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Exposure to high litigation costs can prevent small and medium-sized enterprises (SMEs) and individual inventors from accessing the legal system.
Significantly, the costs associated with proceedings in the Patents Court typically start at £1 million, often escalating to between £1.5 and £2 million in small to medium-sized patent disputes[1].
Currently, there is no cap on recovery of costs in the Patents Court, in comparison to proceedings in the IPEC which are subject to a usual maximum recovery of £60,000 in costs (and £500,000 for damages). This potential exposure to high adverse costs often means that in cases where the value and complexity are lower (but not below £500,000), the Patents Court is not attractive.
This is despite the introduction of the Shorter Trials Scheme (STS) in the Patents Court as an option to streamline proceedings because the uncapped nature of the adverse costs exposure often means that costs can be out of proportion to the nature of the proceedings. Some of these litigants – who are more likely to be SMEs – may opt for the IPEC, but their damages may be unduly limited there and the IPEC costs recovery regime is also potentially too limited where higher value and higher complexity issues (with attendant increased costs) are at stake.
Could the introduction of a cost-cap system for STS cases within the Patents Court mitigate this reluctance and make enforcing patents in the UK courts more attractive to SMEs? [2]
In May 2023 the Civil Justice Council (CJC) published their Costs Review Final Report based on a Consultation Paper from June 2022 by the CJC Costs Working Group, which was set up to take a “strategic and holistic look at costs”.[3] The consultation paper invited respondents to answer set questions including: “Should an extended form of costs capping arrangement be introduced for particular specialist areas (such as patent cases or the Shorter Trials Scheme more generally)? If so, please give details.”
Following this consultation paper, the Intellectual Property Lawyers’ Association (IPLA) published a note in response which focused solely on the proposal of capping costs for patent cases in the STS.
The IPLA note stated that the main reason for this proposal was “to improve access to justice for “mid-tier” patent disputes by providing potential litigants with greater certainty about the total costs risk of commencing proceedings” and would assist in encouraging litigants to use the UK Patents Court “for patent disputes which can be brought in different international jurisdictions”. This latter point is directed at the introduction of the UPC and the competition that will bring.
The IPLA note also suggested that the proposal should be simple to apply and require minimal changes by adopting the current procedures for the STS in Practice Direction 57AB, applying the standard principles surrounding recovery including judicial discretion, while adding a single total costs-cap of £500,000, thus enabling successful parties to recover a “reasonable proportion of their total costs”.
The CJC report suggested that the idea of a costs cap of £500,000 being implemented into the STS for patent cases was supported by a number of respondents to the consultation. Based on this positive response, the CJC report indicated in its recommendations that the CJC supported this proposal and the Civil Procedure Rules Committee (CPRC) and Intellectual Property Court Users Committee (IPCUC) and other stakeholders should work together to introduce a suitable pilot scheme.
Following this recommendation, a proposed draft pilot Practice Direction along with supporting correspondence from the IPCUC was provided to the Secretariat in the October 2023 CPRC meeting.[4] This proposal has since been approved by the CPRC in their November 2023 meeting and a three-year pilot phase is expected to be introduced under Practice Direction 51ZD in the 162nd Civil Procedure Rules update coming into force on 1 January 2024. It is likely to automatically apply to new patent proceedings in the STS once the pilot scheme is in effect, according to Michael Burdon, former chair of the Intellectual Property Lawyers Association (IPLA).
The STS was introduced in October 2018 after a three-year pilot scheme, extended from the originally envisaged two years, for matters in the Business and Property Courts and applies to all claims issued on or after 1 October 2015 with the aim of achieving shorter and earlier trials at a reasonable and proportionate cost by streamlining procedures and removing the need for comprehensive disclosure and a full trial on all issues. The streamlined procedure aims for a case to reach trial within approximately 10 months from issue and is intended for cases which do not involve multiple issues, which can be fairly tried on the basis of limited disclosure and oral evidence, and require no more than 4 days of trial, including reading time by the Judge. The introduction of a costs-cap system in the STS will hopefully enhance and streamline this procedure further for potential patent litigants for the type of dispute it is intended to suit.
For the time being, the costs-cap will only apply to patent cases within the STS. This appears to be a tacit acknowledgment that it is nevertheless possible for significant costs to be incurred in patent cases even when using the STS and that something additional was needed to try to constrain costs.
According to the IPLA note, the proposed amount of £500,000 cap on costs with no limit on damages is: “considered proportionate to the likely value of patent disputes which are suitable for STS” and a “reasonable amount to budget for potential adverse costs for this type of dispute.” The proposed amount of £500,000 is significantly higher than the costs-cap of the IPEC, but lower than the amount the successful party in proceedings in the Patents Court outside of the STS is likely to recover. A lower cap might render the STS less attractive compared to the standard Patents Court, especially if actual costs far exceed recoverable costs.
AA Thornton is well-positioned to guide you through the latest developments in the Patents Court, especially with the new cost-cap system in the Shorter Trials Scheme. This is particularly valuable if you are an SME or inventor who needs to navigate the changing landscape and ensure your patent litigation strategies and both effective and efficient. Please contact Dan Byrne if you would like to discuss any of the issues raised in this article.
Category: News | Author: Daniel Byrne | Published: | Read more
