LD Düsseldorf, December 3, 2024, Order re. procedural security against Defendant, UPC_CFI_140/2024

(pp. 5 et seq.) Contrary to the Defendant´s position, this does not mean that Rule 158 RoP is in conflict with the UPCA. The power to order the provision of adequate security for legal costs is based on Article 69(4) UPCA. From the ordinary meaning of the wording of Article 69(4) it follows that ordering a defendant to provide security for legal costs at the request of a claimant is not excluded. Article 69(4) UPCA provides a minimum norm as to the circumstances in which this remedy must be available (see the wording “in particular” in Art. 69(4) UPCA). Reading Art. 69(4) UPCA in the context of Art. 69 UPCA as a whole (cf. Court of Appeal (´CoA´) order of 12 November 2024 in case CoA_489/2023, AIM/SUPPONOR, par. 11) confirms this interpretation. Article 69 UPCA deals with legal costs and distinguishes between the “successful party” and the “unsuccessful party” without mentioning the status of a party as “claimant”, “defendant” (or otherwise). It follows that Article 69(4) UPCA is not limited to the specific circumstances – or parties – mentioned. This interpretation of the provision, as not being limited to providing security only to the defendant in UPC proceedings, is also supported by the object and purpose of Article 69(4) UPCA. The UPCA, as stated in its Preamble, aims to improve the enforcement of patents and the defence against unfounded claims and the UPC is devised to strike a fair balance between the interests of right holders and other parties. It would at odds with these objectives to interpret Art. 69(4) UPCA as restricting the party who can request a security to only a party having the procedural status of defendant.

Moreover, imposing a security is a precautionary measure to safeguard the right to – as a general rule – have the unsuccessful party bear the reasonable and proportionate legal costs of the successful party (laid down in Article 69(1) UPCA). This provision – which stems from Article 14 of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights (´Enforcement Directive´) – does not distinguish between a claimant and a defendant. The objective of the Enforcement Directive is to approximate legislative systems within the Union so as to ensure a high, equivalent, and homogeneous level of protection for IP rights holders in the internal market (see e.g. recital 10 of the Enforcement Directive). The rights of the claimant IP right holder thus deserve protection (cf. LD The Hague order of 13 February 2024 in case UPC_CFI_239/2023). This includes the right to effectively secure a potential claim for reimbursement of litigation costs.

(pp. 6 et seq.) The Court has the discretion to order a security for legal costs and other expenses. In accordance with the case law of the UPC (see CoA, order of 17 September 2024 in case UPC_CoA_217/2024, Audi/NST), the Court, when exercising its discretion under Art. 69(4) UPCA and Rule 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 UPC 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, but that – 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 and 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 (see also CoA, order of 29 November 2024 in case UPC_CoA_548/2024, Arke/SodaStream).

The above principles apply mutatis mutandis to the situation, as in the present case, wherein the claimant is the party requesting the security order. However, the Court also recognises that imposing a security for legal costs typically serves to protect the position and (potential) rights of a defendant, who has not chosen to commence the main proceedings (see LD Munich, order of 23 April 2024 in case UPC_CFI_514/2024, LD The Hague order of 13 February 2024 in case UPC_CFI_239/2023, CD Munich order of 30 October 2023 in case UPC_CFI_252/2023). A claimant, on the other hand, has made a voluntary decision to litigate. This “asymmetry”, as it was referred to by the Defendant, does not render the request from the Claimant inadmissible (see above), but does have implicationsfor the weighing of interests when exercising the discretion under Rule 158 RoP. In doing so, special care must be taken by the Court that the Defendant´s right to a fair trial is protected (Article 47 of the Charter of Fundamental Rights of the European Union, referred to
in the preamble of the UPCA), and particularly that the Defendant is not denied the opportunity to present its case effectively before the Court (CoA order of 26 August, 2024 in case UPC_CoA_328/2024, par. 35 and case law of the European Court of Justice cited therein).