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The price of success in the PCC – especially on a CFA

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12/09/2013

The very recent patent infringement case of Scopema SARL v Scot Seat Direct Limited [1] has demonstrated just how ruthless can be the costs capping regime in the Patents County Court (PCC).

Background

The Claimant brought a claim for patent infringement against the Defendant. The end result at trial, which lasted only half a day, was that the Defendant succeeded in defending the claim by persuading the Court that its product did not infringe the Claimant’s patent. It had based its defence on three main non-infringement arguments. It only really succeeded in relation to one of those threads of argument – though of course this was sufficient for a finding of non-infringement.

The proceedings then moved to the consideration of costs and there was a separate hearing on the point. The Claimant admitted that the Defendant was the winner overall, and so in the usual course of things, the Claimant would have to pay the Defendant’s reasonable costs. However, this was the Patents County Court, so the recovery of costs was always going to be subject to the £50,000 cap (see, for example, here). In addition, given that a couple of the Defendant’s arguments had failed to persuade the trial judge, the Claimant sought a reduction on the amount of costs it would have to pay to the Defendant.

Costs specifics

The Judge was far from persuaded by the Claimant’s arguments as regards obtaining a reduction on the amount of costs it owed. Essentially, the Defendant had been forced to defend a claim which, in the end, had not been made out and therefore it should recover its costs. However, this being the PCC, the Defendant could not simply ‘submit a bill’; rather, the Defendant had to separate out its costs according to the PCC stages and the amount recoverable from the Claimant would be subject to the PCC caps.

The Defendant tried to maximise recovery in two main ways: (1) by putting time for the CMC into the separate ‘application’ stage, in an attempt to open up not only the CMC cap (£2,500) but also the application cap (£2,500), and (2) by seeking to recover money in relation to work done on investigating a possible counterclaim for invalidity of the Claimant’s patent, which in the end was not pursued. The Judge had no issue with (2) and granted the full cap available for a defence and counterclaim (£6,125), on the basis that it was entirely reasonable, faced with a patent infringement claim, for the Defendant to run validity searches. As regards (1), however, the Judge allowed recovery of only the CMC cap insofar as work done at or for the purposes of the CMC was concerned, i.e. despite the costs adding up to far more than £2,500, the Defendant could only seek this amount from the Claimant for that ‘stage’.

There was an added complication in respect of costs in this matter, due to the fact that the Defendant’s solicitors had entered into a conditional fee agreement (CFA) meaning that an uplift on the fees payable would apply upon a successful outcome, which, of course, had been achieved. In this case, the uplift applicable was 100 per cent, based on the risk of not achieving a successful outcome at the time the CFA was entered into. For perhaps obvious reasons, the Claimant objected to the CFA uplift being taken into account by the Judge in his costs award, and specifically objected to the size of the uplift, claiming that the risk assessment must have or should have changed later on, i.e. as the strength of the Defendant’s case became clear. However, the Judge decided it was entirely reasonable for the Defendant’s solicitors to enter into a CFA and to maintain that CFA to trial, even when it became ever clearer that the Claimant’s chances of succeeding were minimal (on the facts, there was a turning point at which it became more obvious that the Claimant’s case on infringement might fail). The Judge expressly stated, in fact, that in his view there is “no justification for saying that the parties to a CFA should be continually adjusting the relevant uplift according to their instantaneous perception of the chances of success. Unless a new CFA is entered into, the relevant date for consideration of the chances of success is the date at which the relevant agreement was entered into”. The Judge therefore awarded, in principle, the full uplift, that is, doubling the amounts owed to the Defendant by the Claimant.

However, as we know from the case of Jodie Henderson v All Around the World (described here), CFA uplifts do not mean that the PCC costs caps are automatically displaced. Therefore, while the Judge was willing to award the CFA uplift to the Defendant, this remained subject to the cap. For each stage, the Judge therefore doubled the amount awarded as base costs but the amount for each stage actually awarded was restricted to the cap figure.

The Defendant’s total costs, especially with the CFA uplift, would have been far higher than the £50,000 cap. Even its assessed costs (i.e. its costs after having been summarily assessed by the Judge and, in most places, reduced) were, with the uplift applied, in excess of the cap, at £52,990. However, as a result of the manner in which the caps are applied for each discrete stage, the Defendant was in total awarded £33,761.

Conclusion

The judgment demonstrates that in the PCC even a successful defendant, who has been forced to fight a claim (and is clearly justified in doing so), may end up recovering substantially less than even the £50,000 cap. Clients who choose to use the PCC for their IP disputes should be aware that the benefit of the costs regime is the certainty it offers, and, given the fact there is a maximum exposure, the ability to budget for a potential loss at trial. The downside is that there is likely to be a shortfall for a successful party, even where there is no CFA, and the winning side may find it having to pay its lawyers’ fees (even where the solicitors have kept to a tight budget) out of any damages award, or even its own pocket. However, it should be remembered that the High Court would generally involve far greater cost and even before this more expensive Court it is unusual for successful parties to recover more than 70% of their cost outlay. In addition, following the Jackson Reforms implemented earlier this year, success fees under CFAs entered into after 1 April 2013 will not in principle be recoverable from the losing side, even in the High Court.

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[1] [2013] EWPCC 37

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