Harvard College v NanoString Technologies (UPC, Munich Central Division) Case no. UPC_CFI_252/2023 – UPC awards security for costs against UK-based litigant.
Headnote by Kate O’Sullivan, Bristows LLP, London
On 30 October 2023, the Munich Central Division granted an order for security for costs in the case of President and Fellows of Harvard College v. NanoString Technologies Europe Limited. By way of background, NanoString Technologies Europe Limited (NanoString) had brought an action in the Munich Central Division seeking revocation of President and Fellows of Harvard College’s (Harvard) patent relating to methods for detecting analytes in a sample (EP 2 794 928). In response to NanoString’s revocation action, Harvard submitted a Preliminary Objection which challenged the Court’s jurisdiction and competence over the German part of the patent and simultaneously requested NanoString provide adequate security for legal costs (the Security Request). The Court made a Preliminary Order that the Security Request should be split out from the Preliminary Objection challenging jurisdiction and directed the parties to submit written submissions on the Security Request.
Harvard’s Security Request was based on two arguments. First, following Brexit, there is no international treaty that enables a party to enforce an EU (including a UPC) judgment against a UK party. As NanoString is registered in the UK, Harvard had concerns about the enforceability of a UPC costs order. Second, Harvard had seen business records and statements from NanoString’s group of companies during the course of other UPC proceedings. This gave Harvard doubts about NanoString’s financial stability and its ability to meet a costs order, particularly in view of long-term debts held by the NanoString group. Further, in those separate proceedings Harvard had been awarded a preliminary injunction against NanoString’s parent company. Harvard argued that this was an existential threat to the NanoString group of companies, meaning that NanoString would not be able to pay a costs order. In response, NanoString argued that Harvard had failed to provide evidence that there would be difficulties in enforcing a judgment in the UK. On the financial-standing front, NanoString contended, inter alia, that its group of companies had substantial cash reserves, it was a long-standing and stable company, and the NanoString group of companies had never defaulted on a costs award (which was known to Harvard, having been involved in several, separate lawsuits against the NanoString group).
The Munich Central Division considered the submissions of the parties and the legal framework under Rule 158.1 of the Rules of Procedure (RoP) and Article 69(4) of the Unified Patent Court Agreement (UPCA) which states 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. The factors to be considered include the financial position of the other party that may give rise to a legitimate and real concern that a possible costs order might not be recoverable and/or the likelihood that a possible cost order may not (or in an unduly burdensome way) be enforceable.
The Court concluded that the UK’s withdrawal from the EU added procedural burdens and uncertainties to enforcing UPC judgments in the UK. Furthermore, despite substantial cash reserves, the Court agreed that there were legitimate concerns about NanoString’s financial stability given its parent company’s situation and the group’s significant long-term debts. In reaching this decision, the Court noted that NanoString had not put forward any evidence of its own independent financial position or indicated what assets it could use to meet any costs order; instead, NanoString had pointed to its group company finances. The Court was also of the view that NanoString had failed to demonstrate why an order for security for costs would be unreasonable or unfair. In the circumstances, the Court decided to grant the Security Request.
Whilst Harvard deferred to the Court in setting the amount, form and time limit for the security, it did propose that the quantum could be based on the table of ceilings for reimbursable costs as set by the Administrative Committee of the UPC (dated 24 April 2023). In this case, the security corresponding to a value in dispute of €7.5 million would be €600,000. However, the Court ordered NanoString to provide security of €300,000 for the Defendant’s legal costs and expenses, to be paid within six weeks either as a deposit in the UPC account or as a bank guarantee. As Harvard had not submitted any evidence of its actual costs incurred or expected to be incurred, the Court decided that €300,000 was a fair, reasonable and proportionate sum. The Court went on to say that Harvard could request additional security at any time during proceedings if the actual costs incurred during proceedings exceeded that amount. Both parties were granted leave to appeal.
This case is interesting as it demonstrates the need for litigants to support a request for security for costs (or defence against such a request) with sufficient reasons. Had NanoString provided more detail about its own, individual finances (rather than its group’s) or explained why such security would have been unreasonable or unfair, it may not have been ordered to provide the security. Another noteworthy point is the Court’s determination that a company being domiciled in the UK may give rise to a legitimate concern about the enforceability of a costs order. UK-based litigants may wish to take steps to mitigate this concern, for example bolstering their evidence regarding their assets to meet any costs award, reasons why the security would be disproportionate or even an undertaking to pay any costs reimbursement as ordered by the Court. Turning to the order itself, the Court adopted a reasonably lenient approach in relation to the amount (half of the reimbursement ceiling for the value of the claim) and the time in which it needed to be paid (six weeks), which perhaps will give litigants some comfort.
