England and Wales Patents County Court

IN THE PATENTS COUNTY COURT

		St. Dunstan's House 133-137 Fetter Lane London EC4A 1HD
		11/5/2011

JUDGE BIRSS :

1. On 8^th March 2011 I heard the trial of an action between the claimant, Dame Vivienne Westwood O.B.E. and the defendant, Anthony Edward Knight. The action was for infringement of registered trade marks, passing off, infringement of copyright and declarations of invalidity of certain of the defendant's registered trade marks.
2. On 22^nd March I gave judgment for the claimant ([2011] EWPCC 8) and made various orders consequential on the judgment. Mr Henry Ward instructed by Taylor Wessing appeared for the claimant. The defendant did not appear. He had filed written submissions addressing permission to appeal.
3. The orders included declarations of invalidity of the defendants' registered trade marks, injunctions, an order for delivery up, rectification of the register of trade marks, orders dealing with various of the defendant's domain names and an order for an enquiry as to damages (or account of profits). The order for the enquiry or account was not open ended and gives the claimant three months from the date of the order to seek directions if she wishes to proceed with the enquiry. I also refused permission to appeal.
4. The order also dealt with costs. This trial was the first trial heard under the new rules of procedure in the Patents County Court and it was also the first time the new costs capping provisions fell to be applied to the conduct of (more or less) an entire case. Various points arose in the process of dealing with the costs and I heard submissions from Mr Ward on the matters arising. I am very grateful both to him and his instructing solicitors for their submissions and assistance.
5. I assessed the costs at the hearing with reasons to be provided later. These are those reasons.

The proceedings

6. It is not necessary to rehearse the procedural history in detail. The case began in the High Court when the Claim Form was issued on 24^th June 2010. The defendant never filed a document entitled "Defence" but did file a number of documents entitled "Counterstatement of claim" which were in effect defences. The first Counterstatement was served on 18^th August 2010.
7. The case was transferred by the order of Master Bragge made on 1^st October 2010 and the new procedural provisions applied to it. The CMC took place on 15^th November 2010 (see my judgment [2010] EWPCC 16). The trial took place on 8^th March with judgment on 22^nd March.

The applicable provisions

8. The general approach to costs in the Patents County Court is the same as the general approach in every case under the CPR. That is set out in CPR Part 44 rule 44.3. Rule 44.3(1) provides that:

(1) The court has discretion as to-

(a) whether costs are payable by one party to another;

(b) the amount of those costs; and

(c) when they are to be paid.

9. If the court decides to make an order about costs, r 44.3(2) provides that:

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order.

10. Rule 44.3(3) is not relevant to the Patents County Court. Rule 44.3(4) provides:

(4) In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including-

(a) the conduct of all the parties;

(b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(c) any payment into court or admissible offer to settle made by a party which is drawn to the court's attention, and which is not an offer to which costs consequences under Part 36 apply.

11. The further sub-paragraphs of rule 44.3 deal with further matters including the conduct of the parties, the kinds of costs order the court may make and set offs. They all apply to the Patents County Court save for sub-paragraph 44.3(8) concerning a payment on account before costs are assessed. That sub-paragraph does not apply simply because costs in the Patents County Court are subject to summary assessment and therefore a need for a payment on account ought not to arise.
12. The particular rules relating to costs in the PCC are set out in Section VII of Part 45 of the Civil Procedure Rules entitled "Scale Costs for Claims in a Patents County Court". By rule 45.41(1), subject to certain limited exceptions, Section VII of Part 45 applies to all proceedings in the Patents County Court. The limited exceptions relate to abuse of process and cases in which there is a certificate of contested validity relating to the patent or registered design (r 45.41(2)). Neither exception is relevant in this case.
13. The rules in Section VII form part of the package of measures introduced on 1^st October 2010 to reform the procedure in the Patents County Court. The package consists of new rules in Part 63 (procedure), Part 30 (transfers), and Part 45 (costs) along with various practice directions. This package of measures is intended to apply as a whole (see my judgment in Technical Fibre [2010] EWPCC 11 and see also the judgment of Kitchin J in Caljan Rite-Hite Ltd v Sovex Ltd [2011] EWHC 669 (Ch)). These new PCC costs rules do not apply to costs incurred in circumstances in which the rest of the package of measures did not apply. So costs incurred in the High Court before transfer to the PCC are not caught by the automatic provisions of Part 45.
14. By rule 45.41(3) the court will make a summary assessment of the costs of the party in whose favour any costs order is made. This applies whether or not the trial has taken a single day or has taken more time. Thus in the Patents County Court all costs are to be subject to summary assessment.
15. The amount of scale costs which may be ordered is governed by rule 45.42. The costs are limited in two ways. First there is an overall cap on the total set by rule 45.42 (2) (a). By that rule the court will not order a party to pay total costs of more than £50,000 on the final determination of a claim in relation to liability. That applies after any set off (r45.42 (3)) but no set off arose in this case. Second there are caps at various stages in the proceedings. The stages and caps are set by the Practice Direction and are applied by rule 45.42(3). This provides that the maximum amount of scale costs that the court will award for each stage of the claim is set out in the Costs Practice Direction. In every case the amount of the scale costs awarded by the court will depend on the nature and complexity of the claim (r 45.42 (4)).
16. There is also a limit and a set of stages applicable to inquiries as to damages or accounts of profits. These work in the same way as the provisions mentioned above but are irrelevant for present purposes.
17. By r45.42(5) the limits are net of VAT such that a receiving party in relation to whom VAT should be added, recovers VAT in addition to the amount of scale costs.
18. The applicable stages and scale for a trial on liability is in Table A in Section 25C of the Costs Practice Direction (CPR Pt 45). Table A is set out below with numbers for the stages added for the purpose of reference in this judgment:

	Stage of a claim	Maximum amount of costs
1	Particulars of claim	£6,125
2	Defence and counterclaim	£6,125
3	Reply and defence to counterclaim	£6,125
4	Reply to defence to counterclaim	£3,000
5	Attendance at a case management conference	£2,500
6	Making or responding to an application	£2,500
7	Providing or inspecting disclosure or product/process description	£5,000
8	Performing or inspecting experiments	£2,500
9	Preparing witness statements	£5,000
10	Preparing experts' report	£7,500
11	Preparing for and attending trial and judgment	£15,000
12	Preparing for determination on the papers	£5,000

19. It is clear that the effect of the Table is that many Patents County Court cases will not approach the £50,000 limit in any event. For example the total for the first two rounds of pleadings is £12,250, a CMC is £2,500, witness statements £5,000 and a trial and judgment £15,000. These could easily be all the stages undertaken in a simple case. The total there would be £34,750.
20. Rule 44.3(1)(b) provides that the court has a discretion as to the amount of costs but despite that it is clear that the limits at the various stages and the overall £50,000 limit are intended to be adhered to. The purpose of the limits is to aim for certainty for litigants (see section 5 Costs Recovery in the Final Report of the IPCUC's Working Group on Proposals for Reform of the Patents County Court). The correct approach must be to apply the limits if they can possibly be applied, recognising however that in the end the court always has a discretion as to costs (CPR r44.3) and that includes as to the amount of costs. It is a discretion which in my judgment will very rarely (if ever) be exercised to exceed the limits set by Section VII. For one thing specific exceptions are provided for (r45.41(2)). Furthermore to exercise a discretion on a wider basis in all but the most rare and exceptional case would undermine the very object of the scale in the first place. For the scale to give a measure of certainty to litigants, it has to possible to be sure that the limits will apply well before any costs are incurred and most likely before any action has even commenced. Before they embark on litigation to enforce their intellectual property rights (or defend themselves) the potential users of the Patents County Court system need to be able to make a prediction in advance as to their likely costs exposure. Their legal advisers need to be able to say with confidence that the costs capping provisions can be relied on.

Approach to the assessment of costs in the Patents County Court

21. The first question will always be the one contemplated by CPR Pt 44.3(1)(a) – whether costs are payable by one party to another. The usual rules applicable under the CPR apply to that. The general rule is that the unsuccessful party will be ordered to pay the costs of the successful party but the court may make a different order. In some cases an issue based approach and set off may be appropriate just as in the High Court.
22. The next matter to address is then the amount of costs, which will be arrived at using the summary assessment procedure. In order to conduct the assessment the party seeking costs will need to provide information about its costs broken down by stages corresponding to the stages in Table A (for a liability trial). In the present case the claimant's solicitors prepared Statements of Costs for each stage and a summary schedule setting out the totals for all the stages. The detail in each Statement needs to be set out somewhere and it is an important formality that the solicitor signs each Statement to confirm its accuracy. I wonder if it might be possible to prepare a single Statement of Costs setting out each stage without doing too much violence to the form but that is a minor matter.
23. The summary schedule was a useful document and I commend the idea to other litigants in future.
24. The approach to costs assessment in the Patents County Court, being a hybrid of the normal summary assessment procedure and the stage limits, involves considering each stage separately. In my judgment the correct approach is as follows. For each stage the party's costs at that stage should be subject to summary assessment. That will produce schedule of figures for each stage. In the PCC the amount of the costs awarded by the court will depend on the nature and complexity of the claim (r 45.42 (4)). The point in the analysis at which this provision can be best applied is this stage. The sum which might emerge from a summary assessment at this stage in the PCC may well be lower than the sum which might emerge from the same process conducted in proceedings before the High Court. In a simple claim with modest sums at stake the sum is very likely to be lower. Section 5 of the Final Report of the IPCUC's Working Group specifically makes the point that in some cases, such as simpler trade mark disputes, there is no reason why the costs spent or awarded should necessarily be as high as the particular stage limits.
25. Provided the summary assessment has been approached on the right basis (i.e. as a PCC summary assessment) then in my judgment if the assessed figure for a given stage is less than the limit for that stage then nothing further need be done, and if the summarily assessed sum is more than the limit for a given stage, then the limit is very likely to be the right figure.
26. Finally the overall limit should be considered. The maximum recoverable is £50,000. If the total is lower then nothing more is required. If the total approached in this way turns out to exceed £50,000 then, provided the summary assessment was approached on the right basis in the first place, then the limit is very likely to be the right figure.
27. This approach takes into account the specific costs regime in the PCC, ensures that the limits are adhered to and also will award a lower sum than the limit in appropriate circumstances.
28. A specific question which arose before me was the nature and scope of the stages in Table A. Two points were taken. First, what was the position of costs incurred before the action had been commenced? This is a general point and receives extra force given the specific encouragement to employ the pre-action protocol in the PCC rules (r63.20 and r63.22). On the face of it costs incurred before the action starts do not appear to fit into the table at all, which would appear to act to discourage parties from employing the pre-action protocol.
29. The second point related to the definition of the stages. In this case the defendant served numerous documents which one might call defences. Many were called a counterstatement of claim and a number were substantial documents. By my count there were 11 such documents. The claimant's advisers had to consider all of them and decide what to do in each case. They decided that no Reply or Defence to Counterclaim was required but that does not mean that the claimant's legal team did not spend a considerable time (and therefore cost) dealing with the Defences. However since no Reply was served by the claimant, that "stage" in table A might be said not to apply in this case.
30. In my judgment considering both points, the answer is that there is no need to take too narrow a view of the scope of the stages in Table A. I say that because even if a broad view of the scope of those stages is taken, this would not undermine the system. No costs other than costs attributable to the stages in the Table may be awarded. One clearly cannot invent stages which are not in the Table and there is no scope for what are sometimes called the general costs of the action to be added on. Furthermore the caps will always apply and the overall cap will also always apply in any event. So for example although the stages are broadly chronological they are not limited in that way. For example if work was done pre-action which can, once proceedings are commenced, properly be regarded as part of the Defence and Counterclaim stage (stage 2) then such costs ought to be potentially recoverable and the fact they were incurred pre-action is not a bar to recovery (albeit no doubt not irrelevant either).
31. I note that the final proposals in the Final Report of the IPCUC's Working Group makes the point that the scale fees are modelled on the UK IPO's scale fees system but on a somewhat more generous basis. The "Scale of costs applicable in proceedings commenced on or after 3 December 2007" set by the UK IPO (Tribunal Practice Notice (TPN 4/2007)) is as follows:

Task	Cost
Preparing a statement and considering the other side's statement	From £200 to £600 depending on the nature of the statements, for example their complexity and relevance.
Preparing evidence and considering and commenting on the other side's evidence	From £500 if the evidence is light to £2000 if the evidence is substantial. The award could go above this range in exceptionally large cases but will be cut down if the successful party had filed a significant amount of unnecessary evidence.
Preparing for and attending a hearing	Up to £1500 per day of hearing, capped at £3000 for the full hearing unless one side has behaved unreasonably. From £300 to £500 for preparation of submissions, depending on their substance, if there is no oral hearing.
Expenses	(a) Official fees arising from the action and paid by the successful party (other than fees for extensions of time). (b) The reasonable travel and accommodation expenses for any witnesses of the successful party required to attend a hearing for cross examination.

32. As I read the first row in the UK IPO's table, scale costs may be awarded for preparing a statement but also for considering the other side's statement. That recognises the reality that substantial costs can be incurred considering the statements of case of an opponent.
33. In Table A applicable to the PCC the terms in stages 5 to 12 are expressed each make clear what work they relate to. So stage 9 is not just "witness statements" it is "preparing" witness statements, and so on. However stages 1 to 4 simply refer to a particular statement of case. In my judgment, given that it is intended to be a system somewhat more generous that the UK IPO scheme, it is legitimate to include within the costs of any of stages 1 to 4 the costs of considering the statement of case of the other side. That does not mean that such costs will be recoverable in every case but on the facts of this case it seems to me that the claimant is entitled to include costs at stage 2 for considering the other side's defences.
34. I recognise that that might lead to a defendant in a different case claiming costs at stage 1 for dealing with the Particulars of Claim and then costs at stage 2 for preparing a Defence. In many cases I doubt that will be appropriate but it may be in some cases and it can be dealt with when it arises on a case by case basis.

Costs in this case

35. Set out below is a schedule showing the total costs incurred by the claimant at each stage, the sum I determined at the summary assessment stage and the sum determined by applying the limits:

	Ref.	Sum incurred	Summary assessment	Limit in Table A	Sum due
Costs incurred in High Court		£33,069	£25,000	-	£25,000
Defence (considering defences)	2	£11,325	£8,000	£6,125	£6,125
CMC	5	£8,783	£6,500	£2,500	£2,500
Application to amend Particulars of Claim (Red Planet Westwood)	6	£2,837	£2,000	£2,500	£2,000
Preparing witness statements	9	£26,009	£20,000	£5,000	£5,000
Application to amend Particulars of Claim (Too fast to live)	6	£3,411	£2,500	£2,500	£2,500
Defendant's pre trial applications	6	£2,983	£2,500	£2,500	£2,500
Trial and judgment	11	£25,116	£20,000	£15,000	£15,000
Totals		£113,533	£86,500	£36,125	£60,625

36. It is neither necessary nor proportionate to go into the detailed reasons for the summary assessments at each stage but a number of general matters should be recorded.
37. First this action was factually more complicated and of a more substantial ambit than many in the PCC. It involved claims for infringement of 6 registered trade marks (2 UK and 4 CTMs), claims for passing off in relation to 12 separate marks and claims for infringement of copyright in 5 works, of which three succeeded and two did not. There was also the issue of validity of the defendant's 3 registered trade marks. The substance of the action is an important matter which I took into account in summarily assessing the costs at the individual stages in the PCC. It also means I am confident that if the summarily assessed sum is larger than the limit for a given stage, there is no reason not to award costs at the limit for that stage in this case.
38. Second the case began in the High Court and those costs are not capped but are still summarily assessed. What view is taken of costs incurred in the High Court before transfer to the PCC will need to be considered in the particular circumstances of each case. In this case I assessed the High Court costs in the sum shown above.
39. Third, for the reasons given, in this case it was right to include a stage for considering the defendant's Defences.
40. Fourth, the case involved three applications as well as the CMC. It is right to consider each one separately since although the general rule is that applications should be made at the CMC in the PCC, in this case there were good reasons why the claimant's applications had not been brought at that point. It may be noted that in one case the costs awarded are lower than the limit.
41. Fifth, the claimant also claimed the costs of its application for costs as a separate stage 6 "application". I rejected that. In my judgment stage 11 in Table A (preparing for and attending trial and judgment) includes those costs.
42. Sixth, some stages may straddle the transfer of the proceedings from the High Court to the PCC. In this case stage 2 did so. Rather than conduct a wholly disproportionate attempt to extract out costs incurred in the High Court and treat them differently from costs incurred after transfer, in this case in the exercise of my discretion, I simply treated all that stage as covered by the PCC rules.
43. Seventh, although the total (ex-VAT) exceeds £50,000, it does not breach rule 45.42(1)(a) because that total consists of £25,000 in the High Court and £35,625 before the PCC. Thus the costs before the PCC are below £50,000 and that is what rule 45.42(1)(a) requires.
44. Eighth, VAT needs to be addressed. The claimant is entitled to include VAT and rule 45.42 (5) makes clear that VAT may be added on top. However there is a potential difficulty with this since some costs do not incur VAT while others do. In a capped system like this one, how does one deal with that? For example the actual costs incurred for the CMC (£8,783) include a court fee of £115 which is free of VAT. The final capped award is £2,500. In my judgment the right thing to do at least in this particular case is to take the final sum, deduct the non-VAT attracting court fee, add VAT on the remainder and add back the court fee. In this case that gives £2,917.38 (inc VAT) for the CMC. A similar approach applied to the High Court fees gave a total of £29,057.38 (inc VAT). Taking VAT into account on all sums, the total due by way of costs is £71,496.63.
45. Finally, the claimant claimed interest on its costs at 1% over the bank of England rate until judgment, as is normal. However the claimant's proposed order referred to interest running from the date of payment of the relevant solicitor's bill, as is also normal. That does not work in a costs capped regime since one does not know which bill to use. Accordingly rather than not award interest at all, which would not be fair, I decided to order that interest on the overall costs figure would run from a certain single date. Whatever date is chosen would inevitably mean that it could be said to overcompensate in relation to sums paid after that (and vice versa for earlier sums) but to take this approach is a closer approximation to justice than to refuse interest altogether. I chose the date of the case management conference, 15^th November 2010, which is approximately the point in the proceedings at which about half the costs had been incurred. In other cases the date might be later.

Conclusion

46. The practical application of the costs capping system in the Patents County Court was always going to raise issues to be addressed. Having now conducted an assessment under the scheme, none of the issues raised so far are particularly problematic. The costs capping system works and I am sure it can be readily applied to all the intellectual property disputes in the Patents County Court.