ICPillar LLC v. ARM Limited et al., Order UPC Court of Appeal, 16 September 2024, Case no. UPC_CoA_301/2024
The UPC Court of Appeal explained it shall of its own motion consider how to exercise its discretion to disregard facts and evidence submitted at appeal, which were not provided during first instance proceedings. As such, the court disregarded a UK insurance policy due to late submission. It also rejected a US bank guarantee as “adequate security” for litigation expenses, confirming that a cash deposit or bank guarantee from an EU-registered bank should be provided instead.
Background
ICPillar LLC, a USA company, filed an infringement action at the Paris Local Division against ARM Limited (and others) (together, “ARM”) based on EP 3 00 0239, a patent covering a system and method for universal control of electronic devices.
ARM filed an application under R.158.1 of the Rules of Procedure (RoP), requesting ICPillar provide adequate security for legal costs and other expenses incurred by ARM, in case ICPillar did not have sufficient financial resources to pay ARM’s costs if they were successful in the litigation.
The first instance court allowed ARM’s application. ICPillar appealed, and included a new document with their submissions: a legal expense insurance policy (the “Insurance Policy”), which had not been submitted at first instance. ICPillar argued that the document “presents a security equal to a cash deposit or to a bank guarantee” and the execution of the Insurance Policy could be directly invoked to ARM’s benefit. ICPillar relied on R.222.2 RoP, which stipulates the court may use its discretion to allow the document, even though only submitted at the appeal stage.
ARM argued the Insurance Policy should be disregarded, as it should have been submitted in first instance proceedings and was also not a permissible means of security.
As an auxiliary request, ICPillar asked that if the order to provide security of costs was confirmed, it be allowed to provide a bank guarantee from a bank licensed in the USA.
Decision & Reasoning
The Court of Appeal rejected ICPillar’s appeal.
Art. 74(4) of the UPC Agreement (UPCA) states that new facts and evidence may only be introduced in accordance with the RoP and where submission could not reasonably have been expected during first instance proceedings. R.222.2 RoP further provides that the Court of Appeal may disregard requests, facts, and evidence which were not submitted during the proceedings at first instance. Given the use of the word “may”, the Court has discretion here and the Court of Appeal considered the following three criteria in R.222.2 RoP when considering how to exercise its discretion in this case:
(a) whether a party seeking to lodge new submissions is able to justify that the new submissions could not reasonably have been made during proceedings before the Court of First Instance;
(b) the relevance of the new submissions for the decision on the appeal;
(c) the position of the other party regarding the lodging of the new submissions.
In relation to point (a), the Court of Appeal decided that ICPillar had not provided any reasons to justify not submitting the Insurance Policy during the first instance proceedings; it was undisputed that the document existed at the time and ICPillar could have submitted it. Although there was an endorsement adding additional ARM Respondents to the policy which had not yet been signed, ICPillar could have submitted the Insurance Policy and clarified that it was in the process of adding more Respondents.
The Court of Appeal also rejected an argument by ICPillar that under R.171 RoP it was only required to mention the existence of the Insurance Policy, and the first instance court should have then requested its submission if it was considered relevant. The Court of Appeal clarified that, from R.172.1, it follows that there is a duty to provide evidence that is already available to a party. Particularly given it was disputed whether the Insurance Policy would provide sufficient security under R.158, and ICPillar relied on UK case law ([2023] EWHC 850 (Ch)) stating that the construction of terms and wording of the policy is important in determining this, ICPillar should have anticipated that merely mentioning the existence of the Insurance Policy would be insufficient.
ICPillar was also not allowed to rely on R.172.2 RoP as it argued. Under this Rule, the Court “may at any time during the proceedings order a party making a statement of fact to produce evidence that lies in the control of that party”, and the Court of Appeal highlighted that the use of the word “may” makes clear that the Court has a discretionary power to request the production of evidence; it is not obliged to do so.
The burden of proof lay with ICPillar to show that there was no risk they would be unable to reimburse ARM’s costs. Here, ICPillar had merely mentioned the existence of the Insurance Policy without submitting, or even offering to submit it. It was also within the discretion of the first instance court not to order ICPillar to produce the Insurance Policy, and the Court of Appeal considered the first instance court had not taken a wrong decision by deciding on the application for security for costs on the basis of the facts and evidence presented to it by the parties. The Court of Appeal concluded that ICPillar should have known it was under a duty to submit the Insurance Policy at first instance and it could not rely on the court to order its production.
Moving onto point (b), the Court of Appeal agreed that the Insurance Policy was of particular relevance to ICPillar’s argument that there was no need for a security of costs, yet ICPillar chose not to produce it.
Finally covering off point (c), the Court of Appeal sided with ARM who argued it was disadvantaged by the late production of the Insurance Policy (which was also initially only submitted with heavy redactions). ARM was to a certain extent compensated for this by being allowed to amend its statement of response after ICPillar’s request for confidentiality was rejected and the Insurance Policy became available in full, but ARM argued it was still faced with short time limits to respond to an English law insurance document requiring specialist legal knowledge.
ICPillar flagged that ARM had only objected to the late production of the Insurance Policy during the oral hearing, but the Court of Appeal only considered this as one factor in its overall assessment of whether to use its discretion under R.222.2 RoP. Balanced against the difficulty of properly evaluating the level of protection offered by the Insurance Policy within a short period of time, the Court of Appeal considered the fact that ARM only objected to its late submission at the oral hearing was a factor with limited relevance.
Weighing all the relevant circumstances, the Court of Appeal decided to disregard the Insurance Policy. As there was no dispute that there was a risk ICPillar lacked the financial resources to pay ARM’s costs if unsuccessful, the first instance court was right to order ICPillar to provide adequate security of EUR400,000.
ICPillar’s auxiliary request to provide a bank guarantee issued by a bank in the USA, as adequate security, was also rejected. The first instance decision had stated that a bank guarantee must come from a bank licensed to operate in the European Union, in order to guarantee the secure recovery of legal costs due to ARM entities which were all based in Europe (and mostly in the EU). As this reasoning was not solely based on nationality, but on substantive grounds, the decision was not contrary to any prohibition of discrimination.
Conclusion
This decision confirms the importance of submitting all relevant and available evidence during first instance proceedings, rather than waiting until appeal proceedings. This applies even where the documents in question may change or be updated; litigants should submit the documents as they are and explain to the court if they intend to make any changes, so it increases the chances of the courts using their discretion to allow documents to be submitted during appeals.
Additionally, it is important to note that a bank guarantee given from a USA registered bank may not be considered to be “adequate security” where the recipient parties are located in the EU, and a cash deposit or bank guarantee from an EU-registered bank should be provided instead.
The Order (in English) can be read here.
