England and Wales Patents County Court

IN THE PATENTS COUNTY COURT

		Rolls Building 7 Rolls Buildings London EC4A 1NL
		25/09/2012

HIS HONOUR JUDGE BIRSS QC :

1. In my main judgment in this action ([2012] EWPCC 38) I decided that the claimant's patent was invalid and was not infringed by the defendant's security net product. Today I heard the parties in relation to various points arising from the judgment. This judgment deals with two of those consequential points. They are an order for dissemination and costs.
2. Mr Colley appears for the claimant instructed by Withers & Rogers. Mr Pritchard appears for the defendant instructed by Wragge & Co.. Since trial the defendant company has gone into administration. The administrators are seeking to sell the business as a going concern. Taylor Wessing are the solicitors for the administrators although Wragge & Co. were instructed by the administrators for the purposes of this costs hearing.
3. I will not rehearse the background. It is set out in my main judgment.

Order for dissemination

4. The defendant sought an order for dissemination of the judgment. The order sought requires the claimant to place a notice on its website referring to the main judgment for 6 months and to place an advertisement in a prominent trade journal (The Automotive Engineer) for two editions. The claimant submitted no such order for dissemination should be made. If (which the claimant denied) the order was to be made, the claimant submitted that 6 months was too long and only a single issue of the magazine should be covered. I rejected those submissions at the hearing. In my judgment if the order is to be made, the period and number of editions sought by the defendant were fair. There were also detailed points on the wording of the notice but they were resolved at the hearing. It was also agreed that, if made, the order will be stayed pending any appeal or application for permission to appeal. I decided to make the order for dissemination, with the reasons to be given in this judgment.
5. Mr Colley submitted I should not order dissemination for the following reasons. He referred to my judgment in Samsung v Apple [2012] EWHC 2049 (Pat) in the High Court. He pointed out (see paragraphs 32-41) that Art 15 of the IP Enforcement Directive (2004/48) only refers to dissemination in the case in which a rights holder has established infringement. The Directive does not describe an order for dissemination when the rights holder has lost the case. He submitted that this asymmetry was deliberate because an accused infringer can always take action for a declaration of non-infringement and has the remedy of a claim for unjustified threats at least in some cases. He emphasised that the defendant in this case has the freedom to publish the decision itself. Mr Colley also submitted that unlike Samsung v Apple, this case is not one in which there is significant interest in the public domain. Thus he said there should be no order for dissemination of the judgment by the claimant.
6. Mr Pritchard submitted there should be an order that the claimant disseminate the judgment. He pointed out that in this case both sides had sought orders for dissemination in their respective prayers for relief. In particular the claimant had itself sought an order for dissemination of the judgment in its Particulars of Claim (assuming of course it had won the case). Mr Pritchard accepted Mr Colley's point that the Directive does not refer to an order for dissemination when the rights holder has lost the case but submitted that Samsung v Apple shows that the court has jurisdiction to make such an order, the question being whether it is the right thing to do in a given case. Mr Pritchard submitted it was the right thing to do here having regard to the circumstances generally. His client had been sued in the UK and Germany. The German court had found the defendant's product to infringe the patent in a bifurcated procedure. The finding of non-infringement here was important in the particular market in which these companies operate. The perception of the defendant as a going concern was of particular importance given that it is now in administration. Mr Pritchard also submitted that the argument about the availability of declarations of non-infringement and threats proceedings did not justify the asymmetry between making an order for dissemination if the rights holder prevailed but not making one where the rights holder had failed. The same goes for the freedom of a party to publish a decision.
7. Mr Colley replied that the remedy of dissemination in this case was disproportionate given the nature of the market and emphasised that the litigation was certainly not the sole explanation for the defendant's administration. I should say I accept that latter submission of Mr Colley's.
8. It seemed to me that much of the thrust of Mr Colley's submission would have applied equally to an order for dissemination of the judgment which his client had sought itself in the Particulars of Claim (assuming it won). Mr Colley submitted that in this case the factors mean that I would have refused that order had he won the case.
9. I prefer Mr Pritchard's submissions. I distinguish between two factors – first the factors specific to the market and circumstances in this case and second the general points raised by Mr Colley such as the availability of court declarations, unjustified threats and freedom to publish, which are submitted to explain the asymmetry in the Directive.
10. I ask myself whether the particular market and circumstances of this case would make an order for dissemination fair or appropriate. I think they would and do. That would apply as much to the claimant (had it won) as to the defendant (who did win). In my judgment, if the claimant had won this case, Mr Colley would have asked for essentially the same order now sought with the corresponding changes to reflect the outcome. It would have been hard to resist by the defendant. In this case the specific factors in the market and circumstances favour an order for dissemination.
11. I do not accept that the availability of declaratory relief and the fact that a party can publicise a judgment itself, can provide a justification for the asymmetry in the IP Enforcement Directive. It seems to me that if orders for dissemination are to be made, there is no justification for applying a different standard depending on whether they arise because the rights holder had lost rather than because the rights holder had won. Remedies like declarations are available to either side and both have the ability to publicise a judgment. Necessarily all factors have to be considered in the exercise of the court's discretion either way. That will include considering whether there is any need for such an order given the other remedies available from the court and the fact that the winner can publicise its victory anyway. These will be considered in every case.
12. I have noticed that many Particulars of Claim in intellectual property cases now routinely include a claim for an order for dissemination of the judgment. A claimant who includes such a claim can hardly complain if the court decides to make the converse order in favour of the defendant. Perhaps a claimant who does not wish to be made subject to such an order should think twice about seeking one itself in the first place.
13. In this case, it would be fair and proportionate to make the order sought by the defendant and I will do so.

Costs

14. The parties agreed that the general approach to dealing with the scale costs after trial in the PCC is that set out in Westwood v Knight [2011] EWPCC 11.
15. The parties also agreed that the Court of Appeal's judgment in MMI Research v Cellxion [2012] EWCA Civ 139 concerning the costs in patent actions was applicable. In the judgment of the court, given by Sir Robin Jacob, the Court referred to and quoted the relevant part of SmithKline Beecham v Apotex [2004] EWCA Civ 1703, referred to the judgment of Pumfrey J in Monsanto v Cargill [2007] EWHC 3133 and the judgment of Floyd J in Qualcomm v Nokia [2008] EWHC 277. The upshot of those judgments is having identified who won (no dispute about that here) the issue by issue approach involves two further stages. Are there issues on which the winner should be deprived of its costs and second are there issues which are suitably exceptional that the winner should actually pay the loser's costs of those issues.
16. Before me there is no real dispute as to how the MMI principles would work if this were a High Court case. The problem before me is how to marry the issue based approach with the PCC costs scale. Before dealing with the problem, I will deal with the issue based approach as if this were a High Court case.
17. The parties respective costs spent on these proceedings are broadly comparable. Each spent just under £200,000 on the litigation. Mr Pritchard accepts that, if this were the High Court, a discount of 25% off his client's costs would be applied. That arises from two items of prior art on which he lost (Butz and Ament) and two non-infringement arguments he advanced but lost on (bar-like and tubular insert/rohrformigen). Mr Colley submits that the discount should be much larger but in fact there is not as much between the parties as it might seem. He carves up the issues slightly differently on validity – referring to the other invalidity attacks (Opel and cgk alone) but in practice it makes little difference. The important point is that Mr Colley contends that the issues on which the defendant lost are such that they fall into the second category and are such that the winning defendant should pay for them. Mr Croston, the patent attorney instructed by the claimant, has done an analysis of the time spent on the issues. His analysis suggests that 27% of the cost was spent on the issues on which the defendant lost and so Mr Colley submits 27% should be deducted from the defendant's costs and then a further figure – which is 27% of the claimant's costs – should be deducted again. In fact given that the parties' costs are so close, it does not make much difference whether one does it as proposed by Mr Colley or just discounts 54% (double 27%).
18. These figures are necessarily rough and ready but in my judgment, having heard the case, the figures are fair. In other words 25 or 27% of the costs were spent on circumscribed issues on which the defendant lost albeit the defendant won overall. I find a fair figure is 25%. I am sure that in the High Court I would deduct that percentage from the defendant's costs.
19. I am not satisfied that all of the issues on which the defendant lost are ones which satisfy the higher hurdle. In my judgment the only one which does is Butz. I think Butz was a hopeless citation. I regret not noticing this at the CMC in these proceedings. In my judgment the defendant should pay the claimant's costs of Butz. As a percentage Butz was worth about 10%. Given that the parties' costs are so similar overall, I would simply order a deduction of 35% from the defendant's costs. Thus if this were the High Court I would make an order that the claimant pays the defendant 65% of its assessed costs.
20. The question is how to apply this in the PCC using the scale in Table A of Section 25C of the Costs Practice Direction (CPR Pt 45). Mr Pritchard submits that I should apply this in the following way. In Westwood v Knight I decided that the way to apply the costs scales in the PCC was to divide the costs into the various stages. For a given stage one finds out what a party's actual costs were and performs a summary assessment on those costs bearing in mind proportionality and that the case is proceeding in the PCC. This may well produce a lower figure by way of summary assessment than would be arrived at in the High Court. Then one compares that to the scale limit for that stage. If it is higher, the stage limit is likely to be the right figure. If lower, the lower figure is likely to be right. Mr Pritchard submitted that the issue based discount is applied during this process. So one starts with that actual figure, applies the discount, then performs a summary assessment. The figure produced can be compared to the scale limit as per Westwood. When he takes that approach in this case, the end result is that the figure is about £47,000 due from the claimant.
21. Mr Colley submits this is the wrong approach. He submits that the problem with it is that the end result ends up being essentially the same as it would have been without the discount. The defendants were never going to receive more than about £47,000 in this case because of the PCC capping and scale system. So the approach proposed by Mr Pritchard fails to achieve the objective of the issue based approach in the first place because it does not, in the end, reduce the sum obtained in costs by the receiving party. The effect ends up as a positive incentive to parties in the PCC to run bad points because there is no cost risk involved. Mr Colley submits the discounts should be applied after the scale limits are applied. So in this case he submits all the factors come out such that the costs award to the defendant should be just under £20,000.
22. Mr Pritchard submits that Mr Colley's approach is wrong in principle, in that it applies a summary assessment to figures after the scales have been imposed. He also contends that there is an important difference between the PCC and the High Court in that the case management conference in the PCC system means that issues are scrutinised more fully at the early stage in the PCC and this acts as a filter to prevent truly bad points from getting through to trial and causing significant costs. Finally Mr Pritchard contends that in fact Mr Colley's concern, that the approach suggested would mean that the final costs would end up the same regardless of the issue based approach, is not right. The effect of the difference in approach will depend on the details.
23. In my judgment the right approach is the following. I should start with the actual costs for a given stage. Then they should be summarily assessed on the normal PCC basis. That produces a figure for the party's summarily assessed costs at that stage. That figure is the one to which the issue based discount should be applied. Once the discount has been applied the figure can be compared to the scale and the lower of the two taken.
24. An important aspect of the matter is CPR Part 45 r45.42(2). This states that the provisions of paragraph (1), which set the £50,000 cap on the trial costs in the PCC, apply after the court has applied the provision on set off in accordance with r44.3(9)(a). That set off rule is part of general r44.3 relating to costs and applies when a party who is entitled to costs from the other side is also liable to pay them to the other side. A set off may be carried out with an order to pay the balance. That set off is part and parcel of the approach described in MMI. It is the way in which the costs of Butz in this case are being handled. Rule r45.42(2) provides that the £50,000 costs cap is applied after the set off. On its face rule 45.42(2) does not mention the scale costs since they are dealt with in r45.42(3) and not r45.42(1). However it seems to me that the only way to apply this rule sensibly is to apply the set off before the scale limits and the £50,000 cap. In other words I find that the proper interpretation of r45.42(2) means that the Butz set off should be applied before the scale limits. On that basis the other discounts should be applied in the same way.
25. I am concerned by Mr Colley's submission that this approach would reduce the effect of costs as a disincentive to take bad points however I do not believe it will for two reasons. First I agree with Mr Pritchard the function of the CMC in the PCC is to weed out bad points if possible. As I said above, I regret not spotting the nature of the argument over Butz sooner. Second I think that in most cases, the impact of the scale is not such that the issue based discounts will be drowned out completely. In a case in which the summarily assessed costs are relatively close to the PCC scale limits, the effect of the discount could be substantial. In a case in which the parties' costs after proper summary assessment are still relatively high as compared to the scale limits then I agree the effect of a discount is likely to disappear unless it is very large.
26. I have applied the approach which I believe to be correct to the figures in this case below. The effect of the discount here leads to a modest reduction in the sum to be paid (in this case the effect is to reduce the bill by about £2,500). This must be seen in the context of PCC costs generally. The costs recovery in the PCC is not fully compensatory. Without the scale limits, the costs to be paid would be just over £60,000 in this case. The effect of the scale is to bring that down to about £36,000.
27. Moreover it seems to me that the alternative is not fair either. If the issue based discount was applied after the scales in this case then a sum of £39,000 (the sum which a Westwood approach would produce without the discount) would be reduced to about £25,000 (65% of £39,000). I do not think that is a fair result overall having regard to this dispute as a whole. The defendant's actual summarily assessed costs (before discount) are £99,000. Applying the discount at that later stage in my judgment has a disproportionate effect.

The costs figures in this case.

28. The following table summarises the defendant's costs in this case.

	Stage	Actual costs	Summary Assessment	Issue based discount	PCC scale	Result
				65%
1	Defence and counterclaim	£24,434.00	£15,000.00	£9,750.00	£6,125.00	£6,125.00
2	Reply to defence to counterclaim	£21,359.30	£14,000.00	£9,100.00	£3,000.00	£3,000.00
3	Attendance at a case management conference	£14,070.00	£9,000.00	£5,850.00	£2,500.00	£2,500.00
4	Making or responding to 4 applications (costs in case)	£7,954.00	£6,000.00	£3,900.00	£10,000.00	£3,900.00
5	Making or responding to an application (claimant won)		(£2,000.00)	(£2,000.00)	(£2,000.00)	(£2,000.00)
6	Preparing experts reports	£60,780.84	£30,000.00	£19,500.00	£7,500.00	£7,500.00
7	Preparing witness statements	£4,485.00	£1,000.00	£650.00	£5,000.00	£650.00
8	Preparing for and attending trial and judgment	£40,794.95	£26,000.00	£16,900.00	£15,000.00	£15,000.00
	Total	£173,878.09	£99,000.00	£63,650.00	£47,125.00	£36,675.00

29. This table is based on tables produced by the defendant but with some clarifications at the hearing and some modifications by me. The various PCC scale stages are set out. Row 4 puts together 4 applications in the proceedings which it is convenient to deal with together in this table. They are all ones in which the costs should be awarded to the defendant either because the order was costs reserved/costs in the case or was a costs award in the defendant's favour. Row 5 relates to an application for which the defendant must pay the claimant's costs. The claimant's actual costs of that application were £2,133. I summarily assessed them at £2,000 and so that sum appears in the table in red in brackets. It appears in the row marked PCC scale so that the total for that column takes it into account.
30. For each stage the first column of figures shows the defendant's actual costs. The second column of figures is my summary assessment performed on those figures. Three numbers in that column call for comment. My assessment for row 4 is more generous that the norm in the table because it seemed right to me given that this sum deals with four distinct applications. My assessment in row 6 is lower than the norm in the table because I believe the actual costs incurred there are high, bearing in mind the nature of the issues in this case. My assessment in row 7 is much lower than the norm because I am not convinced of the utility of that witness statement.
31. The third column of figures applies the 35% issue based discount I arrived at above. That figure can then be compared to the PCC scale for the appropriate stage and the final column is the resulting figure.
32. Mr Pritchard submitted I should apply the discount only to certain PCC stages. I reject that. It seems to me that the discount is one which can only sensibly applied overall and I have done so. The discount approach is itself a fairly rough and ready approximation and to start applying it only to certain costs and not others cuts across the rationale for the discount in the first place.
33. Overall, the result of applying what I believe is the correct approach to PCC costs in this case, is that the claimant should pay the defendant £36,675.00.
34. This judgment will be handed down with no attendance required. The costs order will be made as of the date on which this judgment is handed down. The parties should submit a draft order with the appropriate figure inserted.