Covid-19 plays a key role in transferring a claim from the High Court to the Intellectual Property Enterprise Court
The general rule in High Court litigation in England and Wales is that the Court will order the losing party to pay the winning party’s legal costs. However, the High Court has a discretion on costs and usually around 70% of a successful party’s legal costs are awarded.
This means for a small business, if it is sued for intellectual property infringement, it could be potentially liable for hundreds of thousands of pounds. However, there is a specialist division of the High Court called the Intellectual Property Enterprise Court (the IPEC) which is aimed at SMEs and less factually complex intellectual property disputes. In the IPEC trial costs for liability are capped at £50,000 (damages are capped at £500,000). This means a losing party’s maximum cost liability to the winning party will be £50,000. Because of this feature, the IPEC is an incredibly popular forum for intellectual property disputes.
However, what happens if you are an SME and a larger business brings proceedings against you in the High Court? If this occurs, it is sensible to consider applying (as soon as possible) to transfer the case into the IPEC.
The High Court recently considered such an application in Shazam Productions Limited v Only Fools The Dining Experience Limited & Others which provides a useful illustration of the factors that are likely to influence the High Court in transferring a case to the IPEC.
The Claimant, who owns the intellectual property rights in the famous TV programme Only Fools and Horses brought proceedings for copyright infringement and passing off against the Defendants, who provide an interactive dining experience based on the TV programme Only Fools and Horses.
The Claimant issued proceedings in the High Court and the Defendants applied to transfer the case to the IPEC.
The Defendants applied to transfer the case to the IPEC as their business had been severely impacted by Covid-19 and argued that because of this they would not be able to afford to defend proceedings in the High Court but would in the IPEC.
The High Court explained when considering whether to transfer a case to the IPEC the following factors must be considered:
- Whether a party can afford to bring or defend a claim in the IPEC; and
- Whether the claim is appropriate for the IPEC having regard to: (a) its value; (b) the complexity of the issues; and (c) the estimated length of trial.
The High Court further explained that generally the first factor is the most important.
The High Court then considered these factors and ordered the case to be transferred to the IPEC. The High Court did so because it agreed with the Defendants’ evidence that they were unable to afford to defend the case in the High Court, because Covid-19 had severely impacted their business.
However, in agreeing to transfer the case to the IPEC, the High Court made very clear that the Defendants had to ensure their defence was appropriately tailored to the IPEC. If it was not, there would be a risk that the case would be transferred back to the High Court.
This is a good decision for defendants to intellectual property disputes and especially SMEs. This is because it illustrates that the High Court will seriously consider their financial means in assessing whether to transfer a case to the IPEC. The case is also positive for businesses involved in intellectual property litigation and struggling from Covid-19, as it indicates that these businesses will have credible grounds to transfer their dispute to the IPEC on the basis that Covid-19 has impacted their business.
That said, this decision should not be construed as giving SMEs and businesses struggling from Covid-19 an automatic right to have their intellectual property disputes transferred to the IPEC. The High Court made very clear in this case that the complexity of the case still counts by warning the defendants to tailor their defence to the IPEC. In other words, if a defendant who wishes to transfer a case to the IPEC fights the case as if it was in the High Court (e.g. by fighting every issue and raising a variety of defences), it is unlikely to succeed with its transfer application.
Written by Ramsay Monime, Senior Associate