CoA, September 17, 2024, order of the Court of Appeal concerning security for costs, UPC_CoA_217/2024 et. al.

The Court, when exercising its discretion under Art. 69(4) UPCA and R.158 RoP, must determine, in 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 relative financial position of the Claimant as compared to that of the Defendant is not as such a criterion pursuant to R.158 RoP, especially where the (limited) level of funding provided to a special purpose patent enforcement entity is a deliberate business decision.

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 Defendant does not have to provide ‘precise evidence’ that Claimant ‘is or will be insolvent at the time a cost decision will be rendered’. It is sufficient if Defendant substantiates what efforts it made to search for all publicly available financial information on Claimant. If the information provided by Defendant give rise to a legitimate real concern that a possible order for costs may not be recoverable, it is then on the Claimant to provide further information on the availability of further assets to comply with a possible cost order.

The Court of Appeal held that, in the case at hand, the duty to provide security for costs does not unreasonably deny the Claimant’s access to justice. This is the case since Claimant is not blocked from filing any claims as such.

The Claimant itself stated that it is a company set up by major external funding companies, specifically for the acquisition of a patent portfolio. As Claimant admitted itself that sufficient financial funding to cover any possible cost orders against it should be part of an appropriate financial funding of its business model, the obligation to provide a security for costs, in the case at hand, cannot be considered to be an additional burden that hinders Claimant’s access to justice.