12 December 2022

New Unified Patent Court may tilt playing field in favour of ‘patent trolls’

Commentary provided by Mathys & Squire has featured in an article by The Patent Lawyer, providing an update on the UPC and ‘patent trolls’.

An extended version of the press release is available below.

‘Patent trolls’, or ‘Non-practicing entities’ as they are generally now known, are companies that use patent rights to earn income from third parties, rather than producing their own goods or services under the patent rights. They often do this by litigating against businesses that they allege are infringing the patents owned.

Under the new laws of the Unified Patent Court, a company facing a patent infringement claim will have as little as two months to prepare their defence. Such a short period of time may be too little for a company to build a proper, robust defence in a complex case.

At present in national litigation, defendants normally have between four to six months to prepare their arguments, including usually an extensive search for prior art (i.e. evidence that the invention is already known or is obvious).

‘Patent trolls’ are expected to deliberately refrain from notifying the alleged patent infringer of the pending litigation until the very last minute, leaving them at a considerable disadvantage.

Chris Hamer, Partner at Mathys & Squire, says the narrow timeframe could make it significantly more difficult for defendants to prepare an effective defence.

Chris Hamer explains: “Some businesses may not even be aware that they are infringing a patent. Eight weeks is very little time for a business to review a summons, instruct legal counsel and come up with a successful defence. Patentees will be only too willing to exploit this advantage for them.”

Even if a patent troll is unsuccessful in enforcing their patent rights, they may only have to pay a small proportion of the other party’s legal costs in cases heard in the UPC. This could act as an incentive to pursue litigation.

Recoverable costs under the UPC are capped at €2m (for a case valued at more than €50m). The UPC also has the discretion to lower the cap if the amount threatens the economic viability of the company. In the UK (which is not under the remit of the UPC), recoverable costs are uncapped and the losing party could typically expect to pay 60-80% of the victor’s costs.

Andreas Wietzke, Partner at Mathys & Squire says: “For patent trolls, pursuing a case in the UPC could be a gamble worth making. If they are successful in blocking use of a patent, the injunction will apply to all selected jurisdictions within the UPC. Even if they lose the case, the potential for cost recovery is considerably lower than in countries such as the UK and US.”

“There has been concerns that the problem that the US has with patent trolls could spread to Europe. The UPC rules do seem to make the environment much more inviting to them.”

“If you are a corporate what you will need to do is set up internal systems so that as soon as a claim comes in you can respond quickly and prepare your case. If you don’t respond quickly you’ll not only be on the back foot, you could just lose by default.”