UPC Early Litigation Data: The Innovation Paradox

The Unified Patent Court’s first two years reveal a troubling pattern: the system is being deployed against the most innovative companies – particularly in high-tech sectors that drive technological progress and economic growth. Without modernising EU patent rules, the UPC risks becoming an innovation tax on these critical industries.

Data source: Independent research initiative led by Valerio Sterzi (University of Bordeaux), tracking all UPC infringement cases since June 1, 2023, available at Key figures – UPCTrack

The data challenges a core assumption of patent policy: that litigation protects genuine innovators from competitors copying their inventions. In reality, the opposite is happening.

In high-tech sectors defendants consistently demonstrate higher R&D expenditures than plaintiffs (5,4 billion USD more on average per company per year in Information and Communication Technologies (ICT)).

Meanwhile, 86.5% of ICT cases involve non-competitors.

The data shows that the patent system is being systematically deployed against those investing most heavily in R&D and leading technological advancement.

High-tech companies that bring complex products to the market face unique exposure because of how component patents interact with automatic injunctions.

80%+ of all litigated patents cover components, not final products
In ICT: 94% of litigated patents are component inventions

Automatic injunctions, which are consistently granted by European courts, can shut down entire complex products for an infringement of a patent related to a minor component, creating massive leverage for the patent holder. This disproportionate threat – where a component patent can halt a sophisticated final product – is what makes litigation economically attractive for patent holders and exposes innovative companies to outsized risk.

Without automatic injunctions, many of these cases would never be filed, as the economic calculus would favour proportionate negotiated licenses over litigation.

Patent Assertion Entities (PAEs) – who create no products and exist solely to maximise royalty payments – are making significant use of and benefiting from this distorted system:

PAEs filed 38% of ICT cases in 2024
97.3% of PAE-litigated patents are component-related

These entities use automatic injunction leverage for financial extraction, not market competition or innovation improvement.

The UPC has become a venue where component patent holders exploit automatic injunctions against companies building complex products – transferring value from genuine innovators to PAEs.

While the Chemical-Pharmaceutical sector operates closer to traditional models (25% competitor cases, smaller innovation gaps), ICT and Instruments show extreme distortions. Yet if the same automatic injunction rules apply across all sectors, it means that remedies that work for traditional industries are weaponised in high-tech.

Without reform, the UPC risks resulting in an innovation tax on high-tech companies: extracting value from R&D leaders rather than protecting them, rewarding patent accumulation over product development, and prioritising financial extraction over genuine innovation.

Amending antiquated proportionality rules in the EU IPR Enforcement Directive to prevent the systematic use of automatic injunctions in all cases is an urgent necessity – one that would protect innovation in high-tech sectors while having minimal impact where traditional patent litigation models remain appropriate.

IP2Innovate

Seeking a new balance point in Europe’s patent system that better suits innovation and society

How to ensure the patent system in Europe best serves the innovation process has been a hotly debated topic for decades. In recent years lawmakers in Germany and in Brussels have started to realise that the old status quo – where patent courts hand out injunctions almost always automatically – doesn’t work in a world where advances in technology constantly bring more and more complex products to market, and where thousands of patents could possibly be relevant. It has become too easy for patent assertion entities (PAEs) to leverage the threat of automatic injunctions and disrupt the market presence of established consumer products in Europe to extract excessive license fees. While the interest of PAEs is limited to monetary compensation and not to stop the sale of products, the mere threat of such automatic injunctions is enough to push most targets of such assertions to accept disproportionate settlement conditions. It’s a hugely profitable business model for PAEs but it does little for innovation or for society, and undermines Europe’s competitiveness. By allowing this abuse, the European patent system is tilted too far in favour of patent holders and needs to be re-balanced. That is why in spring this year IP2Innovate called for the Commission to adjust the EU’s Intellectual Property Rights Enforcement Directive (IPRED), adopted in 2004. The law does require courts to apply proportionality when considering patent infringement cases, but this is not being applied in practice as injunctions continue to be granted effectively automatically even in cases where an alternative remedy would be more proportionate. An analysis of patent court rulings provided by Darts-ip, the leading source of global patent case data, for the period 2015-2020, shows that more than 99% of cases saw no proportionality assessment. Ensuring the equitable resolution of patent litigation in the EU through a targeted amendment of the IPRED is of even more importance with the establishment of the Unified Patent Court (UPC). Indeed, a recent study by Professor Sterzi of the Bordeaux School of Economics shows that PAEs initiated close to 30% of all infringement actions in the ICT sector – a key area for European competitiveness – in the UPC. If automatic injunctions become the norm in the newly established UPC, innovative companies would face UPC-wide automatic injunctions and not just ones at national level. The European Commission is evaluating this dynamic, and in 2023 commissioned a study to look at whether proportionality is being applied in Europe as well as looking into the role of PAEs in Europe. IP2I welcomes the European Commission’s initiative as Europe needs a properly functioning patent system fit for the modern age if it is to succeed in enhancing Europe’s competitiveness. The proportionality of remedies must be applied in patent litigation. Courts and parties need a clearer steer from Brussels to ensure it happens. Targeted revisions of the IPRED in relation to proportionality look set to be the next key challenge in patent policy in Europe. IP2Innovate hopes that the new attention being paid to the IPRED’s proportionality requirement will help to find a balance point in the European patent system that better suits the broader interests of innovation and society.

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UPC Early Litigation Data: The Innovation Paradox

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UPC Early Litigation Data: The Innovation Paradox

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Prof. Alain Strowel: IP law professor with a grounding in philosophy

Seeking a new balance point in Europe’s patent system that better suits innovation and society

IP2Innovate's submission on the upcoming European Innovation Act

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