Security for costs (UPC)

Security for costs is the guarantee that the Unified Patent Court may order a party to provide in order to cover the court costs that the other party might be awarded at the end of the dispute. It is provided for by Article 69 of the Agreement on a Unified Patent Court and by Rule 158 of the Rules of Procedure. Security for costs protects the successful party against the risk of never recovering the costs ordered against an insolvent opponent or one established in a country where enforcement of the decision would be difficult.

The conditions of security for costs

First, the measure is ordered on the reasoned request of a party, generally the defendant, but it may also target a counterclaimant. Next, the Court assesses the financial situation of the party concerned and the risk that the decision on costs cannot be enforced. The Court of Appeal has specified that the mere fact that a party is established outside the European Union is not enough and that the enforcement difficulties in the country concerned and the financial soundness of the party must be examined concretely. Finally, the Court sets the amount according to the recoverable costs ceiling applicable to the value of the dispute, and the form of the security: deposit or bank guarantee.

Effects and sanctions

The party ordered to provide security has a period in which to do so. Failing this, the Court may give a decision by default against it, which makes the measure particularly dissuasive. The order on security for costs may be appealed within the short period applicable to orders. The security is released at the end of the dispute, according to the decision on costs. The Rules of Procedure can be consulted on the website of the Unified Patent Court.

Key points

In practice, an application for security for costs has become a reflex of defendants sued by thinly capitalised claimants or claimants established outside the Union, including some non-practising entities. It must be anticipated by the claimant, in particular in the context of litigation funding by a third party, and documented by the defendant. The firm handles these issues, as presented on the pages lawyer before the Unified Patent Court and patent troll.