German Federal Supreme Court decides on obligation to provide a security for legal costs

In a decision of June 21, 2016, (X ZR 41/15, “Security for legal costs”) the German Federal Supreme Court had to decide the question of whether a patent troll has to provide a security for legal costs in accordance with Article 110 German Code of Civil Procedure. The troll-company was an affiliate of a US-American mother company, having its statutory seat in Dublin (Ireland) at a certain address. In fact, the company was managed from other addresses, one of them being in Dublin as well and one in Turku, Finland. The German Federal Supreme Court did not see an obligation for the plaintiff to provide a security for legal costs, because all places which could be taken into account to determine a place of business were within the European Union. The question of whether a statutory-only seat, which is not a place of business for actually managing the company, within the European Union or in the European Economic Area is sufficient to escape from the obligation to provide a security for legal fees has been denied by the second instance, which was the Higher Regional Court of Düsseldorf. The German Federal Supreme Court has left this question open, because there was, in any case, no place of business to be seen outside of the European Union. The decision is important because, at least according to the Higher Regional Court of Düsseldorf (which is important in patent infringement matters), a mere statutory seat of a patent troll within the European Union or the European Economic Area is not sufficient to escape from the obligation to pay such security bond.