CJEU: "Flat-rate" reimbursement for legal fees must cover a significant part of the costs incurred by the successful party

On 28 July 2016, the CJEU issued its decision in the preliminary referral Case C-57/15 United Video Properties. At issue was whether a provision of the Belgium Judicial Code that provides only for a flat-rate reimbursement of legal costs to the successful party was compatible with the Enforcement Directive, namely Article 14 Enforcement Directive, which reads under the heading "Legal costs":

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.

The CJEU held that while Article 14 Enforcement Directive did not prohibit flat-rate reimbursement of legal costs per se, it set limits on how Member States could set the flat-rate. Namely, the costs to be reimbursed by the unsuccessful party must be "proportionate", which means that they must cover "at the very least, a significant and appropriate part of the reasonable costs actually incurred by the successful party". In other words, the ceilings provided by a flat-rate reimbursement tariff must not be so low as to cover only an insignificant part of the actual costs of representation of the successful party. The CJEU reasoned that the dissuasive effect of an action for infringement would be seriously diminished if the infringer could be ordered only to reimburse a small part of the reasonable lawyer’s fees incurred by the injured rightholder, which would be contrary to the Enforcement Directive's principal aim of ensuring a high level of protection of intellectual property rights in the internal market. Of course, the rule not only applies to the right holder - the successful defendant also profits (Merpel notes that a costly "loser pays" rule may also prevent patent trolling).

 

The CJEU was further asked whether a provision that the costs for a technical expert retained by a party only be reimbursed if the unsuccessful party was at fault was compatible with the Enforcement Directive. Here, the Court held that insofar the costs for the expert was "other expenses" in the sense of Article 14 Enforcement Directive, reimbursement could not be conditioned on fault. "Other expenses" in the sense of Article 14 Enforcement Directive are such costs that are directly and closely linked to the litigation. That is not the case for costs associated with market observation and infringement detection, but any technical expertise required for a successful action is closely linked to the litigation.


The case is interesting because the Preparatory Committee for the Unified Patent Court has suggested the adoption of ceilings on recoverable costs (see table below) that, at least for lower values in dispute, may not cover a significant part of the actual litigation expenses of the successful party (they may be raised by up to 50% for values in dispute below EUR 1 million, and up to 2% for values in dispute above EUR 1 million) and must in principle also cover "other expenses" linked to the litigation, such as expert fees. Now, whether and when the UPC will ever become a reality is anybody's guess - should you feel the urge to organize a conference on the topic, draw a number and get in line, please.


Proposed recoverable costs ceilings for UPC litigation (per instance)

Mr Justice Arnold rejects bid to hear infringement of German designation in Rhodia v Molycorp patent jurisdiction tussle

The AmeriKat on  a sleepless summer night
musing on the future of patent litigation

The late night witching hours have begun again for the AmeriKat.  It is during the quiet, warm summer nights without the ding of incoming emails or calls, that she can muse on the state of patent law.  One of the issues that has been preoccupying her time lately has been the future of harmonization for European patent and SPC law, especially in a post-Brexit landscape.  With the ultimate fate of the Unified Patent Court unlikely to be determined any time soon, her attention is returning back to a national court's ability to land grab an other EU Member State's designation for the purposes of patent infringement actions.   The extent of how long the English court's arm is in this respect was a question posed in various guises in last week's interim decision of Mr Justice Arnold in Anan Kasei Co., Ltd & Rhodia Operations S.A.S. v Molycorp Chemicals & Oxides (Europe) [2016] EWHC 1722 .  The IPKat's ever insightful friend, Eibhlin Vardy, picks up the tale:

"Background

Rhodia is the exclusive licensee of the UK and German designations of a European patent entitled "Ceric Oxide and method for production thereof, and catalyst for exhaust gas clarification". Rhodia commenced infringement proceedings in the English High Court alleging that the English domiciled Defendant, Molycorp, had infringed the UK and German designations of the patent.

Molycorp's solicitors filed an acknowledgment of service, indicating that the Defendant intended to defend the claim, but did not intend to challenge jurisdiction. However, on the same day, Molycorp's solicitors wrote to the Claimant giving notice of Molycorp's intention to challenge jurisdiction of the German designation of the patent in Germany, and asserting that in that situation, the English Courts would not have jurisdiction over infringement of the German designation of the patent.

 Rhodia then issued an application for an order for the provision by Molycorp of samples of its ceric oxide products for testing by an independent laboratory instructed on behalf of Rhodia for the purposes of infringement of both the UK and German designations of the patent. Shortly thereafter, Molycorp issued nullity proceedings in the Bundespatentgericht (Federal Patent Court) challenging the validity of the German designation of the patent on the usual grounds (lack of novelty/inventive step, and insufficiency). It was common ground between the parties that the German validity proceedings were due to take approximately two years.

Issues before the Court

There were two issues before the Court:

Ceric Oxide, not to be confused
with cornmeal....

(1) Does the English Patents Court have jurisdiction over the infringement claim in respect of the German designation of the patent?

Rhodia sought to amend its Particulars of Claim and Particulars of Infringement in order to try and bolster its case on jurisdiction in respect of infringement of the German designation of the patent.  The essence of its proposed Amended Particulars of Claim and Particulars of Infringement can be seen from the following excerpts:

"4. The Defendant has infringed the UK and German designations of the Patent as set out in the Particulars of Infringement served herewith. In respect of the German designation of the Patent, if German designation is not invalid (which is to be determined by the German courts) the Defendant's conduct has infringed, and/or would fall within the scope of the claims of, the German designation of the Patent. 

(1) A declaration that each of the UK and German designations of the Patent has been infringed by the Defendant. 

(1A) A declaration that, if German designation is not invalid (which is to be determined by the German courts) the Defendant's conduct has infringed the German designation of the Patent. Alternatively, a declaration that the Defendant's conduct falls within the scope of the claims of the German designation of the Patent (if not found invalid, which is to be determined by the German courts)."

As things stand, the UK remains a member state of the EU, and the issue of jurisdiction falls under Articles 24(4) and 27 of the Recast Brussels I Regulation, which provide as follows:

"Article 24 

The following courts of a Member State shall have exclusive jurisdiction, regardless of the domicile of the parties: 

… 

(4) in proceedings concerned with the registration or validity of patents, trade marks, designs, or other similar rights required to be deposited or registered, irrespective of whether the issue is raised by way of an action or as a defence, the courts of the Member State in which the deposit or registration has been applied for, has taken place or is under the terms of an instrument of the Union or an international convention deemed to have taken place. 

Without prejudice to the jurisdiction of the European Patent Office under the Convention on the Grant of European Patents, signed at Munich on 5 October 1973, the courts of each Member State shall have exclusive jurisdiction in proceedings concerned with the registration or validity of any European patent granted for that Member State; 

Article 27 

Where a court of a Member State is seised of a claim which is principally concerned with a matter over which the courts of another Member State have exclusive jurisdiction by virtue of Article 24, it shall declare of its own motion that it has no jurisdiction." (emphasis added)

It was common ground between the parties that the German Courts have exclusive jurisdiction over the validity of the German designation of the patent. The issue in dispute was whether the reformed allegations of infringement in the proposed Amended Particulars of Claim/Infringement were "concerned with" the validity of the German designation of the patent within Article 24(4), or "principally concerned with" the validity of the German designation within Article 27.

Rhodia contended that they were not, because the claim had been framed to exclude any question on the validity of the German designation. Molycorp contended that they did fall within these provisions of the Recast Brussels I Regulation, because the question of infringement is inseparable from that of validity.

As a vocal objector to tentacles ::shudder::, the AmeriKat is pleased
that the English court's long arm is cut short by
Recast Brussels I Regulation ...

Following a review of relevant case law (including GAT v LuK  and Solvay v Honeywell), Arnold J concluded that Rhodia's claim fell under article 24(4), or was at least "principally concerned with" the validity of the German designation of the patent under Article 27. The proposed amendments to Rhodia's Particulars of Claim did not assist - the matter in dispute was simply whether "Molycorp has infringed a valid claim" of the patent, and Rhodia could not separate the inseparable through some careful drafting. The reasoning of the CJEU in GAT v LuK was equally applicable here.  Mr Justice Arnold held that:

"First, Rhodia's amendments are a transparent attempt "simply by the way it formulates its claims, to circumvent the mandatory nature of the rule of jurisdiction laid down in that article". Secondly, to allow Rhodia's claim to proceed "would have the effect of multiplying the heads of jurisdiction and would be liable to undermine the predictability of the rules of jurisdiction laid down by the Convention". Thirdly, it would "multiply the risk of conflicting decisions which the Convention seeks specifically to avoid".

Arnold J elaborated on the third point, by reiterating that the same claim construction must be used for both infringement and validity. If Courts in different jurisdictions adjudicate these issues separately, this would allow litigants to overcome the pressure of an infringement/validity squeeze, and could result in conflicting decisions on claim construction (the judge noted that a similar potential issue raised by a bifurcated claim in Germany is avoided because only one claim construction will be adopted by the Court on appeal for both infringement and validity).

In response to an issue raised by counsel for Rhodia, Arnold J noted that the fact that Rhodia had not challenged jurisdiction in the usual way under Part 11 of the Civil Procedure Rules (CPR) was misconceived for at least three reasons: First, the CPR cannot override the mandatory effect of a Regulation, and the timing of the challenge to validity in the German Courts was irrelevant. Secondly, CPR Part 11 does not apply where it is triggered by the defence to the claim, and Molycorp's solicitor's letter giving notice of intention to challenge jurisdiction in Germany was sufficient to raise the issue. Thirdly, Article 27 requires the Patents Court to decline jurisdiction of its own motion, regardless of Molycorp's omission to issue a formal jurisdiction challenge under CPR Part 11.

In summary, this issue of jurisdiction was a matter of substance, not form, and the Patents Court had no jurisdiction over Rhodia's infringement claim in respect of the German designation of the patent.

(2) Should an order be made by the English Court for the provision of samples in aid of a claim by Rhodia in the German Courts?

Mr Justice Arnold  - "principally
concerned  with" being a Patents Judge
or just "concerned with"?

Rhodia undertook to bring an infringement claim in Germany in the event that jurisdiction was declined by the English Court. On this basis, Rhodia maintained its application for an order for the provision of Molycorp's samples for testing for the purposes of the German infringement claim. Molycorp opposed the application on the basis that the Court has no jurisdiction to make the order, and that it would be inexpedient to do so.

Section 25 of the Civil Jurisdiction and Judgments Act 1982 provides as follows:

"(1) The High Court in England and Wales or Northern Ireland shall have power to grant interim relief where –

(a) proceedings have been or are to be commenced in … a Regulation State other than the United Kingdom …; 

…

(2) On an application for any interim relief under subsection (1) the court may refuse to grant that relief if, in the opinion of the court, the fact that the court has no jurisdiction apart from this section in relation to the subject matter of the proceedings in question makes it inexpedient for the court to grant it. 

... 

(7) In this section 'interim relief', in relation to the High Court in England and Wales or Northern Ireland, means interim relief of any kind which that court has power to grant in proceedings relating to matters within its jurisdiction, other than— 

… 

(b) provision for obtaining evidence."

Arnold J sided with Molycorp. Rhodia's application was for the sole purpose of obtaining evidence to support its infringement claim in Germany, and therefore fell under the exclusion identified in s25 (7) (b) above. It was common ground that this exclusion was included because the proper means for obtaining evidence in aid of proceedings in the EU is now governed by Council Regulation No 1206/2001/EC. Rhodia also submitted that the Court alternatively had jurisdiction to make the order through its general power of injunctive relief under s37(1) of the Senior Courts Act 1981. The Court again disagreed - to rely upon this general provision for interim relief would circumvent the specific restriction which Parliament has placed upon s25 of the 1982 Act.

Comment

Let go and be free....a lesson of Rhodia v Molycorp

In previous cases, the English Court has not shied away from adjudicating on patent infringement actions involving designations of a patent from another EU Member State, where the validity of those designations has not been challenged (see for example the Actavis v Lilly saga, reported previously on the IPKat here -  with one chapter of the saga pending before the Supreme Court). In the present case, Rhodia attempted to further extend the reach of the English Patents Court, by slicing and dicing the issues of infringement and validity of the German designation of the patent in its pleadings. However, the issue of jurisdiction over such patent infringement actions is ultimately a matter of substance, not form. By analogy, an alleged infringer wishing to establish jurisdiction for a declaration of non-infringement of a European designation of a patent in the English Courts must relinquish a challenge to validity of that designation to maintain jurisdiction in the English Courts."

AG Wathelet advises CJEU to hold French law on out-of-print books incompatible with EU law

AG Melchior Wathelet

Amidst all the madness hectic legislative activity surrounding orphan works and out-of-print books that took place in Europe in the first half of 2010s (also as a reflection and echo of the unfolding Google Books saga in the US), in 2012 France adopted a loi (Law No 2012-287 of 1 March 2012) to allow and regulate the digital exploitation of out-of-print 20th century books.

This piece of legislation amended the French Code de la propriété intellectuelle by adding a new chapter (Chapter IV - Articles L 134-1 to L 134-9, subsequently amended) to Title III of Book I therein. 

Among other things, this French law gives approved collecting societies the right to authorise the reproduction and the representation in digital form of out-of-print books, while allowing the authors of those books, or their successors in title, to oppose or put an end to that practice subject to certain conditions. 

More specifically, the relevant implementing decree has established a legal framework intended to encourage the digital exploitation of works reproduced in books published in France before 1 January 2001 which are no longer commercially distributed by a publisher and are not published in print or digital format. In that case the right to authorise the reproduction or performance of those books in digital format is exercised, six months after their registration in a publicly accessible database for which the National Library of France is responsible, by collecting societies approved to do so by the Minister responsible for culture.

But is an arrangement of this kind compatible with EU law, notably the InfoSoc Directive? Among other things, Article 2(a) and 3(1) of that directive, in fact, provide authors - not collecting societies - with the right to authorise the reproduction and communication to the public of their works.

This is the question at the core of the reference for a preliminary ruling lodged by the French Conseil d’État and currently pending before the Court of Justice of the European Union (CJEU). This is Marc Soulier C-301/15.

Yesterday Advocate General Wathelet issued his Opinion in this case, advising the Court [not really surprisingly, also considering recent CJEU decisions like Reprobel, noted here] to rule in the sense of the incompatibility of French law with EU law.

Background

The applicants in the national proceedings have lodged an application with the Conseil d’État. They seek the annulment for misuse of powers of Law No 2012-287 implementing decree, on grounds that the Law on out-of-print books is not compatible with the limitations and exceptions to the right to authorise the reproduction of a copyright work which are exhaustively set out in the InfoSoc Directive.

Further to a reference to the Conseil constitutionnel in 2013 regarding the compatibility of Law No 2012-287 with the French Constitution [in 2014 the Conseil constitutionnel responded in the sense of its compatibility], the Conseil d’État decided to stay the proceedings and refer the following question to the CJEU:

Do [Articles 2 and 5] of [the InfoSoc Directive] … preclude legislation, such as that [established in Articles L. 134-1 to L. 134-9 of the Intellectual Property Code], that gives approved collecting societies the right to authorise the reproduction and the representation in digital form of “out-of-print books”, while allowing the authors of those books, or their successors in title, to oppose or put an end to that practice, on the conditions that it lays down?’

The AG Opinion

First: what needs to be considered?

The AG noted at the outset that, although the question referred by the Conseil d’État relates to Article 2 of the InfoSoc Directive, the digitisation and making available of a book also calls into consideration Article 3(1) [right of communication to the public]. This is because [para 26] the digital exploitation of copyright books constitutes ‘reproduction’ and ‘communication to the public’ of a work, which require individual and separate authorisation by the author, unless those acts are covered by an exception or a limitation provided for in Article 5 of that directive.

According to the AG, to answer the question posed by the French court, consideration of Article 5 of the InfoSoc Directive is unnecessary. This is because [para 28] legislation such as that at issue in the case in the main proceedings is not included in the detailed and exhaustive list of exceptions and limitations in Article 5. 

The scope of exclusive rights

Having clarified what provisions need to be considered and recalled the rationale [high protection of authors] and interpretation of InfoSoc provisions ['autonomous' and 'uniform' where no express reference is made to Member States' laws], the AG turned to the consideration of the scope of relevant exclusive rights.

He held [paras 38-39] that: 

"Article 2(a) and Article 3(1) of Directive 2001/29 require the prior express consent of the author for any reproduction or communication to the public of his work, including in digital format. That consent constitutes an essential prerogative of authors.

In the absence of any derogating EU legislation, the author’s express and prior consent for the reproduction or communication to the public of his work cannot be eliminated, assumed or limited by substituting it with tacit consent or a presumed transfer which the author must oppose within a fixed time limit and in accordance with conditions laid down by national law. It follows that national legislation like the decree at issue, which replaces the author’s express and prior consent with tacit consent or a presumption of consent, deprives the author of an essential element of his intellectual property rights."

The AG added that none of the following characteristics of the French law alter such finding, ie: the possibility of opposition and withdrawal; the right to remuneration, and the absence of commercial distribution of the work to the public. 

The scope of EU preemption

The AG also rejected the argument that the legislation at issue would not affect the protection of copyright because it simply constitutes an arrangement for managing certain rights which Article 2(a) and Article 3(1) of Directive 2001/29 do not preclude. According to the AG [paras 55-57], 

"such a view of copyright runs counter to Article (2)(a) and Article 3(1) of [the InfoSoc] Directive. In providing for the author’s exclusive right to authorise or prohibit the reproduction and communication to the public of his works, those provisions also concern the way in which those rights are exercised by the author.

While it is true that [the InfoSoc] Directive 2001/29 neither harmonises nor prejudices the arrangements concerning the management of copyright which exist in Member States, the EU legislature, in providing that authors enjoy, in principle, exclusive rights to authorise or prohibit the reproduction of their work and its communication to the public, exercised its competence in the field of intellectual property.

In those circumstances, the Member States can no longer adopt management arrangements which compromise EU legislation, even if this is done with the intention of furthering a public interest objective. Before management of the rights of reproduction and communication to the public can be taken into consideration, the holder of those exclusive rights must have authorised a management organisation to manage his rights."

Comment

Gentle reminder

This is yet another thoughtful Opinion by AG Wathelet, which in my view is entirely correct. Let's see if the CJEU agrees.

Two further points worth raising are the following.

First, it seems to me that lately AGs have taken protection of 'authors' [rather than - more generically - rightholders] particularly at heart. Besides yesterday's Opinion of AG Wathelet, another recent example that comes to mind is the Opinion of AG Szpunar in Vereniging Openbare Bibliotheken v Stichting Leenrecht, C-174/15 [the 'e-lending case', currently in progress and noted here], in which he clearly stated [para 34] that "the principal objective of copyright is to safeguard the interests of authors".

Secondly, should the CJEU follow the Opinion of AG Wathelet [which seems natural, considering recent jurisprudence] the French law on out-of-print books may not be the only piece of legislation incompatible with EU law. 

Staying in France, only yesterday Loi No 2016-925 on la liberté de la création, l'architecture et patrimoine (freedom of creation, architecture and cultural heritage) was published in the Journal officiel de la République française [this blog reported on this legislative initiative when it was at the draft stage]. 

Among other things, Article 30 of Loi No 2016-925 introduces new provisions into the Code de la propriété intellectuelle to regulate the publication of a plastic, graphic or photographic work by an online communication service. In particular, new Article 136-2(1) states the following:

"La publication d'une œuvre d'art plastique, graphique ou photographique à partir d'un service de communication au public en ligne emporte la mise en gestion, au profit d'une ou plusieurs sociétés régies par le titre II du livre III de la présente partie et agréées à cet effet par le ministre chargé de la culture, du droit de reproduire et de représenter cette œuvre dans le cadre de services automatisés de référencement d'images. A défaut de désignation par l'auteur ou par son ayant droit à la date de publication de l'œuvre, une des sociétés agréées est réputée gestionnaire de ce droit." 

This means that the publication of a plastic artwork, graphic or photographic work by an online communication service is subject to the consent, not of authors, but rather ... one or more collecting societies appointed to this end by the French Ministry of Culture. 

I look forward to reading further commentaries on this new piece of French legislation but, in light of AG Wathelet's analysis and previous CJEU case law, it does not seem that Loi No 2016-925 is entirely compatible with EU law. 

But what do readers (especially French) think? 

BREAKING: CJEU says that operators of physical marketplaces may be forced to stop trade mark infringements of market-traders

Can operators of physical marketplaces be considered "intermediaries whose services are used by a third party to infringe an intellectual property right", so that "rightholders are in a position to apply for an injunction" against them, pursuant to the third sentence in Article 11 of the Enforcement Directive? Put it otherwise: how does the landmark decision of the Court of Justice of the European Union (CJEU) in L'Oréal v eBay [noted here, here, and here] apply in an offline context?

This - in a nutshell - were the issues on which the Nejvyšší soud České rep (Czech Supreme Court) had sought guidance from the CJEU in its reference for a preliminary ruling in Tommy Hilfiger Licensing and Others, C-494/15.

This morning the CJEU delivered its judgment [without a prior Opinion of the Advocate General in this case (Melchior Wathelet)], holding that the operator of a physical marketplace may be forced to put an end to trade mark infringements committed by market-traders.

The judgment is not yet available on Curia, but this is what the press release states:

"The company Delta Center is the tenant of the marketplace ‘Pražská tržnice’ (Prague market halls). It sublets to market-traders the various sales areas in that marketplace.

Manufacturers and distributers of branded products discovered that counterfeits of their goods were regularly in Prague market halls. On that basis, they asked the Czech courts to order Delta Center to stop renting sales areas in those halls to people who committed such infringements. The [Enforcement] Directive allows trademark holders to bring an action against intermediaries whose services are used by a third party to infringe their trademarks.

The trademark holders consider that, like the operators of online marketplaces covered by the judgment in L’Oréal, the operator of a physical marketplace may, pursuant to the directive, be forced in law to bring trade mark infringements committed by market-traders to an end and to take measures in order to prevent new infringements.

The Nejvyšší soud (Supreme Court, Czech Republic), before which the case is now pending, asks the [CJEU] whether it is actually possible to order the operator of a physical marketplace to put an end to trademark related infringements committed by market-traders and to take measures seeking to prevent new infringements.

Looking for some counterfeit
food to confiscate ...
for the sake of IP protection

In today’s judgment, the Court finds that an operator which provides a service to third parties relating to the letting or subletting of pitches in a marketplace, and which thus offers the possibility to those third parties of selling counterfeit products in that marketplace, must be classified as an ‘intermediary’ within the meaning of the directive. 

The Court states that whether the provision of a sales point is within an online marketplace or a physical marketplace is irrelevant because the scope of the directive is not limited to electronic commerce [in my opinion this conclusion is correct, as nothing in the Enforcement Directive (and similarly in the InfoSoc Directive) suggests that injunctions are limited to 'online' intermediaries].

Consequently, the operator of a physical marketplace may itself also be forced to put an end to the trade mark infringements by market-traders and to take measures to prevent new infringements.

Similarly, the Court states that the conditions for an injunction issued by a judicial authority against an intermediary who provides a service of letting sales points in market halls are identical to those applicable to injunctions addressed to intermediaries in an online marketplace.

Thus, not only must those injunctions be effective and dissuasive, but they must also be equitable and proportionate. They must not therefore be excessively expensive and must not create barriers to legitimate trade. Nor can the intermediary be required to exercise general and permanent oversight over its customers. By contrast, the intermediary may be forced to take measures which contribute to avoiding new infringements of the same nature by the same market-trader. In addition, the injunctions must ensure a fair balance between the protection of intellectual property and the absence of obstacles to legitimate trade."

A more detailed analysis will be provided when the judgment is made available: stay tuned!