Context: The Munich Local Division (LD) of the Unified Patent Court (UPC) took a decision on security (for litigation costs with a view to “loser pays” fee-shifting) that favors non-practicing entities (NPEs) and litigation funders: an NPE did not have to give security as its expensive U.S. litigation activity suggested significant funding and a patent portfolio acquired from Philips appeared to be a valuable asset (May 11, 2024 ip fray article). In a case where a plaintiff has an official share capital of only €1 and no known assets other than a single patent, the Hamburg LD ordered the provision of collateral (May 16, 2024 ip fray article).
What’s new: Today (May 21, 2024) the Paris LD entered an order on security (PDF) in ICPillar v. Arm. Like the Munich LD, the Paris LD did not consider it relevant that the plaintiff is based in the U.S., and even the fact that there different U.S. states are involved did not matter. But it was not sufficiently clear that the plaintiff has the liquidity to reimburse litigation expenses should it lose the case. An insurance policy benefiting the plaintiff rather than the potential creditors of a reimbursement was rejected by the court, as was the proposal to post a bond issued by a U.S. bank.
Direct impact & wider ramifications: ICPillar v. Arm contributes to the evolution of UPC case law on security for litigation costs as the decision addressed different kinds of proposals that were not made (or were at least not reached) in some other cases.
The principle of non-discrimination against U.S. companies (relative to EU-based companies) is clearly shared by the Munich and Paris LDs. Even the fact that the plaintiff “has connections to three different states in the United States (Texas, California, Delaware)” was not considered a strong argument with a view to whether enforcement of a fee award would be unduly burdensome.
With a view to whether ICPillar has sufficient assets to reimburse the other side’s litigation costs if it loses, the order says that nothing was known. That is different from the patent portfolio in the Munich case where no security was required because a patent portfolio acquired from Philip was deemed a valuable asset.
Like the Hamburg LD in Ballinno v. Kinexion & UEFA, the Paris LD noted that the security amount could still be increased during the further proceedings, but did not want to order the plaintiff to provide too much upfront. Access to justice is an aspect the UPC is concerned about in this regard.
What is probably the most important aspect of today’s decision is that the Paris LD was not going to accept anything less than a guarantee by an EU bank. The Paris rejected a (U.S.) insurance policy (which, according to the order, just protected the plaintiff but not the defendants) as well as the offer to provide a U.S. bank guarantee.
While no other UPC division has gone as far as the Munich LD in simply denying a request that a small non-practicing entity provide security, it is too early to tell whether that is due to different opinions. For now, it appears that there were objective reasons in that one Munich case that clearly set it apart from the Hamburg and Paris cases. But that does not mean to say that other UPC divisions would necessarily have reached the same conclusion as the Munich LD. Today’s Paris decision appears rather centrist.