When court comes calling

19th Oct 2020

Andy Lee provides a comprehensive introduction to IP court proceedings and some ways to improve your chances of being on the winning side.

IP rights almost always relate to key revenue drivers and are therefore fundamental to a business. Further, a healthy portfolio of IP rights can increase the value of a business, the IP position being a well-researched area of corporate due diligence.

Fundamentally, these rights are negative rights that prevent others from infringing against a business’s IP. So it is perfectly reasonable to ask, “What is the point in obtaining rights if, when transgressed, they are not enforced?” The answer is that failing to act can result in the loss of those rights, as well as potentially damaging the underlying business.

And, importantly, in IP litigation the fight is not usually about money. It’s about putting a stop to a given activity (or not). The injunction is the most valuable prize up for grabs. So, investing in proceedings can be a shrewd way of protecting market share and growth.

Sure, not every claim is meritorious. A defendant faces being sued and will need to deploy resources and management time should a threat to its activities arise. Similarly, not all claimants have money to burn, and the choice of whether or not to invest such resources and time in litigation can pose a conundrum.

A different world

Bringing IP litigation proceedings opens up a whole different world compared with registry proceedings. For example, registry opposition proceedings operate in a hypothetical world, considering a notional and fair use of both the mark applied and the mark on the register across the relevant specifications of each. They are low-cost and streamlined and do not have many of the features of court proceedings. A registry dispute can result in the non-registrability or loss of the mark (or partial loss), but they do not prevent a third party using that mark. That is what infringement proceedings can achieve, and those proceedings operate with a critical eye as to what is happening in the real world.

Procedurally, IP claims operate as split trials. The court first adjudicates on liability. If a claimant is successful, it can then pursue (through another trial) compensation in the form of damages or an account of profits. A successful claimant is afforded a range of remedies through litigation (injunctions, delivery up, etc). Claims are brought in the full High Court, the Chancery Division or the Intellectual Property Enterprise Court (IPEC, formerly the Patents County Court), which is part of the High Court.

Historically, a problem, particularly for smaller businesses, was the cost of proceedings. For example, a business might be unable or unwilling to commit large amounts of money to fund litigation, or might be deterred from going to court by the prospect of facing a large adverse costs order if unsuccessful.

Complementary routes

The IPEC’s core objective – reiterated by judges on many occasions – is providing access to justice at a proportionate cost for businesses that might otherwise be deterred from bringing or defending an IP case. It looks to achieve its objectives through its own rules and structure, taking the factors that make litigation expensive and controlling them. More active judicial management of cases, limiting evidence and disclosure, and capping costs recovery (£50,000 on liability and £25,000 on damages/account of profits) are all aimed at providing litigation at proportionate cost. Cases should also be capable of being heard in two (exceptionally three) days of trial. IPEC has the jurisdiction to hear all IP rights and can provide the same remedies as the full High Court. However, the nature of IPEC can mean that a client may have to cut its cloth accordingly in advancing a case.

Full High Court proceedings allow larger, more complex and evidentially heavier IP cases to be determined. Measures are in place to manage costs (cost budgeting) and disclosure (through the disclosure pilot scheme), but the effectiveness of these measures is debatable.

Whichever route is taken, parties will deal with common features such as pleadings, disclosure, witness evidence and the trial itself. Each step is part of the process of the court reaching a final determination on the issues. Thinking ahead as to how one step might affect another is important. For example, what you say in a letter of claim (or a reply to one) might be used by your opponent in cross-examination. A good counsel can have fun with a witness if exaggerated claims have been made or if questionable facts have been advanced in correspondence.

Whether acting for a claimant or defendant, it is critical to agree an objective early. A claimant’s objective might be to have the defendant stop selling goods bearing the problematic sign. It is not uncommon for a client to get “carried away” as the litigation progresses, and when presented with a deal which would achieve that objective, cognitive dissonance takes over and the opponent is said to be acting unreasonably.

An early detailed investigation into the facts is critical. Former Supreme Court judge Lord Sumption once said that the “most difficult” thing about practising law was “not the law but the facts” and that “most arguments which pretend to be about law are actually arguments about the correct analysis and categorisation of the facts”. Clients can often tell you what they believe you want to hear. It is important to drill down at an early stage into the client’s case. Gaps found early might be able to be plugged; gaps at trial almost never so.

Drilling down

When acting for a claimant, this important first step could be as simple (and critical) as identifying whether the client owns the rights it wants to enforce – for example, goodwill for the purposes of passing off. The business might have changed form over the years, and ensuring a clear line of title to goodwill will be critical before proceedings start. Similarly, companies might operate on an understanding – for example, that Party A has given permission for Party B to trade using its trade mark. However, Party B may require the execution of an exclusive licence to enable it to sue.

Identifying the defendant(s) is also vital. Nowadays, particularly when businesses operate a mixture of online and physical operations, different (but linked) business may be responsible for different aspects of the whole operation. Ensuring that an injunction will apply to all of them is key.

When acting for a defendant, detailed investigation of the claimant should be made. That might include looking into its means, and whether there has been use of the mark at all (if subject to non-use) or on the scale claimed (in cases where there are claims of acquired distinctiveness or a reputation). Has the claimant just made a groundless threat? Be careful here: such an allegation could force the claimant’s hand, making the next piece of correspondence an issued claim.

Weapons available

If proceedings are launched, a critical analysis of the opponent’s pleaded case is crucial. The court offers many weapons that can be deployed to put your client in a better position. For example, strike out applications and summary judgments can be effective ways of dealing early with a weak claim, or parts of it. If a pleading is unclear, seeking further information from your opponent under Civil Procedure Rule 18 can be useful. If a claimant is of limited means, a defendant may consider asking the court for security for its costs at an early stage. A smaller defendant sued in the full High Court may also consider applying for transfer to IPEC to limit its exposure.

Disclosure should be considered early. Disclosure is a “cards on the table” requirement. A client will need to disclose documents which both help and hinder. It’s better to know early if documents exist which harm or support the client’s case and where any gaps might be. Clients often need to understand that an impartial human being will decide their case, most often considering the evidence, and so what can be achieved will often depend on the evidence available or obtainable.

Ensuring witness statements are properly prepared is also key. The purpose of witness statements is explained at s19.3 of the Chancery Guide: “It is not, for example, the function of a witness statement to provide a commentary on the documents in the trial bundle”. Recently, there has been increasing judicial criticism¹ of “overly lawyered” witness statements, so be careful to avoid including anything that might be interpreted as comment, argument or submission.

Equally, remember that your witness will be cross-examined and that poorly prepared statements leave that person a hostage to fortune and bait for a skilful cross-examiner. A witness who performs poorly will not impress the judge. That could be decisive in which way the case swings.

For the trial itself, neatly prepared working bundles are critical. Few things annoy a judge more than poorly prepared ones. Also, do you really need to include every page of correspondence that has passed between the parties? As Mr Justice Nicklin explained earlier this year: “A good rule of thumb is to ask, ‘Is the court likely to be referred to or want to see this document in the course of the party’s submissions?’”²

A mix of good and bad

It is also important to bring the court solutions, and not just problems. Judges are not head teachers at an infant’s school, refereeing playground fallouts. Whinging to the judge about how nasty your opponent has been will rarely impress. Focus instead on persuading the judge why they should find for your client considering the law, issues and facts. Sir Robin Jacob’s cake and turd principle³ is often helpful: advance your best points and avoid spoiling them with bad ones alongside.

References:

¹ See, for example, Waksman J in PCP Capital Partners LLP & Another v Barclays Bank plc, [2020] EWHC 646 (Comm), 12th March 2020.

² Greensill Capital (UK) Ltd & Another v Reuters News And Media Ltd, [2020] EWHC 1325 (QB), 14th May 2020

³ That a tempting piece of cake suddenly becomes less tempting when a turd is placed near it.