Unified Patent Court (UPC) cost considerations
The Preparatory Committee of the Unified Patent Court (UPC) has now agreed the rules on court fees and recoverable costs, which will greatly assist those considering the utility of this new litigation forum. This follows a public consultation and many months of discussion by the Preparatory Committee.
Unified Patent Court fees
UPC fees will be made up of a fixed fee, with an additional value-based fee applicable to higher value infringement claims or counterclaims (those exceeding €500,000). For multi-party or multi-patent actions, only one set of fees should apply. Fixed fees will also apply to interim applications such as interim injunctions and search and seizure orders, as well as for interim appeals. Fees for damages determination and substantive appeals largely follow the same approach as for the main proceedings.
Summary of fee structure for substantive claims and appeals
|Type of Action||Court fee|
|Infringement||€11,000+ value-based fee|
|Counterclaim for revocation||Same as fee for infringement action but capped at €20,000|
|Counterclaim for infringement||€11,000+ value-based fee|
|Action for declaration of non-infringement||€11,000+ value-based fee|
|Application to determine damages||€11,000+ value-based fee|
|Appeal pursuant to an infringement||€11,000+ value-based fee|
It should be noted that a fixed fee for a revocation action and in particular a capped fee for a counterclaim for revocation is a positive step since it avoids the possibility of a very large fee applicable to what might be a defendant's primary or only defence, invalidity.
The UPC will have value-based fees, as noted above, since it is intended to become self funding. Accordingly, higher stakes cases are being looked to in order to provide fees for that funding, a principle that is set out in the UPC Agreement. This in turn requires a case to be valued and in order to do so guidance on valuation has been published. The principle is that valuation should be as simple as possible in order to try to avoid a separate mini-trial on value.
The guidance indicates that a case's value should be calculated on a royalty basis, in line with the existing approaches for many member states when assessing damages. This will require a consideration of the defendant's turnover in relation to an alleged infringing product, including where necessary up to the expiry of the patent (on a hypothetical basis since a successful claimant will expect an injunction to be granted). The notional royalty rate should be either any existing rate used by the parties or the general rate accepted by the industry in question. The value-based fee will be payable at the filing of the claim (or counterclaim) in addition to the relevant fixed fee, based on the claimant's valuation. There is the potential for the other side to contest that valuation (and therefore the fee) and the UPC will then decide on the appropriate figure.
As value-based fees are also payable for the damages part of a case, as well as a substantive appeal, it may be necessary to value a case more than once during the course of the proceedings, ie, at the start, at a counterclaim, at the beginning of any damages determination and on the filing of a substantive appeal. It may also be necessary to value a case for the purposes of representation costs recovery. These valuations may be the same (that is certainly intended to be the case for an appeal) although they may be different, where for example more is learned about the value of a case after evidence has been filed. A party is not necessarily bound by an original valuation.
Value-based fee scale
|Value for action up to and including...||Additional value-based fee|
|More than €50,000,000||€325,000|
Discounts and reimbursements
It is a principle of the UPC Agreement that help with court fees, in order to encourage access for all parties, should be available for SMEs (small and micro enterprises). A discount of up to 40% of the fees can therefore be applied for by SMEs. When this proposal was first raised, there were concerns that this discount may be abused by non-practising entities (NPEs). However, the UPC has sought to prevent unjustified use of this reduction by including the possibility of additional penalty fees that will be applied should unjustified fee reduction requests be made.
Court fees can also be partially reimbursed if a case is heard by a single judge (25% reimbursement) or if the case is settled or withdrawn. The earlier in proceedings that the case is settled/withdrawn, the greater percentage of court fees will be reimbursed.
It is also of note that the UPC has within its discretion a right to deny or decrease the reimbursements due to the behaviour of a party. It is also within the UPC's discretion (upon application by a party) to wholly or partially reimburse the court fees if the amount would threaten the economic existence of a party who is not a natural person, eg, a small business. This flexibility should be viewed as a positive by potential UPC participants.
Rules on recoverable costs
It is important to note that the caps on recoverable costs relate to the costs of representation, ie, lawyer and attorney fees. Court fees, whilst not discussed in the rules and guidance, should be fully recoverable by a successful party. Other related expenses such as expert and translator fees and witness costs should also be recoverable so long as they are reasonable and are not subject to the caps discussed below. Compensation for expert and translator costs will be assessed on the basis of rates that are customary in the respective sector with a consideration of the complexity of the case and relevant experience of the individual.
There are essentially two steps to the approach to recoverable representation costs in the UPC. The first step is to ascertain a party's reasonable and proportionate costs. Once this amount is calculated, the second step is to see whether a cap should then be applied depending on the value of the action.
For recoverable costs of an infringement action, the case will be valued in the same way as for determining the court fee at the start of the action, although as noted above it may or may not be the same value. While an assessment of the value of a revocation action or counterclaim is not necessary for the purposes of court fees (there are, as noted above, no value based fees for such actions), valuation will be necessary in order to identify any applicable recoverable costs cap. For revocation claims, the value of the action is the value of the patent. The guidance states that in the absence of relevant information (without specifying what relevant information may be), the value of a revocation action may be the value of an appropriate licence fee for the remaining lifetime of the patent (and this will mean in all participating member states in which it applies). The value of a revocation counterclaim can be equal to the value of the initial infringement action plus 50% (the higher value being based on the fact that it has a value beyond the member states in which there may have been infringement, as well as value in relation to third party activities).
The value of each patent in the case should be calculated separately and totalled together, as should the value of the claim and any counterclaim, in order to ascertain the relevant cost cap.
Recoverable costs cap scale
|Value of action up to and including...||Cap on recoverable costs|
|More than €50,000,000||€200,000,000|
While cases involving multiple parties will allow separate caps to apply to each party (so each party may recover an appropriate amount of costs), the cap is not affected by the number of patents involved in the proceedings.
It remains unclear whether parties will therefore seek to bring actions separately (that would otherwise sensibly be heard together) so as to benefit from multiple costs recovery (and caps) for each proceeding.
Importantly, the caps may be raised or lowered in certain circumstances, at the request of one of the parties. Where the case is particularly complex or multi-lingual, caps maybe raised by up to 50% for cases valued up to and including €1m, and by up to 25% for cases valued over €1m up to €50m. Cases above €50m can have the cap raised to €5m. The parties' financial position will be considered by the UPC when making the decision whether to raise the cap ceilings.
Further, ceilings may be lowered (to no minimum figure) where the economic existence of the paying party may be threatened and such party is a micro-enterprise, SME, non-profit organisation, university, public research organisation or natural person.
No opt-out fee
As has been widely reported, there will be no fee for opting conventional European 'bundle' patents out of the UPC's jurisdiction, or for withdrawing an opt-out. In our view, this is a reasonable approach given that the cost to the UPC for administrating the opt-out process is believed to be minimal, and there is really no other justification for such a fee.
The logistics for the opt-out process are being clarified and we will continue to report on this as the process is communicated by the UPC Preparatory and Administrative Committees.
UPC fees are relatively high. It should nevertheless be cost-effective for disputes covering multiple member states, or cases with multi-country implications. Smaller cases, especially those involving only a single member state or that can be resolved through proceedings in a single member state, may be more cost-effectively litigated in national proceedings, where that is possible (eg, for conventional European 'bundle' patents) during the transitional period. Opposition proceedings before the EPO will also remain a cost-effective option and we do not expect these to be materially affected by the UPC.
Further, whilst it has been confirmed that multi-party or multi-patent actions should pay only one court fee, it remains to be seen whether parties might be tempted to split related actions involving different patents into separate proceedings, so as to enable higher costs recovery. This has to be balanced of course against the additional court fees that will apply.