PCC Page 28: Stretching tentacles – having designs on costs

Scintillatingly sculpted by the Chartered Institute of Patent Attorneys (CIPA), the PCC Pages seek to explain how litigation works in the recently-revamped Patents County Court (PCC) for England and Wales, taking as its theme a dispute between Cautious Co and IPOff Ltd as to whether IPOff has infringed the IP rights of Cautious in its robotic octopus. In this episode, the 28th, CIPA President Alasdair Poore throws off his jetlag and takes a further voyage into the ever-fascinating area of costs.

"Inspired by last week's note on costs, Cautious’ patent attorney is exploring further.

First, can he get around all this difficult assessment business, and providing detailed records – and incidentally make forecasting costs for his client easier – by just agreeing to charge the maximum in each category when he carries out work for his client?

This seems like quite a neat innovation – a couple of firms of solicitors are apparently offering it.  The answer (which you should ideally be able to deduce from last week’s note) has also been given in a decision last week, Indigo Furniture Ltd v Futurelook Ltd & Another [2011] EWPCC 13.  A Manchester firm had offered a fixed price package – the maximum scale fee – to Indigo Furniture.  They issued a proceedings with a statement of case.  As the defendant did not respond, they applied for and obtained default judgment, and asked for costs for the two steps they had followed: preparation of the statement of case (£6,125), and application for default judgment (£2,500).  They did not provide any detailed breakdown but made it clear that their client had incurred costs significantly exceeding these, not least because another firm of solicitors had initially been involved.  Judge Birss said that this (claim for costs) was based on a misconception: 

“The various sums provided for by the rules and practice direction in this system are maxima (see the Westwood case here). The costs spent or awarded for any particular stage may not be as high as the maximum for a particular stage”

Judge Birss made it clear (para 18) that in future, even where it was pretty simple, he would expect to see the costs breakdowns referred to in Westwood.  In this case, it would not however have been proportionate to schedule yet another hearing just for costs, so he would make an assessment.  He assessed only £1,000 for the application for default judgment (limit £2,500), on the basis that this was pretty straightforward (para 14).  He assessed the maximum for preparation of the statement of case (£6,125) because, although not complex, the case had involved a substantial number, 35, furniture designs; and it appeared clear that significantly greater costs had been incurred (para 15).

Judge Birss explained that it was open to the solicitors to charge on a simple scale fee basis (para 12), but that would not necessarily entitle their client to recovery from the other party on the same basis and that any recovery should be supported by an appropriate breakdown of the actual time/costs incurred (para 18).  So the scale costs approach may provide an easy yardstick for a client, but may not mean the client gets back all they have spent.

The second question Cautious's patent attorney has been pondering is when above-scale costs might be awarded.  Readers will recollect that the principle is that costs will be limited to the maximum amount listed in PD 43-48 25C Table A (subject to the overall maximum in CPR 45.42).  Judge Birss emphasised in Westwood that the discretion will be “will very rarely (if ever) be exercised ” (para 20).  However there is a clear exception set out in CPR 45.41(2): “This [limit] does not apply where – (a) the court considers that a party has behaved in a manner which amounts to an abuse of the court’s process.”

When this was discussed in the IPCUC Working Group, the view was expressed that this would be similar to the situations in which the IPO could award off-scale costs.  The principles were explored in Rizla Ltd’s Application [1993] RPC 365.  The test there was that “the conduct of the [party] constituted such exceptional circumstances that a standard award of costs would be unreasonable”, and Anthony Watson QC said that 

“I believe a case such as the present can only be regarded as exceptional if it can be shown that the losing party has abused the process of the Comptroller by commencing or maintaining a case without a genuine belief that there is an issue to be tried.  … There are of course a large number of other circumstances such as deliberate delay, unnecessary adjournments etc. where the Comptroller will be entitled to award compensatory costs”.  

They are now exemplified in Tribunal Practice Notice TPN 2/2000, para 9 (updated by TPN 4/2007, which does not alter the substance). But a word of caution: the IPO’s discretion in awarding above-scale costs is not fettered by statute or rules (see Rizla, at 373, l31, section 107, Patents Act 1977), although it must be exercised judicially.  The practice appears to reflect “abuse”.  However, it is open to the IPO to change its practice..  The question of what was an abuse of process (in issuing proceedings) was discussed to some extent in Cautious's patent attorney's consideration of whether to seek to strike out IPOff's claim in the Patents Court, on the grounds that it should have been brought in the PCC.  There is some exploration of situations which might be regarded as an abuse at paragraph 4.4.3 in the White Book – but in broad terms taking a step when you know that you have no prospect of success or where it is taken for an ulterior purpose and there is no legitimate justification will be likely to be an abuse.  It seems likely that the discretion will be exercised sparingly.  But 

“if the [judge] were of the view that a case had been brought without any bona fide belief that it was soundly based or if in any other way he were satisfied that his jurisdiction was being used other than for the purpose of resolving genuine disputes” (Rizla at 374),

it may still be used.  In that case, it still does not open up all the costs in the proceedings; only the costs attributable to the abuse of process will be off-scale".