The Future of IP Litigation?

In January of this year, Lord Justice Jackson delivered his long-awaited review of the costs of Civil Litigation in the United Kingdom. Whilst much of the coverage on the Jackson report has centred on the future (or lack thereof) of the CFA or “No-Win, No-Fee” regime in relation to Personal Injury and Libel cases, a number of recommendations have also made on the possible reform of the Intellectual Property Litigation System.

IP Litigation is and always has been a comparatively expensive process, partly due to the fact that it deals with disputes which are usually factually and legally complex and often with issues which are worth a huge amount to the parties.

However, there has often been criticism (as with all Civil Litigation in the UK) of the fact that these high costs almost inevitably lead to a restriction from access to the Courts of both Intellectual Property Rights (“IPR”) owners who simply can’t afford to enforce their rights by bringing infringement proceedings and Defendants who are forced to deal with claims which could well be successfully defended if they could afford to instruct a Lawyer, hence the need for the Jackson review.

The review recognises the social and economic importance of IPRs as well as the need for the Courts “to enable parties to either assert or defend their IPR at an affordable cost”, confirming that the UK system of IP litigation is the “most costly” in the EU and that this “generates a large number of settlements”.

Some of the more significant and specific changes to the IP Litigation system which we may see include:

  • More active and robust case management in the Patents County Court (“PCC”) with a view to “narrowing the issues” in disputes more effectively and discouraging blanket denials of infringement without explanation,
  • The renaming of the PCC as the “Intellectual Property County Court” and the implementation of a new system of costs recovery which would see recoverable costs capped at £50,000 in Patent Infringement claims and £25,000 in other disputes as well as a limit of £250,000 imposed on the financial remedies available.
  • The implementation of a “Small Claims” Track for claims with a monetary value of less than £5,000 and “Fast Track” system  for cases valued at less than £25,000 in the PCC, along with the appointment of specialist Judges to deal with an increased number of cases and ensure a high quality of service
  • The introduction of guidance in the PCC Rules on pre-action conduct or a Pre-Action Protocol in IP disputes

 These recommendations have been largely welcomed, and with good reason. A draft “Code of Practice for Pre-Action Conduct in IP Disputes” was published some time ago and is often used as a template for how IP disputes are dealt with before they reach Court. Introducing a more formal procedure into the Civil Procedure Rules would at least encourage the disclosure of more information at the inception of a dispute to allow Parties to realistically assess whether a case needs to be litigated or can be resolved at a much earlier stage. Whilst this may serve to “front-load” costs, it will also almost certainly mean that they will ultimately be reduced by fewer cases actually making it into Court.

Similarly, more robust case management and new regimes for smaller-value claims will almost certainly allow many more SMEs to bring or defend IP proceedings, rather than being forced to settle and in some cases irrevocably damage their monopoly rights as well as leaving cases that are litigated presented in a much more transparent manner.

 Beyond these specific proposals, the Review also makes a number of other important recommendations for all civil cases, including:

  • The further encouragement of Mediation and other forms of ADR,
  • New incentives in the use of Part 36 Offers, including a 10% uplift on damages where a Claimant’s offer is rejected by the Defendant but ultimately exceeded at Trial
  • The creation of a “menu” system of disclosure to limit the costs of the process 
  • That Success Fees and After The Event Insurance Premiums as part of CFA or “No Win, No Fee” cases should no longer be recoverable

Again, these recommendations should come as good news for the smaller business who could not normally afford to litigate as well as larger IP-rich businesses faced with the rising costs of protecting their assets. In particular, focussed disclosure will allow parties to get to the bottom of the issues in a dispute much more quickly and affordably and the wider use of Mediation in IP cases (provided that the Mediator is an experienced IP practitioner) would allow for realistic and commercial settlements to be reached in a more collaborative environment.

However, although CFAs are comparatively rare in IP cases, many businesses may still only be able to actively enforce or defend their IPRs with such an arrangement in place. Many clients are now keen for their Lawyers to consider dealing with cases under a CFA as it provides them with a means of sharing their risk with their Legal Advisers. Whilst the arguments for limiting their use in Personal Injury, Libel and Privacy cases on the basis that they simply cost the economy too much are understandable, it may be fair to say that their wider use in IP cases may in fact encourage the take-up of the proposed new system in the PCC and encourage the further development of the “knowledge economy” through the continued creation of new IPRs where their owners are safe in the knowledge that they can take action to protect them in the event of infringement at a sensible level of commercial and personal risk.

It has to be said that, on the verge of a general election and in the wake of being received with horror by many Personal Injury and Media Lawyers, Lord Justice Jackson’s proposals may well not be implemented in their entirety. However, what is certain is that changes to the Civil Litigation system are on their way and it will be IP Lawyers’ best interests to develop innovative new approaches to ensure that creativity and innovation continue to flourish.

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