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when can the caps in the Intellectual Property Enterprise Court be overcome?

21 December 2016

Recent cases have examined in what circumstances the costs and damages caps in Intellectual Property Enterprise Court (IPEC) cease to be fully applied. CPR 45 and PD 45 set out that litigants in the IP Enterprise Court (IPEC) are subject to an overall costs cap of £50,000 as well as phase caps, while CPR 63.17A sets a damages cap of £500,000.

Previously IPEC has ruled that a successful claimant can recover costs only up to the costs cap, notwithstanding that there may be multiple defendants (Gimex International Groupe Import Export v The Chill Bag Company Ltd [2012] EWPCC 34). In that case the judge stressed the importance of the certainty provided by the costs caps: “The words are clear. The court will not order a party to pay total costs of more than the capped sum. That means a litigant in the PCC has the security of knowing that, subject to certain exceptions, the costs cap will protect their exposure to the other party's costs.”

HH Judge Hacon followed this reasoning in respect of the damages cap in Abbott and another v Design & Display Ltd and another [2014] EWHC 3234 (IPEC) where he ruled that a single damages cap applies to all the defendants collectively in an action rather than to each defendant. However, he also found that the 'additional amount' of damages which can be awarded following an unbeaten claimant’s Part 36 offer is not subject to the IPEC damages cap. That was because “the 'additional amount' has nothing to do with compensating a claimant for any wrong committed by the defendant in the substantive dispute…it is solely intended to serve as an incentive to encourage claimants to make and defendants to accept appropriate Part 36 offers. That incentive is every bit as important to effective procedure in the IPEC as it is in other courts.”

In Broadhurst v Tan [2016] EWCA Civ 94 (a road traffic accident case rather than a IP case) the Court of Appeal held that a claimant that was awarded indemnity costs as a result of a making an unbeaten claimant’s Part 36 offer could recover its costs on an indemnity basis under Part 36 regardless of the fixed costs regime that applied.

HH Judge Hacon has recently considered the recent judgment of the Court of Appeal as well as the interaction between Part 36 offers and the costs regime in IPEC (PPL v Hagan [2016] EWHC 3076 (IPEC)). PPL brought a claim for copyright infringement on the basis that the defendants played sound recordings in public without a copyright licence. The claimant made a Part 36 offer which the defendant did not accept. The claimant was, however, awarded greater damages that it had offered to accept. The judge recognised that there was a tension between indemnity costs awarded under Part 36 (which were designed to encourage settlement) and the caps on costs in IPEC (which were designed to provide costs certainty). However, following the ruling in Broadhurst v Tan, he found that indemnity costs awarded under Part 36 should not be subject to the capped costs regime in IPEC.

This decision means that a claimant’s Part 36 offer can result in the capped costs regime in IPEC being overridden; undermining the costs certainty that the IPEC rules were designed to provide. However, indemnity costs will not be awarded under Part 36 if it is 'unjust' to do so. This provides the IPEC judge with some discretion.

As claimants in IPEC often stand to benefit from making an early Part 36 offer, they should consider this option from the very beginning of such proceedings. On the other hand, defendants receiving such offers should carefully consider the now increased risks of refusing them.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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