Arbitration and the UPC: A New Avenue for Resolving FRAND and Life Sciences Patent Disputes?

Historically, arbitration has played a limited role in patent disputes. The prevailing view has been that issues relating to patent validity and infringement are best resolved by courts, which possess the authority to revoke or amend patents, with arbitration’s likely role being limited to the resolution of damages assessments or licensing terms such as in FRAND disputes.

However, recent developments may suggest a shift in this perception, opening the door to broader dispute resolution mechanisms.  Two landmark decisions – the CJEU’s ruling in BSH Hausgeräte v Electrolux and the UPC Düsseldorf and Mannheim Local Divisions’ determinations in Fujifilm v Kodak – have signalled a more expansive approach to jurisdiction in European patent litigation, enabling a court of an EU Member State, including the UPC, to rule on the validity of foreign patents for the purpose of resolving the dispute before it.

Against this backdrop, arbitration may become a more attractive alternative.  In the UK, the role of alternative dispute resolution (ADR) as a solution has been recently highlighted in various anti-suit injunction (ASI) and anti-interim licence injunction (AILI) orders, with Nokia arguing its multi-jurisdictional FRAND disputes with Acer, Asus and Hisense should be resolved by arbitration.  ADR is also gaining traction within UPC proceedings, with judges frequently encouraging its use during interim conferences.  The value arbitration may offer, particularly in the context of FRAND disputes, has been further emphasised by the establishment of the UPC’s forthcoming PMAC, scheduled to open in early 2026 with seats in Ljubljana and Lisbon.

The PMAC promises a confidential, flexible, and potentially faster forum for resolving complex, multi-jurisdictional patent disputes. While its precise scope remains to be tested, there is an argument that arbitration could mirror the courts’ evolving approach following BSH Hausgeräte: determining infringement and assessing validity without directly revoking patents.

The PMAC Framework

Established under Article 35 of the UPC Agreement (UPCA), the PMAC provides a dedicated forum for resolving patent disputes through mediation and arbitration.  While it cannot revoke or amend patents – a power reserved for the UPC – it enables parties to agree on settlement terms that may include limiting, surrendering, or not asserting a patent, as permitted under Article 2 of the PMAC Arbitration Rules. These terms can be incorporated into a consensual arbitral award, which the UPC may confirm and enforce under Rule 365 of its Rules of Procedure (RoP). Awards are globally enforceable under the New York Convention, giving parties access to enforcement mechanisms in over 170 jurisdictions.

The PMAC also has the authority to grant interim measures, either as an arbitral award or an order, upon request. This procedural flexibility may be particularly valuable in urgent or cross-border disputes. Importantly, the PMAC’s jurisdiction is not geographically limited to UPC Contracting Member States. It maintains a public list of accredited arbitrators and mediators from both UPC and non-UPC jurisdictions, and parties may nominate their own arbitrators, subject to approval. This supports party autonomy and allows for the appointment of experts with relevant technical or legal expertise.

Pros and Cons of Arbitration in Patent Disputes

As the PMAC prepares to launch, stakeholders are evaluating the benefits and limitations of arbitration within the UPC framework. Arbitration offers several advantages:

• Confidentiality: Particularly valuable in disputes involving sensitive commercial information, such as licensing terms or royalty rates. Articles 45–47 of the PMAC Rules provide enhanced protections in FRAND-related matters.
• Flexibility: Parties can select arbitrators with technical or industry-specific expertise, tailor procedures to suit the dispute’s complexity, and choose language and location.
• Speed: The PMAC aims to deliver final awards within nine months – faster than the UPC’s typical 12- to 14-month timeline for first-instance decisions.

However, arbitration also presents challenges:

• Cost: It is not necessarily cheaper than litigation, especially in fact heavy disputes or technically complex cases requiring expert testimony.
• Transparency: Confidentiality may conflict with the public interest in patent validity decisions, which often have broader implications and contribute to legal certainty.
• Enforceability: While arbitral awards are enforceable under the New York Convention, they do not affect the patent register unless followed by administrative action – limiting their impact in validity or revocation disputes.
• Stay of proceedings: Article 33(10) UPCA and Rule 295(1)(a) RoP allow the UPC to stay proceedings if parties agree to arbitration or mediation. However, UPC divisions are cautious in granting such stays, especially where parallel proceedings (e.g., EPO oppositions) are unlikely to conclude swiftly, or where ADR may be used tactically to delay litigation. Clear UPC guidance on when stays are appropriate in the context of proposed ADR would help mitigate this risk.
• Harmonisation: While arbitration can offer efficiency and confidentiality, it may also reduce the volume of UPC decisions, slowing the development of harmonised case law. Confidential arbitral awards resolve individual disputes but do not contribute to the body of precedent that underpins legal predictability and consistency cross the UPC system.

Strategic Use of Arbitration in Patent Disputes

As the PMAC becomes operational, it may influence how parties approach cross-border patent disputes – offering a compelling complement, or even alternative, to traditional litigation, particularly following the CJEU’s landmark decision in BSH Hausgeräte.

In BSH Hausgeräte, the CJEU confirmed that  courts of EU Member States may adjudicate infringement claims concerning foreign European Patent (EP) designations (e.g. UK, Turkey), including validity challenges raised as a defence. While these courts cannot revoke or amend such patents, they may assess validity on an inter partes basis as part of the infringement analysis.

Following this decision, in Fujifilm v Kodak, the UPC’s Mannheim Local Division asserted jurisdiction over infringement of a UK EP designation. The UPC clarified that although it could rule on validity for the purpose of resolving  the case in issue, revocation remained within the remit of the national authority, in that case the UK Intellectual Property Office.

These decisions, and subsequent long-arm jurisdiction determinations by the UPC in, for example, Dyson v Dreame and HL Display v Black Sheep Retail Products, along with the decision of the Munich Regional I Court in Bayer v Formycon to issue a permanent injunction effective in 20 countries, reflect a growing judicial openness in Europe to cross-border adjudication.

As a result, the PMAC may be particularly strategically valuable in disputes where validity is raised as a counterclaim to infringement, but the parties wish to resolve aspects of the dispute outside the UPC’s jurisdiction – for example, validity challenges concerning patents registered non-UPC countries. This allows parties to tailor arbitration to their commercial and territorial interests.

However, this flexibility introduces strategic tension. A challenger confident in their position may prefer a public ruling invalidating the patent, clearing the path for broader market access. Conversely, a patentee may wish to publicise a favourable decision to deter future challenges. In such cases, the confidentiality of PMAC proceedings may act as a disincentive.

Yet confidentiality can also be a strategic asset – particularly when both parties are uncertain of their position. In life sciences, for instance, arbitration may yield outcomes beneficial to both sides. A finding of validity and infringement could lead to a licence allowing market entry under agreed terms. Alternatively, if the patent is found invalid but remains on the register, both originator and generic or biosimilar competitors may benefit – the originator retains nominal protection, while the generic or biosimilar manufacturer avoids regulatory risks. In either scenario, the arbitration outcome remains opaque to outsiders, enabling commercially pragmatic solutions without public scrutiny.

Ultimately, the strategic use of the PMAC depends on parties’ appetite for risk, publicity, and procedural control. While not a panacea, it may offer a flexible tool for resolving complex, cross-border disputes, including in the life sciences sector – provided its use complements rather than complicates UPC litigation.

Beyond Validity and Infringement: Where PMAC May Add Value

Patent disputes often extend beyond infringement and validity. In sectors like life sciences and technology, commercial and contractual issues – such as licensing terms, royalty structures, milestone payments, and termination clauses – are central to market access and revenue generation. These issues are not always well-suited to litigation.

The PMAC offers a confidential, expert-led alternative for resolving such disputes. In FRAND cases, for example, the UPC has issued only two decisions (Panasonic v Oppo and Huawei v Netgear), both reflecting the German approach focused on negotiation willingness rather than setting global FRAND rates. By contrast, the PMAC’s dedicated FRAND provisions and enhanced confidentiality may offer a more suitable venue for resolving licensing terms and royalty structures, especially in multi-jurisdictional SEP disputes.

In industries like automotive and electronics, patent disputes often intersect with broader commercial disagreements – supplier obligations, indemnity clauses, and licensing arrangements. These multifaceted conflicts could benefit from arbitration’s flexibility and technical expertise.

Importantly, PMAC arbitration can run alongside UPC litigation. Parties may arbitrate licensing or damages issues while litigating validity and infringement.  At interim conferences, UPC judges already encourage the parties to engage in the use of ADR, and the PMAC’s launch will institutionalise this practice. In FRAND cases especially, arbitration may offer a more controlled and commercially viable alternative to unpredictable court-imposed rates.

Conclusion

Arbitration is unlikely to replace litigation for core patent disputes, particularly those involving validity and infringement. The UPC’s framework, and prospect of EU-wide relief, already incentivises settlement, as seen by the notable uptick in settlements in the final quarter of 2024 in high-profile cases like Ocado v Autostore, Abbott v Dexcom, and Huawei v Netgear – driven by the UPC’s tight timelines, territorial reach, and judicial readiness to issue injunctions.