The license of right for the unitary patent: smart cost saving or strategic limitation?

With a LoR, you can officially declare to the European Patent Office (EPO) that you are willing to grant a license to anyone. This opens the door to broad dissemination of your technology. The mechanism aligns well with the open-innovation strategies of knowledge institutions and R&D-driven organizations.

Submitting a LoR can be financially attractive. For all UP renewal fees falling due after the EPO has received the declaration, the patent holder receives a structural 15 percent reduction (Art. 11(3) Regulation (EU) 1257/2012 and Art. 3 RFeesUPP).

However, there is one strict rule: the LoR is fundamentally incompatible with exclusivity. You cannot file the declaration as long as an exclusive license is registered in the UP register, or if a request for such registration is pending (Rule 12(3) UPR). Conversely, an active LoR blocks the future registration of exclusive licenses (Rule 12(4) UPR). This can create a substantial obstacle if, at a later stage, you wish to transfer the technology exclusively to a spin-off or industrial partner.

Patent holders who later regret filing a LoR can withdraw it, but certainly not free of charge. A withdrawal only becomes legally effective after all previously obtained fee reductions have been fully repaid to the EPO (Rule 12(2) UPR). This creates a significant financial lock-in effect.

Moreover, the legislation (Art. 8(2) Regulation 1257/2012) treats licenses as ordinary contractual licenses. Therefore, licenses already granted do not automatically terminate upon withdrawal. A license can only be terminated through contractual termination or with the explicit consent of the licensee.

After effective withdrawal, there is, in principle, no longer any WL obligation toward new parties. However, the moment at which a license under a LoR is considered to have come into existence remains uncertain. A party claiming to have invoked a license before the withdrawal may still ask the UPC to determine the “appropriate compensation.”

Perhaps the greatest impact of the LoR lies in its effect on enforcement dynamics. Since you have publicly declared your willingness to share the invention in exchange for compensation, it becomes very difficult to obtain an immediate injunction against patent infringement. An infringer can often effectively counter such a claim by demanding a license instead.

Importantly, this effect may in practice continue even after the LoR has formally been withdrawn, if licenses under this regime had previously been granted to third parties.

If the parties subsequently fail to agree on the license terms and the amount of compensation, the Unified Patent Court (UPC) has exclusive jurisdiction under Art. 32(1)(h) UPCA. The UPC may not only determine the “appropriate compensation,” but may also set the accompanying license terms in a binding manner. In the event of a dispute, the commercial valuation and conditions surrounding your technology are therefore placed partly in the hands of the court.

The LoR is a powerful mechanism for broadly disseminating technology and may reduce costs. However, it is by no means a no-strings-attached discount opportunity. You must carefully consider the associated limitations, such as the structural loss of the ability to grant exclusive licenses, a weakened enforcement position, the risk of judicial interference in licensing conditions, and the high and costly threshold for withdrawal.

Whether to make use of a LoR therefore requires careful consideration and a well-thought-out long-term strategy.

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