Guidance on IPRED Directive – flat-rate scheme, general obligation and fundamental rights

The IPRED evaluation (de) indicated that rules on reimbursing legal costs differ across the EU and are in some situations insufficient to cover the full costs incurred by the successful party. According to Article 14 of the Directive, the reasonable and proportionate legal costs and other expenses incurred by the successful party are to be borne by the unsuccessful party, unless equity does not allow it. The principle on reimbursing legal costs expressed in Article 14 applies to all types of legal proceedings covered by the Directive, i.e. proceedings on infringement of IPR.

The CJEU explained that legislation providing for a flat rate of reimbursement of a lawyer’s fees could, in principle, be justified, provided that the legislation is intended to ensure that the costs to be reimbursed are reasonable. It would have to take into account factors such as the subject matter of the proceedings, the sum involved, or the work to be carried out to represent the client concerned. This may be the case if that legislation is intended to exclude the reimbursement of excessive costs.

The CJEU also held that the requirement of Article 14 of IPRED that the unsuccessful party must bear ‘reasonable’ legal costs cannot justify national legislation which implements this provision imposing a flat-rate significantly below the average rate actually charged for the services of a lawyer in that Member State. Such legislation would be incompatible with Article 3(2) of IPRED, which states that the measures, procedures and remedies provided for must be dissuasive. National legislation that lays down an absolute limit on costs for lawyer’s assistance must ensure, on the one hand, that that limit reflects the reality of the rates charged for the services of a lawyer in the field of intellectual property.

Article 14 of IPRED does not preclude national legislation providing for a flat-rate scheme to reimburse costs for a lawyer’s assistance, provided that those rates ensure that the costs to be borne by the unsuccessful party are reasonable, taking into account features which are specific to the case. However, Article 14 precludes national legislation providing for flat rates which are too low to ensure that, at the very least, a significant and appropriate part of the reasonable costs incurred by the successful party are borne by the unsuccessful party.

The general obligation in the Directive is to provide for measures, procedures and remedies necessary to enforce IPR. These are to be ‘fair and equitable’ and must not be ‘unnecessarily complicated or costly, or entail unreasonable time-limits or unwarranted delays’; they must also be effective, proportionate and dissuasive, must not act as barriers to trade and must provide safeguards against abuse (Article 3(1) and (2)).

In addition, such measures, procedures and remedies should be determined in each case in a manner allowing the specific characteristics of that case to be taken into due account, including the specific features of each intellectual property right and, where appropriate, the intentional or unintentional character of the infringement. As a result, in order to ensure the balanced use of the civil IPR enforcement system, the competent judicial authorities should generally conduct a case-by- case assessment when considering the grant of the measures, procedures and remedies provided for by IPRED.

In all cases where the provisions of IPRED are interpreted and applied and where various conflicting fundamental rights protected in the EU’s legal order are at stake, it should be ensured that a fair balance is struck between them, in light of the principle of proportionality.