Europe: The sky is not the limit

September 27 2016

This summer, the Court of Justice of the EU issued a ruling that dealt with the application of article 14 of the EU IP Enforcement Directive. According to this article, EU member states must ensure that in court cases, the reasonable and proportionate legal costs and other expenses incurred by the successful party shall, as a general rule, be borne by the losing party. While one could gather from this that the sky's the limit as far as costs compensations in IP cases go, the Court ruling teaches us there may in fact be limits.

It all started with a court case in Belgium, in which claims were made to stop a patent infringement. The claims were denied and the plaintiff was ordered to bear the fixed costs (€11,000) of the defendant, based on provisions of national procedural law. In appeal, the amount of the fixed costs was under discussion, the original defendant claiming that the national provisions of fixed costs were not in conformity with Article 14 of the Directive, and that the plaintiff should pay all costs incurred, amounting to €225,862.55, which is obviously much higher than the fixed costs.

Accordingly, the Court had to rule whether national systems of fixed costs are in conflict with Article 14 of the Directive. Referring to the common goal of the Directive, the Court pointed out that IP infringers must be discouraged from infringing IP rights, justifying high cost awards. At the same time, Article 14 of the Directive merely states that the compensation covers the reasonable and proportionate costs, which does not imply all costs, but only "at least a significant and appropriate part of the reasonable costs". As long as these particular criteria are met, national law provisions are allowed to impose an absolute threshold above which no costs are compensated.

In national IP practices such as the Dutch, where full cost awards are nowadays the rule rather than the exception, this ruling may very well be regarded as the beginning of a new trend.