Wednesday, 13 April 2011

PCC Page 24 – One strike (with a tentacle) -- but are you out?

The PatLit PCC Series, subtly scripted by the Chartered Institute of Patent Attorneys (CIPA), seeks 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 24th, CIPA President Alasdair Poore considers the prospects of striking out a High Court claim which looks as though it might be an abuse of process  ...

IPOff issued proceedings in the High Court (Patents Court) for threats – alleging that the comments that Cautious had made about his (alleged) patent and designs had resulted in the loss of business from a betting syndicate which was about purchase IPOff’s system, fearing the might (and costs) of the UK courts, and being unwilling to bet on success.  IPOff allege that the contract would have been enormously profitable, well in excess of the proposed PCC damages limit, and that such a case is only suitable for the High Court.
 Cautious’s patent attorney is contemplating whether Cautious should seek to strike out the claim as an abuse of process.  It is quite clear to Cautious that the High Court claim was brought simply as a malicious exercise to rack up costs and make proceedings more complicated.  The alternative is to apply to the High Court for transfer of the claim to the PCC.  At the moment, there is no damages limit, so it is not even necessary to agree potential recovery above the damages limit.
 As far as Cautious’s patent attorney can determine this is a bit of a new area.  Striking out for abuse of process, and indeed specifically striking out a claim for multiplicity of proceedings, is not a new area at all – more on that in a moment.  But bringing simultaneous proceedings in more than one English court, especially where there could be sound reasons for the second set of proceedings to be brought in the second court, is not such a common occurrence.  There are numerous cases where proceedings have been brought in multiple courts in different countries – cross border forum-shopping.  The intention in the EU of the Brussels Regulation was to reduce cross border forum-shopping, although torpedoes and super torpedoes were born as a result.  But in those cases there is not the option of transfer.
 Cautious patent attorney thinks: “A strike out would be a rather satisfying solution.  Not only would it deal with the question of costs in the High Court – definitely awarded against IPOff -- but it would look like a victory.”  A small, but nevertheless tactical victory.  A word of caution here.  Tactical victories look and feel great.  However, they are often used as a good way to incur costs without taking a case much forward.  When you start thinking “tactical victory” in the PCC, also think “is this really a good use of client resources?”
 The court has the power to strike out a statement of case under its case management powers in CPR3.4(2) if it appears to the court that
(a)        the statement of case discloses no reasonable grounds for bringing or defending the claim;(b)        the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings; or(c)        there has been a failure to comply with a rule, practice direction or court order.
 The power under CPR3.4(2) does not limit any other power of the court to strike out a statement of case (CPR 3.4(5)).
 PD 3A 1.4 provides examples of where a case is without merit. An illustrative example where a claim may fall with CPR 3.4(2)(b) where it is “vexatious, scurrilous or obviously ill-founded” (PD 3A 1.5). Although an application to strike out the High Court threats claim is tempting, there is a salutary lesson to be learned – the courts tend to treat such applications as a last resort and Cautious might find costs orders against it, should its application be dismissed. Indeed, in Reckitt Benkiser UK v Home Pairfum Limited [2004] EWHC 302 (a trade mark infringement case with a counterclaim alleging groundless threats), Laddie J considered the courts' powers to strike out a valid cause of action as in Wallis v Valentine [2002] EWCA (Civ) 1034, [2003] EMLR 8 and said: 
“The court’s powers under the CPR are wide.  They should be tailored to meet the circumstances of the case.  Although, as Wallis shows, the court has power to strike out even a prima facie valid claim where there is abuse of process, it does not follow that in all cases of abuse the correct response is to strike out the claim.  The striking out of a valid claim should be the last option.  If the abuse can be addressed by a less draconian course, it should be” 
As mentioned above, there is a class of strike-out which has become increasingly familiar recently, which quite often occurs in intellectual property cases.  This arises where a claimant attempts to litigate in a later set of proceedings a claim which should or could properly have been brought in earlier proceedings.  Because, in many intellectual property cases, one act, such as sale of a product, can give rise to several causes of action (such as infringement of a trade mark, passing off, design right infringement and patent infringement), there is the potential to bring multiple claims.  The question is: will the court permit that?
The principle that the Courts will not is based on (and referred to by the name of) a 19th century case, Henderson v Henderson   There is an excellent and very full discussion of the issues, which also reviews many of the past examples, in Jonathan v Gore Wood, and a further discussion in the White Book (Vol.1, para 1.4.15), and Nikken Kosakusho Works v Pioneer Trading Company [2005] EWCA 906 provides and example in the patent field.  The specific issue is not one of res judicata or issue estoppel (the principle that a party will not be allowed to relitgate the same facts, which is an absolute bar to fresh proceedings), but is that there should not be a multiplicity of proceedings where a party could properly be expected to have litigated them together, and is strictly a part of the courts powers to regulate proceedings.
 This issue is potentially very pertinent in the PCC.  What if a claimant thinks that the trade mark or registered design case is straightforward, and entirely suitable for the PCC, but the patent case would be much too complicated and difficult, or just too expensive and unsuitable?  Can the claimant be permitted to bring proceedings in one court, lose and bring a fresh set of proceedings in a different court?
 The prospect of proceedings being started in parallel courts was one that the group looking at revised rules for the PCC did contemplate, and it is for that reason that there is a proposal to amend the transfer jurisdiction so that an application for transfer can be brought in either the High Court or the PCC, but that provision has not yet been implemented.  While the Henderson v Henderson cases are important for intellectual property practitioners and clients thinking that they might keep some of their powder dry, it is also worth repeating that the Court is likely to look on an application to strike out with considerable caution, and ask whether any lesser remedy will serve the same purpose.  In this case, since the probable outcome is that IPOff will bring fresh proceedings in the PCC, it is likely to view the better course as transferring the claim and making an adverse costs order.
 Cautious’ patent attorney has been informed that an application to transfer can be made in writing, and that is what he plans to do.  Striking out looks like a strike too far.

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