Toyota Motor Europe NV/SA v Neo Wireless GbmH & Co KG (Case number: UPC_CoA_79/2024)
In the first major UPC ruling on the validity of opt-outs, the Court of Appeal dismissed a preliminary objection to the UPC’s jurisdiction to hear a revocation action on the basis that the opt-out filed in respect of the European Patent was defective.
Specifically, the authority of the owners of all parts of the patent in question had not been obtained before lodging the opt-out application, contrary to Rule 5.1 RoP and Article 83(3) of the UPC Agreement.
BACKGROUND
Neo Wireless LLC is the patentee of patent application EP 3876490, which concerns cellular connectivity technology (the “Patent”). In early 2023, it assigned the rights to the German part of the Patent to its German subsidiary, Neo Wireless GmbH & Co, retaining ownership in respect of the other national parts covered by the Patent.
Neo Wireless LLC applied to opt-out the Patent (in all EPC states) from the UPC on 30 March 2023. However, upon grant of the Patent, Toyota proceeded to file a revocation action against Neo Wireless GmbH & Co in the Paris Central Division in respect of the German designation of the Patent.
Neo Wireless GmbH & Co challenged the UPC’s competence to hear the claim by way of preliminary objection (made pursuant to Rule 19 RoP). This was on the basis that the Patent had been opted-out from the jurisdiction of the UPC.
The judge-rapporteur ruled that the opt-out request was ineffective since not all proprietors of all national parts of the Patent had lodged the opt-out application, as required by Rule 5.1(a) RoP. More specifically, Neo Wireless GmbH & Co had not filed the opt-out request jointly with Neo Wireless LLC, nor given Neo Wireless LLC consent to do so on its behalf. This was not disputed by Neo Wireless GmbH & Co. Therefore, the preliminary objection was rejected at first instance.
Neo Wireless GmbH & Co appealed the order of the Paris Central Division. It argued that, by reference to Article 83(3) UPCA, a proprietor in respect of just one of the designated countries should be permitted to opt-out the European Patent, without requiring the consent of all the other proprietors of all jurisdictions covered by the patent.
Article 83(3) states:
Unless an action has already been brought before the Court, a proprietor of or an applicant for a European patent granted or applied for prior to the end of the transitional period under paragraph 1 and, where applicable, paragraph 5, as well as a holder of a supplementary protection certificate issued for a product protected by a European patent, shall have the possibility to opt out from the exclusive competence of the Court.
It emphasised that Article 83(3) only refers to “a proprietor” (in the singular, rather than plural) of a European Patent having the right to opt-out.
Neo Wireless GmbH & Co also contended that an owner of a national part “would be unduly and disproportionally impaired in exercising his ownership rights” if agreement between all owners of all national parts was necessary to effect an opt-out.
COURT OF APPEAL DECISION
On appeal, the Court of Appeal sought to interpret Article 83(3), and in doing so acknowledged that the provision was ambiguous. However, it considered that the overall object and purpose of the provision was to ensure that opt-outs were filed by or on behalf of all proprietors of all national parts of the European Patent in question. This is on the basis that an opt-out can only apply to the whole European Patent, and not just some of the designated countries. It considered this to be consistent with the requirements under Rule 5.1(a) RoP.
The Court also considered the argument that a patentee’s ownership rights would be impaired if prevented from opting out without the other owner’s consent, making clear that, equally, if just one proprietor could opt out all national parts of a patent, this would force the other proprietors out of the UPC system, impairing their rights.
With this in mind, the Court of Appeal ruled that the opt-out was invalid and that, as a result, Toyota’s revocation claim could proceed before the UPC, with the Court having jurisdiction to hear the claim. The appeal was therefore unsuccessful.
COMMENTARY
Whilst providing clarity as to the meaning of Article 83(3), the decision serves as a stark reminder to patentees to ensure that all relevant consents are obtained and properly documented before an opt-out request is filed. A deficient opt-out cannot be retrospectively corrected once proceedings have been commenced in the UPC in respect of the same patent. The failure to do so could risk the patent being revoked across all 17 contracting member states of the UPC (albeit the revocation claim in this case only concerned the German part of the Patent).
Equally, this ruling shines a light on the procedural route for challenging opt-outs in the UPC, which is available to parties who wish to bring revocation actions in the forum (either as an alternative, or in parallel to, EPO opposition proceedings). This is a strategy to consider taking where there is reason to believe, or at least a possibility, that the true proprietor(s) have not consented to the opt-out or this has not been documented (the likelihood of an opt-out being invalid is higher where the patent is co-owned or there is a complex chain of title).
There is of course a risk that the patent proprietor is able to prove that the required consents/authorisations were obtained prior to filing the opt-out. This could result in wasted costs in preparing pleadings for and issuing the revocation claim in the UPC. Nevertheless, in relation to particularly problematic patents (e.g. those causing commercial uncertainty for future high-value product launches across Europe) for which there is a reasonable prospect of securing revocation, this may be a risk well worth taking.
