The Patents County Court (PCC) has had something of a chequered history. Created in 1990 to provide a forum for small and medium sized enterprises (SMEs) that could not afford the costs of High Court litigation, its first incarnation fell into disuse after a run of successful appeals against its decisions. Reinvigorated following the appointment of His Honour Judge Fysh QC in 2001, the PCC for a while became almost indistinguishable from the Patents Court in the High Court until practitioners were reminded of its role as a forum for simpler and lower value cases through decisions such as Warheit and Halliburton. But there was little in the Civil Procedure Rules to support such a difference as the same rules applied to both Courts. This meant that, despite the availability of, for example, the “streamlined” procedure for patent actions, the PCC still had difficulty providing a forum in which SMEs could afford to litigate. A particular issue was not so much the ability of SMEs to meet their own legal costs but the risk, if they lost, of having to pay potentially very substantial costs to the other side as well. The costs of a patent action under the standard rules can easily run into several hundreds of thousands of pounds, if not more. This state of affairs acted as a significant deterrent to litigation by SMEs given the limited availability for intellectual property litigation of measures such as after-the-event insurance to mitigate such risks.
As from 1 October 2010, though, the position has changed. The Civil Procedure Rules have been amended from that date to introduce for all actions in the PCC:
- a cap on total recoverable costs of-
- £50,000 up to the decision on liability (e.g. on validity or infringement of a patent); and
- £25,000 for a damages inquiry or account of profits (e.g. where infringement is established at the merits stage);
- scale costs for the main procedural steps; and
- a new procedure aimed at decisions being taken either on the basis of paper and oral submissions alone or following a trial of no more than 2 days.
The cap on costs does not prevent a party spending more on legal costs than the capped amounts, that party just won’t be able to recover those additional costs from the other side if it wins. By removing the risk of a significant costs liability if an action is lost, this measure alone should open up the PCC to litigation by SMEs but it raises two further issues.
The first is what happens if the action justifies greater expenditure than the caps accommodate, for example because it relates to a commercially significant product or is technically complex? In such circumstances the concerned party should apply for transfer of the action to the High Court. In deciding whether or not to allow transfer, the judge should consider whether a party can only afford to litigate in the PCC as well as the value and complexity of the matter. There is also an option to allow a party to withdraw a claim with reduced or no costs against it if its action is to be transferred. How the transfer rules work in practice will determine the effectiveness of the costs caps and whether a well-funded party can circumvent them by having an action transferred to the High Court.
The second issue is the costs of an appeal. Many intellectual property cases are appealed and appeals from the PCC are to the Court of Appeal, which is not subject to the new rules. The hope seems to be that the Court of Appeal will be reluctant to award a successful appellant more on costs than could have been awarded at first instance. The Warheit decision (see footnote 1) suggests this hope is not unfounded.
Scale costs are standard in proceedings in the UK Intellectual Property Office. They now come to the PCC as well through tables setting out the maximum costs that can be awarded for each of the main stages of an action or damages inquiry.
The key steps for an action are:
To see table please click here.
Perhaps the most significant procedural change is that the parties now have to set out their cases in full in the statements of case. This has two knock-on effects. First, the subsequent stages, such as disclosure and evidence, will only be allowed to address specific and identified issues and where the court is satisfied that the benefit will justify the costs. Secondly, it should enable the court to make its decision on the papers plus oral submissions alone and without need for a full trial. The new procedure is therefore similar to that followed in, for example, Germany but retaining the ability to have infringement and validity determined at the same time.
There may be further reforms in the future, including a possible limit on damages awards of £500,000. There are also suggestions that the PCC’s name should be changed to make it clear that it has jurisdiction to hear claims concerning all IP rights and not just patents. It is not yet known, however, whether and when these changes will be implemented.
His Honour Judge Fysh QC retired as the PCC judge from 1 October, though he will continue as a deputy judge, and is replaced by His Honour Judge Birss QC.
As already indicated, the success of the re-designed PCC will depend very much on how the new rules are implemented by the judges, both in the PCC and, regarding transfers, in the High Court. More active and robust case management will be needed than we are used to from our patents judges, which is at least one reason why the streamlined patent procedure has not lived up to expectations. In particular, if the rules on transfer up to the High Court are exercised too leniently, the new procedure will be undermined and SMEs will still not have a forum they can litigate IP disputes in without the risk of unacceptable costs exposure. But more positively, the new PCC rules give the best prospect yet of affordable court proceedings for intellectual property matters.