A recent case in the Patents County Court (when will they get around to renaming it the Intellectual Property County Court?) has explained how the court will apply the caps on legal costs that may be claimed there. The caps are sometimes summarised as a single figure – £50,000 – but actually it is a series of caps for each stage in proceedings that could add up to £75,000. Confused? Will this recent case make things clearer? Read on…
The case was brought by the clothes designer, Dame Vivienne Westwood, against an internet trader, Mr Knight, for infringement of various trade marks and copyright and passing off. The case started off in the High Court but was then transferred to the Patents County Court (PCC) at an early stage. Westwood was represented by the leading IP law firm, Taylor Wessing. Knight represented himself. The case is reported here and last week’s costs award is reported here. The various costs caps in the PCC are helpfully set out in a table in the latter judgment.
In his judgment on costs, His Honour Judge Birss QC explained the process for determining costs. In essence, there is a three stage process:
1. Determine what costs were actually incurred, and group them in the categories for which costs limits apply in the PCC.
2. Reduce the actual costs by assessment in the traditional way – this is likely to result in a reduction by about one third, assuming that costs have not been awarded on an exceptional “indemnity” basis.
3. If any of the amounts resulting from stage 2 exceeds the PCC limit, reduce the amount to the PCC limit.
As Judge Birss points out, the caps on costs in the PCC are designed to provide certainty for litigants. They are also designed to make smaller-scale IP litigation more affordable, particularly for small and medium sized enterprises (SMEs). We are not sure that the latter objective has been given sufficient attention in Judge Birss’s costs ruling, particularly for the SME litigant who wins his case and wishes to recover costs from the loser.
The costs judgment also provides a table that compares Westwood’s actual legal costs with the costs awarded by the court. The picture is complicated by the fact that proceedings started in the High Court, where no cap applies. In respect of those stages of proceedings conducted in the PCC, the costs figures can be summarised and approximated as follows:
Stage 1: Costs incurred – £80,000
Stage 2: Costs assessed – £50,000
Stage 3: Costs awarded after caps applied – £35,000
This blogger finds these figures troubling. We recently advised an SME on possible trade mark infringement proceedings. One of the SME’s primary concerns was to know whether the costs of bringing the proceedings in the PCC would be recovered (assuming the court awarded costs in our client’s favour). On the above figures, less than half of the costs incurred would be recovered. In our case, we had been working on the assumption that the case would cost about £75,000 to run, and that £50,000 would be recovered.
The difference between our case and the Westwood one is is no doubt partly due to the high hourly rates of specialist City firms. But we are particularly concerned about the “double whammy” that stages 2 and 3 create.
I seem to recall comments when the new PCC rules were being set up, that it should be possible for a small, efficient IP firm to run a case within the PCC costs limits. At the time, I thought this was ambitious but might just be possible using junior IP litigators. However, it is never going to be possible if costs are assessed by the court at less than the amount that is incurred. Surely the costs caps provide sufficient control over excessive expenditure, and it should not be necessary to apply a traditional costs assessment as well?