Context: Two months ago, Judge Tobias Pichlmaier of the Unified Patent Court’s (UPC) Munich Local Division (LD) held infringement plaintiff Emboline entitled to security for costs from infringement defendant and revocation counterclaimant AorticLab (item 8 of our April 18, 2025 UPC Roundup), but granted leave to appeal. AorticLab had argued, among other things, that it had only recently raised funding of €10 million, but Judge Pichlmaier held against their claims of financial stability that in the balance-of-interests context they claimed an injunction would drive them out of business. In other cases, other UPC judges also granted security requests from defendants on the basis that bringing revocation counterclaims made them, in part, plaintiffs.
What’s new: Today the UPC’s Court of Appeal’s (CoA) second panel resolved two questions (PDF). The upshot is that defendants will never have to give security (a question that the appealed order left open), and to the extent they bring a revocation counterclaim, they merely exercise their right to defend themselves and still do not have to provide collateral.
Direct impact: AorticLab preserves €200K of liquidity at this stage. The costs of the appeal were very limited as the CoA decided on the papers.
Wider ramifications: Other defendants may now request the release of the security they were ordered to provide due to having brought revocation counterclaims, and other plaintiffs will not refrain from seeking security from defendants.
The CoA concluded that requiring security from defendants is irreconcilable with the UPC Agreement (UPCA), the UPC’s Rules of Procedure (RoP) and the EU Intellectual Property Rights Enforcement Directive. In the CoA’s opinion, all of those statutes entitle to security only those who are sued by a party without sufficient financial means, as opposed to protecting those responding to a lawsuit. As to the UPCA and the RoP, the following passage is key:
25. Although a counterclaim for revocation is considered to be a separate action in Art. 32(1)(e) UPCA, it is intrinsically linked to the infringement action. This link to the infringement action is reflected in the RoP where the claimant in the infringement action continues to be referred to as the ‘claimant’ in the Rules relating to the counterclaim for revocation, whilst the defendant in the infringement action, 5 even though strictly speaking claimant in the counterclaim for revocation, continues to be referred to as the defendant.
Considering that infringement defendants in the UPC cannot raise an invalidity defense without bringing a revocation counterclaim, the CoA held that this is an essential right of defense that must not be compromised through security requirements. A lack of financial resources could dissuade a defendant from bringing an invalidity defense. Even worse, there could be an injunction as the result of a default judgment against a defendant who fails to provide the prerequisite collateral.
The possibility of a revocation counterclaim being bifurcated is mentioned as not changing the result.
The CoA went beyond the call of duty. A dismissal of the application for security would have been warranted just based on the fact that it was made in the infringement proceedings and not in revocation counterclaim proceedings. The CoA nevertheless elected to explain why the application would have failed regardless of the part of the dispute in which it was brought.
Court and counsel
Panel: Presiding Judge (and here, judge-rapporteur) Rian Kalden, Judge Ingeborg Simonsson and Judge Patricia Rombach.
Counsel for plaintiff-movant-appellee Emboline: Vossius & Partner / Vossius & Brinkhof UPC Litigators (counsel of record: Dr. Thure Schubert) and KIPA AB.
Counsel for defendant-nonmovant-appellant AorticLab: Hoyng Rokh Monegier (counsel of record: Sabine Agé) and André Roland SA.