Plant-e Knowledge B.V. & Plant-e B.V v. Arkyne Technologies S.L. (UPC_CFI_239/2023)

Order delivered on 13 February 2024 (ORD_586897/2023)

Background

The proceedings in this case are an infringement action between Plant-e Knowledge B.V. and its licensee Plant-e B.V (together referred to as “Plant-e”) as claimants, and Arkyne Technologies S.L. (referred as “Bioo”) as the defendant. Bioo has counterclaimed for revocation. Bioo also filed an application requesting that the Court order Plant-e to provide security for the legal costs of Bioo (including court fees), which the Court ultimately rejected. This case is interesting as it demonstrates the approach of the UPC in applying the provisions relating to security for costs on SMEs and startups.

Relevant provisions

The Court interpreted Article 69(4) of the Agreement on a Unified Patent Court (“UPCA”) and Rule 158.1 of the Rules of Procedure of the Unified Patent Court (“RoP”) together to mean that: “At the request of the defendant the Court may order the claimant(s) at any time during the proceedings to provide security for such legal costs and other expenses incurred and/or to be incurred by the defendant, which the other party may be liable to bear… An order to provide security is, according to Art. 69.4 UPCA, especially relevant in the cases referred to in Articles 59 to 62 UPCA, but not limited to those cases.” Articles 59 to 62 relate, for example, to orders for preservation of evidence and provisional measures; revocation actions come under article 65.

The Court further notes that the decision whether to order security is at its discretion, and that in exercising that discretion it must “consider the procedural framework, weigh up the relevant facts and circumstances and take into account the principle of proportionality”. It further notes that Article 24 of the UPCA provides: “When hearing a case, the Court shall base its decision on Union law and, among other sources of law, national law.”

Consideration

The grounds that the Court has considered in dismissing Bioo’s application are explored below.

Direct Enforcement of a UPC judgement

The Court noted that the main rationale for an order for security for costs is to secure the enforceability of a cost order, therefore, if such an order is directly enforceable after it is granted, this can serve as grounds not to make an order for security of costs.

In this case, as both Plant-e parties are established and located in the Netherlands, which is a Member State of the EU where the decisions of the UPC can be directly enforceable, a security for costs order will hence not be justified. The Court contrasts the facts of this case with the facts in NanoString Technologies Europe Limited v President and Fellows of Harvard College (UPC_CFI_252/2023), reported here, the case which Bioo relies on; the relevant claimant in NanoString was established outside the EU and there was no treaty regarding the execution of judgments of the UPC in place.

Material Unenforceability and access to justice for SMEs

The Court found that as a general rule, an order for security of costs based solely on expected material unenforceability should be awarded in exceptional circumstances only. The Court reasons that if this is not the case, SMEs may be severely hampered to enforce their patent rights in the UPC if they had to bear their own legal costs and provide security for the defendant; therefore, requiring a claimant to pay a security may be in conflict with the high level of protection for IP Rights holders envisaged by the Enforcement Directive.

Applying these findings to the facts of the case, the court first rejected Bioo’s argument that there is a risk of material unenforceability because of the financial position of Plant-e which warrants an order for security. There was a dispute as to whether Plant-e will be able to pay a cost order on which both parties submitted evidence. However, the Court did not analyse much of that due to its findings above and the fact that the parties agreed that the Claimant has limited financial capacity. Ultimately, the Court found that in the present situation where there are two competing SMEs with limited finances, an order for security for costs can be a serious impediment to the enforcement of a claimant’s rights.

The Court noted also that one of the stated objectives of the UPCA is to facilitate the enforcement of patent rights by SMEs.

Dutch National Law

Lastly, the Court also took into account Dutch National procedural law, which makes it impossible for an order for security of costs be made against a claimant domiciled in the Netherlands under any circumstances, even if there is a good reason to doubt the claimant’s ability to pay a cost order. The Court states that the UPC would distinguish itself from several national courts if an order for security of costs was granted to a party resident in the EU.

Conclusion

Taking all these factors into account, the court rejected Bioo’s application for an order for security for costs.

Comment

Apart from the Nanostring case mentioned above, there have been two cases at the UPC where security of costs has been considered and in each case rejected (reported here and here). The current case law trend suggests that an order for security of costs will not be easily made.

The key takeaway points for this case is that the Court will look at the availability of enforcement of a UPC judgment when deciding whether to make an order for security for costs. In this case, as both Plant-e companies were domiciled in the Netherlands, the Court found against making the order as the UPC judgment would be directly enforceable. Furthermore, the Court has ruled that an order for security for costs solely due to risk of material unenforceability should only be awarded in exceptional circumstance. This is even more so for SMEs, where the risk of denying access to justice was given particular consideration. The UPC will also take national law into account and has shown reluctance in distinguishing from national law.

This may be the first case where the UPC considers security for costs in the context of SMEs. It is interesting to see that the Court comments little on the Claimant’s ability to pay a cost order; this suggests that the UPC place little weight on the financial situation of an SME claimant as long as they are domiciled in the EU. Permission to appeal has been granted, so the Court of Appeal may be invited to consider this matter.

Written by Eugene Chan