Tuesday 2 August 2011

Thou shalt not lie! - The truth about the amout in dispute

Despite of the uncontestable reputation of us german patent attorneys as advocates of honesty and truthfulness, the Düsseldorf Upper District Court (OLG Düsseldorf) appears to have some doubts in this regard.

Mr. Kühnen, the chief judge of the court’s chamber specialized in IP is not the only german judge who is currently concerned about this, in particular when it comes to money.

The first thing the judges decide on in a trial in Germany is the amount in dispute, i.e. the economical value of the right under dispute. This is an important issue because not only the amount of litigation costs refunded by the underlying party but also the court fees depend on this value. In former times, the attorney’s fees to be paid by the client used to be calculated from the amount in dispute as well. This means that not only the court but also the attorneys had a financial interest in not to chose an inappropriately small value for this. Since direct information on the economical importance of the litigation is not available for the judges in most cases, they have to rely on the estimates and information obtained from the parties.

The Düsseldorf OLG and the Xth senate (responsible for patents) in the Federal Supreme Court (BGH) have both identified a recent tendency that the law firms charge their clients on an hourly basis (which is permissible if the result is higher than the one calculated on the basis of the amount in dispute). The consequence is that the parties (and their attorneys) might not have an interest in providing a reasonable estimate anymore but rather to reduce the risk of litigation by providing unreasonably low estimates for the amount in dispute.

One might think that the courts would helplessly come to terms with their fate and simply take over the flimsy numbers provided by the parties. Not so the OLG Düsseldorf!

The Düsseldorf OLG has addressed this problem in two decisions: OLG Düsseldorf, April 15. April 2010 — I-2 W 10/10 “Du sollst nicht Lügen” (you shall not lie) and OLG Düsseldorf, May 10. April 2011 — I-2 W 10/10 “Du sollst nicht Lügen II” (you shall not lie II - not yet available online, published in Mitt. 7-8/2011, 383).

In the first decision, the prevailing plaintiff had originally given an estimate of EUR 200.000 for the amount in dispute and has asked to correct this value to 30.000.000 EUR after the decision was made (in a procedure for fixing and distributing the legal costs which takes place after the decision on the main issue).

The underlying defendant did not find this very sporty and argued that his confidence in the plaintiff’s original estimate should be protected and that the plaintiff should not be rewarded for obvious lies. After all, this is just as if you were entitled to double the stakes in a poker game after not only having seen the cards of your buddy but even after the croupier has decided who has won!

Finally the amount in dispute for this case was fixed by the court to EUR 2.050.000 based on the evidence provided by the plaintiff.

The Düsseldorf OLG argued that the confidence in a lie may not be protected to the detriment of the state treasury and that the true amount in dispute is to be fixed according to the true, factual circumstances.

In the second decision, the tone is even sharper: If the parties do not suitably contribute to an adequate assessment of the value under dispute, the court may estimate a value which is sufficiently high to reliably motivate the parties to fulfil their duty to contribute in a request to correct the value under dispute. To use the picture of the poker game, the croupier is entitled to raise the stakes to a really painful amount if he is bored by the players toying with pennies only.

This is not all: if the party refuses cooperation to an adequate setting of the value under dispute, this will generally lead to the suspicion of an attempted financial fraud to the detriment of the state treasury, which may result in a criminal liability.

As an aside: an attorney who has made himself liable to prosecution will inevitably lose his accreditation. In sincerely think that this will change the way of thinking on the amount in disputeSo better keep up with the truth!

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