The Unified Patent Court (UPC)

Catherine M. Jewell | June 2016

As part of our series on the new European Unitary Patent Package, in this article we examine what is known so far about costs considerations with respect to the Unified Patent Court.  For a general introduction to the Unitary Patent Package see our earlier summary of the system here

Costs of Litigating

Litigation costs can be divided generally into official fees, e.g. court fees, and the costs of representation, e.g. attorney fees.  Damages or other financial costs for which a claimant may become liable as a result of losing a case are not dealt with in this article.  Here we consider what is known so far about court fees and recoverable costs for representation in respect of the UPC.

Unified Patent Court Fees

Court fees at the UPC will be made up of a fixed-fee and an additional value-based fee, applicable to higher value infringement claims or counterclaims (exceeding €500,000), as summarised in Table 1.

Type of Action

Court Fee

Interim Applications e.g. interim injunction, search & seizure order etc.

€11,000

Infringement

€11,000 + value-based fee

Revocation

€20,000

Counterclaim for Revocation

€11,000 + value-based fee

– but CAPPED at €20,000

Counterclaim for Infringement

€11,000 + value-based fee

Action for Declaration of Non-infringement

€11,000 + value-based fee

Action for Compensation for License of Right

€11,000 + value-based fee

Application to Determine Damages

€3,000 + value-based fee

Appeal pursuant to an Infringement

€11,000 + value-based fee

 

Table 1: Summary of selected UPC Court Fees

As can be seen from table 1, fees for damages determination and substantive appeals largely follow the same approach as for the main proceedings, but applications or counterclaims for revocation and applications for provisional measures have only a fixed fee.

Having a fixed fee for a revocation action and a capped fee for a counterclaim for revocation avoids the possibility of very large court fees applying to what might be a defendant’s primary or only defence – invalidity.  For non-patent proprietors, evidently this is a positive point.

It is also worth noting that for multi-party or multi-patent actions only one set of fees should apply, which is a positive point for claimants. 

At present there is no fee for “opting-out” of the UPC in respect of “classical” European patents, which is also significant.  For more information on “opt-out” see our earlier summary article.

Value-based fees

The UPC is intended eventually to become self-funding and thus, in addition to fixed fees, it will have value-based fees for certain actions, as mentioned in table 1 above.  The value-based fee is determined according to a scale, and depends upon the value of the action. 

Value-based fees apply for actions having a value of greater than €500,000.  At the lower end of the scale, actions valued at up to and including €750,000 incur a value-based fee of €2,500.  At the upper end of the scale, actions valued at greater than €50,000,000 incur a value-based fee of €325,000.

For an action where value-based fees apply the case must therefore first be valued. 

How is the case valued for establishing the value-based fee?

Guidance on valuation has recently been published and indicates that in order to keep the process of valuation as simple as possible, it is intended that this should be calculated on a royalty basis. 

Many member states already use this approach when assessing damages.  This requires consideration of a defendant’s turnover in respect of an alleged infringing product, including, where appropriate, the theoretical turnover up to the expiry of the patent – even though a successful claimant would expect an injunction to be granted. 

As a general rule, the notional royalty rate should be either any existing rate used by the parties or the general rate accepted by the relevant industry.  

When must the value-based fee be paid?

The value-based fee, based on the claimant’s valuation, will be payable at the filing of the claim (or counterclaim) in addition to the fixed fee.  If the other side contests the valuation (and therefore the value-based fee) then the UPC will decide on the appropriate figure.

What if the value of the case changes?

Value-based fees are also payable for the damages part of a case, as well as a substantive appeal, so it may be necessary to value a case more than once during the course of the proceedings, for example at the start, at the filing of a counterclaim, at the beginning of any damages determination and on the filing of a substantive appeal.  It may also be necessary to value a case for the purposes of representation costs recovery, discussed below.

It is possible that these valuations may be the same, but they could differ – for example if more is learned about the value of a case after evidence has been filed – and a party is not necessarily bound by their original valuation.

Discounts on Court Fees

As part of the UPC Agreement, in order to encourage access for all parties, it is set out that help with court fees should be available for small and micro enterprises.  Particular kinds of entities can therefore apply for a discount of up to 40% of the UPC fees. 

However, if an unjustified fee reduction request is found to have been made then additional penalty fees may be applied by the UPC.

Reimbursements of Court Fees

Court fees can be partially reimbursed if a case is heard by a single judge (25% reimbursement).

Also, if the case is settled or withdrawn then court fees can be partially reimbursed.   The earlier in proceedings the case is settled/withdrawn, the greater the percentage of court fees that may be reimbursed:

(a) 60% reimbursement if the action is settled/withdrawn before the conclusion of the written procedure;

(b) 40% reimbursement if the action is settled/withdrawn before the conclusion of the interim procedure; or

(c) 20% reimbursement if the action is settled/withdrawn before the conclusion of the oral procedure.

It is also worth noting that the UPC has discretion to deny or decrease the reimbursements that can be applied under (b) and (c), on the basis of a party’s behaviour.

In addition, the UPC has discretion to reimburse the court fees, in whole or in part, if the amount would threaten the economic existence of a party who is not a natural person, for example, a small business.  However, the UPC can only use its discretion in this respect upon application by a party.  

This flexibility in respect of reimbursements/discounts is likely to provide another positive point for UPC participants.

Recoverable Costs for Representation

In the UPC there is a cap on recoverable costs in respect of the costs of representation, i.e. lawyer and attorney fees.  In contrast, court fees, whilst not discussed in the rules and guidance, should be fully recoverable by a successful party.  

Table 2 summarises the cap scale for recoverable costs in respect of the UPC. 

Value of Action up to and including…

Cap on Recoverable Costs

€250,000

€38,000

€500,000

€56,000

€1,000,000

€112,000

€2,000,000

€200,000

€4,000,000

€400,000

€8,000,000

€600,000

€16,000,000

€800,000

€30,000,000

€1,200,000

€50,000,000

€1,500,000

More than €50,000,000

€2,000,000

 

Table 2: Summary of UPC Recoverable costs in respect of representation

The recovery of representation costs in the UPC is essentially a two-step process:

(i)         a value for a party's reasonable and proportionate costs is calculated; and

(ii)        it is determined whether a cap should be applied, depending on value of the action.  

Multi-patent and multi-party cases:

In multi-patent cases the value of each patent and each claim/counterclaim is calculated separately and added together in order to ascertain the relevant cost cap. 

In multi-party cases, separate cost caps apply to each party. 

Increase/decrease in cap:

The caps may only be raised or lowered at the request of one of the parties, and the parties' financial position will be considered by the UPC when deciding whether to adjust the caps. 

If a case is particularly complex or multilingual, cost caps may be raised by up to 50% for cases valued up to and including €1m.  Cases valued at over €1m up to €50m may have their cap raised by up to 25%, while cases valued above €50m may have their cap raised by up to €5m.

The cap may be reduced (to no minimum figure) for certain types of paying parties whose economic existence may otherwise be threatened.

Recovery of other costs:

Other related expenses which are not representation costs, such as expert and translator fees, or witness costs, should be recoverable so long as they are reasonable, and these are not subject to the caps discussed above.

Comparison with existing Courts

The costs of action before the UPC can be roughly compared with costs under the existing court systems, in terms of the court fees and ceiling on recoverable costs for representation.  Table 3 compares the court fees for an infringement or declaration of non-infringement action in the UPC, Germany and the UK (figures from Sept. 2015).  Table 4 compares the court fees for a revocation action in the UPC, Germany and the UK (figures from Sept. 2015).

Value of Action/€

UPC/€

Germany/€

UK/€

1,000,000

15,000

(11,000 fixed fee, 4,000 value-based fee)

16,008

~14,000

5,000,000

43,000

(11,000 fixed fee, 32,000 value-based fee)

59,208

10,000,000

76,000

(11,000 fixed fee, 65,000 value-based fee)

113,208

30,000,000

161,000

(11,000 fixed fee, 150,000 value-based fee)

329,208

50,000,000

261,000

(11,000 fixed fee, 250,000 value-based fee)

329,208

 

Table 3: comparison of court fees for infringement or declaration of non-infringement action in the UPC, Germany and the UK (figures from Sept. 2015).

 

Value of Action/€

UPC/€

(stand-alone)

UPC/€

(counter-claim)

Germany/€

UK/€

1,000,000

20,000

15,000

24,012

~610

5,000,000

20,000

88,812

10,000,000

169,812

30,000,000

493,812

50,000,000

493,812

 

Table 4: comparison of court fees for revocation action in the UPC, Germany and the UK (figures Sept. 2015).

In terms of court fees, the UPC seems to compare favourably with Germany, although it is predicted to be significantly more expensive than the UK.  The UPC, however, covers most of the EU.

Representation costs incurred are expected to be higher for an action before the UPC than in a single national court action.  However, the representation costs incurred in litigating in multiple national court actions would be expected to be greater than would be incurred through an action in the UPC.  

Table 5 compares the recoverable attorney fees in the UPC, Germany and the UK (figures from Sept. 2015).

Value of Action/€

UPC/€

Germany/€

UK/€

1,000,000

112,000

23,565

Typically 60-70% irrespective of value

5,000,000

600,000

83,565

10,000,000

800,000

158,565

30,000,000

1,200,000

458,565

50,000,000

1,500,000

458,565

 

Table 5: comparison of recoverable attorney fees in the UPC, Germany and the UK (figs Sept. 2015).

On the face of it, the caps on recoverable costs in the UPC are significantly higher than in Germany, although it is difficult to predict how the figures will compare in terms of the proportion of the costs actually incurred in practice, in view of the higher overall costs of representation that are expected to be incurred at the UPC in comparison with those incurred in a single national court action.  Hence it remains to be seen whether the UPC cap on recoverable costs will compare favourably against the proportional return generally achieved in UK cases.

Comment

UPC court fees are relatively high in comparison with costs in individual national courts, but it should be cost-effective for disputes covering multiple member states, or cases with multinational implications.  

For cases which involve only a single member state or can be resolved through proceedings in a single member state, it may be more cost-effective to litigate in national proceedings, where that is possible during the transitional period (i.e. for “classical” European patents).  

Opposition proceedings before the EPO also seem set to remain a cost-effective option.

Multi-party or multi-patent actions should incur only one court fee, but it remains to be seen whether parties might consider splitting related actions involving different patents into separate proceedings, in order to facilitate a greater recovery of costs – although this would need to be balanced against the additional court fees that would apply. 

For more detailed advice or guidance in relation to the unitary patent or UPC, please feel free to contact us.