2025 Week 13
The UPC will use the big lever of costs awards to direct the behaviour of the parties, not only during UPC litigation, but also before. In Edwards v Meril, the UPC Court of Appeal (CoA) awarded costs to the winning party (Edwards) in that case, but made it clear that merely winning will not give an automatic entitlement to costs. We explained the significance of the CoA obiter comments in UPC Weekly 2024 Week 40.
In Stäubli Tec-Systems v Konrad, the CoA has now been presented with more or less exactly the circumstances they hypothesized in Edwards v Meril, and they have followed through.
First instance: the winner should pay here
Two inventors named Konrad owned EP 3170639 B1. There had been pre-action correspondence between the patentees and Stäubli from November 2022 to February 2023, in which allegations of patent infringement and counter-allegations of patent invalidity had been flying around, with each party pushing back against the assertions of the other. Stäubli alleged invalidity over various prior art documents at this stage.
Then there was a delay, with apparently no contact between the parties until Stäubli launched a UPC revocation action in October 2023. In addition to the prior art asserted in the pre-action correspondence, Stäubli raised some new prior art for the first time, including document A13 that was clearly published before the priority date of the patent.
The deadline for filing the defence to revocation was 8 January 2024. It seems that there were various problems with the defence, with documents being submitted 16 and 20 November 2023 and 16 January 2024. There is a suggestion that the first instance court may have indicated a 3 month deadline rather than the correct 2 month deadline for filing the defence, although this would not be apparent from the UPC case management system.
The patentees acknowledged that the patent was invalid and declared their intention to surrender the patent in all UPC states. Importantly, they did this in all of their defence submissions. They applied to the national offices to revoke/surrender the patent and also applied to the EPO to centrally revoke the patent on 16 January 2024.
At first instance, the CD Paris had ordered that Stäubli should pay the costs of the patentees. This was on the basis that the allegedly decisive prior art (A13) was only raised for the first time in the UPC revocation action, not in the pre-action correspondence.
Stäubli appealed, arguing that as the successful party they should be entitled to recover their costs from the patentees.
Court of Appeal: surrender “immediately”
The Court of Appeal agreed with the first instance court, ordering Stäubli to pay the costs of the patentees in the first instance proceedings and in the appeal.
The CoA referred back to their obiter comments in Edwards v Meril, considering the circumstances in which the general “loser pays” rule on costs might not apply:
An exception to the general rule of Art. 69(1) UPCA may apply if a claimant initiates proceedings without first sending a warning letter and the defendant submits a cease-and-desist undertaking immediately at the beginning of the proceedings. In such a situation, it may be justified to award costs to the defendant on equitable grounds, in particular because the claimant caused unnecessary costs to the defendant and the Court. [emphasis added]
Edwards v Meril was an action for a preliminary injunction (PI), and Meril fought back initially with detailed submissions, before agreeing to undertakings not to infringe. This agreement was slightly more than 2 months after the start of the PI proceedings.
A difference here is that Stäubli v Konrad was a revocation action. So the questions for the CoA, following their previous reasoning, were whether the patentees had given in “immediately” enough and whether Stäubli should have raised the new prior art before starting the UPC revocation action. On both counts the CoA said yes. You can see that there has been a bit of leniency from the CoA here, because strictly speaking the patentees did not complete their fold until 8 days after the deadline for filing the defence. The CoA adapted their guidance from the Edwards v Meril case:
An exception to the general rule of Art. 69(1) UPCA that the unsuccessful party must bear the reasonable and proportionate legal costs and other expenses incurred by the successful party may apply if a claimant files a revocation action without the patent holder having given rise to the action and the patent holder surrenders the patent immediately at the beginning of the proceedings.
The CoA also considered the patentees’ tone during the pre-action correspondence. Although the patentees had argued that the patent was valid, the CoA considered that they did engage in substantive discussion and therefore that they may have been open to an objective assessment of the new prior art if they had been shown it in pre-action correspondence. This was relevant to the question of whether the patent owners had in effect provoked (or “given rise to”) the revocation action.
What about the risk of an opt-out?
Stäubli argued that engaging in further pre-action correspondence would risk handing a tactical advantage to the patentees, who could opt out of the UPC to forestall a UPC revocation action. The CoA agreed that this is a risk. But it is a risk to be balanced against not being awarded costs in a without-notice UPC revocation action.
Additional rider: apply for EPO central revocation
The CoA also attached a further condition to the patentees in this situation. Faced with killer prior art, the CoA considered that the patentees must request revocation of the patent at the EPO, in order to benefit from the favourable costs decision:
… it is generally necessary that within the time limit for filing a defence to revocation not only the patent holder surrenders the patent but within the same time period also files a request for revocation of the patent pursuant to Art. 105a EPC with the European Patent Office and pays the required fee within that time period.
Of course, in some cases, the patent will be validated not only in UPC states but also in non-UPC states. The CoA left it open whether it would be sufficient simply to apply to surrender the patent ex tunc in each relevant UPC state, or whether they really do mean that the entire European patent should be revoked for all states. The benefit of the EPO route is that it is clean and quick, but maybe the patentee would be revoking more of the patent than is strictly necessary.
