Case Law
Rule 158: Security for costs of a party
Court of Appeal - Luxembourg (LU), Order dated 27/09/2024, Volkswagen AG v. Network System Technologies LLC (Case/ Registry number: App_53213/2024, ORD_53742/2024)
Example of decision on the security for costs of a party: "1. Given that the Court of Appeal in the Order specified the time limit within which NST is to provide the required security, pursuant to R.158.4 RoP, the Court has to inform NST that if it fails to provide adequate security within the time stated in the Order, the Court (meaning in the present case: the Court of First Instance dealing with the main action) may give a decision by default pursuant to R.355 RoP.
2. It does not follow from R.158.4 RoP that the information as meant therein must necessarily be given in the Order itself. In its Statement of appeal and grounds of appeal, Volkswagen had not requested that this information be included in the Order itself either. The Court thus does not see the necessity for rectification of the Order. It therefore suffices that the information as meant in R.158.4 RoP is provided to NST by this separate order."
Court of Appeal - Luxembourg (LU), Order dated 17/09/2024, Volkswagen AG v. Network System Technologies LLC (Case/ Registry number: APL_25922/2024, ORD_48922/2024)
Example of decision on the burden of substantiation and proof related to security for costs of a party: "The Court, when exercising its discretion under Art. 69(4) UPCA and R.158 RoP, must determine, in the light of the facts and arguments brought forward by the parties, whether the financial position of the claimant gives rise to a legitimate and real concern that a possible order for costs may not be recoverable and/or the likelihood that a possible order for costs by the Court may not, or in an unduly burdensome way, be enforceable. The burden of substantiation and proof why an order for security for costs is appropriate in a particular case is on the defendant making such a request. Once the reasons and facts in the request have been presented in a credible manner, it is up to the claimant to challenge these reasons and facts in a substantiated manner, especially since that party will normally have knowledge and evidence of its financial situation. It is for the claimant to argue that and why a security order would unduly interfere with its right to an effective remedy. The relative financial position of the claimant as compared to that of the defendant is not as such a criterion under R.158 RoP, especially where the (limited) level of funding provided to a special purpose patent enforcement entity is a deliberate business decision."
Court of Appeal - Luxembourg (LU), Order dated 16/09/2024, ICPillar LLC v. SVF Holdco, Arm France SAS, Arm lreland Limited, Arm Poland Sp. z.o.o, Simulity Labs Limited, Arm Germany d.o.o, Arm Germany GmbH, Apical Limited, Arm Sweden AB, ARM Limited (Case/ Registry number: APL_33746/2024, ORD_50692/2024)
Example of decision on bank guarantee related to security for costs of a party: "A bank guarantee issued by a bank licensed in the US does not provide adequate security, as R.158 RoP requires. As the reason for not allowing a bank guarantee to be issued by a US licensed bank is not solely based on nationality, but on substantive grounds, this is not contrary to any prohibition of discrimination."
Court of First Instance - Paris (FR) Local Division, Order dated 21/05/2024, Arm Germany GmbH, ARM Limited, Allinea Software GmbH, Simulity Labs Limited, Arm ireland Limited, Arm Sweden AB, SVF Holdco, Arm France SAS, Arm Germany d.o.o, Apical Limited (Case/ Registry number: UPC_CFI_495/2023, ORD_23494/2024)
Example of order on the criterion of the claimant’s financial situation where the Court has to decide the opportunity to provide a security for legal costs: “The insurance broker’s declaration is not sufficient to justify that the legal costs can be recovered from it by ARM for two reasons. Firstly, the purpose of this type of insurance is to provide a financial protection for the ICPILLAR (the insured party), and not to protect the potential rights of the ARM entities (the applicants of the Security for cost request). Secondly, the full terms of the said insurance have not been disclosed and it is hence unclear what are the actual terms of the insurance.”
Court of First Instance - Hamburg (DE) Local Division, Order dated 15/05/2024, Kinexon Sports & Media GmbH, Kinexon GmbH, Union des Associations Européennes de Football (UEFA) (Case/ Registry number: UPC_CFI_151/2024, ORD_23557/2024)
Example of order on the admissibility of providing a security: “bb) In the present case the Panel has especially considered that the patent in suit was not only just recently assigned to the claimant, but that the transfer was performed months after the assignor entered into a pre-trial correspondence about a possible patent infringement with the defendants 2) and 3). This raises the concern that the purpose of this transfer might be to facilitate this litigation without any financial risk to applicant. Whereas an order to provide security can, depending on the circumstances, limit the claimant’s access to justice (LD The Hague, 13.02.2024 – UPC_CFI_239_2023), the Panel weights the interests of the defendants higher than those of the claimant in the present case.”
Court of First Instance - Munich (DE) Local Division, Order dated 23/04/2024, AUDI AG (Case/ Registry number: UPC_CFI No.514/2023, ORD_12232/2024)
Example of decision on the request for security for legal costs by defendant: “In exercising its discretion under Art. 69.4 UPCA and rule 158.1 RoP, the Court must therefore weigh the relevant facts and circumstances. Against this background, it is for the party requesting a security order to provide facts and arguments as to why such an order is appropriate in a particular case. Accordingly, the requesting party must make a “reasoned request”, with the burden of proof generally being on the party relying on those facts (Art. 54 UPCA). On the other hand, once the facts and reasons in support of a security request have been presented in a credible manner, it is up to the responding party to challenge these facts and reasons in a substantiated manner, especially since that party will normally have knowledge and evidence of its financial situation. Similarly, it is for the respondent to argue that and why a security order would unduly interfere with its right to an effective remedy.”
Court of First Instance - The Hague (NL) Local Division, Order dated 13/02/2024, Plant-e, Plant-e Knowledge v. Arkyne Technologies S.L. (Case number UPC_CFI_239/2023 ORD_586897/2023)
Example of decision on the application of defendant to order the claimants to provide security for legal costs: “The main rationale for the cautio is to secure the enforceability of a potential cost order. If such order is directly enforceable after it is granted, it can serve as grounds not to allow a cautio at the start of or during the proceedings. In several multilateral and bilateral treaties wherein (reciprocal) enforceability of judgments is agreed, a requirement of security for court fees based on nationality or residence is excluded, for instance in the Conventions on civil procedure of 1905 and 19544 and the Convention on International Access to Justice of 1980. 5 Almost all Contracting Member States are a party to at least one of these treaties. A Contracting Member State is a Member State of the European Union (hereinafter EU) that is a party to the UPCA (Art. 2(c) UPCA).”
“As a rule, the court finds that a cautio based solely on (expected) material unenforceability should be awarded in exceptional circumstances only. Access to justice is, as mentioned above, an important right throughout the EU (and elsewhere). Especially for SMEs, enforcement of their patents through the UPC may be severely hampered if they not only have to bear substantial costs for their own counsel but are in addition ordered to provide security for the defendant. Requiring a cautio from claimants can thus also conflict with the high level of protection for IP rights holders envisaged by the Enforcement Directive.”
Court of First Instance - Munich (DE) Central Division - Section, Order dated 30/10/2023, President and Fellows of Harvard College v. NanoString Technologies Europe Limited (Case number UPC_CFI_252/2023, ORD_574057/2023)
Example of decision concerning a guarantee claim: “In exercising its discretion under Article 69(4) UPCA and Rule 158.1 RoP, the Court must therefore weigh the relevant facts and circumstances.
Against this background, it is for the party requesting a security order to bring forward facts and arguments why such an order is appropriate in a specific case. Accordingly, the requesting party has to make a “reasoned request”, whereby the burden of proof of facts generally is on the party relying on those facts (Article 54 UPCA). On the other hand, once facts and reasons in support of a security request have been brought forward in a credible way, it is up to the responding party to contest such facts and 7 reasons in a substantiated way, especially since that party will normally have knowledge of and will be in the possession of evidence in relation to its financial position and (the location of) its assets. Likewise, it is up to the respondent to argue that and why a security order would unduly interfere with its right to an effective remedy.”