In the recent Patents County Court (PCC) case of BOS v Cobra [2012] EWPCC 44, HHJ Birss QC considered how capped costs recovery applied in the PCC when the successful party did not win every issue. The outcome was that a successful party's costs will be summarily assessed and reduced to reflect those issues on which it was ultimately unsuccessful, before the court applies the costs caps to the different stages.

The decision of Vernacare Ltd v Environmental Pulp Products Ltd [2012] EWPCC 49, handed down on 30 October, is the first reported decision to apply this approach and confirms that it is correct. However, it is also notable for two further points which will be of importance to parties seeking to recover their costs in the PCC:

Firstly, HHJ Birss QC held that where both parties claim to have been successful, the question the court needs to ask is which party won as a matter of substance and reality.

Secondly, the judge held that in "the very simplest sort of patent case" the costs caps may be too generous and the cap would be set at a lower figure.

Background

Vernacare Ltd (Vernacare) owned a patent for disposable washing bowls made of paper pulp for use in hospitals and other similar establishments. They claimed that three versions of a product sold by Environmental Pulp Products (EPP) infringed the patent. EPP accepted that the first version infringed, but submitted that the others did not, and that the patent was invalid in any case.

The trial was heard in just over half a day. HHJ Birss QC found the patent to be valid, but that only the first and second versions of EPP's product infringed the patent. The third version of the product, which was the only version still being sold by EPP, was found not to infringe.

Who's the winner?

Having successfully established that the patent was valid, and that two out of three products infringed, Vernacare submitted that they were the overall winner.

However, EPP submitted that they were the commercial winner of the case because they could continue to sell the non-infringing third version of their product. Since this version did not infringe, the validity of the patent was no longer of any practical concern to them, and the previous versions of their product which did infringe were of only historical interest.

The question of determining the overall winner of a matter was recently considered by Mr Justice Floyd in the High Court in Omnipharm v Merial [2012] EWHC 172. He approved the judgment of Lord Bingham MR in Roache v News Group Newspapers [1998] EMLR 161 that the correct approach was to ask who had won "as a matter of substance and reality". To help answer this point, it was useful for the court to ask whether "the [Claimant] won anything of value which he could not have won without fighting the action through to a finish?" or whether "the Defendant substantially denied the [Claimant] the prize which the [Claimant] fought the action to win?".

HHJ Birss QC held that while the ability to sell the third version of their product was of significant commercial importance to EPP, this did not mean that they had won, because by losing on validity they were liable for prior sales of the versions which infringed the patent.

Application of the issues based approach and the caps

Applying the issues based approach set out in BOS v Cobra, HHJ Birss QC held that Vernacare was entitled to recover only 70% of its costs from EPP.

A further deduction of 5% was imposed because of Vernacare's failure to constructively engage with EPP's attempts to negotiate. It is important to note that the judge did not criticise Vernacare for not accepting the offers (on the basis they achieved a better result at trial), but held that they should have done more to engage with the settlement discussions.

As a result, Vernacare was entitled to 65% of its costs, subject to summary assessment and the costs caps.

Simplicity

Part 45 of the Civil Procedure Rules (CPR) set out the rules governing costs recovery in the PCC. In Westwood v Knight [2011] EWPCC 11, HHJ Birss QC explained that once the summary assessment has been completed, the maximum recovery a court may award for each stage of a claim is the relevant figure set out in Table A, contained in Section 25C of the Costs Practice Direction.

The general approach explained in Westwood, is that "if the summarily assessed sum is more than the limit for a given stage, then the limit is very likely to be the right figure." One may therefore assume that the capped amount will often be the appropriate figure in patent matters where costs are traditionally higher.

However, the amount of scale costs also depends on the nature and complexity of the claim (CPR 45.42(4)). HHJ Birss QC held that because the matter was "the very simplest sort of patent case one could imagine", some of the scale costs were more generous than necessary. The caps for preparing expert evidence and preparing for trial were therefore reduced by the amounts set out in the table below.

Click here to view table.

As can be seen above, the approach taken by the judge resulted in Vernacare recovering £32,475. This amount was more than £4,000 less than it would have been entitled to if the Table A caps had been applied.

Comment

The court is required by the CPR to consider the nature and complexity of a claim when deciding whether the cap amounts are appropriate. In certain cases the cap limits will no doubt be too generous.

The PCC deals with all manner of intellectual property rights and, while this is undoubtedly a relatively simple patent case, it is arguable whether it is less complicated than the equivalent copyright or trade mark case, for example. Given that the same scale is applied irrespective of the right in issue, it remains to be seen how 'simple' the claim must be before the caps are considered to be too generous, and whether the complexity of a case is decided irrespective of the type of right in question.

It is also surprising that only two stages were deemed to be overly generous in this matter. In a simple case, one would expect the pleadings to reflect that fact, and the capped amounts to be altered accordingly. This is the approach the court takes to the issues based discount.

Finally, as mentioned in our previous analysis, the case management conference (CMC) is of vital importance in PCC proceedings and matters affecting costs recovery (such as multiple parties, or parties attempting to run hopeless arguments) should be raised by the parties at this stage. If the court expects parties to raise such issues, then it seems only right that the court does likewise. For example, if the court considers the case to be simple then, when granting permission to adduce expert evidence, it should make the parties aware that they may not be able to recover the maximum capped amount in costs. This will help ensure parties do not overspend on certain stages of a case and provide increased certainty which is a stated aim of the PCC.