Procedural cost indemnity in IP related cases

Submitted by Thomas Baudewijn on December 26, 2016
pocket money

A couple of months ago the Court of Justice decided in case C-57/15 between United Video Properties and Telenet that in IP related litigation the successful party can claim a significant and appropriate part of the reasonable costs it incurred for attorneys and technical advisers such as patent attorneys.

The origins of this judgment can be found in a dispute between United Video Properties and Telenet in which the latter had been summoned to pay a license fee as a compensation for the TV guide functionality Telenet offers to its subscribers of digital TV. United Video Properties claimed to have a fairly substantial patent portfolio relating to this functionality and thus its rights were allegedly infringed. That did not impress Telenet who claimed that there was a lot of prior art, causing the patents to be null and void. The Belgian courts agreed, revoked a patent and ruled that as a result there was no infringement.

Great success for Telenet then? Not really. Of course winning the case was positive, but at the same time the patents were invalid and this was known beforehand, so this was merely a logical outcome. Winning the case didn’t yield any benefit for Telenet, despite having invested about 225000,- EUR in attorney and patent attorney fees.

Of course under Belgian law the unsuccessful party needs to pay the winning party the procedural cost indemnity covering the attorney fees, but these amounts are capped, allowing Telenet to only recover a maximum of 24000,- EUR. And to make things even worse case-law of the Court of Cassation does not allow to recover the costs incurred for technical advisers unless they were a necessary consequence of a fault of the unsuccessful party, thereby making it impossible to recover the patent attorney fees.

Victory tasted bittersweet and thus Telenet sought a way to recover a higher amount than was permitted under Belgian law. For this they invoked Enforcement Directive 2004/48/EC which states the following in article 14:

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.

This allowed Telenet to argue that the caps imposed by Belgian procedural law cannot be applied because they do not allow to recover reasonable and proportionate legal costs and other expenses. Moreover this provision would not allow to make the recovery of patent attorney fees depend on the existence of a fault committed by the unsuccessful party. Therefore Belgian law would violate EU law and such is not permitted.

In first instance the court rejected this point of view, however in appeal the case is referred to the Court of Justice, that does agree with Telenet’s stance. The Court rules that the caps by themselves are permitted, but only if they allow the successful party to recover a significant and appropriate part of the reasonable costs. Furthermore costs for technical advisers should also be recovered without the need for a fault on the part of the unsuccessful party. It is sufficient that those costs are directly and closely linked to a judicial action seeking to have an intellectual property right upheld.

In practice this means that first it must be determined if the cost are reasonable. If they are, they must be compared to the applicable cap to see if such cap represents a significant and appropriate part of the costs. In the affirmative the cap will have to applied, but when it doesn’t the cap should not apply and a higher amount can be awarded.

At the time of this writing the Court of Appeal of Antwerp still needs to render its verdict and thus it remains to be seen how much of the costs Telenet will be able to recover.

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