Intellectual Property Enterprise Court – Increase To The Amount Of Costs Recoverable

The Intellectual Property Enterprise Court has announced an increase in the amount of legal costs that can be recovered, which could have an impact on litigants. Below, we have considered if this might be the case and how.

General cost rule – costs follow the event and cost budgeting

The general rule provides that the costs ‘follow the event’, i.e., the losing party will pay the proportion of a successful party’s costs, usually in the region of 60-80% of their costs. In High Court litigation, costs budgeting is an additional stage in the litigation process – the parties exchange and file their costs budget at the CMC stage and seek to agree on the costs budgets through the exchange of reports, prior to those budgets being approved by the Court (and the Court making a decision on any areas that the parties cannot agree).

Somewhat ironically, the costs budgeting regime, whilst designed to save costs, often ends up increasing them.

IPEC, which is the specialist IP practice of the High Court, does not have cost budgeting. Instead, it operates a cost cap, applicable across stages of the litigation process and overall.

There are two types of caps – stage caps and overall caps.

Liability and quantum phases

In IPEC, trials are split. This means that questions over liability (i.e., whether there has been an infringement of intellectual property, as alleged) are dealt with separately from questions of quantum (where the amount of money to be paid to a successful claimant, is decided).

Both the liability phase and quantum phase are broken down, for cost purposes, into stages – examples of stages in the liability phase include ‘Particulars of Claim,’ ‘Experts’ and ‘Witness Statements.’ The quantum phase includes ‘Points of Claim’ and ‘Points of Defence.’

For each stage, a maximum amount of costs can be recovered – so for Particulars of Claim, the maximum costs order that can be made is £9000.

In October 2022, the amount of costs that can be recovered for each stage (and, as a consequence, overall) has increased by 20%.

This means that the maximum amount that can be recovered in the liability phase is now £60,000 and the maximum amount that can be recovered in the quantum phase is £30,000.

The exception to this rule is that the Court retains a discretion to order ‘off scale’ costs, where a party has behaved unreasonably.

Conclusion

It is no surprise that the increase in costs that are recoverable within IPEC has been welcomed. IPEC is a particularly useful tool for SMEs, as it allows them to pursue or defend litigation safely in the knowledge that (unreasonable behaviour aside) they have certainty as to potential cost exposure.

However, the disadvantage of this is that, particularly in large and complex cases, where a potentially large amount of costs could be incurred, a significant proportion of those costs may not be recoverable. Defendants with deep pockets could ‘defend’ more thoroughly, as they have the comfort of knowing that if they lose, there is a limit on the amount of costs they will have to pay the successful party, potentially allowing for tactical litigation.

In circumstances such as this, the claimant would be wise to be mindful of the ability to disapply the costs caps where there has been unreasonable behaviour as well as the ability to issue applications so that the Court may make a ruling on any procedural matters that are in dispute.