UPC: managing costs through litigation funding and insurance
One of the recurring concerns around the Unified Patent Court is cost.
For many companies, the UPC is attractive in theory: one court, one action, multi-jurisdictional relief. But in practice, the financial exposure may be daunting, especially for SMEs. Legal fees can easily reach hundreds of thousands of euros. In addition, a claimant may be ordered to provide security for the defendant’s legal costs, and that security may be for a similarly substantial amount.
This creates an obvious access-to-justice issue: what happens when a smaller innovative company has a valuable patent, a credible infringement case, but cannot easily immobilise large amounts of cash or obtain a bank guarantee?
Two tools can help companies overcome the impasse.
1. Litigation funding
Third-party litigation funding is increasingly relevant in patent litigation. In simple terms, an external funder finances all or part of the litigation costs – including lawyers, patent attorneys, court fees – in exchange for a return if the case is successful, usually as a percentage of the recovery or a multiple of the capital deployed.
The UPC is particularly relevant in this context. In fact, precisely because it enables multi-jurisdictional patent enforcement through a single action, the potential value of a successful claim may be high enough to attract specialised litigation finance.
On the other hand, funding is not automatic: funders will typically look closely at validity, infringement, quantum, enforceability, settlement prospects and the defendant’s ability to pay. They will also assess timing, budget predictability and adverse-cost exposure.
Funding is therefore not a solution for every case. It requires early case assessment and a realistic view of the of the merits of one’s claims and the financial implications of the dispute. But for SMEs with strong patents and limited litigation budgets, it may make the difference between having rights on paper and being able to enforce them in practice.
2. Litigation insurance
After-the-event (ATE) litigation insurance can play an important role in relation to the risk of having to pay the other party’s legal costs, and whether it is necessary to provide a security deposit to cover those costs.
In Syntorr v Arthrex (UPC_CoA_889/2025, order of 18.02.2026), the claimant had been ordered by the Munich Local Division to provide €2 million in security for costs by deposit or bank guarantee. Such measures are commonplace in proceedings before the UPC. However, in that case the Court of Appeal set aside that order based on Syntorr’s litigation insurance.
To be clear, the Court did not state that insurance can formally replace a deposit or bank guarantee. Instead, it held that the insurance policy was part of the claimant’s financial position and had to be considered when assessing whether, in the first place, it was necessary to require a guarantee.
The policy was therefore examined in detail by the Court and found to be satisfactory because it:
- covered the defendants’ legal costs;
- included a €4 million indemnity limit;
- contained an anti-avoidance endorsement;
- gave the defendants direct enforcement rights against the insurer; and
- was issued by an EU-based insurer that, as such, must comply with the Solvency II Directive.
Considering that insurance structure, the Court found that there was no legitimate and real concern that a possible costs order would not be recoverable or would be enforceable only in an unduly burdensome way. Hence, no security for costs was needed.
For SMEs, this is significant. A properly structured ATE legal insurance policy may help avoid the need to lock up cash or procure an expensive bank guarantee.
3. Conclusions
UPC litigation is expensive, but not necessarily inaccessible.
For SMEs, the real question is not only whether they have the cash to litigate, but whether they can put in place the right funding and insurance arrangements to make UPC enforcement financially viable.
