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Wednesday, 18 May 2016

IPEC or bust? High Court refusing to deal with IP claims with a value of less than £500,000

This Kat is grateful for this thoughtful piece penned by Katfriend James Sweeting, Senior Associate at Lewis Silkin.


We all know that the Chancery Division is changing and modernising in a number of ways.  I fear that some of these changes are having an adverse impact on the ability of IP owners to enforce their rights in the High Court. 

The changes are not just changes to fee structure but also the transfer and triage processes introduced by the new Chancery Guide and how these are being deployed in practice.  Could this lead to an overburdening of IPEC, and is the Chancery Division out of step with other divisions of the High Court when it comes to transfer?

Fees

In September last year, Andy Lee from Brandsmiths (in an IPKat article here) provoked a discussion on the impact of the hike in High Court fees on IP claims.  As readers will know, prior to March last year the fee for issuing a claim for an “unlimited” amount in the High Court was around £2,000 (plus the £480 payable if the claimant is seeking injunctive relief).  Now, the fee for a claim exceeding £200,000 in value is £10,000 (plus the £480 fee for injunctive relief).  That represents a significant increase.

In that same article, An
Merpel isn't a fan of the significant increase in claim fleas
dy correctly pointed out a) that the issue of liability in an IP claim is almost always tried separately to damages and b) the quantum of damages is almost impossible to predict at the time a claim is being issued.  That is particularly true of IP claims where quantum can only be properly assessed after liability has been determined and following Island v Tring disclosure.  He also offered several possible solutions to this problem.  One solution is to pay the fee appropriate to non-monetary relief only and undertake to pay the appropriate fee in respect of damages after the determination of liability.  I recently tried that approach and was given short shrift by the desk in the Rolls Building who are adamant that I must ascribe a monetary value to my client’s claim.

There have been very few cases on determination of quantum in trade mark infringement claims (for example).  Most recently, HHJ Pelling decided in Jack Wills v House of Fraser that, on an account of profits assessment, it will in many cases be appropriate for an infringer to be able to deduct certain overheads from its net profit figure, as well as apply an apportionment of profits which relate specifically to the infringement.  Having claimed £650,000 on an account of profits, Jack Wills was left with just over £50,000 (see my colleague’s IPKat article here).  The trial on liability was a two day trial in the High Court and the trial on quantum lasted four days.  This has reinforced a long-held understanding that the most valuable remedy in a trade mark infringement claim is injunctive relief (which, as Sir Robin Jacob pointed out in response to Andy’s post, may itself have an intrinsic value).

On issuing a claim, it seems like the claimant has three options:
  1. Insert a very high amount to preserve the position and pay the £10,000 fee.
  2. Ascribe a value as best they can and pay the appropriate fee.
  3. Seek non-monetary relief only and pay £480. 

Triage

I have seen all three of these options be deployed when issuing in the High Court.  Follow options 1 or 3 and it seems that the claim tends to stay in the High Court.  Follow option 2, ascribe a value of anything less than £500,000 and (as of very recently) the Court seems to go on auto-pilot and makes a transfer order to the IPEC as soon as the Particulars of Claim are filed.  Is this the right approach and application of procedure?

When the new Chancery Guide was introduced in February this year, with it came a process of “triage” (see chapter 17, para 17.7).  The Court will now review the claim (supposedly after the initial pleadings, the directions questionnaire and case management documents have been lodged) and will make an assessment, bearing the transfer guidelines in mind (CPR 30.3) of whether the claim is suitable to remain in the High Court or not.  That process seems fair enough. 

However, the Masters in the Chancery Division are, at the moment, conducting the triage process a) as soon as the particulars of claim are lodged (in accordance with the Chancellor’s statement here) and b) with reference only to the ascribed value of the claim.  It seems like their fairly hard and fast approach is this: anything less than £500,000, regardless of any other aspect of the transfer guidelines (eg “whether the facts, legal issues, remedies or procedures involved are simple or complex”), the IPEC Court Guide, the scale of disclosure, the number of witnesses etc is automatically transferred to IPEC.

Don’t get me wrong.  IPEC can in many circumstances be a fabulous forum for litigating IP disputes.  However, there are circumstances (as Master Clark recognised in The Entertainer (Amersham) Limited v The Entertainer FZ and others ([2016] EWHC 344 (Ch)) where a) the value of an injunction (and not purely the value of damages), b) the size of the parties and c) the complexity of the claim should all properly be taken into consideration before making an order to transfer a claim away from the forum where it has been issued.  Furthermore, more complex claims can cost much more than £50,000 to litigate, even if they are litigated in IPEC.  Claimants are then disabused of the ability to recover costs to the High Court standard and the adverse exposure and liability of defendants is capped.

I don’t have a silver bullet solution for this, but the manner in which the court is applying its new “triage” process is not appropriate (for IP claims in particular) in my view.  It will lead to lack of certainty, greater numbers of applications and appeals and greater cost as the parties will have to seek more detailed directions on evidence and procedure.  Some possible solutions include:
  1. Carrying out triage at the time prescribed in the Chancery Guide, and then asking the parties to make brief submissions on the appropriate forum either orally or in writing.
  2. Not to transfer at all but rather leave it to the parties to apply.
  3. Impose a separate fee scale for the value of injunctive relief (specific to IP claims).
  4. Reduce the damages cap in IPEC to bring it in line with other Divisions of the High Court and PD 7A of the CPR which stipulates that proceedings may not be brought in the High Court unless the value of the claim is more than £100,000 (£50,000 for personal injury claims).

Any comments or suggestions are very welcome.  Reform always takes time and is never going to please everyone, but IP claims are a special case when it comes to quantum and need to be treated as such.

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