From October 2016 to March 2017 the team is joined by Guest Kats Rosie Burbidge and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Tian Lu and Hayleigh Bosher.

Sunday, 13 September 2015

"Fees, please!" say the Courts, but can IP owners preserve their cash?

Money: a precious commodity
There have been dark and foreboding rumblings in England and Wales to the effect that the recent increase in court fees is a dire and dreadful thing, and something that will drive deserving litigants from the courts, at any rate if they are poor and impecunious. This Kat's view is that the level of fees is of no importance -- if you don't have to pay them, that is.  With that in mind, this weblog is pleased to host this guest piece from Andy Lee (Brandsmiths), who has given some thought to how the worst effects of the new fees might be mitigated. He wonders whether others might be thinking along the same lines, and this is what he says:
Since the court fees in England and Wales changed on 9 March 2015 when the Civil Proceedings and Family Proceedings Fees (Amendment) Order 2015 (SI 2015/576) came into force, I have thought on a few occasions how this would impact on IP claims, given the substantial increase in the fees payable. I know that some practitioners were concerned that this could impede on access to justice for claimants generally. However I wonder if there is a way around this,  as I will set out.  

What litigants think ...
Almost every IP case in England and Wales proceeds as a split trial. From experience, there is now commonly an express direction included in case management directions setting out that liability will be tried separately from quantum of damages and that those directions focus on disclosure and the like regarding the issue of liability only. Liability is then tried and, if the claimant is successful, any sums due are assessed on an inquiry or an account of profits (at the claimant’s election) –- the court making such an order at the request of the claimant which has included it in its prayer for relief. And so, until that point, all remedies in the claim are non-monetary (eg injunctions, delivery up/destruction, publication).

... and what they do
But there is the age-old problem in IP cases that one can often not tell the scale of the infringement at the start, which makes it difficult to assess what compensation could be due. The basic objective of the claimant is to stop the infringing activity. If a claimant loses on the issue of liability, this never becomes an issue (subject to any appeal).  It is typically (putting aside novel cases such as Big Bus, noted by the IPKat here and here) only upon liability being established that a defendant will be ordered to give information which will shed light on how much compensation may be due.  

In my experience, when issuing claims before the large increase in court fees, one calculated the court fee by (in addition to the non-monetary part of it which in the High Court is currently £480), paying the “unlimited” amount which from memory was claims exceeding £300,000. This resulted in a court fee payable of around £2,000. For most claimants this was not a problem but, even if it were,  one could often pick a lower level i.e. say damages of no more than £100,000 as a “best guess” for issue purposes  but maybe include an express reservation to pay an increased fee, if needs be, should the compensation claim be higher.

When the new court fees were introduced, more one person to whom I spoke thought this could have an adverse impact on court access for IP owners. For example, for any claim worth more than £200,000 the court fee is now £10,000 plus the non-monetary relief fee of £480. That is a significant increase.

My view is that there is a solution to this. One could simply pay the non-monetary relief fee and undertake in the claim form (under the heading “value”) to pay an appropriate additional fee, should the claimant be successful on the issue of liability and if the court then made an order that all sums due be paid following an inquiry as to damages or at the claimants election an account of profits. Further, Page v Hewetts Solicitors and another [2013] EWHC 2845 (Ch) is authority that a claim for an account of profits is a non-monetary claim. One could envisage a situation in which the claimant only asks for an account because the factual circumstances of the case may so dictate. It might have sufficient information at the start of the case that, even though it does know the scale of the infringement, it also knows it will find it to show switch selling (there may be large price difference between the claimant's and defendant's products for example, or they may operate at different levels of the market, eg luxury brand as opposed to midmarket) but where it suspects that the defendant has a large profit margin (possibly because it has cheap copies made abroad). It is also more difficult for defendants, following Hollister (noted by the IPKat here and here) to deduct a proportion of general overheads from the profit payable, so generally a account of profits claim may yield more compensation than they historically did. In such cases one cannot see why any fee would need to be paid in addition to the non-monetary part and so, on the current rates, those claims could be issued for £480.

In most cases the claimant will want to keep its options open and maintain the option for an inquiry to damages. It seems to me arguable that, until the court finds for the claimant on liability and directs there be an inquiry and the claimant actually elects for one, there is no compensation claim before the Court.  It is arguable that one is still asking for a non-monetary relief by asking for an Order that the claimant may pursue an inquiry and the defendant pay all sums due on such an inquiry. The claimant is not asking for a specific sum, merely that any sum found be paid. So a happy medium could be that, if the claimant makes an election for an inquiry, it pays an appropriate fee for compensation, given that it might have a better idea following Island v Tring disclosure of the value of the claim.

Indeed in Tring itself, Lightman J at para 10 spoke about the Order the court makes being a declaration that the claimant is entitled to judgment on an inquiry or account at its election; that supports my view that the order at that stage is still of a non-money nature. However there is one caution. If I am wrong and the court requires all fees to be paid even if quantum may never be decided, in Page the failure to pay correct court fee meant the claim was not brought within limitation. And so anyone near limitation may be advised to hedge their bets pending some clarification on this point.

I have thought whether my views are effected by the “value” of the claim for the purposes of costs budgeting. Claims said be worth more than £10 million are excluded from budgeting. However, as is clear from the Civil Procedure Rules, CPR 3.12 such value can be the value of non-monetary claims (ie the value of the injunction), so that maintains the difference between a non-money and a money claim -- which is how the court fee payable is split. So this makes no difference, in my view, to my approach, given that an injunction could have a value to a business in terms of brand protection aside from what compensation is due.

I wonder whether anyone else has thought of this in light of the fees increase and how it impacts on IP claims or other claims where there is a split trial?

10 comments:

Howard Knopf said...

Dear Jeremy:

I have a modest suggestion. Bring your litigation to Canada ;-)

In terms of Court fees, it costs $50 (~ £25) to start an Application and $150 (~ £75) to start an Action in the Federal Court. The main difference between these two procedures is that the former involves only affidavit evidence with cross-examinations and the latter involves full-blown discovery. These fees are not dependent on the amount claimed.

Best regards,

Howard Knopf

Howard Knopf said...

Dear Jeremy:

I should add that another advantage to litigating in Canada is that we don't wear wigs in court:
https://en.wikipedia.org/wiki/Court_dress#Canada

I gather that wigs are still a fact of life in UK courts. The cost of a quality wig is clearly not inconsiderable. Indeed, I see that genuine horse hair barristers’ wigs cost at the least several hundred pounds:
http://www.chancerywigs.com/product/barristers-wig-2/
http://www.stanley-ley.co.uk/acatalog/Stanley_Ley_Wigs_1.html

That’s more than enough money to buy a live horse:
http://www.equine.com/Rescue-Horses.html

I imagine that there’s probably a maintenance cost too, if you don’t want these wigs to become infested or malodorous. I somehow doubt that you can you throw them in the washing machine along with your socks and undies.

Too bad that shedded cat fur doesn’t seem to be permitted for wig material. There seems to be no shortage of that anywhere. I’m sure Merpel would approve.

Do any British barristers charge their amortized wig costs or maintenance charges back to their clients?

I’m surprised that there’s no active “grey market” (sorry about that) in barristers’ wigs – or heaven forbid – a black market for counterfeit polyester wigs that could presumably be made very cheaply in some far away country. Perhaps something needs to be put in a treaty about this. But let’s not give the #USTR, which is already quite wigged out, any more ideas for the #TPP or #TTIP.

Just as we now have airport-like security in Canadian courts, I trust that you have wig inspectors in your UK courts checking for legitimacy and provenance.

Besides, the absence of wigs may confer an aesthetic and charismatic advantage on those of us who still have lots of curly and still not yet entirely grey hair.

Of course, foreign litigants in Canada will normally need to post security for costs. But let’s not get too technical or practical ;-)

Canada clearly prevails in terms of lower filing fees and absence of wig costs.

Best regards,

Howard Knopf


Anonymous said...

Shame Canada's GDP is 1/20 of the UK's GDP, such that a rough estimate of recoverable economic damages in Canada in connection with a global product would also be 1/20 of the UK value. That is, if the infringing product itself is even available to the Canadian market...
-Econocat

Barbara Cookson said...

Solicitor advocates in the Enterprise Court in London don't have to wear wigs either and I never have.

As to the fee issue, there is merit in seeking only an injunction in many cases but my view is that if you dont pay a value based fee at all then you have not made a money claim and if you have limited the value you are stuck with that limit. This is consistent with the need for defendants to know where they stand before they make a decision to defend or admit. Fysh took the view (unpublished) that the fee set a cap but Birss allowed the extra court fee to be paid late in NGRS v Silveria [2010] EWPCC 015 but the point was not argued by the defendant who did not appear. Its been a hazy question for a long time that needs clarity

Idiot in a Hurry said...

Splitting liability and quantum into two trials already makes settlement difficult; particularly for the defendant, who might well be willing to concede liability at the outset if the proposed settlement figure is reasonably sensible. Current practice gives at least an indication of the figure being claimed, and therefore permits a defendant to decide the budget it is allocating to defend the case. Full prior-art searches, for the purpsoes of assessing the validity of the claimant’s IP, don’t come cheap, and are a wholly disproportionate spend if the claimant is in fact only wanting a few thousand quid in damages. But if quantum could potentially extend to £millions, the defendant would want to use every weapon at its disposal to resist liability.
So you could end up with defendants spending huge amounts of money to defend what turn out to be tiny claims.

Aaron Wood said...

I agree with both Barbara and Andy - put in a claim to a smaller amount of fees subject to disclosure of the level of infringements made.

Of course, some might say that it is incumbent on the defendant to give some indication of the level of infringement involved to ensure that the claimant takes appropriate steps, and for a claimant to request the same prior to commencing a claim to ensure that the case is commenced in the correct court..

This is particularly important where the case is straight-forward such that the level of damages may determine which court is appropriate to hear the case. It would be unfair on a defendant to neglect to disclose the small scale of infringement, allow the claimant to proceed on the basis that damages are likely to be in the 50-100k ballpark, and then request that the matter be transferred to the small claims track on the basis the value is less than 10k.

Annsley Merelle Ward said...

A comment that the Kat received from Sir Robin Jacob on this article is as follows (with permission to post):

Neat idea. But the courts may say that an injunction has value – as they do in Germany and as is contemplated for the UPC where the current idea floated for the value of a case is a notional royalty on the supposed sales of patented items over the life of the patent. Pure conjecture of course, but the Germans do something like that.

The point could be sharpened in a quia timet action where no damages are claimed anyway or where the patentee foregoes any financial claim for past acts – that it is not fanciful since in this country people sue early and financial claims are normally very low anyway,


Robin Jacob

Barbara Cookson said...

There is no doubt that an injunction has value just not easily quanitifed in money terms. The current fee structure sensibly treats the injunction separately. Imagine the counter clerks in the Rolls Building evaluating the value before issuing the claim!. There might be virtue in increasing that fee and moderating some of the money claim fees

Meldrew said...

Econocat

Check your sources - Canadian GDP is about 60% UK GDP

Howard Knopf said...

Thank you, Meldrew, for confirming Canada's significant GDP standing, namely about 60% of that of the UK.

Of further possible interest is the fact that Canadian courts may be getting friskier in terms of extra-territorial rulings.

Howard

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