[UPCKat] UPC Court of Appeal confirms that opt-outs may be withdrawn for patents subject to pre-UPC national litigation

Getting harder to turn
your back on the UPC?

The UPCKat is back with an analysis of last month's critical opt-out decision in AIM v Supponor.  With our guest UPCKat team in the form of guest UPCKat John Snape, and members from the team at Carpmaels, this post will examine the controversial decision. 

Over to John:  

"In joined orders ORD_598488/2023 and ORD_598489/2023, the UPC Court of Appeal (CoA) has held that national litigation commenced prior to the transitional period did not block withdrawal of an opt-out, overturning the first-instance ruling of the Helsinki Local Division. In practice, this means that many more patents may fall within the UPC’s jurisdiction than had been expected based on the first-instance ruling. This UPCKat thinks that patentees who opted out previously litigated patents systematically should read on!

Context

The UPC is currently in a “transitional period”, in which certain actions may be brought either before national courts or before the UPC. Rightsholders can avoid this parallel jurisdiction by ‘opting out’ of the UPC’s competence.

If a rightsholder changes its mind, it can withdraw the opt-out and restore the parallel jurisdiction, with a proviso that a national action must not have already been brought – see Article 83(4) UPCA below, with the proviso underlined:

Article 83(4) UPCA:
Unless an action has already been brought before a national court, proprietors of or applicants for European patents or holders of supplementary protection certificates issued for a product protected by a European patent who made use of the opt-out in accordance with paragraph 3 shall be entitled to withdraw their opt-out at any moment. In this event they shall notify the Registry accordingly. The withdrawal of the opt-out shall take effect upon its entry into the register.

Over what timeframe does that proviso in Article 83(4) UPCA apply? Is the proviso limited to actions brought between the filing of the opt-out and the eventual withdrawal? Or does it include actions brought before the opt-out was filed? Or even actions brought before the UPCA entered into force? This is the question tackled by the CoA in these proceedings between AIM Sport Development and Supponor Oy et al. (herein ‘AIM’ and ‘Supponor’).

Facts

Here, AIM had opted out patent EP 3 295 663 from the UPC’s jurisdiction during the ‘sunrise period’ – a timeframe of 3 months before the UPC opened on 1 June 2023, in which opt-out requests were filed so that they became effective immediately on opening of the UPC. AIM did just this, opting out the patent at issue on 12 May 2023.

After the UPC had opened, AIM withdrew its opt out and brought an action against Supponor on the same day, 5 July 2023.

However, Supponor contested the UPC’s jurisdiction over the action, as the patent was already involved in a national litigation action that had commenced in 2020, prior to the transitional period. Supponor argued that actions like this, which had been brought ‘pre-UPC’, nevertheless fell within the proviso of Article 83(4) UPCA.

These facts are shown in the diagram below (from here).

Interpretation of “action” in the proviso

The second panel of the CoA heard the case, composed of Judge R. Kalden (Presiding and Judge-Rapporteur), Judge I. Simonsson (Legally Qualified Judge), and Judge P. Rombach (Legally Qualified Judge).

The CoA applied the general rule of interpretation specified in Article 31 of the Vienna Convention: “A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the term of the treaty and in the light of its object and purpose”. In doing so, two important themes for general legal interpretation arise (Grounds, 11):

1. The proviso in Article 83(4) UPCA must not be read in isolation, but in the context of Article 83 UPCA as a whole; and
2. A word or a phrase used therein multiple times should be presumed to bear the same meaning throughout the provision, unless the wording or the context clearly requires otherwise.

From these principles, the CoA noted that Article 83 UPCA bears the title “Transitional regime”, and concluded that “action” meant “actions brought during the transitional period” throughout Article 83 UPCA – including in paragraph 4 of the Article (Grounds, 12-14 and 18-20).

18. […] The term ‘action’ in paragraph (3) thus necessarily refers to actions brought during the transitional period, because prior thereto the UPC did not exist and no actions could be brought before it.

[…]

20. The Court of Appeal is of the opinion that […] there is no reason why ‘action’ in paragraph (4) should be interpreted differently than the term ‘action’ in paragraphs (1), (2) and (3), i.e. as an action (depending on the context, either before a national court or the UPC) brought during the transitional period.

Reasons for the interpretation

The CoA discussed several reasons why it considered this interpretation correct. In addition to its application of Article 31 of the Vienna Convention, the Court also considered that the purpose of Article 83 UPCA was to prevent abuses of the UPC system, and because such abuses were not possible prior to the transitional period, “actions” did not include actions commenced before the transitional period (Grounds, 27-28):

27. The limitations to the possibility to opt-out and withdrawal of opt-out as set out above, serve to prevent an abuse of this system. The logic behind the limitation to opt out pursuant to Art. 83(3) UPCA (‘unless an action has already been brought before the UPC’) is that once a patent proprietor either himself already used the UPC or allowed a third party to do so (by not using his right to opt out), a subsequent opt-out to prevent further use of the UPC system would be improper and contrary to legal certainty of third parties.

28. In a similar vein, where a patent has been opted out, Art. 83(4) UPCA provides that this opt-out cannot be withdrawn when an action has already been brought before a national court. Consistent with this purpose to prevent an abuse of the system by improperly switching between jurisdictional regimes, the words ‘already brought’ must be understood to mean an action brought before a national court after the transitional regime came into existence. Prior thereto, an abuse of the system is not even possible.

The CoA also stated that other legislation was in place to address the issue of parallel litigation, highlighting the lis pendens rules in the Brussels I recast Regulation (Grounds, 30).

The CoA indicated that Supponor’s interpretation of Article 83(4) UPCA would lead to different treatment of proprietors (Grounds, 31):

31. Were the relevant phrase in Art. 83(4) UPCA interpreted that it refers to any action brought before a national court, including actions brought before the entry into force of the UPC, as Supponor argues, this would lead to a different treatment of patent proprietors. Under such interpretation, patent proprietors whose patent had ever been subject to litigation before a national court would be deprived of the possibility to first opt out and subsequently withdraw its opt-out. […]

Finally, the CoA held that the Rule 5(8) of the UPC’s Rules of Procedure (RoP) was consistent with its interpretation of Article 83(4) UPCA – and that even if Rule 5(8) RoP had a different meaning, the UPCA would prevail (Grounds, 35):

35. […] Even if R.5.8 RoP were to be interpreted that also national proceedings brought before the transitional period could block a withdrawal of an opt-out, then there would be a clear inconsistency with Art. 83(4) UPCA. In that situation, in accordance with R.1.1 RoP, the provision of the UPCA shall prevail. In other words: the Rules of Procedure as a lower ranking instrument related to the UPCA may serve to fill a gap but cannot serve to overrule the clear meaning of a higher-ranking provision of the UPCA.

A purposive approach to legal interpretation

The CoA in its ruling seems to favour a ‘purposive’ approach to legal interpretation – a consideration of the aims and context of Article 83 UPCA was used over a literal interpretation of the wording of isolated parts of Article 83 UPCA.

The order means that UPC litigation may now be a possibility for many more high-value patents for which national actions were commenced prior to the transitional period.

This UPCKat notes that there is already a precedent of having the other panel of the Court of Appeal review a decision of its sister panel; therefore, we cannot rule out that this decision is revised (or confirmed) in the next few months."