The Preparatory Committee of the Unified Patent Court (UPC) has published its much anticipated proposals for court fees and recoverable costs for consultation, together with alternative drafts of Rule 370 (Court Fees) and an explanatory note.
- Fixed court fees for each type of action plus an additional fee for some types of action based on the value of the action.
- Infringement action fixed fee of €11,000 with a possible additional fee of up to €220,000 depending on the value of the action.
- Revocation action fees fixed at €20,000 with no additional value based fee.
- €80 fees proposed per patent for each opt-out and each withdrawal of opt-out application i.e. per European patent "bundle" rather than per designation.
- Two alternative proposals for reducing court fees either "to reward particular behaviours" (e.g. early settlement) or for SMEs, not-for-profit organisations, universities and other public research organisations.
- Discretion for the court to vary the fees in cases where the economic existence of a party could be affected.
- Ceilings on recoverable costs of €50,000 for actions valued at up to €250,000, rising to €3,000,000 for actions valued at more than €50,000,000.
The consultation closes on 31 July 2015.
The consultation proposes a range of fixed court fees depending on the type of application. The fixed fee for an infringement action is set at €11,000 (with a possible additional fee, see further below) and for a revocation action is €20,000. Generally, the fixed fees must be paid when the claim or application is filed.
Additional value-based fees
Certain types of application attract an additional graduated value-based fee payable at a later date, once the value of the claim is determined by the court to be above €500,000. These include an infringement action or counterclaim for infringement, an action for a declaration of non-infringement and an appeal. The additional graduated value based fees start at an additional €2,500 for claims up to and including €750,000 and rise to as much as €220,000 for cases valued in excess of €30,000,000.
The draft Rules provide that the level of the additional fees element due will not be known until the Court has made a determination as to the value of the case at the interim conference (Rule 104(i)). Such value is to reflect "the objective interest" pursued by the filing party at the time of filing the action (Rule 371). It will not necessarily be the same as the value attributed to the claim or counterclaim by the parties in their statements of case. The net effect is that a party won't know what the court fees will be when it initiates infringement proceedings.
The consultation paper recognises that there is little experience of court fees based on value in European court systems, so guidance will be published as to how the court will determine the value of the case. The consultation paper does however state that it is anticipated that 25% of actions will fall below the threshold of €500,000 and so incur no additional fees.
There are a number of anomalies in the draft proposal. For example, it seems odd that while an application for a declaration of non-infringement may attract additional (and potentially very considerable) value-based fees, a revocation action will not. Revocation actions tend to require more work (and more court time) than infringement actions and the desired result in both cases is the same, namely freedom to operate. It is also strange that court fees for appeals are the same as for first instance proceedings and are cumulative, so an unsuccessful patentee who brings an infringement action could potentially face court fees approaching €500k.
Fees for opt out and withdrawal of opt out
The explanatory note confirms that the level of these fees has been set to recoup administrative costs only.
The consultation paper states that although the proposed fees have been set at the minimum level required to enable the Court to be self-financing, it is still anticipated that the Contracting Member States will have to contribute to the costs of the Court initially. Further, the draft Rules provide for the Court to grant legal aid, with the preparatory committee having indicated that a consultation document would be forthcoming. It is not clear whether the level of fees proposed has taken into account a legal aid budget.
We note that the costs of bringing high value proceedings are very considerable and the intention seems to be that these will subsidise lower value actions (which may still involve a considerable amount of court time and resource).
Fee reductions and variations
Both the alternative drafts of UPC Rule 370 on Court Fees provide for the same fees to apply, but differ as to how and when reductions will be allowed.
The first alternative offers reductions to all parties which are broadly based on savings made by the court when certain steps are taken and apply to both fixed and value based fees. For example, a 25% reduction when an action is heard by a single judge; or reimbursement of 20%, 40%, or 60% when a case is settled or withdrawn at set stages.
The second alternative offers exemptions from the additional value-based fees only and is restricted to SMEs, micro-entities, non-profit organisations, universities and other public research organisations, on application to the Court. There are set definitions of the qualifying entities to provide for uniformity across the Community. The rule also specifies the procedure for the application, including the provision of financial information and the confirmation of the status of the organisation.
Both the alternative drafts of Rule 370 also provide discretion for the Court to vary the fees if it is shown that the level of fees will affect the economic existence of a party.
Costs (scales and ceilings)
The consultation document includes a scale based on the value of the dispute which sets the ceiling for the recoverable costs of a successful party from the losing party provided for by Rule 152(2). For actions valued at up to €250,000, the ceiling is €50,000. This rises up a scale to a ceiling of €3,000,000 for actions valued at more than €50,000,000:
Click here to view table.
The explanatory note comments that although costs incurred by both the Court and the successful party are recoverable from the losing party, it is the successful party's costs which are unpredictable and therefore the ceilings should apply to those costs. This appears to leave a losing party open to both a claim up to the applicable ceiling from the successful party, and a further claim (uncapped but more easily quantifiable) from the Court.
The consultation paper explains that a wide range of ceilings had been discussed, with the result being a middle course. The scale may be adjusted in the future. However, the uncertainty surrounding the assessment of the value of the claim also makes it difficult to assess whether the ceilings provided for recovery of costs are appropriate.
The full consultation document is available here (see pages 10-12 for table of fees, and page 13 for recoverable costs).