June 26, 2016
In a 2011 case, clothes designer and Queen of Punk, Vivien Westwood, won a legal battle after the opposing party infringed her intellectual property rights. The proceedings were primarily run in the Patents County Court (PCC) and were the first in which the court applied new Cost Rules for litigation work undertaken there.
The range of commercial situations in which a legal dispute may arise is vast. Equally, there is a range of commercial decisions that need to be made when legal disputes arise. Not least of these is funding.
The following article deals with some of the factors to consider when faced with a legal dispute. Plus, we suggest ways to fund action if required.
The table below sets out the typical costs of bringing a relatively small and straightforward dispute in the High Court. The actions set out are those that nearly always occur in litigation taken through to trial. However, other actions and evidence (such as expert witnesses) may incur additional costs. Further, the figures are estimates and are not meant as a definitive guide:
Obtaining all facts and formulating the best approach to achieve settlement: £500 to £1000
Issue of proceedings
Drafting Claim Form and Statement of Case, based on documents supplied and other information requested from you:
£1000 to £1250 plus £400 – £1930 Court Fee
Review of Defence and Reply
Agreeing to a first-time extension if requested, reviewing Defence and advising on merit, preparing and filing Reply to Defence:
Allocation and Case Management Conference
Dealing with the allocation of the case at court and preparing and attending case management hearing at court (if it cannot be agreed between the parties):
£1400 – £2000 plus £200 Court Fee
Preparation and review of evidence
Collation of information and preparation of evidence to prove the case, specifically disclosure of relevant documents and preparation of witness statements. Review of evidence filed in opposition to your lawsuit. Preparation of additional evidence as necessary.
£10,000 to £20,000
Preparation of court bundles, instructing barrister, including meeting with the barrister:
£2500 plus £100 Court Fee
Full trial (2-3 days)
Attending at trial with barrister:
£20,000 to £30,000 to include barrister’s fees plus £1000 Court Fee.
Based on these figures, the potential cost of such a dispute, if it goes to trial, maybe over £50,000. While most disputes do not go this far, it is essential to be aware of this from the outset. Even if you end up settling, there are costs and disbursements throughout the process, which will impact the cash flow of your business, potentially restricting your ability to pay other trade debts and invest in the business.
You will also have to consider other relevant costs to your business for lost opportunities and profits due to time spent on litigation, loss of confidentiality, possible negative publicity and a breakdown of business relationships. There is never a complete winner in litigation, and whatever success you might have will come at the expense of other business opportunities.
You not only have to consider your costs but there is also the other side’s costs to consider. The other side can run up another £50,000 and possibly a lot more if a large city law firm represents them. If you lose the case, the general rule is that you will have to pay the other side’s reasonable costs. Also, if you bring an action but your company is not cash-rich, and your opponent is concerned that (should they win) they will not be able to recover their costs, it can seek an order demanding you pay money into court as security in case you lose the case. This procedure, known as Security for Costs, can often hamper a claim and tie up vital funds in your business.
As mentioned above, most disputes do not go to trial, but it is worth remembering that the process typically takes a year from issuing a cease and desist letter. Sometimes it can last over two years. The time involved in seeing a case through to trial and the associated expense and risk are the main reasons disputes usually settle before trial.
Based on what is mentioned above, it is evident that litigation should always be a last resort and only an option to be considered alongside all other options for resolving the dispute. However, litigation does serve a purpose, particularly in intellectual property disputes. Letters of claim threatening legal proceedings are a helpful business tool, especially when establishing intellectual property rights. Also, certain necessary remedies, including injunctions and search orders, can only be obtained from courts. Finally, it may not be your choice if proceedings are brought against you; you will need to look into defending the claim. It is for these reasons that litigation is sometimes a necessary and unavoidable step to protect your rights.
There are generally four ways of funding litigation. These are listed below:
Privately Funded: The most common way of funding litigation is to fund the process yourself from business resources. Some businesses make a reserve for such costs. This is a standard accounting practice. For example, Google put aside €200 million in a reserve account when they bought U-Tube in October 2006 in case of litigation. It is worth speaking to financial advisors from the outset to decide whether this is a viable option. This is, however, not always practical. Once you are faced with the prospect of a claim, you will need to take a financial view of your business and its future projections to decide what the claim’s value is worth against the cost of bringing it. Once you are aware of what you potentially stand to both gain and lose, a decision as to whether your business can support a legal action is often much clearer.
Before the Event Insurance: Litigation is a potential business hazard like any other. If you insure your premises in case of fire, there is no reason you should not insure your intellectual property rights in case of infringement. These should be considered from the outset before any dispute arises. It should be noted that once a dispute does occur, it will not be possible to obtain such insurance retrospectively. Briffa has brokered two such insurance policies, which are open to clients. One, DesignProtect, covers future disputes relating to designs and copyright. The other, BrandProtect, provides funds to those with registered trade marks.
After the Event Insurance: Once a dispute arises, it is still possible to take out an insurance against the risk of losing the case. This is more expensive than Before the Event Insurance and the premium is usually worked out as a percentage of an amount sought. The premium can be recoverable in the event that you are successful and staged payments can also be arranged. After the event insurance is not generally available to those wishing to defend a claim only those wishing to bring a claim.
Conditional Fee Agreements (CFA): This is often mistakenly referred to as a No Win No Fee agreement. A CFA is in fact an agreement by which solicitors agree with their client that they will waive their entitlement to be paid profit costs in specified circumstances. These circumstances are normally where the client loses their claim i.e. makes no recovery of damages. In return, the client agrees to pay the solicitor more than they would normally expect to pay if they win their claim. This additional payment is known as a “success fee”. Usually, the client must pay the solicitors disbursements throughout the process and probably the other sides costs if they lose. It is therefore still advisable to take out After the Event Insurance alongside a CFA.
The best way to avoid litigation entirely or reduce your costs in the long term is to involve an intellectual property lawyer early on. Briffa can help manage your intellectual property rights and commercial arrangements from the beginning to avoid disputes arising. For example, it can be far more cost-effective to pay and register a trade mark from the start than trying to litigate over an unregistered mark and go through the more demanding requirements of proving a claim in ‘passing off’.
As mentioned above, Briffa also provides Before the Event Insurance designed explicitly for intellectual property litigation, including Brand Protect and Design Protect. Booklets on these are available on request. Unfortunately, Briffa is not able to offer CFA’s, but we can make other fee arrangements.
If a dispute does arise, Briffa can help advise how best to fund the process and provide specific estimates on time and money to calculate how much it will cost. Much of Briffa’s work is done on a fixed fee basis which allows you to calculate the total cost better.
As well as successfully litigating a claim where that is required to achieve the result a client needs, Briffa has a great deal of experience in alternative dispute resolution and has negotiated settlements ensuring that the litigation process only needs to last as long as is necessary. For further information, please get in touch with our team.
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