The UPC Court of Appeal’s order in Kodak v Fujifilm of 14 October 2025 (UPC_CoA_699/2025) provides important clarifications on the enforcement of penalty payments for non-compliance with terms of UPC court orders.
In said order, the Court of Appeal sets out in numerous headnotes the framework for requesting and enforcing penalty payments. The decision underscores the importance of detailed and timely procedural considerations and early strategic planning. The risk of considerable and efficiently enforceable penalty payments could, in addition to the risk of a geographically broad injunction, prompt defendants to consider settlement agreements before a decision on the merits is made.
Claimants should consider applying for a penalty order early on, such as in their statement of claim. Such application should include suggested penalty sums and time periods for compliance. It can also be in the claimant’s interest to detail the evidence required, but sufficient, to show timely and full compliance by the defendant. Having the required evidence defined already with the penalty order could simplify the enforcement of penalty payments.
Defendants should in response to the claimant’s application for a penalty order comment on penalty sums and time periods for compliance (whether suggested by the claimant or not) and where needed on the suggested evidence required to show compliance. The burden of proof of full and timely compliance lies with the defendant. If compliance with the terms of a requested order raises reasonably foreseeable confidentiality issues, these should be raised at an early stage to avoid being deemed late filed.
If no time period for compliance is specified in the penalty order, which should be a rare case, the claimant will set it. The time period set by the claimant must be notified to the defendant when notifying intention to enforce, or in the case of a provisional measure with or immediately after service of the order. If the defendant intends to dispute the reasonableness of the time period set by the claimant, they should do it immediately after having been notified of it.
A key ruling of the Court of Appeal in Kodak v Fujifilm is that penalty payments can only be enforced if a prior penalty order has been issued by the Court. Otherwise, any penalty payment would lack legal basis. This is regardless of whether the defendant understood that the Court intends to impose payment of a penalty upon non-compliance. The Court of Appeal finds the need for a prior penalty order to be a consequence of the wording "penalty payments provided for in the order" of Rule 354(4) of the Rules of Procedure.
A (prior) penalty order can be made in the operative part of the main decision or order, or a further order or decision. A reference to the possibility of penalty payments in the grounds for an order or decision alone is insufficient to constitute a valid penalty order.
The Court of Appeal explicitly confirmed that a penalty order does not have to be issued together with the order itself but can be issued in a separate later order. This applies regardless of whether a prior request was made but rejected, or a penalty order is requested later for the first time. The Court of Appeal recognizes that circumstances and the need for a penalty order may change over time.
A later penalty order should however be an exception. Generally, the penalty order is included in the order or decision on the merits as this enhances legal certainty. Thus, although the Court of Appeal takes a pragmatic approach allowing separate later requests for penalty orders improving enforceability, early and detailed applications are encouraged for enhanced legal certainty.
Any penalty sums and time periods for compliance will, despite the parties’ suggestions and comments, be set by the Court. The Court can choose to set a maximum sum, however such maximum sum may be increased in any further orders, for example upon continued non-compliance.
A penalty does not become automatically payable if the claimant alleges non-compliance. Instead, the claimant must request the Court to order the defendant to pay the penalty and, in such proceedings, both parties will be heard (RoP 354.4). This means a further order in which the Court may use its discretion. Especially, the court may deviate from the penalty terms in the prior penalty order in favor of the defendant, if circumstances so require. The defendant should present and substantiate facts in support of mitigation in its favor.
The Court of Appeal seems to take a pragmatic approach to penalty payments. The possibility of later applications for penalty orders and an increased maximum sum upon continued non-compliance gives claimants tools that can be used before the UPC to incentivize defendants to comply with UPC court orders.
This is without giving up on the pursuit of early legal certainty. The Court of Appeal seems to encourage early and detailed applications for penalty orders. Having the details of penalty payments, that is the maximum sums, time periods for compliance and evidence needed to show compliance, set out already in the main decision or order could, in addition to improving legal certainty, also streamline enforcement of penalty payments.
The Court, however, retains its discretion to take the circumstances of the case into consideration when making orders of penalty payments.