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Thursday, 29 January 2015

Belgium asks CJEU: does the Enforcement Directive allow cost-capping in IP litigation?

From Stijn Debaene and Hakim Haouideg (fieldfisher, Brussels: katpat!) comes some pretty hot news from Belgium which ties in to some extent with yesterday's guest Katpost by Barbara Cookson on the recovery of costs in patent litigation -- but it goes wider than that and, like Belgian chocolates, is likely to make an impact that reaches from one end of Europe to the other, and beyond. Stijn and Hakim write:
In a decision of 26 January 2015, the Antwerp Court of Appeal decided to refer some preliminary questions to the Court of Justice of the European Union (CJEU) in a patent infringement action brought by United Video Properties (UVP) against Telenet.

In April 2012 [and thankfully not 2002, as an earlier version of this blogpost erroneously stated] the President of the Antwerp Commercial Court revoked the Belgian part of United Video Properties' patent for lack of novelty. UVP appealed to the Antwerp Court of Appeal but, after a negative decision in the United Kingdom on the UK part of the same patent (in proceedings against Virgin Media), UVP withdrew its appeal. This meant that the only issue that remained to be decided was the costs.

Telenet argued that, if Belgian law as it stands today were to be applied,
* it would only recover a small part of its attorney fees. The Belgian Act of 21 April 2007 and a Royal Decree of 26 October 2007 indeed provide that only small capped amounts can be recovered from the losing party as compensation for the attorney fees of the successful party.

* it would not recover the fees it paid to its patent attorney as Belgian case law only provides for the possibility to recover this type of costs where the unsuccessful party acted wrongfully and the fees were incurred in consequence of that wrongdoing.
Accordingly, argued Telenet, Belgian law violates Article 14 of IP Enforcement Directive 2004/48 ["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"] and asked the Antwerp Court of Appeal to refer preliminary questions to the CJEU. On 26 January 2015 the Antwerp Court of Appeal in essence asked the CJEU whether Article 14 may be interpreted as authorising
* a system of small capped amounts as provided for by the Belgian Act of 21 April 2007 and a Royal Decree of 26 October 2007,

* case law that holds that the successful party can recover the fees it paid to a technical expert only when the losing party acted wrongfully.
We believe this case potentially has a huge European impact, as Belgium is not the only Member State to have a system under which only a small part of the real attorney fees can be recovered from the losing party in a IP dispute.
Says the IPKat, it's plain from the wording of the questions that the referring court, omitting the word "patent", contemplates a ruling that encompasses all forms of IP litigation and not merely patent suits. The CJEU, however, has a track record of not giving answers that run wider than the facts of the underlying national litigation. While it is important to take account of considerations of procedural economy and of not extending a ruling beyond points on which the parties are prepared to argue, it seems immediately apparent to this Kat that there is a more important reason for answering the Antwerp court's broad questions quite narrowly.  The words "reasonable and proportional legal costs" are likely to measured by quite different yardsticks in patent litigation than in cases involving trade marks, copyright or designs and the relatively short life of the patent and the impact of technological obsolescence may justify additional expenditure. While it is always annoying to have to keep returning to the CJEU to get it to amplify or fine-tune earlier rulings, that may still be more desirable than giving a broad ruling that causes subsequent injustice or inconvenience to national trial courts.

Every successful IP
litigant's costs dream ...
Merpel adds, the words "reasonable and proportional legal costs" in Article 14 will be an invitation to counsel to plead before the CJEU that these concepts should also be measured against the ability to recover costs in actions that are not covered by implementation of the IP Enforcement Directive. For example, Recital 13 leaves it to Member States to choose whether to extend its provisions so as to cover actions for unfair competition, parasitic copying and the like.  Will the mandatory recovery of "reasonable and proportional legal costs" in litigation involving the traditional IP rights be treated differently depending on whether that principle does, or does not, extend to other rights, she wonders -- and will a different cost-capping regime determine that, in some countries, breaches of IP licences will be treated as IP infringements rather than breaches of contract?


Andy J said...

Jeremy, Since no posting which includes the word 'patent' goes uncommented on for long, I thought I would get my two pence worth in early. I think your statement
"which ties in to some extent with yesterday's guest Katpost by Barbara Cookson on the recovery of costs in patent litigation"
requires a comma after 'Cookson', because of course the IPEC does not deal with patent cases.
I trust this meets the requisite level of pedantry for a patent posting!

Darren Smyth said...

Sorry Andy did you say "of course the IPEC does not deal with patent cases"? Of course it does, as its former name of the Patents County Court makes clear!

Jeremy said...

Andy J: to substantiate Darren's response (since, when it comes to patents, anything said on this blog is assumed by some of our readers to be untrue unless substantiated) here are three patent cases that have come before IPEC in recent times:

Anonymous said...

I knew they shouldn't have changed the name of that court! Perhaps 'and patents' needs to be squeezed back into the title somewhere.

Anonymous said...

Presumably there are 2 types of scenarios here: 1. How much should be awarded by 'normal' courts, and 2. How does the Directive apply when the litigants have chosen a 'small claims' type of court or one where it is known that there is capping of fees/damages. The Directive should not apply where by their actions the litigants have waived the right to proportionate legal costs.

Andy J said...

That'll teach me to be a smart arse. Of course I was thinking of the Small Claims Track of the IPEC, so not relevant to the case Barbara Cookson was reporting. Mea culpa.

Anonymous said...

There is already a case dealing with art 14 (C-406/09). Further, the authors of the recent edition of the Modern Law of Patents (15.164 and 15.165) question cost capping under the Directive. They suggest that a Claimant who starts proceedings in a cost capped tribunal cannot complain as they are consenting. But the rule should be significant where a claimant resists a transfer application to the IPEC from the Patents Court.

Also, it is important to note that the rule applies only against the infringer (defendant) and not against the claimant. So a defendant cannot complain about capped costs (unless we have another "not similar" = "similar" occurrence).

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