Intellectual

Property

Enterprise Court Overview

October 2015

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Contents

Introduction 2

1 History of the Intellectual Property Court 3

1.1 Transitional arrangements 4

2 Suitability as a forum 5

2.1 Jurisdiction 5

2.2 Required value of claims 5

2.3 Nature of the claim 6

2.4 Remedies 7

2.5 Transfer of proceedings into or out of the IPEC 7

3 Procedural rules 8

3.1 Starting a claim 8

3.2 Statements of case 8

3.3 Timescales 9

3.4 Formalities 10

3.5 Specific guidance as to the content of statements of case 10

3.6 Case management 11

4 Small claims track 16

4.1 Suitability 16

4.2 Costs 16

5 Costs 18

5.1 Overall cap 18

5.2 Scale costs 18

5.3 Exceptions to the capped and scale costs regime 20

5.4 Procedure in respect of costs 21

5.5 Claims transferred into the IPEC 21

6 Successes 22

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Introduction

This note considers the special rules, procedures and cost considerations relating to

the Intellectual Property Enterprise Court, and the cases for which it is most suitable

as a potential forum.

The Intellectual Property and Enterprise Court (IPEC) is a specialist list within the

Chancery Division of the High Court.

The IPEC is intended to provide a cost effective forum to hear intellectual property

claims, as an alternative to the High Court. Savings are designed to be obtained by

active case management and a focus on streamlining the procedure of claims. This is

reinforced with a fixed-cost recovery regime, which significantly limits the exposure of

litigants in the IPEC to adverse costs awards.

The IPEC is presided over by a specialist circuit judge, currently HHJ Hacon. The

IPEC is administered from the Rolls Building, Fetter Lane, London, EC4A 1NL

DX160040 Strand 4.

The majority of this note deals with the multitrack of the IPEC. There is also a

separate small claims track, which is briefly discussed in this note (see Section 4,

p16).

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1 History of the Intellectual

Property Court

The IPEC started life as the Patents County Court (PCC). The PCC was instituted in

1990 to provide a less costly and complex alternative to the Patents Court, and was

part of the county court system. Its jurisdiction was limited to matters relating to

patents and registered designs, although related and ancillary claims arising out of

such proceedings could also be heard.

In June 2009, the Intellectual Property Court Users' Committee published a

consultation paper setting out proposals for reform of the PCC. A final report followed

in July 2009. The proposed reforms were driven by an increasing recognition that

small or medium-sized enterprises (SMEs) were wary of pursuing litigation in the High

Court due to the time and expense involved.

This report made a series of recommendations, including expanding the PCC's

jurisdiction to all forms of intellectual property, and plans aimed at streamlining

proceedings and implementing active case management by judges, in order to

achieve cost savings for the parties.

These proposals were adopted in the final report of the Review of Civil Litigation costs

by Lord Justice Jackson and on 1 October 2010 a new set of procedures were

implemented in the PCC in response to the Jackson Review. The proposed

requirements were that:

The parties should set out their respective cases fully but concisely at the outset.

No further evidence, written argument or specific disclosure should be permitted

without the permission of the judge.

Applications should, if possible, be dealt with on paper or by telephone.

Trials should be limited to one or at most two days.

Recoverable costs should be capped, both in total and according to a scale cost

regime for stages of the claim.

In 2011 a cap on the damages that could be awarded at the IPEC (currently

£500,000; see Section 2.2, p5) was implemented.

Following the Hargreaves review, the small claims track of the PCC was established

on 1 October 2012. On 1 October 2013, the PCC was reconstituted as a specialist list

of the Chancery Division of the High Court and renamed as the IPEC. Save for minor

amendments to the rules, the practice of the PCC did not change as a result of its

reconstitution as the IPEC.

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1.1 Transitional arrangements

Transitional provisions governing the reconstitution of the PCC as the IPEC are set

out at rule 30 of the Civil Procedure (Amendment No. 7) Rules 2013 (SI 2013/1974)

(L.19).

Proceedings which were underway in the PCC as at 1 October 2013 continue in the

IPEC as if they had been started in the IPEC (rule 30(a)).

Essentially, acts taken in compliance with the rules which applied in the PCC are

treated as having been taken in accordance with the corresponding rules of the IPEC

(rule 30(b)). Any judgment or order of the PCC continues to apply as if it had been a

judgment or order of the IPEC (rule 30(c)).

For transitional measures in respect of costs management, see Section 5, p18.

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2 Suitability as a forum

2.1 Jurisdiction

The IPEC hears intellectual property cases of all kinds and can hear claims relating to

UK and Community-wide rights where applicable. As part of the Chancery Division,

the IPEC can hear any case which can be heard in the Chancery Division as long as

intellectual property is a primary concern of the case.

Examples of cases commonly brought in the IPEC include:

Infringement claims relating to patents, designs, trade marks, copyright, database

rights, and any other intellectual property rights.

Revocation or invalidity claims in respect of registered rights.

Amendment of patents.

Declarations of non-infringement for all intellectual property rights.

Determinations of entitlement for all intellectual property rights.

Employee's compensation in respect of a patented invention.

Unjustified threats of proceedings for infringement of patents, designs or trade

marks.

Misuse of trade secrets and other breaches of confidence.

Claims such as contractual claims, defamation, malicious falsehood, breach of

duty where these form part of a broader intellectual property claim.

2.2 Required value of claims

Claims in the IPEC must have a maximum value of no more than a specified figure,

currently £500,000 (CPR 63.17A). This is the primary limitation, along with intellectual

property being the main concern of the claim, which determines whether a claim can

be brought in the IPEC. This cap applies to damages and/or accounts of profits.

For the purposes of valuing the claim, interest other than interest payable under an

agreement and costs are not regarded when applying the cap (CPR 63.17A).

However, "value" is not purely an assessment of the damages or account of profits

sought. Other remedies sought, such as injunctive relief, and the impact of these

remedies on the market more generally, are also a factor in the overall value of the

claim. The IPEC Court Guide suggests that, as a general rule, disputes in which the

value of sales in the UK of products protected by the intellectual property in question

exceed £1 million (whether by the owner, its licensee, or the infringer) are unlikely to

be suitable for the IPEC.

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The IPEC may hear claims valued at more than £500,000 if the parties both agree to

it having jurisdiction (CPR 63.17A (3)).

2.3 Nature of the claim

Due to the special procedural and costs rules applicable to claims in the IPEC, it is

generally most suitable for smaller, shorter, less complex, lower value actions.

Proceedings in the IPEC are subject to a number of special rules designed to achieve

its aim of providing a less costly and complex forum for lower value intellectual

property claims. These rules broadly divide into procedural rules intended to make

proceeding in the IPEC more efficient and reduce litigants' own costs, and costs

recovery rules which sharply limit the amount which can be recovered by the

successful party, reducing the adverse costs risk for litigants.

With this in mind, the following guidelines should be used when considering whether

the IPEC is the appropriate forum:

The IPEC is most suitable for claims where both parties are SMEs. Where only

one party is a SME, the IPEC may still be suitable but other factors below should

also be considered. It is worth noting that there is no set rule as to when a case is

suitable for the IPEC, and in particular, there is no rule that the parties must be

SMEs (although this will be a factor which points to the IPEC as being the proper

court). In MHCS and another v Polistas Ltd and others [2014] EWHC 4541

(IPEC), HHJ Hacon ruled that it was the nature of the claim which was

determinative, not the size of the parties. In that case, the fact that the issue was

fairly simple (the terms of a licence), there were only two key witnesses, a limited

number of documents, and a likely trial duration of no more than two days

outweighed the fact that one of the parties had significant resources and was not

a SME.

Trials in the IPEC should last no longer than two days and a trial estimate of

longer than two days suggests that the claim may be more suitable for the

Patents Court or the general Chancery list.

Cases requiring substantial experimental or survey evidence may not be suitable

for the IPEC, although experiments in a patent case may be admitted.

Cross examination of witnesses is strictly controlled. Where a large number of

witnesses are required the IPEC may not be the appropriate forum.

IPEC judges take an active role in case management and will take a "hands on

approach" at the case-management stage. This may include limiting disclosure,

expert evidence, and even the arguments, made at trial. Judges can also give a

preliminary assessment of their thoughts on the case, if both parties agree to this.

This can be of significant benefit in reducing the cost of the claim.

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Recoverable costs are subject to an overall cap (£50,000 in respect of

proceedings to trial on liability and £25,000 in respect of an inquiry into damages)

and scale costs within this (see Costs). This reduces the risk of a party being

liable for a significant amount of another party's costs, but also sharply reduces

the amount a party can recover for its own costs, regardless of the outcome.

2.4 Remedies

The IPEC can order all the remedies which are commonly available in the High Court,

including damages or account of profits (subject to the cap of £500,000), final and

interim injunctions (including search and freezing orders), delivery up and disclosure.

Note that the small claims track of the IPEC cannot order interim injunctions (see

Section 4, p16).

2.5 Transfer of proceedings into or out of the IPEC

The transfer of proceedings into and out of IPEC to and from other courts is governed

by CPR 30, and in particular paragraphs 9.1 and 9.2 of Practice Direction (PD) 30.

This states that, when considering whether to order a transfer of proceedings to or

from the IPEC, the court will consider whether:

A party can only afford to bring or defend the claim in the IPEC.

The claim is an appropriate one for the IPEC, having particular regard to:

the value of the claim (including the value of an injunction);

the complexity of the issues; and

the estimated length of the trial.

The court may specify the terms of any transfer to or from the IPEC and award

reduced or no costs where it allows the claimant to withdraw the claim (paragraph

9.2, PD 30).

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3 Procedural rules

The IPEC is governed by the CPR generally. However, specific procedural rules

relating to the IPEC are contained in CPR 63.17 to 63.28 and paragraphs 27 to 32 of

PD 63, which override or modify other parts of the CPR in respect of the IPEC. These

procedural modifications are intended to streamline procedure in the IPEC in order to

reduce costs for litigants.

Below is a summary of the procedure in the IPEC, with attention drawn to specific

rules that differ from the usual course of proceedings in other courts, and practical

notes which have arisen from cases coming out of the IPEC.

3.1 Starting a claim

3.1.1 Pre-action protocol

The PD on pre-action protocols and conduct applies to claims in the IPEC. However,

claimants will have to make their own decision as to whether it is appropriate to

engage in pre-action correspondence before issuing proceedings in the light of the

provisions for groundless threats applicable to certain intellectual property right

claims; see Practice note, Threats actions and intellectual property rights. If the Pre-

action PD is not followed, this will increase the time allowed for the defendant to file

its defence; see Section 3.3, p9.

3.1.2 Issuing proceedings

Claims in the IPEC are issued at the Rolls Building. The usual rules in respect of

starting a claim apply.

CPR 63.14 applies to claims relating to the service of claim forms and other

documents relating to registered rights, and sets out that documents may be served

at addresses provided on the appropriate register for the right in question. Relevant

statements of case must be served on the Comptroller or registrar if a party is seeking

a remedy which, if granted, would affect an entry in any UK Patent Office register

(CPR 63.14(3)).

3.2 Statements of case

3.2.1 Requirements

Statements of case in the IPEC must concisely set out all the facts and arguments

which the party relies on (CPR 63.20(1)), as well as complying with the general

provisions for statements of case in CPR 16. Amendments to statements of case are

discouraged and therefore it is important that parties set out in sufficient detail all of

the arguments and facts they intend to rely on at trial.

In addition, unnecessarily lengthy statements of case will not be permitted. Parties

are encouraged to set out brief statements of the arguments that will be relied on,

rather than setting out legal arguments in detail.

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Statements of case in the IPEC can stand as evidence at trial. For this reason, CPR

63.21 modifies Part 22 in respect of statements of truth, by stating that the statement

of truth verifying a statement of case must be signed by a person with knowledge of

the facts alleged. If no one person has knowledge of all the facts, multiple persons

who between them have knowledge of all the facts alleged must sign the statement of

truth.

The particulars of claim must state whether the claimant has complied with paragraph

7.1(1) and Annex A (paragraph 2) of the Pre-action PD (CPR 63.20(2)). Note that the

Pre-Action PD was amended with effect from 6 April 2015 and the cross references in

CPR 63.20(2) are no longer correct. Until this is updated, it may be prudent to refer

both to paragraph 6 of the Pre-action PD as amended, and paragraph 7(1) and Annex

2 (paragraph 2) of the old Pre-action PD, to ensure compliance with CPR 63.20(2).

This requirement is especially important because the time for filing a defence is

dependent on whether such a statement has been made (see Section 3.3, p9).

In addition to the IPEC specific requirements contained in CPR 63.20 and 63.21,

statements of case relating to patent and registered design claims must also comply

with the general requirements set out in paragraphs 4.1 to 4.6 of PD 63.

3.3 Timescales

CPR 63 modifies some of the timings for the filing of statements of case in the IPEC

compared with other courts.

The usual rules apply in respect of service of particulars of claim. These can be

served at the same time as, or up to 14 days after, the claim form is served (CPR

7.4(1)). If a copy was not filed at court at the same time as the claim form, it must be

filed within seven days of service on the defendant (CPR 7.4(3)).

If no acknowledgement of service is filed by the defendant, the usual rules apply and

it must file the defence (and any counterclaim) within 14 days of service of the

particulars of claim (CPR 15.4(1)(a)).

However, if (as will usually be the case) an acknowledgement of service is filed, the

period for filing the defence (and any counterclaim) is either:

If the particulars of claim state that paragraph 7.1(1) and Annex A (paragraph 2)

of the Pre-action PD (see Section 3.2.1, p8 for information on these cross

references) has been complied with, 42 days from service of the particulars of

claim (CPR 63.22(2)).

If the particulars of claim do not contain such a statement, 70 days from service

of the particulars of claim (CPR 63.22(3)).

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If the claimant wishes to file a reply to the defence (and a defence to any

counterclaim), it must file and serve this on all other parties within 28 days of service

of the defence (CPR 63.22(4)).

Where a defendant wishes to file a reply to a defence to a counterclaim, it must file

and serve its reply within 14 days of service of the defence to counterclaim (CPR

63.22(5)).

Timescales are generally treated strictly in the IPEC. The timescales relating to filing

and serving the defence and any replies may only be extended by order of the court

and for good reason (CPR 63.22(6)). In practice, the court seems generally willing to

grant extensions on applications by consent of all parties in order to further settlement

discussions, but this remains at the court's discretion.

3.4 Formalities

CPR 63.21 modifies Part 22 in respect of the IPEC by specifying that the statement of

truth must be made by a person with knowledge of the facts alleged (or by persons

who between them have such knowledge). Where more than one person signs a

statement of truth, the statement should identify which parts of the statement of case

is verified by which signatory.

In practice this means it will usually be the representative(s) of the claimant or

defendant signing the statement of truth. This requirement is present because

statements of case can stand as evidence in trial. In this regard, "where possible" the

court will decide claims solely on the basis of statements of case and oral evidence

(paragraph 30.1, PD 63).

3.5 Specific guidance as to the content of statements of

case

The IPEC Court Guide provides the following specific guidance in respect of

statements of case for patent, registered design, trade mark and copyright claims.

3.5.1 Patent proceedings

Claimants should avoid including lengthy detail regarding the construction of

patent claims. Each party should identify the claims in issue (for infringement and

validity) and identify the relevant features of those claims.

Parties should break down relevant patent claims into suitable integers and relate

these to specific elements of the alleged infringing product or process, in order to

explain the case on infringement. Points on construction may need to be

identified but lengthy argument is not required.

A lack of novelty argument is likely to require a similar approach to infringement,

with the claim integers related to the relevant parts of the prior art relied upon.

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An obviousness argument is likely to require a statement addressing the

allegedly obvious step(s).

Where a party challenges validity, the claims of the patent which are alleged to

be independently valid should be identified in the patentee's reply/defence.

A statement of the facts that are said to be relevant and common general

knowledge is likely to be necessary. A short summary of the relevant technical

background may be helpful.

3.5.2 Design proceedings

The nature and characteristics of the informed user should be identified.

3.5.3 Trade mark proceedings

Similarities relied on between a mark and a sign will not generally require significant

explanation. Detail may be necessary in relation to allegations that goods or services

are similar. Parties should identify the nature and characteristics of the relevant

consumer.

3.5.4 Copyright proceedings

A defence of independent design will need appropriate detail explaining the facts on

which the defence is based.

3.6 Case management

3.6.1 Pre-case management conference

Claimants should apply for a case management conference (CMC) within 14 days of

all defendants wishing to file and serve a defence having done so. Where the case

has been transferred from another court, the claimant should apply for a CMC within

14 days of the transfer. If in either case, the claimant fails to do so, the defendant

should apply.

There is no fast track in the IPEC, and therefore all cases (other than those suitable

for the small claims track of the IPEC (see Section 4, p16)) are allocated to the multi-

track. As a result, parties are not required to file and serve directions questionnaires

(CPR 63.8). A directions questionnaire is required for claims proceeding on the small

claims track, where there is a request for, or objection to, the case being allocated to

the small claims track. The court should send these to the parties, and they should be

completed and returned within 14 days of receipt.

There is no need to file costs budgets in respect of any claim in the IPEC.

Although not expressly stated in the CPR, the case of Cranford Community College v

Cranford College Ltd [2014] EWHC 349 (IPEC) confirms that parties are not required

to serve disclosure reports in the IPEC.

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(See Legal update, No obligation to provide disclosure reports in IP Enterprise Court.)

HHJ Hacon determined that disclosure reports are not required because they form

part of the rules in respect of standard disclosure, and as per CPR 63.24(2), the

provisions on standard disclosure do not apply in the IPEC. It is not clear whether

parties are still required to comply with the requirements of paragraphs 8 and 9 of PD

31B (discussion of e-disclosure ahead of the first CMC) in light of this decision, but

arguably it would seem that this is not required.

No later than four days before the date of the CMC, parties must file and serve

application notices in respect of any orders they wish to be made at the CMC

(paragraph 5.8, PD 63). Parties are encouraged to agree directions in advance of the

CMC, and the provisions of CPR 29.4 apply in respect of exchange of draft directions.

The claimant must, no later than four days before the CMC, file at court and provide

to the other parties bundles containing:

The claim form and all statements of case (but where a summary of a statement

of case has been filed, the summary is sufficient).

A pre-trial timetable, if agreed or ordered.

The principal orders of the court.

Any agreements reached in relation to disclosure.

(Paragraph 5.9, PD 63.)

Parties should also exchange and seek to agree lists of issues in advance of the

CMC and seek to agree these in advance. However, the IPEC Court Guide suggests

that costs should not be incurred debating issues ahead of the CMC, where these can

be dealt with at the CMC in a more efficient manner.

3.6.2 Case management conference

CMCs are usually conducted in hearings, although if both parties consent, the court

may determine the CMC on paper (CPR 63.23(3)).

It is usually the case that one judge hears all applications (and trials) in respect of a

claim. This encourages active case management and the IPEC is likely to take a fairly

robust approach to directions in order to ensure that the claim is managed in a

proportionate and cost-efficient way.

A party wishing to have a statement of case stand as evidence should raise this at the

CMC. Permission will usually be granted, in line with the objective set out in

paragraph 30.1 of PD 63 that statements of case and oral submissions should, where

possible, be the sole evidence on which claims are determined.

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3.6.3 Review of the issues

The court will identify the issues in the claim, having regard to the statements of case

and lists of issues prepared by the parties. This will inform its decision as to the

directions it makes and whether any additional evidence other than the statements of

case should be prepared.

3.6.4 Possible directions

In determining what order to make as to further evidence to be prepared, exchanged

and/or filed before trial, the IPEC will apply a cost-benefit test to ensure that the

benefit of that evidence in terms of its value in resolving the issues justifies the cost of

producing and dealing with it (paragraph 29(2), PD 63). In addition, such evidence will

be limited to specific and identified issues.

There is a general presumption that statements of case and oral evidence alone

should, where possible, be the sole evidence at trial (paragraph 30.1, PD 63).

The evidential steps which the IPEC may order, if warranted by the cost-benefit test,

are as follows:

Disclosure. Any order as to disclosure will only ever be for specific disclosure,

limited to particular identified issues and possibly to particular documents or

classes of documents. The court may, in patent cases, order product or process

descriptions in the usual way, in place of the defendant's disclosure obligation

(insofar as it relates to any infringement claim).

Experts' reports. The IPEC will expect the parties to have a good idea of the field

in which experts should operate, and the CMC order will specify the issue(s)

which any expert evidence should address.

Experiments and supply of samples, where necessary.

Witness evidence. Where possible, the IPEC will seek to avoid further witness

evidence and rely solely on statements of case. Where further witness evidence

is required, it will be limited to particular issues, and likely no more than one to

two witnesses. The IPEC may make allowance for witness evidence in reply.

Survey evidence is not mentioned in PD 63.23, but in Westwood v Knight [2011]

EWPCC 11 the IPEC considered the possibility of survey evidence in respect of

likelihood of confusion and denied it on the basis that it failed the cost-benefit

test. It seems unlikely that survey evidence would generally be permissible in the

IPEC.

Further written submissions or skeleton arguments. In general, the IPEC will not

order skeleton arguments where the statements of case and/or witness evidence

will satisfactorily deal with the issues. Where skeleton arguments are necessary,

they are likely to be limited to particular issues.

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(Paragraph 29, PD 63.23.)

Other than in exceptional circumstances, the IPEC will not permit a party to file

evidence beyond that ordered at the CMC.

The IPEC's order will also set out the nature of the final trial, including whether oral

testimony and cross-examination is necessary. If an oral hearing is considered

necessary (as opposed to a decision on the papers alone), it will be of fixed duration

of no more than two days. If cross-examination of witnesses is permitted, the order

will limit this to particular issues and defined time limits.

The order will also set out the timetable to trial taking into account the production of

such material as is ordered.

3.6.5 Possible costs issues at the case management conference

If a defendant wishes to seek security for costs, it should do this before or at the

CMC, in accordance with the usual rules contained in CPR 25.12-14.

Where there are multiple defendants, the parties should consider the impact of the

costs capping provisions. Any uncertainties should be raised at the CMC.

3.6.6 Applications

Applications in the IPEC are governed by the usual provisions set out in CPR 23, with

the following modifications contained in CPR 63.25:

Except in respect of applications to be heard at the CMC, the respondent must

file and serve its response to an application within five days of service of the

application notice.

An application for the transfer of a claim out of the IPEC to the Patents Court, or

the general Chancery Division, or for a stay of proceedings, must be made at or

before the first CMC. An application to transfer a claim from the IPEC made later

in the proceedings will only be heard in exceptional circumstances.

All applications other than for the CMC will be dealt with without a hearing unless

the court considers a hearing necessary.

3.6.7 Amendments to statements of case

Parties are encouraged to set out their case in full in their initial statements of case. If

a party wishes to amend its statement of case, it should first seek the agreement of

the other parties. If this is obtained, the court will usually allow the amendment.

If consent cannot be obtained from the other parties, a party seeking to amend its

statement of case will need to apply. In considering whether to grant the application

the IPEC will consider all the circumstances including proportionality and the cost-

benefit test contained in CPR 29.2.

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3.6.8 Other proactive case management steps

The IPEC is proactive in seeking to reduce the issues and streamline the final trial.

For example, in Beechwood House t/a Binleys v Guardian Products [2010] EWPCC

12, HHJ Birss QC heard a summary judgment application in which it was apparent

that the underlying issue was unlikely to be determinable on a summary or strike out

basis, but that it would likely need to be disposed of as a preliminary issue before

trial. Rather than waste the opportunity, HHJ Birss QC invited the parties to agree that

the issue could be dealt with in that hearing, but on the merits rather than on a

summary basis. The parties agreed reducing the issues which needed to be decided

at trial.

The IPEC is also willing to express preliminary and non-binding opinions, if requested

by the parties, in order to assist the parties in settlement negotiations (see Weight

Watchers v Love Bites [2012] EWPCC 12 and Fayus v Flying Trade [2012] EWPCC

43).

3.6.9 Documents and trial timetable

The IPEC Court Guide provides detailed guidance as to the preparation of bundles for

trial and application hearings. In general, all papers should be lodged at the Rolls

Building by noon two days before the hearing is to take place, unless a different

period is specified in the CPR, the IPEC Court Guide, or by the judge.

Important documents should also be supplied electronically on a USB stick or by

email, usually in either Microsoft Word or text searchable .pdf format. For trial, this will

include skeleton arguments, important patents and drawings, witness statements, and

expert reports.

Parties should follow paragraph 9 of PD 63 ahead of trial. One week before the trial is

due to begin, both parties should inform the court in writing of the estimated length of

its oral submissions, examination-in-chief of its own witnesses, and cross-

examination (if permitted) of the other parties' witnesses.

Four days before the trial, the claimant must file the trial bundle, a reading guide for

the judge (in accordance with paragraph 9.3 of PD 63), and a detailed trial timetable,

which should have been agreed with the other parties if possible).

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4 Small claims track

The small claims track of the IPEC is suitable for straightforward and lower value

claims. It is intended to be even more streamlined and cost efficient than the multi-

track of the IPEC. In general:

Parties should not require legal representation.

There should not be significant pre-hearing preparation.

The formalities of the trial process are reduced.

There is a minimal and limited risk in respect of third-party costs.

Cases on the small claims track are heard by one of three district judges, or by

deputy district judges.

4.1 Suitability

The small claims track can only be used for intellectual property claims relating to

copyright, UK and Community trade marks, passing off, and UK and Community

unregistered designs. In general, the small claims track is particularly popular for

simple copyright claims, for example, brought by photographers in respect of

unauthorised reproduction of photographs online.

The small claims track cannot hear claims relating to patents, registered designs, and

plant varieties.

Most importantly, there is a limit on the value of a claim which can be heard on the

small claims track of the IPEC. Like the limit for the small claims track in other courts,

this is currently £10,000 (CPR 63.27).

Most final remedies, such as damages or account of profits (up to the £10,000 limit),

delivery up or destruction of infringing items and/or final injunctions are available.

However, interim remedies are not available on the small claims track.

4.2 Costs

There are only very limited circumstances in which a party on the small claims track

will be ordered to contribute to the costs of another party. These are set out at CPR

27.14 and include:

Fixed sums in relation to issuing the claim.

Court fees.

Reasonable expenses incurred by a party or witness in travelling to or from a

hearing or staying away from home in order to attend a hearing.

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Loss of earnings or loss of leave suffered by a party or witness caused by

attending a court hearing, limited to £90 per day for each person (paragraph 7.3,

PD 27).

In proceedings which include a claim for an injunction, a sum for legal advice and

assistance not exceeding £260 (paragraph 7.2, PD 27).

Up to £750 for experts' fees, although in general it is unlikely that the IPEC would

order expert evidence for a claim on the small claims track.

Any further costs as the court may decide at the conclusion of the hearing should

be paid by a party who has behaved unreasonably. A party's rejection of an offer

of settlement will not of itself constitute unreasonable behaviour but the court may

take it into consideration (CPR 27.14(3)).

There is a separate court guide which contains detailed information in respect of

procedure on the small claims track (see Justice: Guide to the Intellectual Property

Enterprise Small Claims Track).

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5 Costs

The cost provisions of the IPEC are intended to make the court more accessible by

reducing the risk of an adverse costs order against a party, giving certainty to litigants

as to their maximum potential exposure to their opponents' costs, regardless of the

outcome of the case. This is done by making costs awards in the IPEC subject to a

capped and scale costs regime, set out in Section VII of CPR 45 and PD 45.

5.1 Overall cap

Subject to limited exceptions (see Exceptions to the capped and scale costs regime)

a party will not be ordered to pay total costs of more than £50,000 on final

determination of a claim in relation to liability, and no more than £25,000 on an inquiry

as to damages or account of profits.

5.2 Scale costs

The overall cap is also subject to a scale costs regime which limits the costs

recoverable for each stage in the litigation. Claims started on or after 1 October 2013,

are subject to the following maximum scale costs (as well as the overall cap of

£50,000), set out in Section IV of PD 45, Table A.

Stage of a claim Maximum amount of

costs

Particulars of claim £7,000

Defence and counterclaim £7,000

Reply and defence to counterclaim £7,000

Reply to defence to counterclaim £3,500

Attendance at a case management conference £3,000

Making or responding to an application £3,000

Providing or inspecting disclosure or product/process

description

£6,000

Performing or inspecting experiments £3,000

Preparing witness statements £6,000

Preparing experts' report £8,000

Preparing for and attending trial and judgment £16,000

Preparing for determination on the papers £5,000

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Costs recoverable in respect of an inquiry into damages are subject to the following

scale costs (in addition to the overall cap of £25,000), set out in Section IV of PD 45,

Table B.

Stage of a claim Maximum amount of costs

Points of claim £3,000

Points of defence £3,000

Attendance at a case management conference £3,000

Making or responding to an application £3,000

Providing or inspecting disclosure £3,000

Preparing witness statements £6,000

Preparing experts' report £6,000

Preparing for and attending trial and judgment £8,000

Preparing for determination on the papers £3,000

Subject to assessment, the following may be recovered in addition to the amounts

specified for each stage:

Court fees

Costs relating to enforcement of a court order

Wasted costs

VAT where appropriate; all scale costs are net of VAT

(CPR 45.31(4A) (a-c) and (5).)

The scale costs specified in Tables A and B above, which were set out in

amendments made to PD 45 by the 66th update to the CPR, apply only to

proceedings started on or after 1 October 2013 (see CPR 66th Update, paragraph

25). Lower scale costs apply to proceedings started before that date. In respect of

such proceedings, these lower scale costs also apply to matters occurring after 1

October 2013 (PPL v Hamilton (No.2) [2013] EWHC 3801 (IPEC)).

The scale costs regime sets out the maximum recoverable; costs are still determined

according to normal principles of recoverability within these limits, and the court will

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also have regard to the nature and complexity of the claim when determining the

scale costs to award.

5.3 Exceptions to the capped and scale costs regime

There are the following three express exceptions under which the IPEC may order the

payment of increased costs beyond the limits set out in the capped and scale costs

regime:

Where the court considers that a party has behaved in a manner which amounts

to an abuse of the court's process (CPR 45.30(2)(a)).

Where the claim concerns the infringement or revocation of a patent or registered

design or registered trade mark which has earlier been certified valid by a court

or by the Comptroller-General of Patents, Designs and Trade Marks (CPR

45.30(2)(b)).

Where a party has behaved unreasonably in an application, in which case the

costs of that application may be awarded at the conclusion of the hearing and fall

outside the £50,000 cap (CPR 45.32 and CPR 63.26(2)). However, consequential

increased costs incurred in respect of other stages of the claim as a result of the

application are not subject of this exemption and would need to be sought under

CPR 45.30(2)(a) (abuse of court's process) (PPL v Hamilton [2013] EWHC 3467

(IPEC), at paragraph 17).

(CPR 45.30.)

In the case of either the first or second bullet points above, the entire proceedings

and both sides' costs will fall outside the cost caps. In the case of the third bullet, only

the costs of the application in question are outside the caps (Henderson v All Around

The World Recordings Ltd [2013] EWPCC 19, at paragraph 10).

In addition to the three express exceptions, the general discretion of the court in

respect of costs also applies in the IPEC(The court has a general discretion as to

whether costs are payable and the amount of such costs, and specifies certain

circumstances which must be considered including the conduct of the parties (CPR

44.2). However, the discretion is "strongly conditioned by the special rules as to

costs" in respect of the IPEC.

This has been interpreted as meaning that the IPEC may depart from the cost and

scale caps at its own discretion, in the following circumstances:

In the case of the overall costs caps, only in "truly exceptional" cases; to do

otherwise would undermine the point of the cost capping system (see Henderson,

at paragraph 12).

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In respect of the scale caps (that is, the scale costs for the stages, whilst still

respecting the overall caps), although it will seldom be open to the court to

disregard the scale costs regime, it does not require the truly exceptional case

necessary for the overall caps to be disregarded (Brundle v Perry [2014] EWHC

979 (IPEC)). (See Legal update, IP Enterprise Court considers transitional costs

provisions and departure from costs cap due to losing party's behaviour.)

An example of this is seen in Brundle v Perry. The defendant had exhibited

obstructive behaviour, including persistent use of expletives and "intemperate

language" in pleadings and communications. More troublingly, he had sent a

fraudulent email purporting to be from the judge to all the parties, containing an

apparent ruling in favour of the defendant. HHJ Hacon held that this behaviour, while

"strikingly unusual", was not "truly exceptional on the scale of unsatisfactory

behaviour."

HHJ Hacon was prepared to depart from the scale costs, but not the overall caps, and

therefore awarded an additional £2,000 costs, taking the total awarded against the

defendant to £49,645.

5.4 Procedure in respect of costs

Costs are dealt with by summary assessment (CPR 45.41(3)). There is no detailed

assessment in the IPEC. In preparing statements of costs, parties will need to explain

in relation to which stage of the claim the costs were incurred.

The costs of interim applications are reserved to the conclusion of a trial, where they

will be dealt with on summary assessment (CPR 63.26(1)). The court can order the

costs of an application to fall outside the cost caps and scale cost limits if it is satisfied

that a party has behaved unreasonably (CPR 63.26(2)).

As a result of the capped and scale costs regime, the costs management procedures

in CPR 3.12 to 3.18, including the requirement for costs budgets, do not apply (CPR

3.12(1)(c)).

5.5 Claims transferred into the IPEC

For cases that have been transferred to the IPEC from elsewhere (either the County

Court or another part of the High Court), the IPEC will deal with costs incurred in

proceedings before transfer (and therefore outside the IPEC costs regime) on a case-

by-case basis. Costs incurred in the High Court before transfer are usually dealt with

by summary assessment and not subject to the IPEC costs regime.

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6 Successes

A report commissioned by the UK government and published in June 2015 found that

the reforms implemented in the IPEC appeared to have led to a large increase in

claims filed (see Evaluation of the Reforms of the Intellectual Property Enterprise

Court 2010-2013 (22 June 2015)). In addition, case filings by SMEs were found to

have increased substantially since the reforms. In 2013, 45% of IPEC cases were

filed by SMES, and 22% by individuals. There also appeared to be evidence of a

causal link between the reforms and the quantity of out-of-court settlements. Survey

evidence found that the cost caps and active case management were the most

influential reforms impacting the large increase in cases.

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Reproduced from Practical Law with the permission of the publishers. For further

information visit http://www.practicallaw.com or call 020 7542 6664.

Kemp Little LLP 2015. All rights reserved. This publication may not be reproduced or

transmitted by electronic or other means without the prior consent of the copyright

owner. Applications for the copyright owner’s permission to reproduce any part of this

publication should be addressed to Kemp Little LLP.

The information and opinions contained in this guide are not intended to be a

comprehensive study, nor to provide legal advice, and should not be relied on or

treated as a substitute for specific advice concerning individual situations.

Kemp Little LLP is a limited liability partnership. Registered number OC300242.

England Registered office as shown.

For more information contact:

Peter Dalton Associate, Intellectual Property & Litigation

+44 (0) 20 7710 1604 peter.dalton@kemplittle.com