One of the objectives of the Unified Patent Court (UPC) is to improve access to the European patent system, for example by reducing the costs and complexity of obtaining and enforcing patent rights. UPC’s Court of Appeal decision on February 18, 2026 (Case Number: UPC_CoA_890/2025). represents a further step towards achieving that goal.
In its ruling in the proceedings between Arthrex and Syntorr, the Court of Appeal confirmed that litigation insurances may constitute an adequate security for costs. The Court clarified that the security for costs under the UPC framework is not limited to traditional instruments such as cash deposits or bank guarantees.
Security for costs is a provisional measure intended to protect defendants against the risk that their incurred costs will not be paid for by the applicant. While the concept has its origins in common law jurisdictions, it is also embedded in the UPC legislation.
Article 69(4) of the Unified Patent Court Agreement (UPCA) provides that, upon a reasoned request by the defendant, the Court may order the applicant to provide adequate security for legal costs and other expenses. Rule 158.1 of the Rules of Procedure (RoP) gives the Court the right to decide whether security is appropriate and, if so, in what form and within which term it should be provided. The Rule refers to deposits or bank guarantees as examples of acceptable security.
In the appeal between Arthrex and Syntorr, the Court of Appeal was asked whether a litigation insurance policy is an adequate security for costs. In this case, the lower Court has ordered Syntorr (applicant before the court of first instance) to provide security for costs of up to 2.000.000 EUR, either by bank guarantee or by deposit.
The Court of Appeal ruled that R. 158.1 should not be interpreted exhaustively; the references to the deposit and bank guarantee do not preclude other forms of security from being acceptable. According to the Court, a litigation insurance can provide adequate protection for the defendant’s recoverable costs. Whether this is the case, must be assessed based on the policy conditions. Relevant considerations include, for example whether, reimbursement can be obtained without undue burden and what the consequences of termination for the policy would be for the security provided.
This judgements shows the importance of submitting the insurance policy in the proceedings when a party seeks to rely on litigation insurance as security for costs. This confirms the Court of Appeal’s ruling in ICPillar (Case Number: UPC_CoA_301/2024), where litigation insurance was rejected as security because the policy had not been submitted during the proceedings at first instance.
This decision may have broader implications for the UPC system. The risk of being ordered to provide security for costs and its financial position, are factors that are often taken into account by companies when deciding whether to initiate proceedings before the UPC. Reimbursement of the costs to the successful party is subject to a ceiling, which is determined by reference to the value of the proceedings. That ceiling forms the basis for recoverable costs determines the amount of security that may be ordered. In practice, the ceilings for the recoverable costs (and thus the security deposits) can be substantial, ranging from several ten thousand to millions of euros (as set out in the scale of ceilings for recoverable costs of the Administrative Committee).
The acceptance of litigation insurance as a form of security of costs reduces financial barriers for applicants to initiate proceedings before the UPC. SMEs, which often have limited liquidity and/or creditworthiness, may now cover the risk of securities by taking out an appropriate litigation insurance. This decision may also create (more) opportunities for NPEs. However, all companies must choose their insurance wisely; the policy terms will be decisive in determining whether litigation insurance will be accepted as adequate security for costs by the UPC.
