“Litigation funders and insurers will not take any incalculable risks”

The interest of litigation funders and risk insurers in patent litigation in Europe has increased sharply due to the UPC. Industry insiders confirm this. Streamlined proceedings, the prospect of a central strike against the opponent and more calculable costs in one UPC proceeding instead of many national cases have litigation funders and risk insurers increasingly looking to the UPC.

US litigation funder Burford Capital, for example, shows great interest in patent litigation in Europe. But European companies are now also taking a close look at the opportunities that debt capital offers in litigation campaigns. Last September, a joint event by JUVE Patent and teh US litigation funder, for example, attracted great interest from Eruopean SMEs and big corporates.

“As case law develops and investor familiarity increases, legal finance will become an essential part of patent enforcement in Europe. The UPC not only changes how litigation is conducted but also redefines how patents are valued and financed”, says Christopher Freeman from Burford Capital.

“The interest among litigation funders is definitely high at the moment due to the UPC,” reports a lawyer who advises litigation funders. However, other advisers report that the number of externally financed patent litigation campaigns in Europe is still relatively small. There are no concrete figures on financed patent cases in Europe.

At the JUVE Patent event in Munich, not all participants immediately shouted hurrah. Rather, the general mood among participants was interested but cautious. In-house experts, lawyers and litigation funders agreed that the UPC, a still young court, needs a few more months to become further established.

For the court to reach its full potential, the case law must become more established. Experts are also critically observing the rising case numbers at certain divisions. The most attractive divisions are those that offer expertise and fast decisions. Another important aspect for the financing and risk hedging of lawsuits at the UPC is the procedural costs. These are still difficult to calculate.

A question of security

Recently, however, the Court of Appeal provided more clarity regarding security deposits. In the dispute between Syntorr and Arthrex, it ruled that, going forward, divisions can use a litigation risk insurance policy to assess whether the claimant must provide security at all (case ID: UPC_CoA_890/2025 and UPC_CoA 889/2025). A properly structured and underwritten insurance policy issued by an EU insurer may mean that the claimant no longer has to pay security. Otherwise, the claimant would need to deposit a high amount via cash payment or bank guarantee with the court.

This makes UPC litigation financially more attractive. An insurance policy is more cost-effective than a cash payment or bank guarantee, for which the claimant usually has to provide their bank with high securities. The decision is therefore also positive for risk ensurers and litigation funders. Last week, when the UPC Court of Appeal published its judgement, probably  more than one champagne cork popped at companies in both sectors.

The Court of Appeal judges under presiding judge Ulrike Voß overturned an order from the Munich local division. In the dispute, Syntorr had sought to deposit the substantial total amount of €4 million via an insurance policy. However, the local division rejected this approach, stating that “according to Rule 158(1) RoP, Claimant’s insurance policy is no adequate security.” As a consequence, Syntorr had to lodge a bank guarantee alongside the insurance. Following the Court of Appeal’s judgment, Syntorr no longer has to pay security.

Doors wide open

However, supporters also praised more fairness in the system “This clarification matters because excluding insurance as acceptable security would create a structural gap in the UPCA’s protective framework. Large companies can draw on established banking relationships for guarantees, and individuals may obtain legal aid, yet SMEs often lack such options making enforcement difficult or impossible without insurance-based solutions”, says Jakob Hübert. The German is Head of Germany and Nordics at Navalion. He deals with risk transfer solutions in legal finance and litigation risk insurance

Critics warn that the door is now wide open for all kinds of UPC litigation. This is because the financial risk has been significantly minimised. Some see a wave of NPE litigation rolling towards the new court. Especially because claimants may no longer even need to prove they have a seat in the UPC territory. An insurance policy with a European insurer alone is enough to secure the potential costs for the defendant. Some experts therefore warn of a very high risk for defendants.

Strict examination procedures

In purely practical terms, however, the possibilities are probably not too great at the moment. According to industry experts, only a limited number of risk insurers actually insure such litigation in Europe. And they also look very closely at what they are insuring. Many consider insuring or financing patent litigation a high-risk business.

Litigation funders and risk insurers sometimes work together in campaigns — but not always. Litigation funders also often hedge the risks through their own capital.

Following the Court of Appeal judgment, interest in UPC litigation will increase once again, experts are certain. “As a result of the ruling, we will certainly see more applications to support patent litigation campaigns in Europe,” Jakob Hübert is sure. “However, this does not necessarily mean that we will see a significant increase in litigation supported by litigation funders or risk insurers at the UPC. This is because only the most promising cases are accepted for funding or insurance.”

Experts report that at most a single-digit percentage of patent litigation actually manages to be financed or insured. In any case, funders and insurers will not take any incalculable risks.