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Casting a Worldwide Net: How Litigation Funders Can Leverage Europe’s New Unified Patent Court

March 14, 2023

Casting a Worldwide Net: How Litigation Funders Can Leverage Europe’s New Unified Patent Court

The following article was contributed by Lionel Martin (Partner, August Debouzy), Pierre-Olivier Ally (Counsel, August Debouzy), Ben Quarmby (Partner, MoloLamken LLP) and Jonathan E. Barbee (Counsel, MoloLamken LLP).  Europe’s Unified Patent Court (UPC) is on the cusp of launch, confirmed for this June 1, 2023.  It has been eagerly anticipated by the patent litigation community across the member states—starting with 17 European countries, but expected to extend rapidly to all of Europe minus Poland, Spain, Croatia, and, most notably, the UK. The UPC has been long in the making: over ten years have passed since the agreement was first signed.  What is to be expected of this new court, and what opportunities does it present for litigation funders? Uniformity and Scale.  The principal goal of the UPC is to offer a single, consistent, and coherent court system in Europe for the litigation of patents.  Historically, procedural differences in the member states’ national patent and court systems meant that the timeline of patent litigation could vary wildly from one jurisdiction to the next.  The jurisdictions also differed on substance: infringement, validity, and injunctive relief rulings were not consistently applied across the board.  And the one way in which the national jurisdictions were similar—comparatively low damages models—acted as further disincentive for patent owners looking to enforce their rights. The UPC promises to overhaul that system entirely.  It is expected to issue speedy judgments on both infringement and validity.  It should set the scene for damages verdicts that are not only more consistent across jurisdictions, but also generally much greater in size—as one would expect for verdicts covering at least 17 member states.  And it promises greater accessibility and uniformity insofar as English will be the preeminent language of infringement proceedings in any matter involving allegations of infringement extending beyond a single member state. The UPC must now live up to that promise, and there is some uncertainty as to how the system will play out in its early stages.  Will the court be able to keep up the expected pace?   What standards will the court rely on when imposing preliminary injunctions?  How will damages awards be limited or expanded?  How will the appellate process work?  How will early litigants help shape the law and jurisprudence of the UPC? Those questions and many more will have to be answered in the coming months and years.  But if the UPC delivers on even part of its promised mandate, it may represent an exciting new arena for litigation funders working with patent owners to enforce their rights.  Indeed, there is reason to believe that the court will strive to be patentee-friendly—at least at the outset—in order to attract its “customers”. Opportunities for Litigation Funding.  Many of the key features of the UPC as currently contemplated, align neatly with the incentives and priorities of litigation funders and patent owners.
  • Broader Geographic Reach. The UPC makes multi-jurisdictional patent campaigns cost-effective and efficient by allowing plaintiffs to target infringement across at least seventeen countries in one court proceeding.  Plaintiffs no longer need to pick and choose the countries in which to enforce their patents.  The reach of the UPC is likely to expand further: the UPC is expected to be integrated into European mutual recognition mechanisms that will allow the UPC’s jurisdiction to extend not only to the EU but also to Switzerland, Norway, and the UK.  While these mutual recognition mechanisms have long existed, national courts have historically been reluctant to rely on them.  The UPC, by contrast, is expected to do so much more regularly.
  • Reduced Transaction Costs. Reliance on a single proceeding across multiple countries will cut down on the costs of litigating in multiple European countries in parallel.  The UPC will therefore dramatically reduce the resources necessary to launch and maintain a multi-jurisdictional campaign in the EU.  The UPC will also cut down on the logistics and transactional costs associated with such campaigns.  A plaintiff, for example, no longer needs to hire three separate teams to enforce patents in, for instance, France, Germany, and Italy, and pay additional fees for those three teams to coordinate to ensure coherence across jurisdictions.
  • Short Time to Trial. UPC proceedings will expedite the pace of patent campaigns.  Some commentators suggest that proceedings will only take 12-15 months from complaint to final ruling—a significant boon for patent owners looking to promptly and efficiently enforce their rights.  If this holds true, and if sustainable, this pace would rival the speed of some of the fastest dockets among U.S. district courts.
  • Efficient Evidence Gathering Procedures. Unlike the U.S., there is no formal discovery in the UPC, which significantly reduces litigation costs and can expedite proceedings.  But the UPC offers several key features that will be of value to patent owners: (i) plaintiffs may move to seize evidence of infringement from a defendant’s premises, and (ii) they may obtain court orders to force defendants to produce documents.
  • Larger Damages Awards. Since UPC judgments will cover more countries and consumers, the potential damages awards should be considerably larger than they would be in a single jurisdiction.  This should help drive up the value of settlements, and put more pressure on defendants to settle earlier.  It also radically tips the scale on the economics of patent litigation funding in the EU.  Suddenly, the EU becomes an attractive venue in-and-of-itself for funders—not just an ancillary venue in support of higher-stakes U.S. litigation.
  • Broad Injunctive Relief. The UPC will allow patent holders to seek injunctive relief across multiple countries in one shot.  This too should help drive bigger and earlier settlements—a boon for funders looking for a rapid return on their investment. 
  • High-Quality Decisions. It is expected that the Court will render first-rate decisions for two principal reasons: (i) it has attracted seasoned IP judges from across Europe, and (ii) the judges consist of a mix of legally and technically qualified judges.  Furthermore, due to the high specialization of the Court, the number of judges will be quite limited (<100), which may help contribute to greater respect for precedent from fellow judges, which in turn leads to greater predictability for litigants.
Will the UPC be able to deliver on all of these fronts?  Only time will tell.  But for a savvy funder looking for an early mover advantage in a relatively underdeveloped market, and with the opportunity to potentially help shape early UPC jurisprudence in ways that will benefit patent owners for years to come, these are exciting times indeed . . . .

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Certum Group Survey: 70% of In-House Counsel Know Litigation Funding, Only 6% Have Used It

A new research brief from litigation finance and insurance provider Certum Group finds that corporate legal departments are broadly aware of litigation risk transfer products but almost never use them, a gap the firm describes as "the next frontier in corporate litigation strategy."

According to the brief published by Certum Group, which surveyed 44 General Counsel and in-house litigation attorneys, roughly 70% of respondents are familiar with litigation funding but have never used it, while only about 6% have. The brief was authored by Kevin Skrzysowski, a Director at Certum Group, whose litigation funding team also includes Director William Marra, a former U.S. Supreme Court clerk.

The survey characterises in-house litigation risk as operational rather than existential. Employment and intellectual property disputes drew the highest concern levels, while roughly two-thirds of respondents reported no concern at all about antitrust or mass tort exposure. Decision-making was consistent across defensive and affirmative matters, with likelihood of success (~84%) and cost to pursue (~74%) the most frequently cited factors.

On affirmative claims, respondents said they would be more likely to proceed if cost and risk could be shifted to an insurer (~62%), a contingent-fee firm (~49%) or through claim monetisation (~46%). A litigation funder ranked lowest at ~28%. Looking forward, however, roughly 51% said they would consider litigation funding, ahead of capital protection insurance (~43%) and claim monetisation (~41%), with about 30% ruling out all such products.

Cost certainty (~51%) and budget constraints (~46%) were the leading drivers of interest. Among the small group that has used litigation funding, two-thirds reported satisfaction with the decision.

Commercial

UPC Orders €200,000 Security After Finding Patent Claimant Had Pledged Its Assets to a Funder

The Unified Patent Court has ordered a newly formed patent claimant to post €200,000 in security for costs after concluding that the entity was economically assetless because its patents, licences and future income had all been pledged to its litigation funder.

As reported by Mishcon de Reya, the Hamburg Local Division reached that finding in *Nixu v Infoblox* (UPC_CFI_360/2026). Nixu, a US-domiciled claimant, was incorporated in March 2025 and acquired the patent in suit weeks later. The court declined to treat US domicile as a ground for security in itself, holding that "a claimant's domicile in the US did not, in itself, justify security for costs" and noting that US courts recognise European judgments.

What did justify security was the claimant's financial structure. Under a Patent Security Agreement, all patents, licences and future income were pledged to the funder, and part of the purchase price remained unpaid. The court found Nixu was "basically assetless in an economical sense" and dependent on discretionary support from its funder.

The same update reports a second security decision. In *La Siddhi v Athena Pharmaceutiques* (UPC_CoA_48/2026), the Court of Appeal upheld a €75,000 order against an SME claimant, confirming that "a party's SME status does not, by itself, exempt that party from the obligation to provide security for costs." The court distinguished fee reductions and cost ceilings available to SMEs from the security regime under Article 69(4) UPCA and Rule 158, which contains no SME carve-out. Security was set at roughly 60% of the applicable €112,000 recoverable costs ceiling.

Together the decisions suggest the UPC will look through corporate form to the funding arrangement itself when assessing whether a claimant can meet an adverse costs award.

Commercial

Demotech Urges Insurers to Break Out Litigated Claims, Citing Funded Claim Generation

Insurance rating agency Demotech has called for a structural change to the way property and casualty insurers report loss costs, arguing that the current composite format masks the effect of technology-driven claim generation that is sometimes financed by third-party litigation funders.

As reported by PR Newswire, Joseph L. Petrelli, president and co-founder of Demotech, said the firm's 2022 review of failed carriers pointed to litigation as the decisive factor. "In 2022, our postmortem of failed carriers identified new, annual litigation as the proximate cause of what destroyed them," Petrelli said.

The argument turns on an assumption built into loss cost reporting decades ago. Petrelli noted that until the mid-1980s advisory organisations published rates and premiums for insurers to adopt or deviate from, and that "an implicit assumption underlying the original loss cost format was that an equilibrium existed in the relative claim frequency between claims reported and settled with policyholders, and claims litigated and negotiated with plaintiff firms."

Demotech's position is that the equilibrium no longer holds. Its research concluded that industrial-scale increases in litigated claims were achieved through technology, online marketing and advertising, "sometimes financed through third-party litigation funding." Petrelli also pointed to alternative business structures, managed services organisations and what he described as other mutations in the legal profession that "may circumvent the disclosure of third-party litigation funding."

The proposed remedy is to trifurcate loss cost data, disaggregating a single composite figure into claims closed without payment, litigated claims and non-litigated claims, each weighted by its own frequency. Demotech contends that the added granularity would allow insurers and regulators to price the litigated portion of a book directly rather than absorbing it into a blended average.