[Guest Post] Appeals from the IPEC - costs, fairness and submarines

Following on from Oliver Fairhurst's recent post on the Makeality v City Doggo appeal, the IPKat has received and is pleased to share some thoughts from Andrew Lomas (Barrister, One Essex Court) on the recent spate of appeals from the IPEC.

By Andrew Lomas, One Essex Court

In a post-script to Oliver’s recent IPKat post, a question was raised as to whether the number of recent appeals from IPEC might be undermining that court. By way of recap IPEC “…is intended to provide access to justice for small- and medium-sized enterprises and individuals in intellectual property disputes by keeping the costs of such litigation down and by limiting the costs exposure of litigants if they are unsuccessful. In order to keep costs down IPEC has special procedures which involve tight restrictions on the materials that can be placed before the court. In addition, trials should not normally exceed two days.” [per Arnold LJ in Penhallurick v MD5 Ltd [2021] EWCA Civ 1770]

The procedural constraints placed on parties at first instance give rise to two particular problems when considering appeals from IPEC.

The first of these is that the costs of the appeal will often outstrip the total cost caps for IPEC (which are currently capped at £60,000 up to and including a trial on liability). Thus, one of the big selling points of IPEC - that it is cheaper and offers limited adverse costs risk - can be significantly diluted, if not totally destroyed, by the prospect of preparing for a heavy appeal. 

 

However, this issue seems to be easy enough to fix, not least as there is an entire provision of the CPR dedicated to rectifying the lack of congruence between: (a) rules as to first instance costs; and (b) rules as to appeal costs. Specifically, CPR 52.19 provides that “…in any proceedings in which costs recovery is normally limited or excluded at first instance, an appeal court may make an order that the recoverable costs of an appeal will be limited to the extent which the court specifies.”  Whilst few parties to appeals from IPEC appear to be making (or even contemplating) an application under CPR 52.19, that doesn’t mean more shouldn’t, or - to go one step further - that the rules should, as a default, require an order capping recoverable costs on appeal whenever granting permission from IPEC (as to quantum of that cap, the current stage cost for preparing for and attending trial and judgment is capped at £20,000, something in the region of £15,000 for the appeal would seem to be about right). To the extent that this might encourage more appeals from IPEC: (i) the same test at the permission stage will apply to filter out any appeals lacking merit; and (ii) this, to me, would seem to argue in favour of greater costs capping if parties currently feel shut out from the appeals process because of the costs / costs risks involved.

The second issue relating to IPEC appeals is that the appeal hearing will often be as long as the trial itself but focussed on a narrower set of issues. This problem was recognised in Thatchers ([IPKat here and here]) where Arnold LJ noted that “[t]he arguments on the appeal lasted two days, as long as the entire trial before the judge. It is clear that, as a result this Court received much more assistance on section 10(3) than the judge did. Furthermore, unlike the judge, we have not had to consider Thatchers' claims under section 10(2) and for passing off.”

As a starting point, there is an element of unfairness (both to the trial judge and the respondent) from allowing an appellant to expand a point on appeal that may have received little or no attention at first instance. There is no silver bullet in this regard, though it is worth noting that the High Court appears to be increasingly focused on transferring matters that involve multiple issues / non-trivial amounts of disclosure and evidence out of the Shorter Trial Scheme. With that in mind, judges in IPEC should maybe be more willing to transfer cases out to the general IP list where the number of issues in play cannot be fairly developed within the framework of a 2-3 day trial. Faced with that choice, parties may elect instead to pre-emptively narrow their cases / pick their best points in order to retain the benefits of IPEC.

Otherwise, there is Court of Appeal authority – starting with cases such as Pitallis v Grant [1989] QB 605 – where a party has been allowed to take an entirely new point on appeal so long as any prejudice can be cured by an appropriate order for costs, i.e. barring a successful appellant from recovering costs relating to any new points. It seems that the same principle could be applied to submarine points that, whilst pleaded, only properly surface on appeal.