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First Court of Appeal decision issued on validity of UPC opt outs
On 4 June 2024 the UPC Court of Appeal provided their first decision on the validity of opt outs in the case of Neo Wireless v Toyota (UPC_CoA_79/2024)1. The Court confirmed that for an opt out to be valid and effective it must be filed by or on behalf of all proprietors of all of the national parts of the European patent.
In the case at issue, an opt out had been filed by Neo Wireless LLC (‘Neo USA’) on 30 March 2023, before grant of the application. However, earlier on 7 March 2023 the German national part of the application had been transferred to Neo Wireless GmbH & Co KG (‘Neo Germany’) by way of an assignment. Importantly, the opt out was filed only by Neo USA and the opt out was not filed on behalf of Neo Germany or with their consent. After grant, Toyota Motor Europe NV/SA filed a revocation action at the UPC.
In reply Neo USA argued that their earlier opt out prevented the UPC considering the case. In their view Article 83(3) of the Unified Patent Court Agreement (UPCA) gave the right to “a proprietor” or “an applicant” to file an opt out and it would be wrong to force a proprietor or applicant into the jurisdiction of the UPC “against their will” just because another proprietor or applicant did not consent to the opt out. While Neo USA agreed that Rule 5.1(a) clearly requires that all proprietors or applicants lodge the application to opt out, they argued that the Rule must be ignored as being incompatible with Article 83(3) UPCA which must take precedence.
The Court of Appeal held that the opt out was invalid. The Court noted that the wording of Article 83(3) UPCA was not in itself clear on this issue. However, the UPC was clear that an opt out must apply to all national parts of the European patent. Taking into account the object and purpose of the UPC system – which was to set up a new legal forum that is the default jurisdiction for litigating European patents – the Court held that allowing one proprietor or applicant that only owned some of the national parts of the European patent to opt out all of the national parts would deprive the other proprietors from their use of the UPC against their will. Therefore, in the absence of agreement between all of the proprietors the default situation must remain – that is the UPC having jurisdiction. The result was that the opt out was invalid since the proprietor of the German national part had not filed or consented to the opt out.
The outcome of this case, while not surprising to most practitioners familiar with the UPC, is a timely reminder of the importance of ensuring, when filing an opt out, that the opt out is lodged by or on behalf of all of the true proprietors of the European patent or application. It should also be remembered that the true proprietors are those entitled to be registered as such in the national registers or the EPO register. Therefore, great care must be exercised when opting out European patents or applications where assignments (possibly as yet unrecorded) have previously been executed.