Arbitrariness is not fair - T0595/11 – underpayment of appeal fee

What may we legitimately expect from the
formalities officers in this building?

We have all experienced that judgments appear sometimes unfair, in particular for the underlying party. In my experience, this entirely subjective impression is less likely to arise in cases where the tangible interests of human, warm blooded parties are balanced against each other but rather in cases where the interest of one party is balanced against the interests of faceless and anonymous "third parties" or an undefined “public” whom nobody has ever met in person. This is the case e.g. for the payment of fees or legal remedies where the legal certainty for the third parties has to be established as soon as possible.

The rules of law are generally meant to strike the right balance between the interest and fundamental rights of the parties involved. In the case of an unintended loss of rights or the failure to use a legal remedy, the system of time limits for re-establishment of rights as laid down e.g. in Rule 136 EPC has been developed for this purpose, wherein in particular the time limit of one year of expiry of the unobserved time limit is meant to be fairly absolute as it insures legal certainty for third-parties.
In many cases where procedural fees are not paid or paid in an insufficient amount, the EPO or the national intellectual property office will issue a corresponding notification that the right has been lost ("loss of rights") and that it is possible to file a request for re-establishment of rights under the pertinent rules of law. While such a notification is likely to be considered sufficient to remove the cause of non-compliance with the period as it draws the applicant’s attention to this fact, the failure of the office to send out such a notification is, according to the case law, not as such sufficient to render the absolute one-year time limit for re-establishment of rights ineffective. It is the very purpose of this time-limit to create legal certainty for the public even in cases where the loss of rights has not come to the attention of the former right holder.

In view of this, the decision T0595/11 comes as a real surprise. The appellant, having its seat in Switzerland, has filed a notice of appeal in Dutch language and paid an appeal fee reduced by 20 % eight days prior to the expiry to the time limit to file the appeal. Swiss parties are supposed to understand German or French and are therefore not entitled to a reduction of the appeal fee. The amount was insufficient. However, this had not been remarked by anybody for four years until some months prior to the Oral Proceedings, when the one-year time limit according to Rule 137 (1) EPC to file a request for re-establishment of rights has long passed.


Would anybody of the experienced practitioners among our readers have expected the formalities section of the EPO board of a appeal to issue a notification

1. within the 8 days between the payment of the appeal fees and the due date? or
2. within the 1-year time-limit for re-establishment?

However the answer may be, I think that most of our readers would presume that the appeal would be dismissed as inadmissible.

Surprisingly, the board decided to the contrary, by referring to the “principle of good faith” and the “principle of the protection of legitimate expectations”, the board examines if a legitimate expectation of the appellant existed that the EPO should have warned him significantly earlier of the deficiency. The Board derives from Rule 101 EPC that the duty of the office to examine the correct fee payment, including the entitlement for fee reduction exists and that this check has to be done “with a reasonable time frame”, without, however exactly defining this time frame.

According to point 1.7 of the reasons “the argument that any time frame should be such that a warning can be expected in time for the appellant to file a request for re-establishment of rights, appears persuasive. However, the issue need not be decided now as the board is confident that whatever this expected time frame it might be, it is certainly shorter than the 4 whole years that have passed in the present case between the expiry of the time limit for filing the appeal (and for paying the full appeal fee) and the time when the office first made the appellant aware of this issue.” The board than considers “that an objective observer relying on the duty of the office to act as explained above would have concluded that the appeal has been examined for such formalities as the appeal fee" and “that the legitimate expectations of the appellant (and possibly other parties) that the fee payment was in good order and would no longer be objected to, where indeed established”. After having noted that not nearly the legitimate interests of the appellant must be protected in an inter partes case, the board says that it “can only strive to find with it considers to be an equitable balance of the consequences to either party.” And says that “the board must choose between a possible and certain adverse effect, where it also must consider that the possible, but nevertheless conjectural adverse effect is the prevention of an immediate success of the respondent's case (i.e. the revocation becoming final), while the certain adverse effect is the immediate loss of the appeal”. Weighing up the legitimated interest of both sides and also that of third-parties, the Board finds that “it is equitable that the office's failure is made good and the error is now allowed to be remedied as far as possible" and finally judges that the appeal is allowable (The remaining 20 % of the appeal fees had meanwhile been paid).
The core part of the judgement goes as follows:

[1.13] Weighing up the legitimate interests of both sides and also that of third parties, and considering the overall circumstances of the present case, the Board concludes that the original error might have had serious and inequitable consequences through the Office's failure to discover it. Therefore, it is equitable that the Office' failure is made good and the error is now allowed to be remedied, as far as possible. Seeing that some adverse effect is inevitable, the Board considers that the possibility of a real, but otherwise in itself not necessarily decisive setback (here the non-occurrence of an immediate success) for a party is more preferable than a certain decisive loss of all rights for another party, in particular given the fact that for a long time none of the parties did expect the latter. Put differently, a merely possible injury obviously is less serious than certain death. Therefore in the present case the Board accepts, through the application of the principle of protection of legitimate expectations, that the appeal fee has been timely and fully paid. The Board considers that in this manner overall, least harm is done to all parties. The Office has not suffered any loss either, as the fees were eventually paid in full. It is also satisfactory that in the end the appeal can be decided on its merits.

With all compassion for the appellant, this blogger finds this decision highly questionable as it tries to arbitrarily find a fair balance between the interests of the parties while disregarding the rules of law. Most importantly, the under-payment of the appeal fee was not the result of the office's negligence. If the board really thinks that the Formalities section should have notified the appellant within one year, the opportunity lost by the appellant due to the office's error would have been the lost opportunity fo file a request for re-establishment of rights. The board should therefore not have immediately considered the appeal as admissible but rather have examined an eventual request for re-establishment of rights to be filed by the appellant and whether or not the appellant has exercised all due care required by the circumstances at the time of filing the appeal.

The latter approach would have been the solution of the German courts, according to the theory developed by the BGH in "Crimpwerkzeug III" , a re-establishment maybe requested even after expiry of the one-year term for re-establishment of rights in cases where “the reasons for the failure to comply with the time limit are to be assigned to the court/office” and not to the appellant 
A decision balancing the legitimate expectations of a party with legal security for thirds parties was issued by the 10th senate of the Budespatentgericht in 2012 and has been discussed here. Following the "Crimpwerkzeug" theory, the senate judges that re-establishment may be requested even after expiry of the one-year-term

"in specific exceptional cases for reasons of ensuring an effectice legal protection and the right to be heard, in particular when the reasons for the failure to comply with the time-limit do not lie in the sphere of the party but are rather to be assigned to the court/office".

The decision T0595/11 as it stands is a clear case of arbitrariness where the explicit rules of law are overruled by fairness arguments shot from the hip.  It risks to entail attempts to circumvent the one-year time-limit for re-establishment in other cases and does poor service to the legal certainty in our field.