UPC_CoA_596/2024_July12_Security – Suinno v Microsoft

Expert Commentary

Security for costs Facts 1. Suinno filed infringement proceedings in the Central Division in Paris against Microsoft. It stated in its Statement of Claim that the value of the litigation is € 5 to 6 million. 2. Microsoft requested an order to provide security at the amount of € 800k, or alternatively € 600k. The Court ordered Suinno to provide security for € 300k, stating that Suinno had not shown that it has sufficient assets. 3. Suinno filed an amendment of claim in which it asked € 2 million instead of € 5 to 6 million in damages, which was granted. 4. The Court did not change the security amount, as it considered the request for the amendment of claim was not an application to amend the security. 5. The Central Division granted leave for appeal. Appeal 1. Suinno filed an appeal and requested the amount for security to be set on € 100k instead of € 300k. 2. In parallel proceedings the Court of Appeal decided that Suinno was not validly represented (UPC_CoA_563/2024). 3. A representative who could validly represent Suinno finally signed the grounds for appeal. In a side letter the representative requested to set the security to zero, arguing that the security would lead to a refusal to access to justice and violation of fundamental right. Decision of the Court of Appeal 1. The Court of First Instance has a margin of discretion which means the review by the Court of Appeal is limited. 2. The decision of the Central Division based on Suinno’s own original estimate with respect to the value of the litigation was reasonable. The argument that the real work would not cost Microsoft more than € 100k because that is the experience in other UPC cases, is not a valid argument, because it does not address the amount of legal costs and other expenses to be incurred by Microsoft in this particular case. 3. The fact that Suinno filed an amendment to reduce its claim for damages from € 5-6 million to € 2 million is not relevant because the value of the litigation is also based on the request for an injunction. 4. The new arguments in the “side note” and during oral argument is refused, because they were filed/made outside the time limit for the grounds of appeal. 5. They would anyway not have changed the outcome because even if Suinno’s rights would be limited this must be deemed necessary to protect the rights of Microsoft. Comment 1. A case in which an unexperienced representative did everything wrong. a. He represented himself and his own company. b. He filed a Statement of Claim in which he demanded a high amount of damages (apparently hoping that this would scare Microsoft into a settlement?). c. He litigated with a company with apparently no assets with the idea that his risk was limited. However, that resulted together with the aforementioned high amount of damages in a high security amount. d. He filed an amendment of claim and lowered the value of the case but did not file a request for amending the amount for security. e. After he had found a representative that could act for the company, the appeal was pursued with arguments which he himself had not made in the Statement of Grounds for appeal. f. He argued in appeal that in other UPC cases € 100.000 was sufficient for the work which has to be done by a defendant. He should have argued that in this specific case a reasonable representative and company would not have to spend more than € 100.000k accompanied by an expert statement of a reputable and experienced litigator/representative to confirm this. 2. The Court of Appeal states (in an obiter dictum) that the (argued) limitation of rights of Suinno must be deemed necessary to protect Microsoft’s rights. I find that not extremely convincing. Suinno is defending its fundamental ownership’s rights and I find that that should prevail over the right of Microsoft. Microsoft has not argued that it cannot defend itself (which is also a fundamental right) but that it should not have to bear the costs if it wins. However, the Rules are such that Microsoft under the Rules is indeed fully entitled to a security of costs, because if Suinno cannot afford granting such security, it should have asked for legal aid before starting the litigation (R. 374 RoP et seq.).

Full Decision Text

Order of the Court of Appeal of the Unified Patent Court issued on 12 July 2025 R 220.2 RoP Appeal on security for costs KEYWORDS Security for costs (R 158 RoP) APPELLANT (DEFENDANT IN THE R 158 RoP APPLICATION AND CLAIMANT IN THE MAIN INFRINGEMENT ACTION BEFORE THE COURT OF FIRST INSTANCE) Suinno Mobile & Al Technologies Licensing Oy, Helsinki, Finland (hereafter "Suinno") represented by Petri Eskola, attorney-at-law, Backström & Co, RESPONDENT (APPLICANT IN THE R 158 RoP APPLICATION AND DEFENDANT IN THE MAIN INFRINGEMENT ACTION BEFORE THE COURT OF FIRST INSTANCE) Microsoft Corporation, Redmond, Washington, USA (hereafter "Microsoft") represented by Prof. Dr. Tilmann Müller-Stoy and Nadine Westermeyer, attorneys-at-law, Bardehle Pagenberg, Partnerschaft mbB Patentanwälte Rechtsanwälte. PATENT AT ISSUE EP 2 671 173 DECIDING JUDGES Panel la Klaus Grabinski, Presiding judge Peter Blok, Legally qualified judge Emmanuel Gougd, Legally qualified judge and judge-rapporteur LANGUAGE OF THE PROCEEDINGS 1 English IMPUGNED ORDER OF THE COURT OF FIRST INSTANCE Order of the Court of First Instance of the Unified Patent Court, Central Division, Paris Seat, dated 27 September 2024 Numbers attributed by the Court of First Instance: UPC_CFI_164/2024 App_42517/2024 ACT_18406/2024 ORD _45914/2024 DATE OF THE HEARING 17 June 2025 FACTS AND REQUESTS OF THE PARTIES 1. On 9 April 2024, Suinno filed an infringement action against Microsoft before the Paris Seat of the Central Division (hereafter the "Central Division") (ACT_18406/2024_UPC_CFl_164/2024). Request for Security for costs and CFI Order 2. On 25 July 2024, Microsoft filed a request for security for costs pursuant to Art. 69 UPCA and R. 158 RoP in parallel to its Statement of defence and its Counterclaim for revocation of the patent at issue, requesting that Suinno be ordered to provide security for the legal costs and other expenses in the amount of at least € 800,000, alternatively of € 600,000. 3. On 27 September 2024, the Central Division ordered Suinno to provide a security for costs to Microsoft in the amount of € 300,000 (ORD_45914/2024, hereafter "the impugned order"). 4. The Central Division considered that it is credible that Suinno's financial situation gives rise to a legitimate and real concern that a possible order for costs may not be recoverable. Considering that Suinno failed to provide further information an the availability of further assets to comply with a possible cost order, it may be assumed, according to the CFI, that Suinno does not have financial resources to cover a possible order for reim bursement of legal costs. 5. On the basis of the value of the case, which it determined at € 4,950,000, the Central Division decided that the ceiling for recoverable costs was to be set at € 600,000, and that, considering the remaining uncertainties and difficulties in relation to the future course of the proceedings and the complexity of the procedural activities, it was reasonable to set an amount of the security equal to 50% of the ceiling, that is € 300,000. R. 263 application for leave to change the claim 6. On 10 October 2024, Suinno filed an application for leave to amend the case, pursuant to R. 263 RoP, regarding the value of the case to be set at€ 2 million instead of the initial €5 to 6 million estimated by Suinno in its Statement of Claim. Suinno argued that this estimation was more accurate than the 2 one on which the request in the statement of claim was based. 7. The Central Division granted Suinno leave to change the claim reducing the request for da mages to € 2 million. lt rejected Suinno's request to reconsider the fees already paid to the Court (Order of 26 November 2024, ORD_62739/2024, ACT_18406/2024 UPC_CFI_164/2024 APP 55394/2024) and considered that the subject-matter of the application is the grant of the leave for a change of the claim and not for the amendment of the value of the proceedings. Appeal 8. The Central Division granted leave to appeal the impugned order (Order of 10 October 2024, O R D 55642/2024). 9. Suinno lodged an appeal againstthe impugned order, requesting that the amount of the security for costs be reduced from € 300,000 to € 100,000. 10. Suinno argues inter alia that the security for costs is "not commensurate with the real work it takes to communicate non-infringement or lack of validity to the Court", that "all risk is borne by the Claimant", that the value of the case has actually been amended to € 2 million following its application filed under R. 263 RoP and that a security for costs in the amount of € 100,000 is consistent with other security for costs already granted in the UPC. 11. Microsoft requests the Court of Appeal to dismiss the appeal and to order Suinno to bear the costs of the appeal proceedings. 12. According to Microsoft, a security for costs serves to protect the position and rights of the defendant who did not choose to initiatethe main proceedings and that factors to be considered when ordering a security primarily include the financial position of the claimant. lt further emphasizes that Suinno has not provided, neither in first instance nor in the appeal, any evidence regarding its financial position and that the amount of the security set in the impugned order is consistent with other UPC order already granted on security for costs. Parallel proceedings 13. Because of parallel appeal proceedings (APL_53716/2024 UPC_ CoA_563/2024) concerning the validity of the representation of Suinno in a R. 262A application related to the infringement action (ACT_18406/2024_UPC_CFI_164/2024), Suinno requested that the present appeal on security for costs (APL_55849/2024) be decided once the appeal on the issue of representation (APL_53716/2024) had been decided. 14. On 11 February 2025, the Court of Appeal decided that Suinno was not validly represented (O R D_68946/2024 in APL_53716/2024_U PC_ CoA_563/2024). 15. Following the change of representative of Suinno as of 26 March 2025 in the present appeal proceedings (APL_55849/2024), Suinno's representative was requested to ratify the Statement of appeal and the Statement of Grounds of appeal filed on 11 October 2025, which it did, together with additional non-solicited observations filed on 8 May 2025 by which, "as a sidenote", it requested 3 the court to "considerably lower" the amount of the security for cost down to € 0 (App_55394/2024). 16. At the oral hearing, Suinno argued that ordering it to provide a security for costs in the amount of € 300,000 or € 100.000 would deprive it from access to justice, would be contrary to the legitimate interests of all parties (Art. 41(3) UPCA), would deny the right to an effective remedy and to a fair trial as provided for under Art. 47 of the Charter of Fundamental Rights of the European Union and would distort competition (Art. 42(2) UPCA). GROUNDS 17. The appeal is admissible but shall be rejected. 18. This appeal is about the amount of the security for costs that Suinno has been ordered to pay. lt is not about whether or not Suinno should have been ordered to pay a security for costs. 19. Art. 69(4) UPCA provides that, at the request of the defendant, the Court may order the applicant to provide adequate security for the legal costs and other expenses incurred by the defendant which the applicant may be liable to bear. 20. Under R. 158.1 RoP, at any time during proceedings, following a reasoned request by one party, the Court may order the other party to provide, within a specified time period, adequate security for the legal costs and other expenses incurred and/or to be incurred by the requesting party, which the other party may be liable to bear. 21. 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, however, 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 (CoA order of 17 September 2024, UPC_CoA_218/2024 APL_25922/2024, UPC_CoA_220/2024 APL_25924/2024, UPC_CoA_222/2024 APL_ 25928/2024, Volkswagen vs Network System Technologies). 22. Given that the Court of First Instance has a margin of discretion when deciding on a request for security for costs, the review by the Court of Appeal is limited (CoA Order of 17 September 2024, CoA_217/2024 APL_25919/2024, Audi AG v Network System Technologies, para. 8 and 9). 23. When setting the amount of the security for costs, the Central Division referred to the value of the case, as set out at the time by Suinno (€ 5 to 6 million) and, pursuant to the UPC Guidelines for the determination of the court fees and the ceiling of recoverable costs of 24 April 2023 (hereafter the "Guidelines") and the Scale of ceilings for recoverable costs adopted by the Administrative Com m ittee on 24 April 2023, set the ceilings for recoverable costs at € 600,000. Pursuant to Article 1 of the Guidelines on the determination of the value of the injunction claim and of the da mage claim, considering the circumstances of the case and all available information on the parties, the Central Division has not exceeded the boundaries of its discretion in setting the amount of the security equa I to 50% of the ceiling, meaning at € 300,000. 24. In the light of these considerations, Suinno's argument that the security for costs is "not 4 commensurate with the real work it takes to communicate non-infringement or lack of validity to the Court" is not sufficiently substantiated. Its argument that a security for costs in the amount of € 100,000 is consistent with other security for costs already granted in the UPC do not give more reason to decrease the amount of the security for costs either, as it does not address the amount of legal costs and other expenses to be incurred by Microsoft in this particular case. The assertion that "all risk is borne by the Claimant" is not relevant to determination of the amount of security and is incorrect, given that it is credible that Suinno's financial situation gives rise to a legitimate and real concern that a possible order for costs may not be recoverable. 25. The fact that Suinno filed an application for leave to amend the case and to limit the damage claim to € 2 million and that the Central Division granted Suinno leave to reduce the request respectively does not change this finding either. 26. As rightly pointed out by the Central Division, which rejected Suinno's request to reduce the fees already paid to the Court, a change of the claim with a limitation of the damage claim has to be distinguished from an amendment of the value of the proceedings (Order of 26 November 2024, ORD_62739/2024, ACT_18406/2024 UPC_CFI_164/2024 APP 55394/2024) as Suinno is also asserting further claims with its action for infringement, such as a claim for injunctive relief. 27. Also the fact that the Central Division decided that the value of the proceedings for the purpose of applying the scale of ceilings for recoverable costs is set at € 13 million with regard to the infringement action speaks against a reduction of the security as required by Suinno (order of 21 April 2025, ORD_69248/2024, ACT_18406/2024 UPC_CFl_164/2024). 28. The new arguments raised by Suinno an 8 May 2025 in its Reply to a procedural order as well as during the oral hearing referred a bove under para. 16 shall be disregarded and declared inadmissible pursuant R. 233.3 RoP following which grounds of appeal which are not raised within the period specified for the Statement of grounds of appeal in R. 224.2 RoP shall not be admissible. 29. Suinno failed to provide any justification for not meeting the time limit. The Court of Appeal shall thus disregard the request filed by Suinno as a "side note", in its response to a procedural order relating to the appointment of Suinno's representative, that "the considerably lowered sum for the Security is now 0 €". 30. The same applies to the arguments raised by Suinno for the first time during the oral hearing. 31. Regardless of the inadmissibility of these arguments, Suinno has not demonstrated that the security for costs ordered by the Local Division would amount to an actual barrier to access to justice or a limitation of its fundamental right to an effective remedy and a fair trial. 32. Even assuming that the impugned order constitutes a limitation of Suinno's rights, such limitation must be deemed necessary to protect the rights of Microsoft, in the light of Microsoft's legitimate and real concern that a possible order for costs may not be recoverable. Suinno failed to submit

Key Holdings

• Security for costs order (€300k) upheld.
• CFI discretion respected.
• Reduction in damages claim did not mandate reduction in security.
• New arguments in side letter/oral hearing rejected as late.

Tags

• Discretion
• Late Submissions
• Legal Representation
• Security for Costs

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