Procedural indemnity in
Intellectual Property disputes

Does a recent judgment of the European Court of Justice
provide the possibility to claim the lawyer’s fees
from the unsuccessful party?

1.    Procedural cost indemnity

Contrary to other jurisdictions, lawyer’s fees do not constitute damages or costs, which have to be borne by the unsuccessful party when he loses a procedure in Belgium.

On the other hand, the Belgian legal system provides for the procedural cost indemnity.

This indemnity serves as a flat-rate compensation for the lawyer’s fees and the amount depends on the value of the claim. If a claim would not be quantifiable, the normal procedural cost indemnity amounts to 1.440 euro and the maximum amount is set at 12.000 euro.

The procedural cost indemnity is part of the legal costs, which have to be borne by the unsuccessful party.

2.    Intellectual Property disputes

Disputes on Intellectual Property, such as a cessation claim, are often not quantifiable. The successful party is awarded with the same flat-rate amount, regardless of the lawyer’s fees he had to bear in order to carry out his defense.

3.    The judgment of the European Court of Justice

On 28 July 2016, the European Court of Justice has rendered a judgment which questions the amount of the procedural indemnity cost in Intellectual Property litigation.

When judging Intellectual Property cases, the measures provided by the Enforcement Directive have to be taken into account  (Directive 2004/48/EC of 29 April 2004 on the enforcement of intellectual property rights). In this regard, Article 14 of the Enforcement Directive 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.

Based on Article 14 of the Enforcement Directive, it should be possible for the successful party to reclaim his lawyer’s fees from the unsuccessful party, except if equity would prevent this.

The current system of the procedural indemnity cost does not allow this.

Regarding the dispute, which was at the origin of the judgment of the European Court, the lawyer’s fees of the successful party amounted to 185.000 euro. The maximum procedural indemnity cost was only a fraction of this amount.

The Court of Appeal of Antwerp requested a preliminary ruling from the Court of Justice concerning the interpretation of Article 14 of the Enforcement Directive. The Court of Appeal asked whether Article 14 of the Enforcement Directive opposes a system of flat-rate amounts, with an absolute maximum amount concerning the legal costs.

According to the Court of Justice, legislation providing for a flat-rate of reimbursement of lawyer’s fees could be justified, provided that it is intended to ensure the reasonableness of the costs to be reimbursed. In this regard, factors such as the subject matter of the proceedings, the sum involved, or the work to be carried out to represent the client have to be taken into consideration.

On the other hand, the Court states that it is not justified to work with flat-rate amounts, which are significantly below the average rate actually charged for the services of a lawyer in that Member State.

The Court of Justice notes that imposing significant low legal costs on the unsuccessful party would diminish the dissuasive effect of the measures and procedures of the Enforcement Directive. Such a legislation would be, according to the Court of Justice, incompatible with one of the main goals of the Enforcement Directive.

The Court of Justice holds that the Enforcement Directive does not prevent legislation, which determines the amount of the legal costs. However, the Enforcement Directive does oppose national legislation, with flat-rate amounts, which does not guarantee that a significant part of the legal costs of the successful party are borne by the unsuccessful party.

It is now up to the Court of Appeal of Antwerp to determine whether the amount of 12.000 euro is a significant and appropriate part of the reasonable costs actually incurred by the successful party.

4.    Conclusion

This judgment opens the door in Intellectual Property disputes, to reclaim the actual lawyer’s fees from the unsuccessful party, instead of asking the procedural indemnity cost.

It is possible that, following this judgment, the legislator will create a new system of procedural indemnity costs, specifically for intellectual property disputes. In that event, the procedural indemnity cost will have to be a realistic reflection of the normal lawyer’s fees incurred in such procedures.

06 September 2016

Lynn Pype - lynn.pype@peeters-law.be
Griet Verfaillie - griet.verfaillie@peeters-law.be

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