January 7, 2026
Introduction
The allocation of costs is a key strategic consideration in any litigation. A recent decision from the UPC Court of Appeal offers important clarification on the application of cost principles under Article 69 of the UPCA, particularly concerning the concepts of unnecessary costs and the conduct of the parties.
Facts and Procedural History
The case (UPC_CoA_8/2025) concerns a patent infringement action brought by Oerlikon (Plaintiff and patentee) against Bhagat Textile Engineers (Defendant). Oerlikon is the owner of European patent EP 2 145 848 with unitary effect. Oerlikon accused Bhagat of infringing this patent by exhibiting a corresponding machine at the ITMA trade fair in Milan and subsequently obtained an order for the preservation of evidence. At first instance, Bhagat neither contested the infringement nor the validity of the patent. The Milan Local Division found in favor of Oerlikon, holding Bhagat liable for infringement and ordering it to bear 80% of the legal costs. Bhagat filed an appeal against this decision.
Decision of the Court of Appeal
The Court of Appeal partially overturned the decision of the first instance. While the award of provisional damages was set aside, the appeal was rejected on all other points. The first instance decision on costs was notably upheld. Due to the partial success of both parties in the appeal, the costs were apportioned equitably, with Bhagat ordered to bear 80% of Oerlikon’s costs.
Key Findings of the Court on Costs
Unnecessary Costs (Art. 69(3) UPCA): The principle of unnecessary costs (Art. 69(3) UPC) is a key component of the cost regime under the Unified Patent Court Agreement, which allows the Court to deviate from the general rule that the losing party pays the costs of the successful party (Art. 69(1) UPC). Under this principle, the Court can order a party to bear any costs it has caused another party to incur unreasonably and not in good faith, regardless of the final outcome of the case. Such costs may arise from, for example, frivolous motions, unfounded objections, delaying tactics, or the late submission of evidence without adequate justification. The objective is to promote procedural fairness and efficiency by discouraging parties from engaging in conduct that unnecessarily inflates the financial burden of litigation.
The Court analyzed whether the patentee had caused unnecessary costs by applying for an order to preserve evidence at a trade fair without first sending a warning letter. It concluded that, given the urgency and short duration of the trade fair, immediate court action was justified. The patentee’s conduct was not considered unreasonable, and thus no deviation from the general “loser pays” rule was warranted on this basis.
Seriousness of Settlement Offers: The Court also assessed settlement offers made by the infringer during the proceedings. It found the offers to be “too late and not specific enough” to justify a different allocation of costs. A general undertaking without a penalty clause, made weeks after the infringement action had already been filed, was not viewed as a serious or timely effort to resolve the dispute and mitigate costs.
Equitable Apportionment (Art. 69(2) UPCA): In the appeal proceedings, where both parties succeeded in part, the Court apportioned costs equitably. The infringer, having succeeded only on the issue of damages, was ordered to bear the majority (80%) of the patentee’s costs, reflecting the overall outcome of the appeal.
Procedural Advice and Implications
Action at Trade Fairs: In urgent cases of infringement, swift action via court measures without a prior warning letter is a procedurally acceptable strategy and will not necessarily be held against the claimant in the allocation of costs.
Conduct of Settlement Negotiations: To be considered a mitigating factor in a costs decision, settlement offers must be timely, specific, and serious. Vague or delayed offers are unlikely to be viewed favorably by the Court.
This article is intended for general informational purposes only.
Authors
Dr. Klaus Platzer
Mingyan Xi