Tuesday, 10 May 2011

PCC Page 26: Offering a tentacle of good will

Following a short break for the Easter holiday, the PatLit PCC Series is back in full swing.  Delicately directed by by the Chartered Institute of Patent Attorneys (CIPA), this series 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 26th, CIPA President Alasdair Poore considers the legal and tactical dimensions of making an offer, and how an offer to settle which is made by a claimant differs from one made by the defendant.
Readers may recollect that Cautious Co has brought proceedings against IPOff.  IPOff makes the Robot Octopus football results predictor.   Cautious has a patent relating to the predictor.  The patent is challenged on the grounds that it is obvious, it doesn't work and is anyway a computer program or business method (infringement is denied too).  The second claim is in relation to unregistered design right infringement in respect of octopus-shaped toys.

Over the Bank Holidays, IPOff has been thinking about ways of putting pressure on Cautious.  Cautious’s earlier offer was rejected by IPOff, which asserted that it was not an offer to settle at all.  IPOff ‘s solicitor has now written to Cautious’s patent attorney with its own Part 36 offer.  The offer is made on the following basis:
·         IPOff agrees that the unregistered design rights are valid and infringed, and undertakes not in the future to infringe them and to pay damages to be assessed;·         Cautious agrees that its patent is invalid and not infringed.
As it is a Part 36 offer there is no specific provision in relation to costs as these are determined in accordance with Part 36.

Of course IPOff sees that they can change the design easily.  If it can circumvent any patent claims, it can get back into the market.  Currently just the existence of the claim is making marketing difficult.
Since Cautious made its offer, there has been a useful case, AB v CD ([2011] EWHC 602 (Ch)).  This is discussed below.
First, the effect of a defendant’s Part 36 Offer is not quite the same as for a claimant’s offer.  For the claimant the incentive to settle needs to be greater; since a successful claimant would receive (most of) its costs anyway, a claimant obtaining a judgment at least as advantageous as its offer is entitled to indemnity costs and interest.  In contrast the defendant is entitled (Part 36.14(2)) to (a) his costs from the date on which the relevant period expired; and (b) interest on those costs.  This is only slightly different from the likely result of an offer “without prejudice save as to costs” or “Calderbank Offer”, so the need to ensure that the offer complies with Part 36 is probably less.

AB v CD is coincidentally a trade mark infringement case.  It followed the usual procedure of a split trial on liability and damages.  Both parties had made alleged Part 36 Offers in the course of the stage up to trial on liability, and the judge was now being asked to review whether they were effective Part 36 Offers.
The first difficulty was that the trial judge is not supposed to know that there is a Part 36 Offer in play, and certainly not to see the details – so a different judge had to consider this (and use pseudonyms in reporting it so that the trial judge would not be aware of the entire discussion).  Perhaps this is a more acute difficulty in the PCC! 
The judge, Henderson J observes (in relation to the claimant’s offer) that:

In my judgment the offer must contain some genuine element of concession on the part of the claimant, to which a significant value can be attached in the context of the litigation.” (para 22). And at para 34 he asks: “But did the offer make any real concession of significant value, bearing in mind that the policy of Part 36 is to encourage the settlement of claims before trial and before any judgment has been given? In my view it did not, for the following reasons.
He observes, taking a broad robust approach to whether there is any real concession, that:

The order for delivery up of infringing items is in my view of negligible significance, given the re-branding exercise which has taken place. I would not be surprised if there were no material at all to be delivered up, and I find it difficult to imagine what it would consist of. Such allegations of continuing infringement as there are relate to the continued use of some of the impugned signs as Google adwords, or other forms of electronic infringement. There is no serious suggestion, so far as I am aware, that the defendants are currently using any infringing physical items in the course of their trade. With regard to publicity, it is true that the publication order requires the defendants to take certain steps at their own expense, but, that apart, the publication order achieves nothing of substance that the claimant could not have done for itself had its offer been accepted, except of course for publication of the judgment itself. … I accept the submission for the defendants that obtaining a reasoned judgment from the court following a trial cannot in itself be regarded as an improvement upon a Part 36 offer, because the policy of Part 36 is to promote the settlement of cases before trial. Further, in the light of the scope for publicity retained by the claimant, the confidentiality offered to the defendants was in my judgment also of no real value. Finally, the opportunity to obtain a certificate of contested validity in relation to the UK mark seems to me to take matters no further, because the advantage that it gives to the claimant is not an advantage in relation to the defendants (who would anyway be bound by the judgment, or in terms of the offer by the discontinuance of their counterclaim), but in relation to future proceedings by third parties. For the purposes of Part 36, it must in my view be regarded as a purely incidental advantage of proceeding to trial, and forgoing it was not a genuine concession offered by the claimant to the defendants.” (para 38)
AB v CD makes it clear therefore that it is difficult for a claimant to make a tactical offer of settlement, unless there is some genuine concession.
Note also that the claimant’s contention that it could not make a meaningful assessment of the defendants’s offer, without further information, was discounted to a large extent.  However, in particular, the need for further information does not prevent the offer being a Part 36 offer; it only forms a ground on which the offeree might ask for the court not to apply the full rigour of Part 36, on the ground that it was not just to do so. (para 48, 49)
Interestingly, the defendant’s offer appeared to be expressed to be open only for 21 days – which in accordance with other cases would prevent it from being a Part 36 offer.
Do not forget (particularly as a defendant) that simple “without prejudice save as to costs” offers are still available, and may well have a similar effect.  And also that a “without prejudice” offer is not the same.  The latter may never be shown to the court other than as evidence of an agreed settlement.

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