IP Cases & Articles

Security for costs at the UPC: is Brexit a factor for UK-based users?

It is a well-established form of legal relief across the world; one party to a case may be ordered by a court to pay the legal costs of another party.

A costs order is often used as a deterrent against unreasonable behaviour by parties in a dispute, typically the claimant, including the bringing of baseless or frivolous claims.

Sometimes, courts may decide that there is a risk that parties to a case might be unable to fulfil the costs order, or that the court may not be able to enforce the order. In such instances, the court may require a party (or multiple parties) to a case to provide funds in advance, where either those funds will be returned upon conclusion of the trial or an amount of those funds will be awarded to the relevant party or parties if a costs order is handed down. This is called a security for costs, and is something that the Unified Patent Court (UPC) is able to order (see Rules 158 and 159 of the UPC’s Rules of Procedure).

Edwards Lifesciences Corporation v Meril Italy srl

So far, there have been relatively few applications for security for costs orders at the UPC. In Edwards Lifesciences Corporation v Meril Italy srl, Edwards Lifesciences requested that security for costs be awarded, because Meril Italy was a small company with very little in the way of assets. The UPC declined to award security for costs in this case, because the risk of any prospective costs order not being fulfilled by Meril Italy (as a wholly-owned subsidiary of a much larger group (Meril Life Sciences) which had sufficient assets) was deemed to be insignificant. Perhaps of bigger concern to Edwards Lifesciences is that the request for security for costs was only a secondary request to the primary request that the UPC find Meril Italy’s revocation action filed against Edwards Lifesciences’ patent to be inadmissible. This was also rejected. Edwards Lifesciences had previously filed an infringement action against Meril Life Sciences, but the UPC allowed Meril Italy to bring a separate free-standing revocation action to this infringement action, as a wholly-owned subsidiary was deemed to be a different party to its parent company.

NanoString Technologies Europe Limited v President and Fellows of Harvard College

A converse decision regarding security of costs was made in NanoString Technologies Europe Limited v President and Fellows of Harvard College, which appears to be of particular consequence to UK-based users of the UPC. Here, the UK based NanoString brought an action at the UPC seeking revocation of President and Fellows of Harvard College’s patent. Harvard requested that NanoString be ordered to provide a security for costs in respect of the revocation proceedings, while NanoString unsurprisingly asked that this request be rejected. The UPC found in favour of Harvard, and handed down an order that NanoString provide security for costs totalling €300,000, at either the UPC’s security for costs account or a significant EU bank of NanoString’s choice. The decision came down to two main factors:

  1. concerns over NanoString’s means to fulfil any future costs order handed down in the revocation proceedings; and
  2. concerns that the costs order may not be enforceable due to NanoString’s status as a UK-based company.

While it seems, from the grounds of the order handed down by the UPC, that the concerns over NanoString having inadequate means to bear the legal costs and expenses incurred by Harvard were the main deciding factor in the security for costs being awarded, the discussion around NanoString being a UK-based company cannot be ignored. As a result of the UK’s departure from the European Union, and despite there being no reason to believe UPC costs orders would not be enforceable in the UK in principle, the UPC found that “(procedural) burden and uncertainty” on a party seeking to enforce such a costs order in the UK “is a factor that weights in favour of ordering a security”.

Given that it seems likely a security for costs order would have been handed down in this case anyway, due to NanoString’s particular financial circumstances, it remains to be seen whether Brexit will play a major role in future security for costs orders handed down by the UPC. For now, UK-based parties to UPC proceedings should at least be aware that this is a risk that they will have to tolerate.

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