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.

Monday, 12 December 2016

Part 36 offers in the IP Enterprise Court

A peak (not to be
confused with an IPEC)
The Unified Patent Court (UPC) has been grabbing the headlines in recent weeks and it is easy to forget that the last six or so years have brought many major reforms to IP litigation in England and Wales.  This has primarily taken the form of the Intellectual Property Enterprise Court (or IPEC) and, more recently, the Shorter Trials Scheme (STS) in the High Court.

Both the IPEC and STS offer streamlined procedure and a fixed term for trial.  IPEC is only concerned with claims which have an IP element where the value is under £500,000 and the issues are sufficiently simple that they can be resolved within a two day trial.  The STS is potentially available to all courts situated in the Rolls Building i.e. Chancery (which includes IP), Commercial, Technology and Construction, Admiralty and Mercantile courts.  The STS does not have a damages cap but the case must be straightforward enough to be heard in four days (including reading time).

The streamlining process includes limiting the number of witnesses, amount of disclosure (i.e. discovery), docketing of judges and, where possible applications which are decided on the papers rather than at a hearing.  In the IPEC, simpler claims can be decided without a hearing at all.

New life can grow in court(yards)
One of the big differences between the two procedures is costs.   The STS offers a respite from the costs budgeting which has become commonplace post the Jackson reforms.  Instead of submitting costs budgets, the parties are required to exchange schedules of costs three weeks after trial to enable the judge to make a summary assessment.

Meanwhile, the IPEC has a series of costs caps for each stage of the proceedings plus an overall costs cap of £50,000.  There have been various attempts to allow for costs outside this £50,000, most notably in Henderson v All Around the World [2013] EWPCC 19 (27 March 2013) re the ATE insurance premium (at that time recoverable from the other side) and OOO Abbott v Design & Display Limited [2014] EWHC 3234 (IPEC) (10 October 2014) re costs on the indemnity basis from the period after the Relevant Period for the Part 36 offer has expired at [21].

In both instances, the court held that both ATE premiums and indemnity costs were subject to the costs cap.  This reduced the value of Part 36 offers in the IPEC and, arguably, made it harder to settle cases.

The other side of the
Part 36 rainbow
Since those cases, the Court of Appeal has considered the impact of fixed costs on Part 36 offers (Broadhurst v Tan [2016] EWCA Civ 94).  The Court of Appeal concluded that Part 36 took precedence over the fixed costs.  Although some of the court's reasoning was specific to personal injury cases, HHJ Hacon in a recent IPEC decision, PPL v Hagan [2016] EWHC 3076 (IPEC) (30 November 2016) identified two principles which could apply to Part 36 offers in IPEC:

  1. where fixed costs are intended to prevail over Part 36, the civil procedures explicitly say so [37]; and
  2. if there was any doubt, the court is entitled to refer to the Explanatory Memorandum which states that, if a claimant makes a successful Part 36 offer, "the claimant will not be limited to receiving his fixed costs, but will be entitled to costs assessed on the indemnity basis..." [38].
On that basis HHJ Hacon concluded that both staged costs and the cap in IPEC does not apply to an award of costs under Rule 36.14(3)(b).

While this may not be the most exciting IP case of recent years, it has positive implications for IPEC litigants as it enables Part 36 offers to have a bit more bite.

1 comment:

Anonymous said...

Very interesting. It does however make a mockery of the IPEC costs cap, since a party with deeper pockets will simply make a part 36 offer early in the procedure and will then benefit from the possibility of indemnity costs being claimed for the entirety of the process, or at least the trial (with many part 36 offers being made in the final month to allow the massive costs of the final weeks to be reclaimable on an indemnity basis).

If we combine that with the rather tiny position on accounts of profits in the UK this means that a large party can make a "medium" offer knowing that there is a substantial risk it will not be beaten at trial and the enormous costs of the other side will fall upon it. If the other side think that a case is going to take a huge amount of work then the answer is to apply for it to be transferred (and accept the risk both ways): if this case is right a large litigant who has been sued by a smaller one can make a tactical part 36 offer which exposes the other side, but not them.

In one fell swoop the decision of HHJ Hacon undermines all his hard work on IP Pro Bono. It was always the case that the 10% uplift did not fall within the cap - as a result it was possible to get more than the £50k limit - but this goes a lot further.

Subscribe to the IPKat's posts by email here

Just pop your email address into the box and click 'Subscribe':