Key considerations: Licensing & the UPC

While it is usual for research and development agreements to include comprehensive provisions addressing which party/parties can prosecute, enforce and defend the licensed patents and how, it is worth remembering why this is particularly important in the context of the Unitary Patent.

As described in further detail in our previous article, key issues to bear in mind are:

1. Pinning: action taken by a party in the UPC will prevent an opt-out, and action in a national court after an opt-out will “pin” all designations of the patent in the national system; consequently litigation has the potential to materially affect prosecution strategy for the licensed patents. If a contract provides for a split approach (ie one party to control prosecution of the licensed patents, but another to control enforcement or defence), then the parties might consider including language requiring the litigating party not to take any action which would affect prosecution strategy without the other party’s consent.

2. Applicable law: if the agreement provides for joint ownership of new patents, consideration will need to be given to the order in which the owners are listed on the subsequent patent application. This is because the nationality of the first named applicant will now determine the applicable law governing the patent as an item of property, which will determine procedures and permissions for assignments, licences and using the patent as security for borrowing. If an agreement includes a broad prosecution provision which provides for the parties to take decisions with respect to joint patents via an IP committee, then it may be sufficient for that committee to make that decision at the time. However, the Parties may wish to expressly specify in the contract the order of applicants for UPs in order to “bake in” which law will apply and avoid disputes in future.

3. Multiple owners: only the patent proprietor can file an opt-out application and if there is more than one proprietor, all of the proprietors must apply together (and if any SPCs have been granted in respect of the patent, then all holders of SPCs and all proprietors of the patent must make the relevant application). In some cases, this may result in significant difficulties in effecting an opt-out, even if both licensor and licensee agree that opting-out is the preferred approach. If the licensee is aware that the licensed patents are jointly owned by third parties, it may wish to include: (i) a robust further assurance clause obliging the licensor to liaise with other co-proprietors and/or related SPC holders to procure any necessary action if an opt-out has been decided; and (ii) warranties from the licensor that it is in fact able to opt-out and that all necessary information required to effect that opt-out are in its possession. This could be particularly important given that an error on the opt-out request will result in the request being ineffective until the error is corrected (ie pending correction, the relevant patent remains subject to the UPC’s jurisdiction).

4. Standing: While the holder of an exclusive licence has standing to enforce a licensed patent (unless the licence agreement provides otherwise), importantly a non-exclusive licensee may also take action to enforce a licensed patent if expressly permitted by the licence agreement. This is different from the current position under certain national laws which prohibit a non-exclusive licensee from having standing. Accordingly, even a non-exclusive licence should expressly state whether a party has the right to take action to enforce the licensed patents to avoid any future confusion.

5. Audit: consider reviewing the relevant terms of key IP licences, to confirm that they do not present any unforeseen issue with the advent of the UPC and, if such terms are lacking, consider agreeing an amendment to add more detailed provisions to mitigate the risk of future issues in respect of UPs and/or agreeing with the counter-party in advance on the proposed approach in respect of unitary patents.

If in doubt, ensure that any licensing agreements include fulsome provisions detailing the parties’ rights to prosecute, enforce and defend the licensed patents. While specifying that the Parties will jointly agree (whether via a committee or otherwise) on such actions at the relevant time in respect of joint patents may seem an attractive negotiating solution, depending on the specific circumstances, it may be worth including additional specificity and contractual protections.