Remember Tom Cruise as Jerry McGuire, and his mission statement to the sports agency industry, from whom I have stolen the title of this essay? “With so many clients we had forgotten what was important…the key to this business is personal relationships…the answer was less money.” The scene ends with him being applauded as he enters the office, and an aside from two of his colleagues:
‘How long do you give him?’
‘About a week.’
More up-to-date, Tristan Harris in The Social Dilemma taking a stance against his former employer Google, noting that the social media platforms were deliberately manipulating people into more on-screen time, competing for their on-screen attention in an immoral way. His presentation went viral within Google…and nothing changed.
Perhaps not worthy of a Hollywood blockbuster or a Netflix hit documentary, but the same thing is happening within law firms handling IP disputes in the Intellectual Property Enterprise Court (IPEC) and the Shorter Trials Scheme (STS) of the High Court. Both forums were established with laudable intentions, to reduce the time and cost of litigation in the UK. Both are failing in their objective, not through faults in the court system (although braver case management decisions would help to control firms incurring unnecessary costs in taking silly points), but through the traditional heavyweight IP firms incurring the same level of fees as they would in a full High Court dispute.
The issue is this: the big IP firms want to be involved in all IP disputes. They don’t want to leave IPEC and the STS to the more cost-conscious firms. Because surprisingly enough, clients like IPEC and the STS and use them a lot – anything to reduce the cost of English IP litigation. However, traditional IP law firms are reluctant to adjust to running disputes as IPEC and the STS intended because, frankly, it is not profitable for them to do so and there are no penalties for failing to do so.
Let me give you a few anecdotes.
At the end of last year, my firm defended a registered design/design right case which went to trial in IPEC. We won on unregistered design and there was held to have been no copying (which is what all of our factual evidence went to), but the Judge was against us on a straight comparison of the registered design with our client’s product. The recoverable costs in IPEC are capped at £50,000. The claimant had brought out the big guns and instructed a major IP firm. They insisted on expert witnesses – we resisted: first, on the basis it was not necessary or proportionate; and then by seeking to narrow the scope; IPEC allowed it, albeit with a narrower scope, but then in its judgement criticised its necessity. The claimant’s firm treated it like a High Court claim, instructed a QC, and incurred fees of £500,000. Fair enough, if their client wants to instruct them and incur £500,000 but recover only £50,000, that is their prerogative. But this is where it is going wrong. A defendant, wanting to run IPEC cases as they should be run, is relatively powerless to stop the claimant running riot. Yes, you don’t have to engage with every point. Yes, you can ignore a lot of their pointless correspondence. Yes, you can instruct a junior barrister instead of a QC. But at the end of the day, you do need to counter their evidence: expert with expert. And the constant correspondence, disclosure challenges, Part 18 Requests, from a firm intent on treating it as a High Court dispute, do rack up costs. My firm’s fees came in just short of £200k, which was two-fifths of the Claimant firm’s fees but four times the costs cap in IPEC. It is still too much.
In February this year, my firm acted on a passing off trial under the STS against a large multinational. We represented a family business. In order to take on the might of the defendant and its leading IP firm, our client had to secure after-the-event costs insurance. We, and the junior barrister who did the trial, both acted on a Damages Based Agreement. The defendant’s solicitors instructed a leading QC and will have incurred legal fees of around £700k. There is no costs cap in the STS at the moment, although there is a proposal (for patent cases initially) to cap at £500k. It is still too much.
As a practitioner still at the coal face, who remembers Lord Woolf’s Access to Justice Report in 1996 which resulted in the Civil Procedure Rules, with an intention to reduce the costs of litigation in England to make it fairer on all litigants, I am left wondering where it has all gone wrong. Particularly as our court system has, for IP disputes, introduced some laudable options such as IPEC and the STS.
The answer is simple, and here comes my Jerry McGuire/Tristan Harris moment: many law firms are abusing the system by treating IPEC and STS disputes no differently to full High Court disputes. And, which is just as bad, they are being allowed to get away with it.
Here are some thoughts on how things might be improved:
· Procedural wrangling and access to Masters: the bundle that is least looked at in trials is the inter solicitor correspondence. It usually runs to a couple of volumes. That is where law firms can run riot and generate a lot of revenue that serves no one, by taking every point. Is it really necessary to incur the costs of a Case Management Conference, or to have to issue an application, to have these contested procedural points argued out by barristers? Wouldn’t email access to a Master – no need to issue an application notice with supporting witness statement - to resolve procedural wrangling on the papers, be a more cost-effective solution; and make firms think twice about whether they want to pursue the point?
· Client driven hourly rate reductions: assume that a hard fought High Court IP trial costs £1m in legal fees, including a QC and a junior. The proposal is that in the STS there could be a costs cap of £500k. A partner in a leading IP firm will typically charge at least £700 per hour. Why are clients, who want to run their case in the STS, not requesting a 50% reduction to hourly rates? Knowing they are earning less from the case, the firm will then have to handle the litigation in a more streamlined way, as was intended by the STS.
· IPEC fixed fees: why are clients whose recoverable costs are capped at £50,000 in IPEC, not requesting their firms to act on a fixed fee? Admittedly, £50,000 has been the costs cap since 2010 and is now unrealistic, but shouldn’t it be possible to take an IPEC matter – which is by definition meant to be less complex - to trial for £100k including a junior barrister? It is possible for that sort of budget in European IP disputes, so why not here? Why are QCs appearing in IPEC which is meant to deal with non-complex disputes? Again, IPEC was intended to encourage parties to only focus on those issues central to the case – what better way to focus the law firms than to hold them to a fixed fee? Taking silly points, will then cost only them.
· Costs transparency: Costs Management Conferences and Costs Budgeting in the High Court are a start, but they are expensive. They don’t apply in IPEC and the STS, where arguably they are more necessary to enable those forums to stick to their remit. Again, wouldn’t intermittent email access to a Master, when both sides have to show their hand on costs as they are incurred, aid the court in more actively managing what are meant to be the cheaper options of IPEC and the STS? If the expert evidence alone in IPEC is in fact costing more than the entire costs cap, shouldn’t the court have better visibility over this during the life of the proceedings rather than only after trial? IPEC already conducts a cost/benefit analysis for every stage of evidence, but this is done in isolation and only to decide whether to go ahead with the evidence, without a close understanding of the types of fees that are then actually generated by firms.
· Real case management: in IPEC, it ought not to be the norm that firms spend well over double the costs cap. The system is broken because firms are able to spend more with no consequences and with the Masters/Judges doing nothing to keep them within the costs cap. It makes no sense for there to be less costs management than in the High Court, but that being the case it must nonetheless be obvious that the following steps would reduce costs: not allowing experts (or at the very least, only allowing a sole court appointed expert); restricting disclosure to only Models A and B; not permitting any interim applications unless at the CMC. Let’s see more of the active case management that IPEC is intended to achieve but often does not.
If you would like to discuss further, please contact Geoff Steward