Show notes

Click to visit our special UPC page. Click to read the rules on Court fees and recoverable costs Stefan, I think the costs at the Unified Patent Court, that is the UPC, is an essential topic for our clients, so let's jump right into it.

Thank you, Jan. I fully agree that costs are an important topic with many interesting aspects. And of course whenever we talk about costs, a lot of numbers are involved. However, we will try to avoid just reading out numbers today, because you can just take them from the Rules and Guidelines on Costs which are published on the UPC website. We will put the link in the show notes for you. In our podcast today, we want to focus on higher-level issues that we consider important, particularly in comparison with German national patent actions. The UPC provides many advantages for patent owners, particularly the option to enforce patents over multiple European countries by one infringement action. Apart from the legal aspects, financial considerations will be very important for plaintiffs when it comes to the decision where to assert their respective patents During the transitional period, owners of European Patents have the choice whether to assert their patents at the UPC or at national courts. This was not lost on the creators of the UPC, which is why they consciously decided on rather low court fees and rather high ceilings for the recoverable costs for the representatives of the successful party, at least compared to the statutory fees according to the national litigation in Germany. Both make the UPC a very attractive venue for patent infringement actions as we will explain here today in more detail. Jan, before we look at the court fees and the recoverable costs, we need to look at the issue of the value of actions at the UPC, because at the UPC – like in German national proceedings – the recoverable costs and at least some of the court fees are determined based on the value of the respective action.

You are absolutely right, Stefan, so let's take a look at the determination of the value of actions at the UPC. As you already mentioned, the UPC has published their so-called "guidelines for court fees and recoverable costs" on their website. These guidelines also contain suggested approaches for the calculation of the value of the available actions. For infringement actions, the value should generally be based on a royalty calculation, so similar to the license analogy we know in Germany. The same determination applies for the value of actions for non-infringement and for compensation for license. And for applications for interim relief, the value should be 2/3 of the value of a main infringement action. One interesting question here is the impact of multiple patents and/or multiple defendants on the value of an action. Here, the guidelines provide that the value should be determined based on a combined license for all patents and for all defendants.

What about third-party interveners, are they also considered?

That's a very good question, Stefan, and one that is not answered in the guidelines because they do not mention interveners. When we look at Rule 315 (4) of the Rules of Procedure, interveners are generally treated as a party, so one could argue that they must be considered in the determination of the value of an action once they join the action. The counter-argument would be that the intervener is not affected by an adverse judgment and thus their involvement does not increase the value of the action. Also, when we use potential royalties as the basis for the calculation, usually either the main party or the intervener needs to take a license and thus the royalty does not increase with the involvement of an intervener. So, this is certainly an open issue that needs to be decided by the UPC divisions. Back to the value of infringement actions. Stefan, in Germany we usually see litigation values in the range of € 50.000 to 2 million in patent infringement actions. What would be your expectation for infringement actions at the UPC?

That's certainly hard to predict, but I assume that arguably higher litigation values will apply due to the larger territorial scope of the UPC. Do you agree?

Yes, I agree, exactly for this reason. So that's infringement, now let 's look at invalidity. In German nullity actions, the Federal Patent Court typically applies a value of 125% of the value of the parallel infringement action relating to the same patent. At the UPC, the value of a counterclaim for revocation can be up to 150% of the value of the infringement action. So, for example an infringement action with a value of 1 million Euro results in a value of the counterclaim for revocation of up to 1,5 million Euro and thus an overall value of the proceedings of 2.5 million Euro. For an independent revocation action, the value should be the value of the patent, which may be determined based on an appropriate license fee for the remaining lifetime of the attacked patent. What's important to understand here is that the value of the invalidity actions at the UPC is only relevant for the recoverable costs, not for the court fees, because the court fees are fixed. Stefan, this is a nice segue to our first main topic: the court fees at the UPC.

As you just mentioned Jan, court fees are fixed for invalidity actions at the UPC, namely for revocation actions and counterclaims for revocation. Revocation actions are subject to a court fee of € 20k, whereas for counterclaims for revocation the same fee as in the infringement action applies, but limited to € 20k. Moreover, a fixed court fee of € 11k is payable for applications for provisional measures. In contrast, the court fee for infringement actions, DNI actions and actions for damages is being calculated on the basis of a combination of a fixed fee plus an additional value-based fee for values in action exceeding € 500k. For example, based on a value of action of € 1 mio the plaintiff of an infringement action would have to advance court fees in the amount of € 15k. comprising a fixed fee of € 11k plus a value-based fee of € 4k. This will be discussed in more detail in the last part of this episode. Notably, the court fees for the second instance are similar to the first instance which is another difference compared to the national scheme in Germany where the court fees for the second instance are higher than in the first instance. Jan, according to the German cost scheme the court fee will be reduced particularly if courts are being relieved. Are there any similar reductions for actions before the UPC?

Yes, indeed. A reduction applies if the action is withdrawn or settled before the conclusion of the oral hearing. The level of the reduction depends on the stage of the withdrawal or settlement. For example, the court fee is reduced by 60% if the litigation is terminated before the conclusion of the written procedure, by 40% in case of a termination before the conclusion of the interim procedure, and by 20% if the litigation is terminated after the interim procedure but before the conclusion of the oral hearing. Finally, you should be aware that a reduction of court fees by 40% may apply for SMEs if the entity can prove that the requirements for an SME are fulfilled.

Jan, we have now talked about court fees for actions before the UPC. What about recoverable fees for attorneys at the UPC? Are there similar reimbursement regulations to the system in Germany, namely that only statutory fees – based on the respective value of action – are recoverable?

No Stefan, that is actually different. At the UPC, the "winner" can claim reimbursement of their actual costs, not only some statutory fees as in Germany. However, reimbursement of the actual costs can only be claimed up to a certain cap which is once again determined based on the value of the action. This cap is a fixed amount, irrespective of the number of parties or interveners involved on the other side. Multiple parties do increase the reimbursable costs by causing a higher value of the action and thus a higher cap for the reimbursable costs, but it's not like in German proceedings where the winner has individual cost reimbursement claims against the different parties on the other side. I was wondering, Stefan, do we know how it will work if there are multiple "losing" parties and the "winning" party requests full cost reimbursement only from one of the losing parties?

I was wondering the same thing, Jan, and so far I do not have a satisfying answer. Maybe this will become something that multiple parties acting on the same side should contractually agree upon at the beginning of a case, for example in a joint defense agreement.

When it comes to reimbursable costs, one very interesting option for the courts at the UPC and something we do not know from German proceedings is that the court can ask the parties to estimate their costs early in the proceedings. This is Rule 118.5 of the Rules of Procedure. This is interesting because it forces the parties to estimate their costs at a point in time where the outcome of the case is entirely open, and may therefore lead to very realistic estimates. Stefan, we have now talked more abstractly about the two cost aspects at the UPC, namely court fees and recoverable costs, and we saw that they are clear differences to the cost scheme in German proceedings. I think for our listeners it would be very interesting to see how these differences are reflected in specific numbers. I know we promised at the beginning that we will not read you a lot of numbers, but I think a short overview comparing the fees and costs of an infringement action at the UPC and those at a German national infringement ac tion would nicely illustrate the differences.

Yes sure, I have prepared a respective comparison for two different values of actions, namely € 1 mio and € 10 mio. First of all, we will look at the court fees. Based on a value in dispute of € 1 Mio. for a national infringement action in Germany the plaintiff of a national infringement action in Germany has to pay court fees in the amount of approx. € 18k. Assuming that the defendant will then file a nullity action with the Federal Patent Court resulting in a value of dispute of € 1.25 mio. the defendant would have to pay court fees for the nullity action of € 31 k so that the court fees total to approx. € 49 k. By contrast, at the UPC only €15k for the infringement action and € 15k for the counterclaim for revocation are due, totaling to € 30k for court fees which are 40% less than the national court fees in Germany. This difference becomes even larger if a value in dispute of € 10 mio is taken into account. Here, the total national court fees in Germany amount to approx. € 356k divided into approx. €125 for the infringement action and approx. € 231k for the nullity action. By contrast the court fees for the UPC only amount to a total of € 96, divided into € 76k for the infringement action and the fixed fee of only € 20k for the counterclaim for revocation. Thus, the court fees for the UPC are almost only ¼ of the national court fees in Germany. Now, we will look at the recoverable attorney's fees. Based on a value in dispute of € 1 Mio. for a national infringement action in Germany the statutory fees for attorneys – which are subject to reimbursement - amount plaintiff to approx. € 56k for the first instance for both, infringement and nullity proceedings divided into € 26k for the infringement and € 30k for the nullity action. By contrast, at the UPC actual costs of the attorneys are recoverable up to € 400k which is more than seven times higher than the reimbursement according to the national cost scheme in Germany. This difference – at least looking to absolute figures – becomes even larger if a value in dispute of € 10 mio. is taken into account. Here, the total national recoverable attorney's fees in Germany amount to approx. € 390k whereas the recoverable attorney's fees at the UPC cover the actual costs up to € 1.2 mio. Thus, the cap of the recoverable costs at the UPC exceeds the national recoverable costs in Germany by more than € 800k. In summary, the court fees at the UPC are significantly lower than at the German national courts whereas the recoverable costs at the UPC are significantly higher than at the national courts in Germany. Thus, the winning party may expect – unlike the national actions in Germany – a full or at least largely reimbursement of their costs even with only low values of actions. For the patentee, this means that asserting a weak patent may lead to a significant increase of the cost risk due to the considerable caps for recoverable costs.

But at the same time, if you have a strong patent, the lower court fees and higher recoverable costs might be additional reasons for asserting such patents at the UPC.

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