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 que l’autre partie pourrait se voir rembourser à l’issue du litige. Elle est prévue par l’article 69 de l’accord relatif à une juridiction unifiée du brevet et par la règle 158 du règlement de procédure. La sécurité pour les frais protège la partie gagnante contre le risque de ne jamais recouvrer les frais mis à la charge d’un adversaire insolvable ou établi dans un pays où l’exécution de la décision serait difficile.

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 attorney before the Unified Patent Court and patent troll.

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This glossary entry is general in scope and does not constitute legal advice.

Dhenne Avocats litigates patent disputes before the Paris Judicial Court, the Paris Court of Appeal and the Unified Patent Court. Where the question arises in a real case, the useful moment is almost always before proceedings are issued.

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