In a recent decision of the Intellectual Property and Enterprise Court (IPEC) (formerly known as the Patents County Court) a successful claimant in a passing off action was awarded only a portion of its costs in light of the Defendants' early settlement offer, as a consequence of which, in the Court's opinion, the continued litigation was primarily motivated by costs (Bocacina Ltd v Boca Cafes Ltd [2014] EWHC 26 (IPEC)).

However, notwithstanding the Claimant's reduced recovery, the Defendant still ended up paying more in costs than it would have had it offered to pay the Claimant's costs as they then were when it made the offer of settlement.

Summary

Daniel Alexander QC, sitting as Enterprise Judge, awarded the Claimant 90% of its costs up until the date of the Defendants' settlement offer and decreased the Claimant's recovery rate to 50% after that date. In their settlement proposal, the Defendants had offered to change their name and surrender their trade mark for "BOCA BISTRO CAFÉ". The Judge considered that the Defendants had effectively "given in" and that the settlement offer had removed any real cause for complaint. The Judge considered that after the settlement proposal, which was rejected by the Claimant, the litigation had become a dispute about costs. As a result, even though the Claimant had been successful in its claim against the Defendants, the Judge cut significantly the proportion of costs recoverable by the Claimant after the settlement offer. However, the Judge also noted that had the Defendants offered to pay the Claimant's costs as part of its settlement proposal, this would have avoided the action proceeding to trial and, due to the early stage at which the offer was made, would have resulted in the Defendants paying significantly less than it now had to.

The Judge decided that there should be a reduced incentive for claimants to continue to trial when a settlement offer proposes to provide substantive relief. That said, the Judge remarked that a settlement offer may not always be reasonable, for instance where the offer does not include an offer to settle a significant proportion of the costs expended up until then.

The judge also considered issues relating to conduct and particular points on the level of costs in these proceedings.

Business impact

  • Rejecting a reasonable offer to settle in the IPEC may have an impact on the measure of costs recoverable, even by a successful party.
  • Including a cost contribution proposal in a settlement offer can save litigants money in the long run in particular if the question of costs is all that remains in issue between the parties.
  • Filing documents late and in breach of a court order may lead, at best, to costs penalties if it causes cost increases and, at worse, to the documents being disregarded.