Current trends in the Intellectual Property Enterprise Court

[Article first published in Lexis Nexis]

IP & IT analysis: The Intellectual Property Enterprise Court (IPEC) is intended to serve as a quick, cost-effective alternative to the High Court in hearing intellectual property disputes. Lorna Brazell, Partner at Osborne Clarke, explores the growth in popularity behind the IPEC and considers the current trends and recent developments.

What is the background to the IPEC and who is using it?

The IPEC is an evolution from the old Patents County Court. As the new name suggests, the jurisdiction has been expanded to include all forms of IP, and there have also been a number of changes to the procedure to try to ensure that it is the cheap, speedy alternative to the Intellectual Property Court of the High Court that it was intended to be.

The need for a cheaper and quicker alternative was identified way back in 1987—the problem is that small and medium-sized companies are frequently innovators and may get IP protection for their products, but then find themselves unable to enforce those rights because the costs of High Court litigation are too high. Even if a party to a High Court action rigorously controls its owns costs, it is still at risk of facing a seven-figure bill from the other party if it loses. Many smaller businesses simply were not prepared to take that risk, whatever they believed their chances of success might be.

So small and medium businesses are the core constituency of the IPEC, but as it became recognised for high quality decisions larger companies are now also using it for suitable cases—those where there are a limited number of issues and not too much factual investigation required. The problem is, as everyone has piled enthusiastically in to use the court, its diary has become more crowded and so inevitably it has slowed down. These days, there is often little to distinguish the time from issuing a claim to trial in the IPEC from that in the High Court.

What have been the main reasons behind the growth in popularity of the IPEC system?

The founders were correct that there was a pent up, unmet need for a slimmed-down way to handle IP disputes. It has taken time for the word to get out—IP specialists have been aware of it for a long time but most businesses never face an IP dispute, and those that do will be most unlikely to face a second, so many companies and their advisers simply did not know of this alternative. Now that more of its cases have been reported, more potential claimants are lining up to avail themselves of it.

What advantages/disadvantages does the IPEC have compared to a claim run in the Chancery Division of the High Court?

The single biggest advantage, from the point of view of a smaller business, is the £50,000 limit on the costs which a winning party can claim from the losing party. This does not stop either party spending as much as they feel they have to in order to win, but it does mean that a smaller player can afford to try, without fearing being put out of business by costs if they lose. Of course, this cuts both ways—if they win, they may wish they had been able to recover more of their own legal costs. But that amount is at least to some extent within their own control, although in practice it is rarely possible to run a case for under £50,000.

The other side of that coin of course is the cap on damages as well—the IPEC can only award damages up to £500,000. Of course in many IP disputes the key objective is to stop the infringer, so the injunction is what matters and the main aim is not to let damages run up to that level at all. But if the infringement is not discovered until it has been ongoing for a while, then IPEC may not be suitable.

Another advantage where lower value cases are concerned is the ability of the IPEC to ‘cut to the chase’, focusing only on issues which are going to affect the outcome at trial. This means parties need to think the case through thoroughly upfront and make sure that those critical issues are in front of the court by the time of the case management conference, or they may never get considered at all. The judges really do actively manage their cases and can be very strict, whereas in the High Court there is a default tendency to go for the gold-plated approach and consider every issue in depth just in case it might make a difference.

Finally, the possibility of asking the judge to give a preliminary, non-binding opinion at an early stage can be very useful. In many disputes, IP or otherwise, the parties get emotionally attached to their position and find it impossible to give any weight to what they are being told by their opponent. But if the judge steps in and says it looks like a weak case, that can cause a party to re-evaluate whether the other side was not just being difficult but actually might have right on their side.

What were the notable cases heard in the IPEC in 2015?

Perhaps the most important was the decision in Sofa Workshop Ltd v Sofaworks Ltd [2015] EWHC 1773 (IPEC), where the judge held that Sofa Workshop’s Community Trade Mark (CTM) was invalid since despite its widespread use within the UK it had not been used at all in the rest of the EU. This will have come as a shock to many CTM owners, but in fact the reasoning was aligned with that of the Court of Justice. We may see a resurgence of national trade mark filings as a result.

In a similar vein, the Ukelele Orchestra of Great Britain lost their CTM since they were unable to prove that the name had acquired distinctiveness in all the English speaking countries of the EU (see Ukulele Orchestra of Great Britain v Clausen & Anor (t/a the United Kingdom Ukulele Orchestra) [2015] EWHC 1772 (IPEC)). Failing that, it was descriptive and so invalid. A national mark would have survived. However, they did win their alternative claim in passing off.

The IPEC continues to give a stream of judgments around the calculation of damages, something which the High Court has very rarely had to do since most High Court cases settle once the liability stage has been decided. This year a decision in a dispute over loft extensions, brought by Absolute Lofts, looked at the appropriate damages for using a copyright photograph in online advertising without permission (see Absolute Lofts South West London Ltd v Artisan Home Improvements Ltd and Another [2015] EWHC 2608 (IPEC)). And on the patent front, in AP Racing’s claim for damages for infringement of a brake caliper patent the judge held that additional products could be included in the enquiry over and above those identified in the liability phase, because the further products would not have been apparent to a reasonable claimant exercising reasonable diligence early in the proceedings. But, illustrating my point above about getting the case right at the beginning, the judge commented that if those further products would have been apparent earlier, then to try to bring them in only at the damages stage could be an abuse of process.

What three key points can lawyers take away to enable the cost effective running of a claim in the IPEC?

Most important by a long shot is to prepare the case thoroughly from the very outset. This is not a court where you can put forward a speculative case and adjust the arguments as you go along. The effect is to frontload costs, but also should encourage settlement since both sides can get a more realistic view of their chances rather than waiting until the closing stages to see the full force of the evidence.

Alongside that, focusing on a few key points is the way to control costs. The court is not going to want to hear about a fascinating legal argument based on nineteenth century case law which will at best only affect the rate of interest applicable to the damages (say) by 1%. Nor is an additional sixth piece of prior art going to be let in, since it just will not win the case if the first three have not.

Finally, remember that it is not a mini High Court. The IPEC operates from different principles—limited disclosure, if any, and severely constrained cross-examination—and these should be borne in mind in shaping the case all the way through, or costs may simply be thrown away.