A system providing for flat-rate tariffs to reimburse the costs of legal assistance paid by the losing party is conformed to EU law.

In proceedings with reference to intellectual property, flat-rate tariffs for legal assistance paid by the losing party are conform to European Union law. That is what the Fifth Chamber of the EU Court of Justice stated in its judgment of 28 July in order to respond to the preliminary ruling about the case C 57/15 issued by the Court of appeal of Antwerp, Belgium.

A company owning a patent dragged another company to its national court in order to ascertain its patent infringement and consequently have the violation ceased. However, the appeal was rejected by the commercial court of Antwerp, which had annulled the patent and sentenced the appellant to pay the other company of a procedural indemnity for the first instance of 11,000 Euros, namely the maximum amount that can be required with regard to the fees paid to the lawyer according to the Belgian legislation.

However, as the implicated company had considered its costs widely in excess of the abovementioned amount, it lamented that the Belgian legislation was contrary to article 14 of Directive 2004/48, which prevents Member States from both setting an upper limit to reimbursement for attorney fees and a condition of a criminal offence as a necessary element to reimburse other expenses incurred by the prevailing party in the litigation.

The reasons of the European Court of Justice

In ruling on the matter, the European Court recalled first that article 14 of Directive 2004/48/EC on the enforcement of intellectual property rights enshrines the principle that the reasonable and proportionate legal costs incurred by the successful party must normally be borne by the losing party, except in cases where compliance with the principle of fairness is at stake. Within the concept of “legal costs” shall be obliged to reimburse the losing party is included, among other things, the fees of a lawyer.

Moreover, according to aforementioned article, Member States are supposed to ensure the reimbursement of “reasonable” legal expenses. At the same time, article 3, paragraph 1, of the same directive provides that the procedures laid down by the Member States should not be unnecessarily expensive.

Consequently,  legislation providing for flat-rate tariffs for reimbursement of fees of lawyers may be warranted in principle – provided that this is intended to ensure the reasonableness of reimbursable expenses and takes into account factors such as the matter of the dispute, its value or the work to be done for the defense of the right in question.

Conversely, a policy that requires the losing party to endure the “reasonable” legal costs cannot justify – for the purpose of implementing in a Member State of article 14 of Directive 2004/48 – legislation prescribing flat rates lower than average rates effectively applied to the services provided by lawyers in that Member State.

Such legislation would be incompatible with article 3, paragraph 2, of Directive 2004/48, which states that procedures and remedies provided for by the directive should be dissuasive. Therefore, if the infringer were condemned solely for the reimbursement of a small portion of the reasonable costs incurred by the owner of the intellectual property right in order to pay the lawyer, the deterrent effect of an infringement action would be severely compromised.

The main objective pursued by the Directive 2004/48, that is to ensure a high level of protection of intellectual property rights in the internal market, would therefore be affected by this legislation.

In conclusion, it should be considered how article 14 of Directive 2004/48 establishes that the legal costs by the unsuccessful party must be “proportionate” and these cannot be evaluated regardless of the costs that the prevailing party has specifically advocated for legal assistance, as long as they are reasonable.

Although the requirement of proportionality does not imply that the unsuccessful party should inevitably reimburse the costs incurred by the other party, the latter is nevertheless entitled to get refunded of, at least, a significant and reasonable part of the expenses it actually incurred.

The principle beneath article 14

Therefore, a national legislation imposing an absolute limit to the costs of legal assistance must ensure that, on the one hand, this limit expresses the rates actually charged forlegal aid services in the field of intellectual property and, on the other hand, at least some relevant and appropriate reasonable expenditure actually borne by the successful party is supported by the losing party.

Such legislation, in particular in case the limit were too low, is not such as to ensure that the amount of such expenditure does not exceed the limit set for the reimbursement due to the successful party to become disproportionate or, where appropriate, article 14 of the directive, by subtracting insignificant 2004/48 on its effectiveness.