2024 Week 30
Every litigator needs to have a clear view of the possible routes out of litigation. Maybe the case goes bad, maybe the other side wants to fold, or maybe both sides lose commercial interest. Once an action at the UPC is started, it’s not mandatory to go to trial. A recent decision of the UPC Central Division Munich, Astellas vs. Healios, gives a bit of colour to how parties can settle UPC proceedings with the minimum of fuss.
Settlement options
Typically, the parties will negotiate the terms of a settlement, which should of course address the areas of dispute between the parties. The result might be an agreement to take a licence, undertakings not to infringe, agreement to the revocation or amendment of the patent, and so on. But the settlement should also include agreement on the UPC procedure to be followed. Broadly, there are three options:
- Request the UPC to confirm the settlement by decision of the Court (Rule 365 RoP);
- Request the UPC to dispose of the action (Rule 360 RoP); or
-
The claimant(s) can apply to the UPC to withdraw the action (Rule 265 RoP).
Which option to take?
In Astellas vs. Healios, the parties chose Option 2 – they requested the Court to dispose of the actions as they had “become devoid of purpose and there was no longer any need to adjudicate on them” (this is the just the wording of the relevant Rule).
But there are pros and cons, and wrinkles, for each option.
-
Confirmation of settlement by Court decision (Rule 365 RoP)
Pros: Enforceability
As the settlement (and thus the undertakings in the settlement) are confirmed by a final decision of the court, this decision itself can be enforced. Decisions of the UPC are treated as having the same power as decisions of national courts in the UPC contracting member states and therefore enforcement of UPC decisions is straightforward in those countries.
Cons: Disclosure of settlement terms
The actual terms of the settlement (e.g., any monetary payments, details of the undertakings) must be provided to the Court. The parties can request that the details of the settlement are kept confidential under Rule 365(2) RoP, but it is not clear that the Court must always follow this.
-
Disposal of action (Rule 360 RoP)
Pros: Confidentiality
Here there is no need to provide the Court with any details of the actual terms of the settlement.
Cons: No enforcement via UPC
The court will dispose of the action by way of order, rather than a decision, meaning that the terms of the settlement (e.g., undertakings not to infringe) cannot be enforced in the same way as a UPC decision.
-
Withdrawal of actions (rule 265 RoP)
Pros: Confidentiality
Similarly to option 2 above, the parties do not need to provide the actual terms of the settlement to the Court, so can ensure these remain confidential.
Cons: No enforcement via UPC
The Court will declare the proceedings closed, this time by way of a decision. However, since the terms of the settlement will not form part of the decision, enforcement of the settlement will need to be done under the provisions of breach of contract of the governing law of the settlement agreement, as for Option 2.
What are parties doing in real life?
These provisions do not only apply to proceedings on the merits – they also apply to applications for provisional measures and appeals. We have seen Options 1, 2 and 3 being used to end various disputes, and parts of disputes. However, Option 3 has been the most widely used to date, with the parties applying to the Court to withdraw the action and any counterclaims, and presumably agreeing to keep their settlement terms confidential.
Partial refund of court fees
There are refunds available for UPC court fees for actions that do not go the distance. To promote early settlement, these operate on a sliding scale (Rule 370.9(b) and (c) RoP), as follows:
- 60% refund if settled before closure of the written procedure;
- 40% refund if settled before closure of the interim procedure; and
- 20% refund if settled before closure of the oral procedure.
Keeping it privileged
In common law jurisdictions, litigators will be used to the concept of without prejudice letters – typically correspondence relating to settlement offers and negotiations that is privileged from disclosure to the Court. In those jurisdictions, it is good practice to mark such correspondence as “without prejudice” or similar, to avoid any confusion about the intended purpose and status of such correspondence.
The Rules of Procedure of the UPC also provide for a similar privilege from disclosure to the Court of such documents. In order to make this clear, our suggestion is that all such documents and correspondence should be clearly headed as correspondence under Rule 11.3 RoP.
Summary
To be a success, the UPC wants lots of cases, across all of its divisions. However, mindful of the workload involved in the oral procedure in particular, the UPC also encourages parties to settle their dispute at an early stage by offering partial refunds of the sizeable court fees. In this way, the UPC will try to maintain its ambitious aim of getting to the oral hearing on the merits of the remaining cases that do not settle within about 12 months. The procedural routes out of UPC litigation are now becoming clearer, but parties need to take care about how the terms of settlement are negotiated and how it is intended that those terms would be enforced, should it come to that.
Lucy is a Patent Attorney at Mewburn Ellis. She works primarily in the computer software, electrical engineering, transport, and mechanical engineering sectors. She is involved with all stages of the patent process, particularly in the drafting and prosecuting of applications in the UK and at the EPO. She also has experience in oppositions and opinion work.
Email: lucy.coe@mewburn.com
