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IP Enforcement for Small and Medium Sized Companies - The Patents County Court

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All businesses, including small and medium sized enterprises (SMEs), have intangible intellectual property (IP) rights;

These rights include:

  • Goodwill or reputation in their name and branding
  • Copyright in both traditional creative works and all digital material, including software
  • Rights in databases
  • Design rights in utilitarian or functional designs
  • Patented inventions

These IP rights are often highly valuable to a business.  It may therefore be necessary for an SME to pursue litigation in certain circumstances in order to protect its IP rights and stop them being used by third parties.

In the past, SMEs have been put off pursuing litigation in the High Court due to the time and expense involved.  Instead it has been easier for SMEs to focus resources on development and coming to market more quickly than their competitors.  In particular there was very little incentive for SMEs or sole traders to become embroiled in an IP dispute with a larger, well-known company that was better able to absorb the time and financial cost of litigation.  However that has changed recently with the reform of the Patents County Court.

On 1 October 2010, the Patents County Court (PCC) was reformed so that it could provide a streamlined and less costly procedure for litigating IP disputes.  In particular the idea was that SMEs would no longer be deterred from innovation by the potential cost of the litigation required to protect their rights. 

The reformed PCC has been operating for 2 years now.  This article therefore appraises the success of this initiative and whether it has allowed greater access to justice for SMEs, start-ups and sole traders.  In particular, this article considers the following:

  1. How the PCC compares with High Court IP litigation
  2. How the PCC achieves its streamlined approach
  3. The damages and cost caps imposed on PCC litigation
  4. The types of cases considered by the PCC in 2012
  5. The small claims track that was recently set up within the PCC
     

Part 1 – PCC versus the High Court – An Overview

The name of the Patents County Court is misleading because the PCC is not just restricted to patents cases.  The Court actually deals with all the same intellectual property issues as the High Court: patents, registered designs (UK or Community), plant varieties, trade mark and passing off disputes, copyright, unregistered designs, databases.

The PCC is intended for lower value and less complex cases, which can be heard using a streamlined Court procedure.  The PCC is therefore considered suitable in the following circumstances:

  • One or both parties are an SME
  • The trial will last no longer than 2 days
  • No complex experimental or survey evidence is required
  • The number of witnesses is small – cross-examination of witnesses is strictly controlled
  • ·The value of the claim falls within a certain limit (see Part 3 below)

In terms of legal remedies, the PCC can grant the same remedies as the High Court, including interim and final injunctions, damages, accounts of profits, delivery up and disclosure, search and seizure (Anton Piller) orders and asset freezing (Mareva) orders.  The latter two orders are only available if a Circuit Judge or High Court Judge is sitting.

If an IP dispute gives rise to complex issues of fact or law, it is best heard by the High Court and indeed the PCC Judges have the power to transfer cases to the High Court in such circumstances. 


Part 2 – PCC’s Streamlined Procedure
 

In the High Court, it is very rare for an IP trial to last for just 2 days but the PCC achieves this by:

  • Requiring Statements of Case to be concise and to set out major issues only.  This is quite different to High Court litigation where Statements of Case traditionally detail all the arguments (and alternative arguments) that a litigating party may wish to rely on at trial.
  • Using these brief Statements of Case to whittle down the issues at a Case Management Conference (CMC).  CMCs also take place during the course of High Court litigation but, in the PCC, the judge plays a more active role, identifying the most pertinent issues in the case and considering on a cost-benefit analysis whether to permit material relating to those issues.
  • Strictly limiting cross-examination of witnesses at trial.

A PCC judge will strike out peripheral arguments at an early stage in the proceedings.  Clearly this is not suitable for IP cases that require detailed consideration of a number of points of law.  However, where the law is fairly settled and the parties merely seek a judgment of the law based on the facts, the PCC is the ideal forum.  

 

Part 3 - Damages and Costs Caps in the PCC

As stated above, the PCC is intended for low value claims and there is therefore a limit on the damages or account of profits that a successful claimant can be awarded: £500,000 for the multi-track and £5,000 for the small-claims track.[1] 

It is usual in litigation for the losing party (whether the claimant or the defendant) to pay a proportion of the successful party’s legal costs.  In the PCC, the amount of legal costs that can be recovered is strictly controlled: £50,000 for final determination of a claim (or £25,000 for enquiries as to damages or an account of profits) for multi-track cases.[2] 

These caps on damages and costs mean that parties entering litigation before the PCC will have a decent idea of their maximum liability for the other party’s costs, as well as what they may recover in damages and costs if they succeed.  Of course, these caps also mean that a party should think very carefully about whether their actual damages and/or costs will greatly exceed the caps.  If they do, it may be best to litigate before the High Court.

 

Part 4 – PCC Cases in 2012

Set out below are a few of the cases that the PCC considered in 2012.  These cases demonstrate the breadth of the PCC’s jurisdiction and the fact that parties are bringing cases before the PCC that previously might not have been heard:

January 2012 – Hoffman v Drug Abuse Resistance Education (UK) Ltd [2012] EWPCC 2 - This was a copyright infringement claim made by a photographer (Mr Hoffman) against a charity called Dare, which provided information about drug abuse to young people. 

Dare employed a firm to create two websites for them, which included 19 photographs of various illegal drugs.  These photographs were taken from another government-sponsored website, therefore, Dare believed the photos were covered by Crown Copyright and they were permitted to use them.  In fact the copyright in the photographs was owned by Mr Hoffman.

HHJ Birss QC in the PCC decided relatively quickly that Dare had breached Mr Hoffman’s copyright even though Dare had employed a third party firm to produce the website bearing the photographs. 

The PCC judgment also made interesting observations on how damages should be assessed in relation to breach of copyright in photographs.  HHJ Birss QC held that damages should be the sum that a willing photographer in Mr Hoffman’s position and a willing user in Dare’s position in the charitable sector would have agreed upon.  He concluded that the right sum was £10,000 (substantially less than the £47,500 claimed by Mr Hoffman). 

May 2012 – Emma Delves-Broughton v House of Harlot Ltd [2012] EWPCC 29 – This was a case in which the creator of a photograph successfully enforced her “moral rights”. 

Moral rights are related to copyright but are personal to the author – they include the right to object to derogatory treatment of the work.  In this particular case the claimant objected to her photograph being adapted so that a forest background was removed and the image was cropped. 

It is very rare for cases on moral rights to come before the High Court because authors tend not to be in a financial position to pursue litigation over their personal rights.  However the PCC system enabled the creator of this photograph to obtain a judgment in her favour. 

June 2012 – Destra Software Ltd v Comada (UK) LLP and others [2012] EWPCC 39 – In this judgment, the PCC decided it had jurisdiction to hear a software copyright infringement claim, despite its complexity.

HHJ Birss QC noted that, although the case was likely to be complex, there was one preliminary issue that could be determinative of the entire case – this was whether the defendants were entitled to use the software on the grounds that they had commissioned such software.  HHJ Birss QC believed that this preliminary issue should be tried in the PCC. 

HHJ Birss QC appears to have been swayed by the fact that the defendant companies, which were seeking transfer to the High Court, were large companies, whereas the claimant was a sole trader. 

September 2012 – Vernacare Ltd v Environmental Pulp Products Ltd [20121] EWPCC 41 – This was a patents case in which the PCC held that the patent for a washing bowl used in hospitals was valid and infringed.  The defendant had argued that the invention was obvious but the Court rejected this argument because the invention was only obvious in hindsight.  The judge pointed out that this case could be heard by the PCC because there was limited expert evidence and the trial took place in just over half a day.

November 2012 – Ningbo Wentai Sports Equipment Co Ltd v Wang [2012] EWPCC 51 – This case considered the extent to which the PCC had jurisdiction to hear a breach of confidence claim.  Breach of confidence is closely allied with other IP rights, such as patents and designs. 

The PCC held that it had jurisdiction over such claims when they arose as a result of breach of a confidentiality agreement or they were ancillary to, or arising out of the same subject matter as, proceedings relating to patents or designs.  This shows the PCC’s continued willingness to widen the ambit of its jurisdiction.   

December 2012 – Redd Solicitors LLP v Red Legal Ltd and Martin Crighton [2012] EWPCC 54 – This was a relatively simple trade marks dispute and shows how the PCC can be a useful forum for applying established legal principles to the facts of a particular case.  

The claimant was a firm of solicitors specialising in intellectual property legal services and owning a Community Trade Mark for the word REDD in respect of “legal services” and a UK-registered mark for the word RED.  The defendant offered residential conveyancing services under the name “Red Legal Ltd” and was sued by Redd Solicitors LLP for trade mark infringement.  The defendant responded that their trade mark for “legal services” should be partially revoked because Redd Solicitors only practised intellectual property law and not residential conveyancing. 

It was plain that Redd Solicitors LLP did not plan to advise on residential conveyancing in the near future but the PCC judge nevertheless concluded that the type of “legal services” that Redd would carry out could vary considerably from time to time and it was therefore unfair to carve out conveyancing services from their registration.  Consequently the defence failed and the defendant was liable for trade mark infringement. 

Comment on PCC Cases in 2012:

The cases above are a small sample of the total number of cases heard by the PCC last year but they demonstrate that:

  • The PCC is willing to hear claims for all IP rights and even related rights (e.g. breach of confidence).
     
  • Parties that might not normally consider litigation are bringing cases before the PCC presumably because they can be certain it will be dealt with quickly and their maximum liability for damages and/or costs will be capped.
     
  • The types of claims being heard are those that might not ordinarily be heard in the High Court (for example, cases relating to copyright in photographs, an author’s moral rights and infringement of design rights).

The selection of cases above suggests that the PCC has been successful in its stated aim of increasing access to justice for SMEs with valuable IP rights. 

 

Part 5 - Small Claims Track

All of the information set out above relates to the multi-track for the PCC.  However, on 1 October 2012, a small claims track was set up within the PCC that is suitable for low value cases.  The small claims track differs from the multi-track in the following ways:

  • Damages Cap - the maximum damages that can be recovered is £5000.
  • Costs Recovery – the successful party cannot recover their legal costs apart from a few prescribed court fees, such as the claim form issue fee.
  • Types of Claims – the small claims track cannot hear claims relating to patents, registered designs (UK or Community) and plant varieties but can hear claims relating to trade marks and passing off, copyright and unregistered designs.
  • Legal Remedies – the small claims track can grant final injunctions only (not interim injunctions) and not Anton Piller or Mareva orders.
  • Judges - The multi-track judges that sit in the PCC will be a Specialist Circuit judge, High Court (Patents Court) judge or member of the IP Bar qualified to sit as a recorder.  In the small claims track, the case is considered by a District Judge or Deputy District Judge.

It is anticipated that the small claims track will be particularly useful for sole traders, such as independent photographers or journalists, whose IP claim may amount to a few hundred pounds.


Conclusion

The PCC is a good example of how proactive case management by judges can limit the time and costs of litigation and lead to greater access to justice. 

Many intellectual property cases do not require judgment on a point of law but simply require a judgment on how the law applies to the particular facts of the case. Taking trade mark disputes as an example, it is very helpful to have an impartial judicial opinion on whether the “average consumer” will be confused by the defendant’s use of an identical or similar mark. 

It is worth bearing in mind that PCC judgments carry relatively little weight and can be overruled by most other Courts, including the High Court.  However, this may not be a concern to most SMEs seeking an opinion on whether or not their rights are being infringed in particular circumstances. 

The PCC passed judgment on just over 50 cases in 2012 and it is anticipated that 2013 will be an even busier year with the implementation of the small claims track.

For more information, please contact Alison Rea

[1] See section 5 below for details of the small-claims track.

[2] This is for multi-track cases.  In the small-claims track, the cap on recoverable costs is even more restricted (see further below).