Unitary patent promises a cheaper alternative for life sciences companies

It is looking likely that the unitary patent (UP) will finally become available in 2022, now that Austria has completed its legislative requirements. While the preparatory committee has yet to announce a definitive timetable, its current estimate is for the provisional application phase to begin in January 2022, followed by the new system properly starting in mid-2022. Even with some delays, it seems realistic to expect the UP to arrive by the end of this year. While the most obvious beneficiaries may be innovators in the life sciences arena, how will the new system work and what will happen to the current national validation system?

Once a European patent has been granted by the EPO, national validation is also necessary. Following this, the European patent is split into separate national patents. Innovators consider a number of factors when deciding where to validate European patents. Here, we take a look at some of these – focusing on patents in the life sciences sector – and consider how this decision-making process might change with the arrival of UPs.

What factors do innovators currently consider when validating European patents?

Wide validation strategies are costly and can be difficult to justify when the ultimate value of the patent is unclear at grant. The cost of national validation in different European states varies based on the requirements that each state has in place, with translation requirements pushing up costs significantly. As well as the cost of national validation, innovators must consider the price of national renewal fees payable annually in each state: a broad validation programme can run into tens of thousands of dollars.

When deciding where to validate, innovators often consider both the likely markets for their inventions and the implications of their validation strategy on future enforcement. Predicting major markets can be a primary driver for the validation approach, especially when validation decisions need to be made early in a product’s lifecycle. Looking ahead to loss of exclusivity, generics companies tend to set up manufacturing and/or batch release sites in states that have traditionally not been regularly validated. While, at the time of validation, a particular state might not be expected to be an important market, gaps in protection may allow early entry of generics. Generics manufacturing can, in theory, take place in any state and so some innovators consider it to be worthwhile validating patents widely across all European Patent Convention (EPC) territories – especially when infringement is a real concern – to prevent a gap in protection that could be exploited.

How might this change with the arrival of UPs?

With UPs likely becoming available in 2022, the strategy of innovators at grant is expected to change. UPs will be issued by the EPO and will require no national validation. They will benefit from greatly reduced translation requirements, significantly lowering the costs incurred at grant. UPs may also save costs as only a single annual renewal fee is payable, rather than separate national renewal fees. For life sciences companies that have had previous concerns about justifying the wide validation of a patent and the resulting annual renewal fees, the UP may prove to be a useful cost-saving tool (making the decision to obtain broad geographical protection easier).

However, innovators should bear in mind that the coverage of UPs is not the same as classic European patents, so some conventional national validation will still be necessary. European patents can be validated in any of the 38 contracting states of the EPC (including all EU states, plus 11 others); UPs are based on EU legislation and therefore provide coverage in EU states only (and then only those that have ratified the relevant agreement). Similarly, states that have not ratified the agreement when UPs first become available, despite having signed up in principle, will be not be covered by the first UPs. 

The scope of a UP will be fixed when it is granted; after new states ratify the agreement, the scope of a granted UP will not expand (but the new state will be covered by UPs granted after ratification). It will still be possible to obtain national patents in the usual way in states not covered by the UP, so there is no need for any coverage to be lost by choosing to acquire a UP. While UPs offer some exciting new options, they will often need to be strategically coupled with conventional national validation to achieve the required coverage.

Changes to litigation practices to consider

Another factor that innovators should weigh up when deciding whether to obtain a UP is the fact that UPs can be litigated only in a new court, the UPC, which will open its doors at the same time that UPs become available. The UPC will enable central enforcement across all of the states covered by UPs. This could be a significant advantage, particularly for life sciences innovators that wish to enforce their patents in multiple European states. However, with the possibility of central enforcement comes the risk of central revocation. Additionally, it is difficult to know how the untested UPC will operate in practice until its launch, and the challenges of litigating in an untested court will be another element of risk that will need to be considered.

It will be vital for innovators to balance the potential cost benefits and the advantage of central enforcement with the possible risk of central revocation when deciding whether to obtain a UP. In many cases, it will be necessary to analyse the strength of a patent’s validity as well as its enforceability, alongside usual considerations of cost and required geographical scope. Innovators might choose to obtain separate national patents using the current national validation system for certain EP patents that cover a product, so that any revocation actions would need to be brought by generics companies in separate national courts across Europe, while also acquiring UPs for other patents covering the same product, to reduce costs and make central enforcement possible. This strategy will require careful consideration of the double patenting risks, in addition to the aforementioned pros and cons.

Comment

National validation decisions can be complicated and result in a great deal of expense for life sciences companies wanting to protect against early generic entry and price reductions. The UP may offer help in the form of reduced costs to obtain wide geographical protection, which could be particularly useful for early-stage biotech and pharma companies with products in the initial stages of development. This advantage comes with the further benefit of central enforcement, but at the risk of central revocation at the UPC.