Economic implications of the UPC for Scandinavia and beyond - part 2

A few months ago, I introduced some big picture ideas that I have been exploring with colleagues across Scandinavia about the potential financial compensation for someone infringing a patent following the introduction of the new UPC. I introduced the suggestion that the transition from the current multi-courts system to a single court system would inevitably speed up handling time, and more efficient handling will probably result in increased demand. This, in turn, could have the potential to deliver some unintended implications.

Many of our clients across Denmark, Sweden and Norway face the constant threat of NPEs (sometimes referred to as patent trolls), and a more efficient patent court may lead to such trolls viewing Europe as a more interesting and lucrative destination. Increased interest from NPEs may then have the knock-on effect of increasing transaction activity in the patent market. If it becomes easier to transform patent rights directly into liquid capital, this may encourage innovative companies to develop more comprehensive filing strategies. The possible benefit of such an approach is that one part of a patent portfolio could be used to fund further development of products covered within another part of the portfolio.  

Another possible side effect of the UPC, intended or otherwise, could be that companies will keep a closer eye on competitor patents and this will probably result in increasing opposition proceedings and third-party observations, especially if infringing parties face significantly higher potential damages. This would result, from a purely economic standpoint, in companies deciding more often to take action as early as possible to have a patent revoked, or its scope limited. This may also result in a corresponding significant increase in licensing activity.

It may be that such increased interest in oppositions and third-party observations, stemming from the introduction of the UPC, will be fuelled by new technologies. With advances in AI development and the new breed of search tools arising from this growing field, it becomes increasingly likely that the companies of tomorrow will be equipped with tools not yet envisioned, let alone available today. Examples of how this may develop can already be seen in the work done by Alexander Klenner-Bajaja and his data science team at the EPO. It is likely, although not certain, that the combination of a new court system and new tools will propel the development of oppositions.

It is still early days, with many predictions, but we can say that this new European patent reality will be markedly different from what we know today. It is possible that few patents will survive in their current form, due to a significant increase in scrutiny by both the UPC and patent holders, many of whom will do whatever they can to avoid having their patents tested through invalidation proceedings at the UPC. Although there are still many unknowns in the UP and UPC equations, companies who play their cards wisely may well come to dominate the patent landscape. We believe that European patents will become a lot more interesting to follow over the next few years. Change is coming, do not forget the big picture.