The Hague - local division

UPC_CFI_455/2024 App_52709/2024 ORDER

of the Court of First Instance of the Unified Patent Court delivered on 17 December 2024 regarding R. 158

APPLICANT/S

1. MAARS HOLDING B.V.

• Newtonweg 1 - 3846 BJ - Harderwijk,

Gelderland - NL

Represented by Martin Luten

2. MAARS PARTITIONING SYSTEMS B.V. -

Newtonweg 1 - 3846 BJ - Harderwijk, Gelderland - NL

Represented by Michiel Rijsdijk

3. MAARS PROJECTEN B.V. Gelderland - NL

• Newtonweg 1 - 3846 BJ - Harderwijk,

Represented by Michiel Rijsdijk

4. MAARS FRANCE

95 Rue La Boetie - 75008 - Paris -FR

Applicants 1 to 4 are defendants in the infringement action and claimants in de counterclaim action

Represented by Michiel Rijsdijk

RESPONDENT/S

CITY GLASS AND GLAZING PRIVATE LIMITED Vii/423 (v/258), Paravur Kavala, Thottakattukara, Aluva West - 683108 - Kerala - IN

Claimant in the infringement action, defendant in the counterclaim action

Represented by Joel Coles

PATENT AT ISSUE

DECIDING JUDGES

The judge-rapporteur referred the decision on this application to the panel (R. 331.2 Rules of Procedure, 'RoP'), which is composed as follows:

Presiding judge: Brinkman Legally qualified judge: Johansson Judge-rapporteur: Kokke

LANGUAGE OF PROCEEDINGS: English

BACKGROUND AND SUBJECT-MATTER OF THE APPLICATION

• 1. Applicants 1 to 4 (hereinafter collectively Maars) are defendants in an infringement action filed by the patentee as claimant in the main proceedings (hereinafter City Glass). Maars filed a counterclaim for revocation after filing this application.
• 2. With the present application (the 'Security Application') , Maars requests that the Court order City Glass to provide Maars security for the legal costs and other expenses incurred and/or to be incurred by Maars in first instance in the amount of at least EUR 49,000 or another amount the Court considers justified, by way of deposit on the UPC account dedicated for security deposits, within a time period to be specified by the Court, in any event in due time prior to the oral hearing, pursuant to Article 69(4) UPCA and Rule 158.1 RoP. Maars also requests leave for interim appeal to ensure consistent application and interpretation of the RoP.
• 3. Maars thus requests the Court to order City Glass to provide security for legal costs of its legal representation (including court fees). Maars argues that it has serious concern about the recovery of a possible cost order in its favour and the enforceability of such possible cost order:
• (i) because of City Glass' financial situation and
• (ii) because City Glass is based in India
• 4. City Glass was invited to comment in accordance with R.158.2 RoP, which it did, requesting that the court dismiss the Security Application. It argued, among other things, that it qualifies as a 'small or medium enterprise' (' SME ) with limited financial capacity. The granting of the request ' would limit its access to justice and would unduly interfere with its right to an effective remedy

contrary to Article 47 of the Charter of Fundamental Rights of the European Union. Granting 1 security would also be contrary to one of the objectives of the creation of the UPC to facilitate the enforcement of patent rights for SMEs, which is enshrined in the second recital of the UPC Agreement:

' CONSIDERING that the fragmented market for patents and the significant variations between national court systems are detrimental for innovation, in particular for small and medium-sized enterprises which have difficulties to enforce their patents and to defend themselves against unfounded claims and claims relating to patents which should be revoked;'.

• 5. Should the Court decide order security, City Glass requests that:
• 1. the amount of security be limited to no more than €19,000 . -
• 2. City Glass can select the type of security (bank deposit or bank guarantee); and
• 3. City Glass be permitted a time period of six weeks to provide security.

GROUNDS FOR THE ORDER

• 6. The Panel considers the Security Application admissible and justified to the extent laid out in this order.

Legal framework

• 7. The unsuccessful party in proceedings before the UPC shall as a rule bear the reasonable and proportionate legal costs and other expenses incurred by the successful party up to a ceiling set in accordance with the RoP (art. 69.1 UPCA). At the request of the defendant the Court may order the claimant(s) at any time during 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 (art. 69.4 UPCA and R.158.1 RoP). 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; this follows from ' in particular ' in Article 69(4) UPCA).
• 8. The decision to order security for legal costs is at the discretion of the Court (art. 69.4 UPCA and Rule 158.1 RoP '…the Court may order…'). In exercising its discretion under Article 69.4 UPCA and Rule 158.1 RoP, the Court must consider the relevant legal framework including European Union law, must take into account the principle of proportionality and balance the interests of the parties, thereby weighing the relevant facts and circumstances of the case.
• 9. Imposing a security for legal costs serves to protect the position and (potential) rights of a defendant, who did not choose to initiate the main proceedings. Protecting the defendant must be balanced against the right of the claimant to enforce its patent right and the burden for the claimant caused by an order to provide security. National rules on the provision of security for costs have been assessed several times by the Court of Justice of the European Union and held compatible with EU law provided they do not discriminate in relation to nationals of other

1 Chapter VI, Article 47, Charter of Fundamental Rights of the European Union.

Member States and that the litigant is not denied the opportunity to present its case effectively before the court , as confirmed by the Court of Appeal of the UPC. 2 3

• 10. An order to provide security can in certain circumstances, limit the claimant's opportunity to present its case effectively before a court and hence its access to justice. The security must not be an unjustified interference with the claimant's right to an effective remedy and to a fair hearing as guaranteed in European Union law, including art. 47 of the Charter and the 4 Enforcement Directive. 5 Any limitation on the right to an effective remedy before a tribunal within the meaning of art. 47 of the Charter must, according to art. 52.1 of the Charter, be provided for by law and respect the essence of that right. Furthermore, subject to the principle of proportionality, limitations on this right may be made only if they are necessary and genuinely meet objectives of general interest recognised by the European Union ('EU') or the need to protect the rights and freedoms of others. Furthermore, the Enforcement Directive, which 6 purpose is to ensure a high level of protection for IP-right holders, provides in art. 14 concerning legal costs, that these shall be borne by the unsuccessful party ' unless equity does not allow this '.
• 11. An important consideration for the granting of security is the enforceability and recoverability of an eventual cost order. If an eventual cost order is directly enforceable after it is granted, and there seem to be enough funds/assets for it to be readily recoverable, it is generally not necessary to grant security at the start of or during proceedings.

Considerations

• 12. City Glass is established in India, where the enforcement of orders and decisions by the UPC is not straightforward. In this case, imposing security for costs of Maars is hence justified because of the risk that a possible cost order in favour of Maars will not be readily enforceable. This is in line with the situation decided by the CD Munich where a security for costs was granted, on 7 which Maars relies. In that case the relevant claimant was domiciled outside the EU as well and no treaties regarding the execution of judgments was in place.
• 13. In addition, based on the (financial) information provided by Maars, which was not disputed , it 8 is credible that City Glass' financial situation gives rise to a legitimate concern that a possible order for costs may not be recoverable, if enforceable.
• 14. City Glass argues that the granting of security should be rejected in this case in spite of the above, because the granting thereof would put such a strain on its cash flow and operations, that it would effectively limit C ity Glass' access to justice and would unduly interfere with its right to an effective remedy, preventing it from taking action against Maars at the UPC for patent infringement. Even if City Glass (undisputedly) qualifies as a small enterprise as is also apparent

2 see for example judgment of 7 April 2011 in C-291/09 Francesco Guarnieri & Cie, ECLI:EU:C:2011:217, para 19, and judgment of 22 December 2010 in C279/09 DEB, ECLI:EU:C:2010:811, paras 45-47 and 61

3 UPC Court of Appeal 26 August 2024 UPC_CoA_328/2024 APL_36389/2024 App_45255/2024 (Ballinno/Kinexon)

4 Article 47 of the Charter of Fundamental Rights of the European Union (the Charter), also referred to in the preamble of the UPCA

5 Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights

6 See the judgments of the Court of Justice of 15 September 2016, Joined Cases C-439/14 and C-488/14 ECLI:EU:C:2016:688, par. 49 and of 4 May 2016, C 477/14, EU:C:2016:324, par. 160 -

7 UPC Central Division (Section Munich), Order in UPC_CFI_252/2023, 30 October 2023

8 UPC Court of Appeal, 17 September 2024, UPC_CoA_218/2024 APL_25922/2024, UPC_CoA_220/2024 APL_25924/2024 and UPC_CoA_222/2024 APL_25928/2024 (Volkswagen/NST)

from the fact that it is entitled to payment of a reduced court fee of EUR 6,600. - in the infringement proceedings, this argument is dismissed.

• 15. The court finds that the balance of interest to grant security tips in Maars' favour in this case. The access to justice-argument is insufficient to prevent the granting of the Security Application in the present factual situation. City Glass has not substantiated its contention that it is effectively prevented from pursuing its patent infringement action even when a limited security is granted, as it argued alternatively. Furthermore, the fact that City Glass is based in India, results in a real risk of enforceability of a possible cost order as well as a risk of recovering such costs as -even apart from its financial situation - City Glass has no assets in the EU. This sets the present case apart from the factual situation in the case at hand at the LD The Hague on which 9 City Glass relies, wherein security requested from a claimant based in the Netherlands was rejected.
• 16. The above warrants the granting of a security in Maars' favour. City Glass ' right of access to justice is however a reason to limit the amount of the security, as discussed below.
• 17. Maars requests a security of 'at least' EUR 49,000.-. This amount is based on the ceiling for recoverable costs 10 of EUR 38,000. - (corresponding to a value of the proceedings of EUR250,000.- as proposed by City Glass and not contested by Maars) plus the regular court fee for an infringement action of EUR 11,000.-. In the infringement action, however, there is no court fee for Maars. It is not considered justified to take into account the court fee to be paid in the counterclaim as well, as this is not a proceeding initiated by City Glass. Taking into account the facts of this case, in particular the fact that the amount set should not prevent City Glass from continuing its case and pursuing its patent right, the amount of the security to be provided is determined at EUR 19,000. - which is 50% of the ceiling for recoverable costs.
• 18. In the absence of any suggested time frame in the Security Application (apart from 'before the Oral Hearing'), City Glass is given six weeks to comply with the order as requested in its reply. Pursuant to R. 158.4, City Glass is informed that a decision by default may be given in case security is not provided within this time limit.
• 19. According to R. 158.1 RoP, it is at the court 's discretion to decide whether the security is to be provided by deposit or by bank guarantee. The local division shall exercise the discretion thus granted to the effect that the security is to be provided by deposit, as requested by Maars. This relieves the parties and the court of the need to discuss which bank is suitable as guarantor and which guarantee conditions appear sufficient to fulfil the purpose of the security.
• 20. This order may be appealed together with the final decision (Art. 73(2)(b) UPCA, R.220.2, R.224.1(b) RoP). The requested leave for interim appeal is dismissed as the court does not consider this necessary to ensure consistency of interpretation of the RoP in view of the guidance already available.

9 UPC Local Division The Hague 13 February 2024, UPC_CFI_239/2023, App_586761/2023 10 As specified in the Decision of the Administrative Committee of 24 April 2023 on the scale of recoverable cost ceilings

ORDER

On these grounds, having heard the parties on all aspects of relevance:

• 1. City Glass is ordered to provide Maars with security for the legal costs and other expenses incurred and/or to be incurred by Maars in first instance in the amount of EUR 19,000. -
• 2. The amount is to be deposited on the dedicated UPC account on or before 29 January 2025, instructions for which can be found on the UPC website at https://www.unifiedpatent-court.org/en/court/payments (point 3, ' For a deposit of security for costs' )
• 3. The requested leave for interim appeal is dismissed.

DETAILS OF THE ORDER

App_52709/2024 in

UPC case number: UPC_CFI_455/2023 CMS no: ACT_44624/2024 (claim) and CC_60624/2024 (counterclaim, UPC_CFI_684/2024)

Issued on 17 December 2024