The CJEU Rules on Legal Costs with Regard to IP Proceedings: Judgment of July 28th 2016, C-57/15, “United Video Properties Inc.”
Nuria Ruiz
The retrieval of legal costs by the successful party in a judicial proceeding is a controversial issue. On the one hand, the imposition of the totality of legal costs to the losing party could lead to disproportionate situations, mainly in cases in which the agreed lawyer fees are higher than usual. However, the same disproportion could be observed in cases where the successful party can only recover a minor fraction of the expenses generated by the proceeding.
In view of this situation, the Member States have implemented in their national legislations different systems aiming to reconcile the interests at stake. Nevertheless, such solutions, formulated in general terms and applicable to any type of proceedings, may not be suitable to reach the intended purpose when applied to especially complex and specialized areas of law, as is the case of intellectual property law, and more precisely, the field of patents. Actually, the impossibility to obtain a reasonable compensation regarding the legal costs of a judicial proceeding might act as a considerable deterrent regarding the right holders.
In order to solve this problem, a provision concerning legal costs was included in Directive 2004/48 on the enforcement of intellectual property rights, namely art. 14, establishing that: “Member states shall ensure that reasonable and proportionate legal costs and other expenses incurred by the successful party shall, as a general rule, be borne by the unsuccessful party, unless equity does not allow this”.
As we shall see, in its ruling of 28th of July 2016, C-57/15 “United Video Properties Inc.”, the CJEU analyses the compatibility with EU law of the Belgian national system on legal costs.
This case arose from a conflict between United Video Properties Inc. and Telenet NV. The former, right holder of a patent, brought an infringement action against Telenet before the Belgian Courts. The Commercial Court of Antwerp dismissed that action and declared the patent at issue to be invalid. Such ruling was appealed by United Video Properties, but in the light of the unfavorable outcome of the case in other European jurisdictions, the patent owner finally decided to discontinue the appeal.
As a consequence, the defendant Telenet NV requested that United Video Properties be ordered to reimburse 185 462.55€ in respect of lawyers’ fees, and 44 400€ in respect of the assistance provided by an agent specialized in the field of patents.
According to the Belgian Judicial Code, the unsuccessful party in a judicial proceeding must be ordered to bear the legal costs in every final decision. Such indemnity must be determined by the judge taking into account the circumstances of the case, albeit in accordance with the minimal and maximum amounts predefined by Royal Decree. Furthermore, following the case law of the Belgian Court of Cassation, the reimbursement of the costs of a technical adviser is provided only in the case of fault on the part of the unsuccessful party.
In view of this limitation, Telenet argued that the Belgian legislation was contrary to the abovementioned art. 14 of Directive 2004/48. This led to the ruling discussed in the present post, in which the CJEU answers the questions referred by the Court of Appeal of Antwerp, summarized hereafter:
- ¿Is art. 14 of Directive 2004/48 contrary to a national legislation establishing a system of predefined flat rates regarding legal costs?
- ¿Is art. 14 compatible with the fault requirement concerning the reimbursement of the costs of a technical adviser?
With regard to the first question, the CJEU rules that a system of predefined flat rates as the Belgian is not per se contrary to art. 14, provided that it ensures “on the one hand, that that limit reflects the reality of the rates charged for the services of a lawyer in the field of intellectual property, and, on the other, that, at the very least, a significant and appropriate part of the reasonable costs actually incurred by the successful party are borne by the unsuccessful party”
Vis-à-vis the second question, the CJEU starts from a distinction: according to the Directive, the costs associated to the intervention of a technical adviser can fit in two different provisions: article 13, concerning damages, which considers the infringer’s fault, and art. 14, related to “legal costs and other expenses”. Such other expenses are defined by the Court as “those costs that are directly and closely related to the judicial proceedings”.
There being no reference to the unsuccessful party’s fault in the analyzed art. 14, in the case that the characteristics of the technical expert’s intervention allow to consider the accrued costs as having a close link to the proceeding, the case law of the Belgian Court of Cassation would be incompatible with EU law.
In conclusion, this CJEU ruling will probably lead to a reform of the Belgian Law regarding legal costs, at the very least concerning complex procedures, as is the case of IP matters, allowing the right holders to obtain an adequate compensation.
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