UPC_CFI_628/2024 – Emboline v AorticLab

Expert Commentary

Security for costs Facts The applicant asks for security for costs, as the defendant has stated that an injunction would mean insolvency. Judge Rapporteur 1. Whether Art. 69(4) UPCA (which states that the defendant can ask for costs) also allows the claimant to ask for costs does not have to be decided, because the defendant is claimant in the counterclaim for invalidity. 2. The JR grants the requested security of €200,000. Comment 1. Is a defendant also a claimant in the sense of Art. 69(4) UPCA when they are sued by a company and are forced to defend himself with a counterclaim for invalidity because under the Rules of Procedure they cannot simply invoke invalidity as an inter partes defence? Are they not de facto a defendant? 2. The JR cites only a part of the case law of the Court of Appeal (“likelihood that the claimant cannot pay the costs”) but says nothing with respect to “access to justice” — and in this case, the defendant’s right to defend themselves (Art. 6 of the Treaty of Strasbourg). It is, in my opinion, totally unacceptable if, by imposing security on a defendant, the defendant is confronted with a default judgment only because they cannot provide the required security. 3. All this means that the defendant’s statement that an injunction would mean bankruptcy is, in fact, a reason not to impose security. In this case, the defendant states that in the meantime it raised money — but that argument is not used by the JR to justify that the defendant can easily provide a security of €200,000. 4. If the JR states that in the cross-complaint for invalidity the defendant is the claimant and therefore security can be ordered, then I cannot follow why they ordered the full amount requested (which was for the whole case). They should then have awarded half of the requested amount as security for the counterclaim proceedings, i.e. €100,000. 5. The JR also does not respond to the argument that in the meantime the defendant raised new capital of €10 million. So it was clearly good for its money. 6. I sense from this decision a division that is overloaded with cases and cannot spend much time on these (continuous) security for costs demands. Again, it would be much better for a healthy UPC if cases were better spread across the different divisions. If representatives keep filing in the same divisions and this behaviour is not changed voluntarily, the UPCA should, in my opinion, ultimately be amended (see Art. 87 UPCA) to give the President of the Court of First Instance (CFI) the power to refer cases to different divisions in order to better balance the workload. __

Full Decision Text

Procedural Order of the Court of First Instance of the Unified Patent Court Local Division Munich issued on 16 April 2025 Headnotes: 1. The one who files a counterclaim for revocation (Art. 32 (1) e) UPCA) is an “Applicant” according to Art. 69 (4) UPCA. 2. Anyone who claims that he would be driven into insolvency in case of an injunction to desist, confirms that his financial position gives rise to a legitimate and real concern that a possible order for costs may not be recoverable. Local Division Munich UPC_CFI_628/2024 ACT_58638/2024 App_8962/2025 2 APPLICANT (CLAIMANT IN THE INFRINGEMENT PROCEEDINGS) Emboline, Inc., 2901 Mission Street, Bldg 2, Santa Cruz, CA 95060, United States of America represented by: Thure Schubert RESPONDENT (DEFENDANT IN THE INFRINGEMENT PROCEEDINGS) AorticLab srl, Via Ribes, 5, 10010 Colleretto GiacosaTO, Italy represented by: Sabine Agé LANGUAGE OF PROCEEDINGS: English PATENT AT ISSUE: EP 2 129 425 PANEL: Panel 1 of the Local Division Munich DECIDING JUDGES: This order has been issued by the legally qualified judge Tobias Pichlmaier (judge- rapporteur) POINTS AT ISSUE: Security for costs pursuant to R.158 RoP 3 Facts and parties requests Applicant requests for a security for costs. Applicant alleges that Respondent is in a highly unstable financial situation. Furthermore, Applicant points out that Respondent itself states in its Defence to the Statement of Claim and Counterclaim for Revocation (paragraphs 296 et seq.) that the grant of an injunction might drive Defendant into insolvency. Applicant therefore requests I. to order the Defendant to provide adequate security for legal costs and other expenses to the Claimant, either by way of deposit on the UPC account dedicated for security deposits, alternatively by way of bank guarantee issued by a bank licensed in the European Union, within a time limit and in an amount to be determined by the court, preferably in an amount of EUR 200,000 (two hundred thousand euro) within four weeks from the date of service of the court order; II. to give a decision by default against Defendant if Defendant fails to provide adequate security within the time limit set by the Court Respondent is of the opinion that the application is inadmissible and unfounded. He points out that according to Art. 69 (4) UPCA only the defendant may request the Court to order the claimant/applicant to provide a security for costs. Apart from that Respondent argues that a request for a security that is solely based on the weak financial situation of the other party may only be granted in very exceptional circumstances. Such circumstances have not been pleaded in the view of Respondent. Since Respondent has raised funds in the total amount of USD 10.500.000, in the view of Respondent there is no question of an immediate financial distress. Respondent requests, that the Claimant’s application for provision of a security for costs be dismissed. 4 in the alternative, that the Defendant be given leave to appeal against an order to provide a security for costs (Rule 220.2 RoP); and that the provision of a security for costs is to be made only within six weeks of the date of service of any decision by the Court of Appeal to uphold the order. Grounds for the order According to the jurisdiction of the Court of Appeal it is decisive for an order for security (Art. 69 (4) UPCA and R.158 RoP), 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 (UPC_CoA_217/2024). 1. It can be left open in the case at hand whether the jurisdiction of the Local Division Düsseldorf, according to which each party may request the court to order the respective other party to provide adequate security, is in line with Art. 69 (4) UPCA, where it is said that the court may order a security “at the request of the defendant”. In view of this wording and the way this issue is handled in the law of the member states, it seems at least questionable whether a party who only has the position as a claimant is entitled to request for security (R. 158 RoP). In the proceedings at hand, applicant is both claimant and defendant since there is not only an infringement action but also a counterclaim for revocation. According to the UPCA, “claimant” is not only the one who files an infringement action (Art. 32 (1) a) UPCA), but also the one who files an action for revocation (Art. 32 (1) d) UPCA) or a counterclaim for revocation (Art. 32 (1) e) UPCA). Accordingly, the same applies vice versa with regard to the position as “defendant”. 5 According to Art. 33 (8) UPCA (“applicant” with regard to a counterclaim) and Art. 69 (4) UPCA (“…may order the applicant…”) the court may order the Respondent in the case at hand to provide security for costs. 2. The financial position of Respondent gives rise to a legitimate and real concern that a possible order for costs may not be recoverable, because he himself claims that he would be driven into insolvency in case of an injunction to desist. In terms of time, an order for costs would follow an injunction to desist so that Respondent would no longer be solvent at that point in time. 3. The amount of the security was to be set at € 200,000 according to the costs reimbursable in the event of a value in dispute (for the counterclaim) up to 2 million €. Order 1. It is ordered that Respondent must provide security for costs to Applicant in an amount of € 200.000,00. The security can be provided either - by an irrevocable, unconditional, unlimited and absolute guarantee at first request from a bank established and authorised to operate within the territory of the EPC Contracting Member States or - by depositing the security amount in the Unified Patent Court's account set up for this purpose (indicated in point 3. on the website www.unified-patent- court.org/de/court/payments). The provision of a security for costs is to be made within two weeks of the date of service of any decision by the Court of Appeal to uphold the order. If no appeal is filed the provision of a security for costs is to be made until 31 May 2025. 2. Respondent is given leave to appeal against this order (Rule 220.2 RoP). 6 3. Respondent's attention is drawn to the fact that a default judgment may be entered in accordance with Rule 355 RoP if the security is not provided within the time limit set in accordance with no. 1 of this order. Tobias Pichlmaier Judge-rapporteur

Key Holdings

• Security for costs ordered against defendant/counterclaimant.
• Financial instability (risk of insolvency) justified security.
• Access to justice argument not fully addressed.

Tags

• Counterclaim
• Effective Remedy
• Insolvency
• Security for Costs

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