Forging a new path: cost caps and contrary behaviour in cut-price IP court

Today has been one of those English spring days where the warmth of the approaching summer is starting to sneak into an otherwise dull and oppressive London sky, but the truth of the matter is that it's still worth snuggling up against the nearest available radiator It's also more than somewhat damp, as any Kat whose paws have touched the pavement can confidently verify.

If there was a hyperlink somewhere, with the instruction "click for another month in bed, with breakfast provided", Merpel would probably have clicked it -- but for the sudden excitement aroused by her curiosity when a judgment from the Intellectual Property and Enterprise Court (IPEC) plopped roundly into her inbox. Merpel doesn't get out of bed for any IPEC (né Patents County Court) judgment -- but Brundle v Perry [2014] EWHC 979 isn't any IPEC judgment. It involves some exceptional conduct on the part of one of the litigants that suggests it would have been wiser for him to click the "another month in bed, with breakfast provided" option rather than adopt a course of action that could more easily have earned him a month being entertained at Her Majesty's pleasure and a daily dose of porridge.

Back in March, the IPKat reported on that rarest of cases -- a groundless threats action -- successfully brought against Richard Perry by one F H Brundle.  Mr Brundle [remember that lovely word, a cross between 'bundle' and 'trundle'?] was also successful in relation to Mr Perry's counterclaim for patent infringement. Given Brundle's success, the company was duly entitled to an award of costs. Because Brundle's claim form was dated 12 March 2013, before the new scale costs applied on 1 October 2013, the judge held that it would be the old scale costs that would apply, notwithstanding that, in December 2013, Mr Perry's counterclaim for infringement was dated after 1 October 2013, in December 2013. On this basis the court would respect the legitimate expectations of the parties when Brundle commenced its action. Judge Hacon then said he would award Brundle £34,525, including £15,000 for preparation and attending trial and judgment.

If the cap fits,
wear it ...

"So far, so yawn ..." says Merpel, "but here comes the juicy part." Mr Brundle argued that the costs cap and scale costs in IPEC proceedings should not be applied because of Mr. Perry's unreasonable behaviour in light of CPR44.2(4(2)(a). Mr Brundle argued that Mr Perry used intemperate language and expletives in his pleadings and in his skeleton argument for trial. This language continued in emails that Mr Perry sent to the good judge's clerk. Mr Recorder Meade QC warned Mr. Perry about his language at a hearing of an application but, according to the judgment, Mr Perry had said he had chosen not to heed the warning.

Then things got worse. On 26 March 2014, Mr Perry sent an email to Judge Hacon's clerk, the parties' solicitors and counsel. In that email, Mr Perry stated that he had received a letter purported to come from Judge Hacon himself.  The text of that email was as follows:

Royal Courts of Justice 

Patents County Court

Rolls Building, Fetter Lane 

London 

sales@hmcts.fasteners.co.uk

...

26th March 2014

Claim CC13P00980

Dear Mr Perry,

I have re-considered the case CC13P00980 and upon reflection; your opponents (FH Brundle, Betafence and Britannia Fasteners) having used your name on purchase orders for the infringing goods protected under your patent (which seems to be a fundamental point in the case), have colluded to defraud you of substantial sums of profits you were rightfully entitled to and therefore I have reversed my decision in your favour and award £5,000,000.00 in damages that would settle the claim in full.

I apologise that I did not even question your opponents on this issue or the matters concerning the manipulation of design sheets and copyright dates as at the time I didn’t think it was all that relevant.

I order the claimants and counter defendants to pay the claim in full within 14 days and the claim for unjustified threats is dismissed.

Mr Justice Hacon”

The judge stated that there was no evidence that Mr Perry's name had ever appeared on Brundle's purchase orders and that, in any event, it would make no difference. As regards the forgery, the judge stated, in that very restrained and understated way in which English judges express emotion:

... the best that can be said about this purported letter is that for several reasons no one would take it seriously... A deliberate attempt to influence others by means of a forged letter from a judge would be an extremely serious matter. I think the purported letter circulated by Mr Perry, to my clerk among others, is better characterised as a further example of Mr Perry’s intemperate and eccentric behaviour in the conduct of these proceedings. The question I have to decide is what effect, if any, this behaviour should have on costs".

The costs regime in the IPEC -- both the overall caps and the scale costs -- is mandatory. There are however three exceptions (i) where the party's behaviour amounts to an abuse of process; (ii) when a claim concerns a registered right which has been earlier certified as being valid; (iii) where a party has behaved unreasonably in an application, in which costs of the application would be awarded at the conclusion of the hearing and where those costs are in addition to the other costs subject to the cap.

Tiddles prepares for
his day in court ...

The IPEC still had overall discretion on costs by virtue of the Civil Procedure Rules, CPR 44.3.  But, as held by Judge Birss QC (as he then was) in Henderson v All Around the World Recordings Ltd [2013] EWPCC 19, the exercise of that discretion is conditional on the special rules as to the costs in the then Patents County Court. A judge should only depart from the usual IPEC costs rules in "truly exceptional" cases. Judge Hacon commented that it is open to the court not to apply scale costs for one or more stages of a claim, while still keeping the total award within the overall cap. Another Civil Procedure Rule, CPR 44.2(4)(a), permits the court to consider the conduct of the parties when assessing costs. This being so the judge held that Mr. Perry's conduct had been:

"strikingly unusual but not, in my view, truly exceptional on the scale of unsatisfactory behaviour [which leaves open the fascinating question as to what sort of behaviour one would have to practise in court to exceed the bounds of the merely "strikingly unusual" and enter the realms of the "truly exceptional"]. It is open to me in the present case to take Mr Perry’s conduct into account if this does not give rise to a total award in costs above £50,000."

The judge then awarded Brundle an additional £2,000 in costs, as well as further £2,000 to a third party defendant who had also been sued by Mr Perry. The total costs to be paid by Brundle totalled £49,645 - just under the £50,000 costs cap. Following the Court of Appeal's decision in Samsung v Apple [2012] EWCA Civ 1339 and in light of

"Mr Perry’s tendency towards an unrestrained response to anything he does not agree with, whether coming from the court or his competitors"

the judge also ordered that Mr Perry publish notice of the judgment in Fencing and Landscaping News.

Merpel is struck by the judge's reasoning on the costs order. She thinks that the judge, in keeping the costs under the £50,000 costs cap, had in his mind the potential floodgates of costs litigation in the IPEC if he were to award costs above the £50,000 cap. This reasoning is not satisfactory. Says Merpel, forging a letter from a judge of the High Court of England and Wales must surely be considered exceptional conduct that would justify ignoring the costs cap. In short, instead of sending IPEC litigants a powerful message that the costs floodgates will not be lightly opened and that cost-capping still apply, this decision basically says "you can behave as inappropriately as you like throughout the proceedings despite warnings. You can even forge a letter from the judge -- but don't worry, your costs will still only be capped at £50,000, however egregious your conduct". This surely is not the reputation that IPEC wants to promote.

But does Merpel's view of the judge's reasoning actually constitute a fair reflection of today's depressing weather? Was he truly constrained by the "truly exceptional" threshold imposed by virtue of the special costs regime? And what would be "truly exceptional" conduct? Readers are invited to supply some truly exceptional suggestions ...

More on porridge here and (courtesy of Jamie Oliver) here
Not truly exceptional conduct, presumably, on the part of Jamie Oliver here