The specialist Intellectual Property Enterprise Court (IPEC) provides a useful alternative option for brand owners who are contemplating commencing proceedings for trademark infringement.
While trademark infringement actions can be filed in either the High Court or the IPEC, the latter is designed for less complex, lower-value actions. This makes it an attractive forum for small and medium-sized enterprises (SMEs) which may be trying to limit the costs of litigation. The usual position in English litigation is that the loser is required to bear at least a proportion of the winner’s legal costs (provided that they are properly incurred), as well as its own. In the High Court this can be a daunting prospect because there is no completely effective way of controlling what the other side spends. However, the recovery of costs at the IPEC is capped at £50,000, which means that the parties have a good idea of their maximum exposure from the outset. Similarly, there is a £500,000 cap on recovery of damages.
The procedure before the IPEC has also been streamlined. The parties must file detailed statements of case and it is more difficult to obtain permission to amend than in the High Court, so the parties must set out their case as fully as possible early on. The IPEC also encourages active case management, which means that the parties must apply for permission to conduct disclosure exercises, admit evidence or carry out cross-examination, and must have a good basis for such requests. Trials are limited to two days. It is even possible to have a case decided on the papers. Accordingly, IPEC proceedings tend to be more front-loaded and focused than High Court proceedings.
Clients are becoming increasingly cost conscious and often indicate a preference for fixed fees and reduced rates when commissioning legal services. Brand owners can be cautious about commencing legal proceedings because they worry that they will be throwing money into a black hole. The IPEC cost cap means that it is more straightforward to budget for litigation because exposure is clearer at the outset. The cap for each stage of the litigation enables clients to assess how their exposure will increase as the case proceeds. A recent independent review of the 2010 reforms to the IPEC procedure found that the introduction of the costs cap has been the most important reform in attracting litigants to the court.
IPEC cases usually come to trial more quickly than High Court cases, so a claimant can obtain a faster result
The remedies available for trademark infringement before the IPEC are the same as those before the High Court. This means that as well as claiming damages, claimants can seek injunctions, which in many cases are the principal remedy sought. IPEC cases usually come to trial more quickly than High Court cases, so a claimant can obtain a faster result and remove the infringer from the market reasonably swiftly.
One of the main barriers to commencing litigation for SMEs can be the prospect of spending large amounts of management time on the case, which can be an unwelcome distraction from running the business. The focused nature of IPEC proceedings should mean that they require less management time. One of the most time-consuming aspects of litigation before the High Court is the disclosure obligation. A representative of each side is required to supervise the disclosure exercise, which can require a considerable investment of time. In the IPEC, disclosure can be ordered only if the benefits outweigh the costs, which means that disclosure is likely to be granted only in relation to specific, targeted issues, if at all. Applications to file witness statements and conduct cross-examination are subject to the same cost/benefit analysis, so it is less likely that directors will be involved in the evidence process, or will be required only to give evidence on particular points.
A further advantage of IPEC proceedings is that they concentrate the minds of both sides. The court’s guidelines on the content of statements of case indicate that similarities relied on between a mark and a sign will not generally require elaboration. Some detail may be necessary in relation to allegations that goods or services are similar, in appropriate cases, and the parties should identify the nature and characteristics of the relevant consumer (if relevant). The requirement to concisely set out the case from the beginning means that the issues in dispute are crystallised well in advance of trial, which can be extremely helpful when it comes to achieving an appropriate settlement.
Brand owners may be concerned that the focused nature of the IPEC procedure means that there will be less opportunity to explain the case properly and introduce relevant evidence. However, the principal points at issue in trademark matters are often questions for the judge, which means that it makes sense for them to be determined without voluminous evidence. Further, it has now been established that survey evidence is rarely appropriate in trademark cases, no matter what the forum. Accordingly, there is no great benefit in commencing proceedings in the High Court just to try to obtain permission to admit such evidence.
For claimants which are keen to minimise the costs of instructing counsel, the IPEC procedure offers additional benefits because it is possible to request that a case be decided on the papers if both sides consent and if the court considers it appropriate. This may be attractive to brand owners which have experience of registry proceedings, which are often decided without a hearing. Opting for this procedure arguably sends a strong message to the defendant that you are confident in your case. If the defendant has shown a reluctance to engage, it can be tactically helpful to use the prospect of a trial to try to bring them to the negotiating table. However, in circumstances where it is doubtful that they will even attend the trial, claimants may try to take advantage of the written procedure to keep costs to a minimum. The advantages of the procedure should be weighed against the benefits of enabling counsel to cross-examine witnesses and to test the other side’s case more vigorously at trial.
As set out above, the IPEC is particularly suitable for lower value, less complex proceedings. However, it should not be assumed that trademark infringement matters will always fall into this category. For SMEs, the brand is often the key asset and loss of the ability to use it or stop others from doing so could have serious consequences. Accordingly, careful thought should be given to which court will offer the best chances of success. In some cases, it is vital to adduce substantial evidence of use or to demonstrate actual confusion between two marks. There can also be complex interplay with ongoing registry proceedings, which means that a number of arguments will need to be run in parallel. In such circumstances, the IPEC may not be the most appropriate forum.
Similarly, it may not be the best forum if the claimant’s aim in commencing proceedings is to put pressure on the defendant and encourage it to settle. The fees for issuing civil proceedings (in both the High Court and the IPEC) increased in April 2015 to 5% of the value of the claim for claims of £10,000 to £200,000, and to £10,000 for claims over £200,000. In the IPEC there is also the additional legal cost of preparing detailed statements of case. This means that the claimant must invest substantial resources just to commence proceedings. There is then arguably a greater incentive for defendants to settle cases brought in the High Court because the financial exposure is less predictable. In particular, defendants may be more prepared to gamble if presented with a Part 36 offer in IPEC cases, because they will be liable only for capped costs if they do not accept the offer and the claimant goes on to achieve a better result at trial. (It is worth bearing in mind that Rule 36.17(4)(d) of the Civil Procedure Rules includes provision for a 10% uplift in damages up to the value of £500,000 in such a situation, which can result in some additional exposure for the defendant, depending on the level of damages awarded. This provision may go some way to compensate for the cap on recovery of costs, as it could result in recovery of a further £50,000.)
Accordingly, while the shock of an IPEC claim form landing on the desk of a defendant may be enough to bring it to the table, the caps on recovery of damages and costs may make it more likely to fight the case.
Issues to consider
It is important to consider at the outset what the brand owner wishes to achieve. If the case is straightforward and the principal aim is to seek an injunction in the most streamlined manner possible, then issuing in the IPEC is likely to be the most efficient course of action. Further, the more focused nature of the procedure means that less management time is likely to be eaten up in running the case. However, if there are high damages at stake or the ultimate aim is to encourage settlement (possibly because of concerns over the strength of the case), the IPEC may not be the best forum. If a claimant is confident in its case, it may tactically decide to file in the High Court, so as to increase the defendant’s liability for costs and damages. Overall, the IPEC in its current form is a welcome development because it increases the portfolio of tools available to brand owners for enforcing their marks. If a case is framed appropriately, the IPEC can offer an efficient procedure for pursuing infringers while avoiding the sometimes unwieldy and unpredictable nature of High Court proceedings.
This article first appeared in World Trademark Review. For further information please visit www.worldtrademarkreview.com.