Where are we now? Sir Richard Arnold's Jackson Implementation speech

Further to the IPKat's recent post here, the Judiciary of England and Wales website now hosts the 17th lecture in the Implementation Programme, "Intellectual Property Litigation: Implementation of the Jackson Report's Recommendations", here.

The lecture, delivered by Mr Justice Arnold and hosted by the AIPPI UK, gives a good where-are-we-now summary. It is easier to appreciate if you have already read the Jackson Report (which is rather long). A workable alternative is to glean the background from PatLit's earlier posts and its recommendations as they affect IP litigation which you can check out here.

The Jackson Review: how will it affect patent litigation in England and Wales?

The Review of Civil Litigation Costs: Final Report (a.k.a. The Jackson Review), covering civil litigation in England and Wales, has just been published here. It's 584 pages in length and its thrust is summarised by one of the most no-nonsense Forwards you'll ever read. Writes Lord Justice Jackson:

"In some areas of civil litigation costs are disproportionate and impede access to justice. I therefore propose a coherent package of interlocking reforms, designed to control costs and promote access to justice".

What does it say about patent litigation? The following pointers may be of initial assistance here.

"5.1 Intellectual property litigation (chapter 24). The creation and use of intellectual property (“IP”) rights play a crucial role in economic activity and the owners of IP rights must be able to assert or defend them in the courts. The cost to SMEs (and larger enterprises) of resolving IP disputes can be significant. To reduce the costs of IP litigation, and particularly the cost to SMEs, I recommend that the Patents County Court (the “PCC”), which deals with lower value IP disputes, be reformed to provide a cost-effective environment for IP disputes. These reforms include (i) allowing costs to be recovered from opponents according to cost scales; and (ii) capping total recoverable costs to £50,000 in contested actions for patent infringement, and £25,000 for all other cases. I also recommend that there be a fast track and a small claims track in the PCC".

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"[p. 12] In the space of just 12 months, there have been major developments in relation to civil litigation costs", footnoting " ... "For example, ... the consultation exercise by the IP Court Users Committee on proposals for reform of the Patents County Court; the introduction of the new Practice Direction – Pre-Action Conduct in April 2009".

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"[p.24] 8. INTELLECTUAL PROPERTY CASES

8.1 Appendix 3. The data in appendix 3 to this report include a sample of 15 large intellectual property cases settled or taken to first instance trial by a leading IP department from a City law firm in the period from 1999 to 2007. Of these 15 cases, the firm acted for the claimant in ten cases and the defendant in five cases. The cases covered disputes over patents, trademarks, design and copyright. Of the 15 cases, three settled and 12 went to trial.

8.2 The adjusted costs incurred on these cases up to first instance judgment or settlement range from £196,957 to £1,540,933, with an average cost incurred per case of £696,742. The costs have been adjusted from actual costs to current costs by reference to the hours spent on the case at current hourly rates.

8.3 The data show the total costs incurred (profit costs and disbursements) up to various standardised stages in the litigation process (service of claim, defence, disclosure, witness statements, trial etc). This assists the law firm to estimate potential costs for clients up to various stages of the litigation process. The costs incurred up to a particular stage are cumulative, including the costs for all work up to that stage, not merely the costs incurred on performing tasks for that stage.

8.4 The data also include the number of weeks each case took to reach the various stages outlined above. The cases ranged between 36 weeks and 111 weeks from start to first instance judgement or settlement, with the average length being 66 weeks.

8.5 The law firm is also able to calculate the average monthly cost of the IP cases. The cases in the sample incurred average monthly costs ranging from £18,376 to £104,615, with the average being £45,542.

8.6 The costs incurred from the start of trial to judgment or settlement averaged nearly 20% of the total costs of the cases. The trial costs were a large proportion of the total costs due to the cross examination of the expert witnesses".

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"[p.170] 2.4 The majority of respondents oppose any fixing of costs in the multi-track. Both the Law Society and the Bar Council oppose any extension of the fixed costs regime above the fast track. The Bar Council writes:

“Save in relation to the Patents Court, we cannot see any justification for the implementation of a fixed costs regime in cases in the Chancery Division, Commercial Court or TCC48 depending on the value of the claim or the size or turnover of one or both claimants.”

2.5 In relation to intellectual property (“IP”) litigation, it is generally recognised that there is a case for limiting or fixing recoverable costs in respect of claims up to about £500,000. There is a groundswell of support amongst IP practitioners and court users for reforms along these lines: see chapter 24 below".

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Part 5 of the Report, dealing with specific types of ligitation, gives 10 pages to IP (pages 248 to 257) and recommends as follows:

"(i) Consideration should be given by the Patents Court judges and the IPCUC [Intellectual Property Court Users' Committee] to the question whether the Guide should be amended to include any of the proposals set out in paragraph 2.5 above [These relate to more robust case management].

(ii) The proposals in the IPCUC Working Group’s final report for reforming the PCC should be implemented [on which see PatLit here].

(iii) After reformation of the PCC, the Guide should be amended to give clear guidance on the requirements for statements of case, illustrated by model pleadings annexed to the Guide.

(iv) There should be a small claims track in the PCC for IP claims with a monetary
value of less than £5,000 and a fast track for IP claims with a monetary value of between £5,000 and £25,000.

(v) One or more district judges, deputy district judges or recorders with specialist
patent experience should be available to sit in the PCC, in order to deal with small claims and fast track cases.

(vi) There should be consultation with court users, practitioners and judges, in
order to ascertain whether there is support either for (a) an IP pre-action protocol or (b) the Guide to give guidance regarding pre-action conduct [i.e. as to whether there should be reform of the law currently governing groundless threats, which has implications for, inter alia, the drafting of letters before action]".

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On appeals, at p.337, the Review touches on the special position of IP disputes:

" ...the Intellectual Property Court Users’ Committee (the “IPCUC”) in its final report dated 31st July 2009 has proposed making radical reforms to the Patents County Court (the “PCC”). These reforms include imposing a cap upon recoverable costs, in order that SMEs should not be deterred from litigating by the fear of indeterminate liability for adverse costs. In relation to costs on appeal the IPCUC states:

“…we are confident that the Court of Appeal would be sensitive to the question of costs on appeal from the reformed PCC, and would be unlikely to award more by way of appeal costs than the first instance costs.”

There is an important issue here as to whether (a) this is a matter which should be left to the general discretion of the Court of Appeal or (b) the rules should make special provision for costs on appeals from the (reformed) PCC".

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Disclosure is mentioned at p.370: "3.9 After referring to the limited disclosure regime in patent cases, CLAN [the Commercial Litigation Association] looks at disclosure more widely. It states:

“... perhaps the default position should be that parties would disclose only those documents upon which a party wished to rely, but that it was open to either party to seek more general disclosure if appropriate. This was the approach adopted when the modern form of the county courts was being introduced in the 19th century.”

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PatLit is sure that there will be much discussion and welcomes readers' comments, both from at home and from abroad.

Expensive litigation in England and Wales: the latest initiative -- and how it affects patents

The Times Online yesterday published a short article by legal editor Frances Gibb on the Jackson Report on the cost of civil litigation in England and Wales. According to the article,

"Going to law has become so expensive that ordinary people or small companies who lose a case face financial ruin ...

Lawyers on huge success fees and claims companies that receive a share of awards are blamed for a surge in the cost of making a claim through the courts.

... The first in-depth inquiry into the costs of civil justice in a decade presents a damning picture of a system plagued by soaring costs that are out of all proportion to the damages people recoup.

The report by Lord Justice Jackson, the Court of Appeal judge, ... calls on ministers to reconsider their policy of charging increasingly high fees to people bringing claims so as to make the civil courts pay for themselves. It says: “We have arguably reached the position in this jurisdiction where the level of costs is so high that facing a full adverse costs order is likely to be a disaster for most ordinary citizens.”

... The 650-page report highlights the huge “success” fees charged by lawyers under no win, no fee deals as one factor in fuelling the costs explosion.

... Lord Justice Jackson also challenges the government’s policy of making the courts self-financing. His report says that court fees now account for about 80 per cent of the £650 million a year cost of running the civil and family courts in England and Wales. Such fees have risen “substantially” above the rate of inflation, ...

... The report notes that as well as “massive costs” now run up in some cases, there has been an “explosion” of litigation over these costs, a “costs war”, adding a further layer of costs.

The report, on which comments are invited by July 31, floats a series of possible reforms, including: fixed costs for many more cases than now, a benchmark or tariff of costs; contingency fees or a “contingency legal aid fund” paid for through a slice of each winning claimaint’s damages; and an overhaul of no win, no fee cases involving capping the “success” fees charged by lawyers.

... The 200-year old “loser pays” principle is aimed at deterring unmeritorious claimaints. But it does not apply to all disputes, the report notes: for instance in tribunals each side bears its own costs. The judge rules out complete abolition of the rule as not “realistic” but suggests that it could be scrapped or partially scrapped in some areas. Winning claimaints should recover their costs; but winning defendants might not always recover all of theirs.

... In 2007, about 75,000 cases were brought in the High Court of which 10 per cent were contested and so gave rise to significant costs. In the county courts about 2.1 million cases were brought of which five per cent were contested.

... Graham Huntley, partner in Lovells and past President of the London Solicitors Litigation Association, said: "Helpfully, and correctly, in my view, the report accepts the principle that there is no 'one size fits all' approach to costs, and that in higher value and complex litigation the topic cannot sensibly be addressed without looking at the procedural code and practice out of which flows the costs."

Liam O’Connell, partner with CMS Cameron McKenna, predicted the report would lead to curbs on no-win, no-fee deals. The report had also put insurance which claimaints take out to protect against costs “in the firing line”.

That is a general picture, which makes no specific reference to intellectual property litigation in general or patent litigation in particular. Lord Justice Jackson does however give some thought to this sector. In particular,

* he sets out the common problems associated with patent litigation (high costs, complexity, uncertainty) identified by various sources, including the Gowers Review and the Department of Constitutional Affairs Consultation Paper of April 2007;

* he discusses recent proposals by Mr Justice Arnold that (i) the Patents County Court (PCC) should be reconstituted as a low-cost forum, distinguished from the Patents Court by having an upper financial limit; (ii) the PCC's procedures should be based primarily on written arguments; (iii) disclosure, experiments, written evidence and cross examination should only be allowed upon application and where a cost-benefit test is satisfied; (iv) there should be a system of scale costs. According to Arnold J the prospect of a party paying the other side's costs if it loses is of greater concern to SMEs than the prospect of recovering only limited costs if they win, and he puts forward compelling evidence to support this.

* he notes that the Chartered Institute of Patent Attorneys has proposed a scheme along the same lines as Arnold J's proposals, but involving the creation of a special "small claims track" for patent litigation.

* he states that he sees considerable force in these proposals and that provisionally his preference is to follow such a course.

* he notes that the IP Court Users' Committee has set up a working group to draft proposals and recommendations in respect of the PCC and is proceeding down a similar route. He would therefore like to take its proposals and recommendations into account in his final report, calling for it to provide a fully worked-out scheme including the draft of any Bill that as necessary.

As to cost-capping, Jackson LJ sets out in detail the various authorities on cost-capping and the views of practitioners: these range from the opinion that there should be universal cost-capping to the view that costs should never be capped. His own analysis is as follows:

*cost-capping cannot be used in isolation to control costs;

* it may be used in the context of a wider exercise of costs management where appropriate;

* otherwise, it should be reserved for exceptional circumstances.

So what happens next? Phase 2 of the Costs Review is a consultation period which ends on 31 July 2009. Jackson LJ will then draft a final report by the end of the year, containing proposals for reform.

Thanks to Mo Efeyini for doing all the digging for this post.