Belgium: Room for Cost-capping Litigation Fees under IP Enforcement Directive?

On 27 January 2015, the Antwerp Court of Appeal referred two preliminary questions to the Court of Justice of the European Union (CJEU) concerning the interpretation of article 14 of Enforcement Directive 2004/48/EG. In short, the CJEU is asked whether article 14 allows Member States to impose systems for the recovery of litigation fees in IP matters based on (small) fixed amounts. 

Article 14 of the Enforcement Directive 2004/48/EG 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 allows this.’ 

Before the Antwerp Court of Appeal, Telenet, defendant in appeal and the successful party in first instance, is seeking full recovery of its legal costs from the appellant, United Video Properties. The amount claimed is more than 200,000 Euros. United Video Properties, on the other hand, refers to the Belgian statutory legal cost recovery system imposing a maximum recovery sum of merely a fraction of the amount claimed. The system provides for the recovery of capped amounts that differ depending on the total sum of the legal costs claimed.  According to Telenet, the national cost-capping system constitutes a violation of article 14 of the Enforcement Directive. The Belgian laws impose maximum recovery fees which cannot be held to be ‘reasonable and proportionate’ as required by the Directive. 

Based on the arguments put forward by the parties, the Antwerp Court of Appeal refers questions of interpretation to the CJEU to determine whether the cost-capping system leads to unreasonable and disproportionate results with regard to both the recovery of attorney fees and the fees of technical experts. 

As article 14 refers to both legal costs and ‘other expenses’, the question arises whether the latter may also not be subjected to additional remuneration requirements. In Belgium, some courts held that technical expert fees can only be recovered in case the successful party proves that the unsuccessful party has acted wrongfully, subsequently resulting in the technical expert costs. 

The questions referred to the CJEU are the following: 

1. Do the terms ‘reasonable and proportionate legal costs and other expenses’ in article 14 of the Enforcement Directive oppose Belgian laws allowing judges to take into account the specific characteristics of the case and taking as a starting point a system of varied fixed rates regarding the compensation of legal costs? 
2. Do the terms ‘reasonable and proportionate legal costs and other expenses’ in article 14 of the Enforcement Directive oppose case law in which it was held that the costs of technical experts can only be recovered in case of a wrongful act (contractual or non-contractual)? 

The answers of the CJEU to these questions potentially have a considerable impact, as Belgium is not the only Member State having enacted a remuneration system limiting the amount of legal costs that can be recovered from the unsuccessful party in intellectual property matters. 

By contrast, in the Netherlands, the starting point in intellectual property matters is that the successful party is awarded full compensation of legal costs on the basis of a statutory provision. For the purpose of providing legal practice with some guidelines as to the amounts to be regarded as ‘reasonable and proportionate’, the Dutch judiciary drafted an indicative rates document stating the costs likely to be incurred in the various stages of legal proceedings such as ‘simple proceedings on the merits’ and ‘injunctive proceedings in appeal’. The complexity of the case allows for a higher indicative rate to apply. Notwithstanding the rates included in the document, the cost compensation order eventually to be given by the competent court may allow for a higher or smaller sum to be recovered compared to the indicative rates. In addition, where the opponent does not refute the amount of legal costs claimed, the reasonably claimed costs are generally awarded even though they exceed the indicative rates. The indicative rates do not apply to patent disputes, so that in such cases cost compensation orders are not unlikely to amount to sums triple or quadruple the amount set by the indicative rates. 

Based on the judgement of the CJEU in United Video Properties v Telenet, systems like the Dutch one may have to be imposed in Belgium – and other legal cost-capping Member States for that matter – as well. In the meantime, fixed recovery fees systems are something to be kept in mind when litigating IP matters.