Order of the Court of Appeal of the UPC issued on June 20, 2025 – APL_20694/2025
The issue at hand relates to the interpretation and application of Article 69(4) of the Unified Patent Court Agreement (UPCA) concerning security for costs that may be requested by defendants in patent litigation before the Unified Patent Court (UPC). Specifically, the case examines whether in the context of an infringement action, the defendant to a counterclaim in revocation can request security for costs from the alleged infringer, a question that has implications for the balance of power and fairness in patent disputes.
Emboline initiated an infringement action against AorticLab regarding the European patent EP 2129425. During the proceedings, Emboline requested security for costs, arguing that AorticLab’s financial instability posed a risk of insolvency. AorticLab filed a counterclaim for revocation and argued that Emboline’s request for security for costs was unfounded, as only a defendant may request such a measure.
The Court of First Instance ordered AorticLab to provide security for costs amounting to €200,000. It reasoned that the dual role of Emboline as both claimant in the infringement action and defendant in the counterclaim for revocation, justified a reciprocal interpretation of Article 69(4) UPCA. The Court of First Instance granted leave to appeal, acknowledging the unresolved legal question of whether Article 69(4) UPCA permits either party to request security for costs.
The Court of Appeal conducted a comprehensive analysis of the legal provisions and underlying principles of Article 69(4) of the UPCA.
The Court of Appeal emphasized that the provision of Article 69(4) UPCA allows for a request for security for costs specifically at the request of the defendant. The Court of Appeal deemed the language of the article intentional and not open to broad interpretation that would include claimants. While Rule 158 of the Rules of Procedure (RoP) uses broader language, referring to “a party” requesting security for costs, the Court of Appeal held that this rule cannot override the specific provisions of the UPCA.
The Court of Appeal delved into the rationale behind Article 69(4) UPCA, which is to protect defendants from claimants who might initiate legal actions without the financial means to cover the resulting legal costs. This protective measure ensures that defendants are not unfairly burdened by legal proceedings initiated by claimants who lack sufficient financial resources. The Court of Appeal underscored that this rationale does not extend to claimants seeking similar protections.
Although Emboline is the defendant in the counterclaim for revocation filed by AorticLab, the Court of Appeal noted that a counterclaim for revocation, while technically a separate action, is intrinsically linked to the original infringement action. The counterclaim for revocation is a necessary defensive measure rather than an independent action initiated by the defendant. Therefore, the rationale of protecting defendants from claimants’ actions does not apply in this context.
The Court of Appeal considered the potential implications of allowing claimants to request security for costs. It concluded that such a measure would unreasonably limit a defendant’s ability to defend itself, particularly in cases where the defendant might not have the financial resources to provide security. This could lead to situations where defendants are unable to raise valid defenses due to financial constraints, thereby undermining the principle of fair access to justice.
The Court of Appeal further underlined that its reasoning is also justified in view of the consequences of non-compliance with a security order. Claimants, if unable to provide security, have the option to withdraw their actions, whereas defendants might face default judgments if they fail to comply with security orders.
The Court of Appeal explored whether Union law, particularly Article 14 of the Enforcement Directive (Directive 2004/48/EC), could provide a legal basis for expanding the scope of Article 69(4) UPCA but concluded that the Enforcement Directive does not establish a right to request security for legal costs at the claimant’s initiative.
The Court of Appeal ultimately set aside the impugned order, rejecting Emboline’s application for security for costs as inadmissible. This decision clarifies the scope and limitations of requesting security for costs in patent litigation, reinforcing the principle that such measures are intended to protect defendants from potentially insolvent claimants.