AG Campos Sanchez-Bordona clarifies the "legal costs" to be borne by unsuccessful party in IP proceedings

AG Campos Sanchez-Bordona

How should legal costs and other expenses borne by the successful party in relation to IP proceedings be reimbursed by the unsuccessful party?

This morning Advocate General (AG) Campos Sanchez-Bordona addressed this very question by delivering his Opinion in United Video Properties, Inc v Telenet NV, C-57/15, a reference for a preliminary ruling from the Court of Appeal of Antwerp (Belgium) seeking clarification as to the correct interpretation of Article 14 of the Enforcement Directive. 

This provision states 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 the AG noted at the outset, this reference may appear limited in scope. However it raises "delicate legal problems", notably the effect of EU legislation on national civil procedure laws.

Given that there is a specific provision governing legal costs in the Enforcement Directive, how is it possible to bring the whole Belgian civil procedure code and case law into line with a ‘sectoral’ provision of EU law relating specifically to IP disputes?

Background

This reference arose in relation to the application of the Belgian system to costs in respect of lawyers’ fees and experts’ fees. More specifically, the background proceedings are aimed at establishing: 

(1) the sums which the unsuccessful party in a lawsuit must be required to pay in respect of the successful party’s lawyers’ fees, in the light of the Belgian legislation which provides for an upper limit in that regard; and 

(2) as concerns experts’ fees, who should cover them. 

The area on which the Court of Appeal of Antwerp is seeking guidance from the Court of Justice of the European Union (CJEU) is whether the setting of that limit and the rule derived from national case law are compatible with Article 14 of the Enforcement Directive. More generally, the issue - of no little importance - is whether Member States have a margin of legislative discretion in this area or not.

These are the questions that the Belgian court referred to the CJEU:

"(1)      Do the terms “reasonable and proportionate legal costs and other expenses” in Article 14 of the … Directive preclude the Belgian legislation which offers courts the possibility of taking into account certain well-defined features specific to the case and which provides for a system of varying flat rates in respect of costs for the assistance of a lawyer?

(2)      Do the terms “reasonable and proportionate legal costs and other expenses” in Article 14 of the … Directive preclude the case-law which states that the costs of a technical adviser are recoverable only in the event of fault (contractual or extra-contractual)?"

Is sky the limit?
Not always

The AG analysis

(1) The upper limit for lawyers' fees

The AG began his analysis by observing that the general rule in Article 14 of the Enforcement Directive is that the unsuccessful party must bear the lawyers' fees of the other party, "unless equity does not allow this". It follows that the qualifiers "reasonable and proportionate" [cumulative conditions left to the appreciation of the referring court] are key to the determination of whether a party’s lawyer’s fees must be borne by the party who has been ordered to pay the costs. 

Fees might not be regarded as reasonable if, for instance, a lawyer’s involvement in a particular action was superfluous. As such the costs whose reimbursement is claimed from the unsuccessful party maybe restricted to expenses necessarily incurred by the successful party [para 52].

As regards the issue of proportionality, this entails consideration of a number of factors, including whether the costs at hand are in due proportion to, eg, the subject matter of the proceedings, the sum involved, the complexity of the legal issues arising, the work carried out to represent the client, the financial means of the party against whom the order for costs is made [para 53].

This said, the AG considered Article 14 in light of general principles of EU law (including the principle of legal certainty and the right to an effective remedy in the context of the right of access to justice), the objective (to ensure a high, equivalent and homogeneous level of protection in the internal market) of the Enforcement Directive, and relevant provisions therein. 

He held the view that Article 14 allows: (1) one to recover only the costs that are reasonable and proportionate; and (2) Member States to determine ‘objectively’ and in general terms the maximum amount recoverable, within a scale of the kind in the disputed Belgian legislation [para 64]. 

This means that "[w]hile Article 14 ... was intended to homogenise the legal systems relating to the costs applicable to intellectual property proceedings in all the Member States, it was not aimed at creating parity or narrowing the gap between the lawyers’ fees of the Member States, which are markedly different from one other." [para 73] 

As such, "Article 14 ... does not provide a basis for the Court to ‘correct’ the will of the Belgian legislature ... concerning the maximum limit of fees above which the party against whom an order for costs is made is not obliged to reimburse the fees payable to the other party’s lawyer." [para 75]

Fault? Not a requirement, so cheer up!

(2) The fees of legal experts

Turning to the consideration of the second question, the AG noted at the outset that reimbursement of experts’ expenses (including those of technical experts or advisers) are not subject to the rules applicable to the recovery of lawyers’ fees [para 77].

National legislation includes within the legal costs which the unsuccessful party must pay the costs of ‘witnesses and experts’ who have been involved in the proceedings as a result of the adoption of the ‘measures of inquiry’ decided upon. So far as those experts’ costs are concerned, according to the AG the (subjective) criterion of fault to which the referring court refers does not seem to be applicable but rather the (objective) rule that the successful party is awarded costs [para 80].

Following a detailed analysis, the AG concluded that Article 14 precludes a requirement that fault must exist as a necessary condition for ordering the unsuccessful party to reimburse the reasonable, proportionate and equitable experts’ costs incurred by the successful party, provided that those costs are directly and immediately connected to the pursuit of proceedings for the protection of intellectual property rights.