This summer, the European Court of Justice (hereafter the ECJ) ruled on two cases relating to the interpretation of the Directive 2004/48 of 29 April 2004 on the enforcement of intellectual property rights (hereafter the Enforcement Directive). These rulings clearly demonstrate the increasing need to reform the text of the Enforcement Directive.
In this context, the Commission announced in its Communication on a Digital Single Market Strategy for Europe, that it will make proposals in 2016 to modernize the enforcement of intellectual property rights. These changes are eagerly awaited. A public consultation on the evaluation and modernization of the legal framework for the enforcement of intellectual property rights ended on 15 April 2016, but a proposal has yet to be made and will hopefully take the recent rulings under consideration …
In the meantime, you will find below a summary of these two insightful rulings. Right-holders can apply for injunctions against the operator of a physical marketplace!
The ECJ held that operators of physical marketplaces are "intermediaries" within the meaning of the Enforcement Directive. As a consequence, they may be forced to take measures to prevent or to end trademark infringements.
In its ruling of 12 July 2011 (L’Oreal v. eBay, C324/09), the ECJ clarified the obligations incumbent upon a company operating an online marketplace to prevent its users from committing trademark infringements. The Court ruled that Member States had to ensure effective protection of IP rights and should be allowed under Article 11 of the Enforcement Directive to oblige the operator of an online marketplace to take measures that contribute effectively not only to putting an end to intellectual property rights infringements but also to preventing further infringements within that market place.
In its ruling of 7 July 2016 (Tommy Hilfiger Licensing LLC and Others v Delta Center, C-494/15), the ECJ went one step further.
It was asked whether a tenant of physical marketplaces whose services are used by a third party to infringe intellectual property rights is an "intermediary" within the meaning of the Enforcement Directive.
The Court states that whether the provision of a sales point is within an online or a physical marketplace is irrelevant, as the scope of the Enforcement Directive is not limited to electronic commerce. For this reason, the ECJ decided that an operator which provides a service to third parties such as letting pitches in a marketplace (which offers the possibility to market traders to sell counterfeit products) must be classified as an ‘intermediary’ within the meaning of the Enforcement Directive.
As a result, the operator of a physical marketplace may be forced to put an end to trademark infringements committed by market traders. It could also be required to take measures in order to prevent such infringements.
This ruling will have important implications in practice, because it gives a broad interpretation of the notion of intermediaries under the Enforcement Directive. Right-holders are now in a better position to apply for injunctions against these intermediaries, regardless of the nature of the marketplace (online or physical).
The reimbursement of legal or technical advisor costs may in principle be limited
On 28 July 2016, the ECJ ruled on a request for a preliminary ruling from the Court of Appeal of Antwerp (Belgium) about the compatibility of (1) the Belgian provisions on procedural costs indemnity and (2) the case-law on the reimbursement of the costs of a technical advisor within the meaning of Article 14 of the Enforcement Directive.
This Article provides 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".
(1) According to the Belgian Judicial Code, the unsuccessful party to judicial proceedings has to pay the legal costs which comprise notably a procedural cost indemnity. The latter is a flat rate contribution fixed by royal decree which cannot be exceeded. The rate depends notably on the value of the claim and, when the latter cannot be evaluated in monetary terms (for instance an injunction proceeding or a cancellation proceeding without request for the payment of damages), its amount is between 1,440 EUR and 12,000 EUR per instance depending on various features of the case.
The ECJ decided that such legislation could, in principle, be justified, (i) provided that it is intended to ensure the reasonableness of the costs to be reimbursed, taking into account factors such as thesubject matter of the proceeding, the sum involved or the work to be carried out to represent the concerned client, and (ii) provided that the successful party has a right to the reimbursement of, at the very least, a significant and appropriate part of the reasonable costs actually incurred by that party.
(2) According to the case law of the Belgian Supreme Court, the costs of a technical advisor are recoverable only in the event of fault of the unsuccessful party, irrespective of whether the fault is contractual or extra-contractual.
The Court ruled that the Enforcement Directive does not provide for a condition of fault on the part of the unsuccessful party, that the concept of "other expenses" should be interpreted narrowly, and that one should take the view that only the costs that are directly and closely related to the judicial proceedings fall under this concept. Hence, for instance, the costs of research and identification, such as a general observation of the market, are not included in such a concept, but the costs of a technical advisor may fall within its scope.
Based on this decision, the Court of Appeal of Antwerp will have to assess whether the amount of:
- 12,000 EUR (the maximum amount of procedural cost indemnity in that case) could be considered as unreasonable or disproportionate because it would be too low, since the successful party requests the reimbursement of an amount of 185,462.55 EUR for the lawyer’s fee. So far, Belgian judges had always refused it, stating notably that they did not want to create differences between different kinds/matters of dispute;
- 44,000 EUR invoiced by the specialist technical advisor is totally or partially based on the type of work performed and more particularly on whether it is closely linked to the judicial action in order to have the intellectual property upheld.
We look forward to reporting on the decision of the Court of Appeal of Antwerp, which is expected to be rendered within the coming months.