10x Genomics, Inc v Curio Bioscience Inc, UPC Court of First Instance, Düsseldorf Local Division, 3 December 2024, Case no. UPC_CFI_140/2024
Introduction
In what at first sight appears to be a surprising decision, the Düsseldorf Local Division has held that the UPC Agreement and the Rules of Procedure permit the Court to order a defendant to provide security for the claimant’s legal costs in an infringement action, notwithstanding the express provisions of the UPC Agreement and the fact that the claimant is able to choose whether to commence legal proceedings against the defendant, whereas the defendant has no such choice.
Article 69(4) UPCA provides 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 by the defendant which the applicant may be liable to bear … .”
RoP 158, on the other hand, provides that, “At any time during the proceedings, following a reasoned request by one party, the Court may order the other party to provide … adequate security for the legal costs and other expenses incurred and/or to be incurred by the requesting party, which the other party may be liable to bear.”
10x Genomics argued that Curio Bioscience was not “good for the money” and that there were considerable doubts as to whether Curio Bioscience could pay 10x Genomic’s legal costs and other expenses. As Curio Biosciences did not dispute this, the Court assumed these allegations were true. 10x Genomics also argued that it would be difficult to enforce an order on cost reimbursement in the USA.
Curio Bioscience argued that, pursuant to the UPCA, only a defendant could seek security for costs and the relevant UPC rules of proceedings had to be interpreted accordingly, given Article 69(4) and also the requirement in Article 41(1) that the RoP shall “comply with this Agreement.” However, the Court ruled in favour of 10x Genomics, holding that Article 41(1) was not limiting the circumstances in which security could be ordered and accordingly did not preclude the RoP from providing that security for costs could be ordered against a defendant.
The Court acknowledged that there was an asymmetry in the position of the claimant in UPC proceedings, who had chosen to litigate, and that of the defendant, who had not. The Court also noted that “special care must be taken by the Court that the Defendant´s right to a fair trial is protected (Article 47 of the Charter of Fundamental Rights of the European Union, referred to in the preamble of the UPCA), and particularly that the Defendant is not denied the opportunity to present its case effectively before the Court”. However, Curio Bioscience had not argued that its right to a fair trial and its opportunity to present its case effectively would be jeopardized by a security order. The Court therefore ordered the defendant to provide security in the sum of €200,000 within 4 weeks of service of the Court’s order.
Comment
Whilst it may appear surprising to require a defendant to UPC proceedings to provide security in favour of the claimant, it is possible to contemplate situations in which it would be reasonable for the Court to make such an order. For example, security can be awarded at any time and it may appear that the defendant is behaving unreasonably and unnecessarily increasing the costs of the proceedings. It could also be the case that a defendant is financially in a good position but, perhaps due to its location in a country in which UPC costs orders are unlikely to be enforced successfully, the claimant would be unlikely to recover its costs even if it won and the Court ordered the defendant to pay them.
However, in circumstances where the principal reason in favour of awarding security is the poor financial position of the defendant, it would appear that those same circumstances will often mean that it will be hard for the defendant to be able to provide security. If an impecunious defendant is nevertheless ordered to provide security, there is a clear risk that the defendant will then be unable to prepare its case and defend the claim, which could deny the defendant a fair hearing.
The Court in this case appears to have relied on the fact that the defendant did not positively assert that an award of security against it would interfere with its right to a fair trial. This decision will almost certainly be appealed and it will be interesting to see if the Court of Appeal takes the same view. It will also be interesting to see if the Court of Appeal suspends the effect of the local division’s order pending any appeal, assuming Curio Bioscience requests this (RoP 223) – the local division rejected Curio Bioscience’s request that the date for providing security should be deferred until after the conclusion of any appeal.
In addition, should the Curio Bioscience fail to provide security, it appears that 10x Genomics will need to apply for a decision by default against the defendant. The Court will presumably need to reconsider at that stage whether the defendant’s right to a fair trial will be jeopardized by making such an order.
The Order can be read here.
