Hereunder you will find a follow-up to an insightful ruling from the European Court of Justice (ECJ), on which we reported last year. It relates to the interpretation of EU Directive 2004/48 of 29 April 2004 on the enforcement of intellectual property rights (Enforcement Directive), in particular relating to the reimbursement of legal and technical advisor costs.
Recap
Belgian law provides for a system of fixed amounts for lawyer's costs that the winning party may claim from the losing party (the so-called "procedural indemnity").
According to the case law of the Belgian Supreme Court, the costs of a technical advisor are recoverable only in the event of fault of the unsuccessful party, irrespective of whether the fault is contractual or extra-contractual.
On 28 July 2016, the ECJ ruled on a request for a preliminary ruling from the Court of Appeal of Antwerp (Belgium) about the compatibility of (1) the Belgian provisions on the procedural indemnity and (2) the case law on the reimbursement of the costs of a technical advisor within the meaning of Article 14 of the Enforcement Directive.
This Article provides 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".
ECJ Ruling
As regards the first point, the ECJ decided that provisions such as those in Belgian law could, in principle, be justified, (i) provided that it is intended to ensure the reasonableness of the costs to be reimbursed, taking into account factors such as the subject matter of the proceeding, the sum involved or the work to be carried out to represent the client concerned, and (ii) provided that the successful party has a right to the reimbursement of, at the very least, a significant and appropriate part of the reasonable costs actually incurred by that party.
With regard to the second point, the ECJ ruled that the Enforcement Directive does not provide for a condition of fault on the part of the unsuccessful party, that the concept of "other expenses" should be interpreted narrowly, and that one should take the view that only the costs that are directly and closely related to the judicial proceedings fall within this concept.
Hence, more in particular, the costs of a technical advisor may fall within the scope of "other expenses" if they are closely linked to the judicial action in order to have the intellectual property upheld.
Belgian Court Decision
In its long-awaited judgment of 8 May 2017, the Court of Appeal of Antwerp ruled that the Defendant cannot invoke Article 14 of the Enforcement Directive to obtain a procedural indemnity which is higher than the fixed amounts provided for in the Belgian provisions because this Article has no direct effect. Moreover, even though the Court of Appeal acknowledges that it must interpret the Belgian provisions in accordance with the Enforcement Directive as much as possible, the latter states that such a ruling would be contra legem.
Consequently, taking into consideration the complexity of the case, the Court of Appeal allocated an amount of 24,000 EUR (2 x 12,000 EUR) to the Defendant instead of the claimed and actual amount of 263,171.13 EUR for lawyer's costs. This amount of 12,000 EUR is the maximum amount for a procedural indemnity per instance in case of injunction proceedings, which is the most chosen option for IP litigation in Belgium.
Regarding the technical advisor's costs, since the Claimant did not dispute the aforementioned "close link", the Court of Appeal of Antwerp allocated the full amount of the technical advisor's costs to the Defendant, namely 63,804.25 EUR.
The way forward
The Court of Appeal of Antwerp took the view that it was not competent to set aside the Belgian fixed amounts for procedural indemnities even though it cannot be reasonably disputed that in a lot of cases these amounts are not a significant and appropriate part of the reasonable costs actually incurred by the parties.
If followed by other courts, we consider that the Belgian legislator should intervene and recast the procedural indemnity system and in particular should increase the maximum amount of 12,000 EUR so that such is closer to the real legal costs of IP litigation, which are still reasonable in Belgium. As regards the reimbursement of the technical advisor's costs to the winning party, it will be interesting to see how often parties will dispute the required "close link" and more in particular whether these costs actually contributed to the solution of the case.
