual member states. The European Patent does not automatically have an effect in all 38 member states, but the patent owner has to decide in which of the 38 EPC member states the European patent shall be validated. For each country in which the European patent is validated, separate validation and renewal fees apply. During a transitional period the classical European patents can be enforced, subject to the rules on the Opt-out, before the UPC or before the national courts,

The new Unitary Patent is also granted on the basis of a European patent application. However, when the European Patent is granted, the patentee can choose that a European Patent shall be granted with unitary effect for all member states that participate in the UPC (currently 17). The Unitary Patent is, therefore, no bundle of several national patents, but it is a single patent with unitary effect in all participating member states, which will in fact be regarded as one territory of protection for the Unitary Patent. All litigation concerning infringement and validity of Unitary Patents has to take place before the UPC, whereby the decision of the UPC will have effect for all participating member states.

How can I apply for a Unitary Patent?

The Unitary Patent is granted on the basis of a regular European patent application which has been filed before the European Patent Office. If the applicant wants to reserve the option to obtain a Unitary Patent later, it has to file the European patent application for all participating member states. However, when the application is filed, the applicant does not need to decide whether it chooses a classical European Patent or a Unitary Patent for the participating member states.

When the European patent is granted, the patentee has to decide within one month after grant whether it wishes to obtain with respect to the member states participating in the UPC either (i) a classical European Patent for all or some of the participating member states, or (ii) a Unitary Patent for the participating EU member states.

For the sake of completeness, it should be noted that the patentee may additionally decide to validate the European patent as a classical European Patent in some or all of the non-participating EU member states (e.g. Spain, Croatia, Poland) and/or for non-EU member states (e.g. United Kingdom, Norway, Switzerland).

How much does a Unitary Patent cost?

Application Fees

During the application procedure, the office fees for the examination procedure before the EPO are identical up to the examiner’s decision to grant the European patent. There is no office fee for the application of the unitary effect. Also, the patent claims have to be translated so that they are available in the three official languages of the EPO (English, German, French).

Translation Costs

One difference concerns translation costs, which will be higher during a transitional period for a Unitary Patent: During a transitional period of up to 12 years, the patent specification of a Unitary Patent has to be available at least in English and one other official EU language. This means that the specification of the Unitary Patent (in its entirety and not only the claims) has to be translated from its original language into at least one other language, which is currently not required for classical European Patents with respect to most countries.

Validation Fees and Renewal Fees

The most significant difference regarding the costs of a Unitary Patent concerns the validation fees and annual renewal fees. For a classical European Patent, validation and renewal fees have to paid separately for each country in which the European Patent has been validated. In contrast, for the Unitary Patent, only one single, uniform validation fee and renewal fees will be payable for the entire territory of the participating member states.

The annual fees for the Unitary Patent are based on the "True Top 4" model. This means that the annual fees roughly correspond to the annual fees of a classical European Patent that is validated in Germany, France, the Netherlands and the United Kingdom. Brexit and, thus, the departure of the United Kingdom from the Unitary Patent system, has not resulted in an adjustment of the annual fees so far.

Compared to validating a classical European patent in all participating member states of the new system, the Unitary Patent offers a significant cost reduction over its lifetime (about -60%) with increasing annual renewal fees, starting from 35 EUR for the second year increasing to up to 4,855 EUR for the 20^th year.

The following chart illustrates the development of the annual renewal fees of the Unitary Patent, compared to a national German patent and classical European patents in 3, 13 or 38 countries.

However, many classical European Patents are currently validated only in Germany, France and the UK (“EP-EU3”), whereas the UK is no longer part of the UPC system. Therefore, as an example, a corresponding coverage of these countries by a Unitary Patent (for Germany and France) and a classical European Patent (validated in the UK) would result in significantly higher costs (approx. +60 %) compared to the solution to apply for a classical European Patent with these designated three countries.

Even taking into account lower administrative costs for validation and monitoring of the individual renewal fees, the Unitary Patent only results in cost savings for those applicants, which would otherwise validate their classical European Patents in at least 4 of the participating member states, which will be covered by the Unitary Patent (e.g. France, Germany, Netherlands and Italy).

What does a litigation before the Unified Patent Court cost?

Court costs for litigation before the UPC consist of two parts: (1) a fixed fee and (2) a variable value-based fee that is calculated depending on the value of the action.

The fixed fees are determined on the basis of the type of procedure. The fixed fee for most actions is 11,000 EUR, which applies, for example, for an infringement action, counterclaim for infringement or an action for declaration of non-infringement. The fixed fee for a revocation action is 20,000 EUR. The fixed fee for appeals is in many cases identical to the fixed fee for first instance proceedings.

The variable fee only applies for infringement actions, counterclaims for infringement, actions for declaration of non-infringement, actions for compensation of license of right and for applications to determine damages. The value-based fees do not apply for revocation actions or applications for provisional measures, such as preliminary injunctions.

The variable value-based fee depends on the value of the action, which shall reflect the objective commercial interest of the applicant. The fee is between zero (for values of the dispute up to 500,000 EUR) and 325,000 EUR (for value of the dispute up to 50,000,000 EUR).

The following table gives an overview of the most relevant fixed fees and the value-based fees:

In order to increase the attractiveness of the UPC system for micro-sized and small enterprises, such enterprises may obtain a reduction, so that they only have to pay 60% of the regular court fees. Further substantial reductions of the court fees are provided if the action is withdrawn before closure of the written or oral proceedings, if the parties reach a settlement, or if the action is heard by a single judge.

Which costs are reimbursable?

In UPC proceedings, like in most national procedural laws, the losing party has to bear the necessary costs of the proceedings (Art. 69 (1) UPCA), unless equity requires otherwise. However, if the parties are only partially successful, a split of the costs is also possible. The reimbursable costs are a considerable cost risk which has to be included in the strategic considerations before initiating UPC proceedings.

The necessary, reimbursable costs include

• court fees in full

• attorney and patent attorney fees if appropriate and up to a certain amount (“ceiling”)

• costs for technical experts, translations, witness statements

The reimbursable attorney and patent attorney fees are – like the court fees – dependent on the value of dispute and they have to be “reasonable”, which might leave room to test the reimbursable fees of the other party.

Upon request of one of the parties, the UPC may

• reduce the ceiling of the reimbursable costs, in particular if the losing party is a natural person, micro-enterprise, SME, non-profit organization, university, public research organization, and if the amount of recoverable costs may threaten the economic existence of such entity, or
• increase the ceiling in exceptional cases, e.g. if the case is particularly complex or includes multiple languages, by 50% (if the value is up to 1 million EUR), 25% (if the value is up to 50 million EUR) and up to 5 million EUR (if the value is above 50 million EUR).

Considering court fees and cost exposure the proceedings before the UPC, therefore, increase the cost exposure of the parties compared to litigation in a single country. UPC proceedings provide costs benefits if the parties would otherwise litigate in several countries in parallel.

Summary

With respect to the prosecution costs the new Unitary Patent provides a cost benefit compared to a classical European Patent if patent protection is sought in four and more member states or if the additional territory of protection provides a strategic advantage.

If the enforcement strategy is considered as well, also the costs of a potential litigation have to be taken into account. Generally, UPC litigation is more cost efficient if the patentee would otherwise have to litigate patent infringement cases against the same infringer in several countries. For infringement cases that are limited to the territory of only one or two countries, litigation before the national is likely to be less expensive. Therefore, from a mere cost perspective, a patent holder should consider initiating a litigation before the UPC (with a Unitary Patent or a classical European Patent) when infringement takes place in multiple countries, while infringement cases that are limited to a single country are less expensive in the national courts. In order to keep the option of national proceedings where this is more appropriate, patentees need classical European Patents and national patents in their patent portfolio as well.

Why Hogan Lovells?

We are one of the very few firms that has patent litigators in virtually all major European jurisdictions who have great experience in working on cross-border litigations in multinational teams. For this reason we are exceptional well positioned to guide you through the challenges and opportunities which come with the new Unitary Patent and the UPC system. We do not only defend, we help you create and grow. We are with you from the initial idea to the global roll out. Whether you operate in a traditional industry such as life sciences, telecommunications, automotive or energy, or are part of a new generation operating at the intersection of these industries, we are the team for you.

Authored by Anna-Katharina Friese and Christian Stoll.