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Unified Patent Court – patent heavy businesses buy into benefit, those with small portfolios less convinced as time runs out

 

A year before the Unified Patent Court (UPC) is set to launch, considerably more patent heavy businesses believe the UPC will benefit their company (80%), compared to only 36% of those with small portfolios. This is according to a survey by Allen & Overy of 151 European senior executives with responsibility for their company’s patent portfolio.

Across all those surveyed, however, just over half (51%) of businesses say the UPC will benefit them, down from three quarters (74%) in 2014.

Nicola Dagg, partner at Allen & Overy in London, comments: “Based on our work with clients on the UPC over the past two years, this general change in mood is not a reflection of a more negative opinion of the UPC but the result of businesses taking a more mature and nuanced approach to the system.”

The findings highlight that businesses with significant IP exposure are better prepared, with senior management assessing the opportunities and risks the UPC presents and taking a more commercially pragmatic approach as the UPC becomes a reality. Those with small and medium sized portfolios, however, are still struggling to engage senior management and possibly lack the expertise to assess their exposure and the risks to their business.

There is an increasingly urgent need for the UPC to help educate businesses and SMEs in particular on how the new system will work. The number one challenge for businesses in preparing for the UPC remains getting clear answers to questions regarding how the system will work in practice and its various implications for their business, according to 68% of respondents. With better understanding may come better acceptance of the benefits of the UPC system.

It is, perhaps, no surprise that businesses with larger portfolios (over 500 patents) are better prepared, but with just one year to go even these businesses are yet to decide whether to opt out or leave in 44% of their patent portfolios on average. This rises to 53% for smaller portfolio companies (less than 50 patents) and climbs to 63% for mid-sized portfolios (50-499 patents). This should be a concern for senior management at any patent-reliant business; especially given respondents say the possibility of their patents being centrally revoked is the major source of uncertainty within the new system.

Joachim Feldges, partner at Allen & Overy in Munich comments: “Businesses across Europe need to wake up to the new reality the UPC will bring to their markets. Being blocked from the biggest consumer market in the world is a real risk for some businesses and something that senior management everywhere should be actively engaging with. Having worked with a large number of clients and seen the effort that needs to go into making a well-informed decision on how to approach the UPC, it is a real concern for us that one-third (35%) of businesses have still not moved past the early stages of preparation.”

The research also shows that attitudes toward the UPC do tend to vary between countries. UK businesses are far more positive about the UPC, with 76% saying it would benefit them, compared to only 22% and 38% in France and Germany respectively. This is in contrast to two years ago when the UK was the least optimistic, with 63% saying it would benefit them, behind both France (91%) and Germany (80%).

The reason for this sentiment reversal is probably less national than structural. In the UK, there tends to be more companies with large patent portfolios than France and Germany and larger businesses are expected to benefit more from the UPC.

Geert Glas, partner at Allen & Overy in Brussels, added: “We have seen first-hand the more considered and commercial decisions when senior management actively engage with this issue. When it comes to crown jewels many are avoiding putting all their eggs in one basket and better hedging their exposure by both using the UPC while also retaining access to existing systems during the transition period.”

As attitudes towards the UPC mature, companies are choosing to leave fewer of their most valuable patents, their ‘crown jewels’ in the system. Just over a quarter (27%) say they will be leaving their crown jewels in the UPC, down from 82% in 2014. When asked why they would be opting out, 46% said they want to retain the ability to design local enforcement strategies and avoid putting all their eggs in one basket, and 40% said they have concerns over the quality of the judges.

This demonstrates how important the new regime’s ability to deliver convincing evidence of its competence and quality during its early interactions with business, will be for the success of the UPC.

With the spectre of Brexit looming, almost half (44%) said the UK’s exit would make them rethink the proportion of European patents they would opt out of the UPC system.

David Por, Partner at Allen & Overy in Paris, concludes: “It has been a long road to get to the stage where the UPC is ready to launch and the UK referendum is the last roadblock before it can steam ahead. It’s difficult to say what impact a ‘leave’ vote would have on the system but it would certainly cause a delay as a series of logistical issues would have to be addressed.

“The UK not being part of the UPC would also have potential knock-on effects on the cost-benefit of a European unitary patent as many companies would still have to validate their patents in the UK but would need to do so separately.”

For further information, please contact Campbell McIlroy, campbell.mcilroy@allenovery.com, on +44 (0)20 3088 2783.

Methodology: YouGov surveyed 151 respondents during 11 April-12 May 2016, 27 respondents
completed the survey online, 124 via telephone. Weighting has been applied to 2016 data to
better reflect the spread of sample in the previous 2014 wave.

Overall results are based on 151 respondents, which is a sound base for research of this nature
amongst a senior audience, highly expert in a particular area.

 

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