Tips on transferring PCC cases
June 20, 2012
To seek to encourage smaller businesses to invest in and enforce their intellectual property rights, the Patents County Court (PCC) was founded in 1990 to provide a less costly and less complex alternative to litigation in the High Court. This was followed in 2003 by the introduction of a new “streamlined” procedure in patent actions. This procedure limits the evidence given by the parties (no disclosure, cross examination of witnesses and experts only if necessary) which is all in writing. Also, any trial is restricted to no more than 2 days and fixed to be heard within 6 months of the procedure being ordered (usually at the Case Management Conference).
Both approaches have met with some success. However, in the last 18 months the popularity of the Patents County Court has seen a renaissance following the implementation of new procedural rules.
The New rules
The new procedural rules came into effect on 1 October 2010 and built on the Patents County Court’s already established role. The key aspects of these changes were:
- more detailed Statements of Case identifying all facts and arguments relied upon by each party are required (CPR 63.20(1));
- at the Case Management Conference the Court will only make directions for disclosure and witness statements on specific and identified issues to the extent it is satisfied that the value of this evidence to the Court in resolving the issues in front of it justifies the cost in producing and dealing with it (CPR 63.23(1)); and
- the recovery of costs will be limited to £50,000 in total with set maximum amounts to be claimed for each stage of an action (CPR 63.26).
Equally, the PCC is generally accepted to be a quicker route to trial given the limited scope of evidence ordered and a trial date will be fixed with reference to the directions agreed with the Court at the CMC. In AS Watson v The Boots Company the primary motive for bringing the action in the PCC was the speed at which the matter could be heard. It is possible to apply for a High Court trial to be expedited, however, this is subject to the Court’s availability.
Grounds for transfer
These changes, in particular the approach to costs has led to numerous Claimants, not just small and medium enterprises, commencing claims in the PCC. But what if you, as a Defendant, want to be there but the Claimant has started in the High Court? Conversely, what if the action has been commenced in the PCC but you do not think that the action should be there?
The provisions for transfer to or from the PCC are at paragraph 9.1 and 9.2 of Practice Direction 30 and provide that on an application for transfer the Court will consider:
(1) if a party can only afford to bring or defend the claim in the PCC;
(2) if the claim is appropriate to be determined by the PCC having regard in particular to:
(a) the value of the claim (including the value of the injunction);
(b) the complexity of the issues;
(c) the estimated length of the trial.
Therefore, the criteria assesses both the parties involved in the claim and also the substance matter of the action. No one factor is determinative and even if a party has limited financial means if the case it is bringing does not fit into the PCC regime then it may not stay there or be transferred there.
The Court also has the power to specify the terms on which a case is transferred.
Since the inception of the new procedural regime, there have been a number of transfer cases heard both in the PCC and High Court. While the individual circumstances and facts of each case have been decisive, a number of general principles have emerged. However, also it is becoming clearer the factors which may influence the Judge or Master in granting or refusing transfer and with these in mind litigants wishing to avoid or stake their claim to be in the PCC need to shape their case in this way from an early stage. It was also confirmed by the Court in a recent case where the writers acted that Masters do have jurisdiction to consider transfer applications from the High Court to the PCC.
Financial position of the parties
From the initial contested transfer case of ALK Abello the Court has continued to underpin its decision making process with the guiding purpose of the PCC, to give access to justice for smaller businesses, while ensuring that the interests of justice for both parties and other litigants are served. For example, in AS Watson v The Boots Company, it was apparent that the Court was strongly persuaded by the view that two commercial heavyweights should not be using the resources of the PCC, as this would result in a decrease in resources for that period for the smaller litigants it was founded to support.
Therefore, at best, if both parties can be shown to be able to fund litigation in the High Court this issue will be neutral. However, it can be expected in most cases that any application to transfer is likely to result in a response that the party will not be able to continue its claim/defence if it is transferred to the High Court or that the potential costs exposure would result in insolvency.
As the Court noted recently in Comic Enterprises Limited v Twentieth Century Fox Film Corporation, just because an intellectual property right is held by a small enterprise does not mean that any party it sues will also conveniently be a small enterprise.
To pursue such arguments at a hearing a party will have to provide more than broad assertions as to their financial position, for instance, annual accounts showing losses or negligible profits for the business. However, these may not be definitive where the party has access to funding from third parties or is the member of a larger group of companies. In the case of Caljan Rite-Hite Limited v Sovex Limited, the High Court while acknowledging that the Defendant was “in a far from healthy state” refused transfer as it was clear that the Defendant had investors who had made substantial sums available to the business and might be expected to continue to do so in the future. Further, when questioned, the Defendant accepted that it would continue to defend the proceedings if they remained in the High Court.
In Comic Enterprises, the PCC was clearly concerned about the Claimant’s financial position if it was transferred to the High Court. While its accounts showed a turnover of between £2m to £3m in recent years, if it was unsuccessful in the High Court its costs exposure would be around £1/2million to £3/4million, which it stated would “devastate” its business. Also, the PCC considered that the Claimant’s fear that the immediate consequence of transfer would be an application for security for the Defendant’s costs which would “stifle” its Claim was a real one.
However, Fox Corporation negated the Court’s concerns by undertaking not to apply for an order for security in excess of £50,000 (the PCC costs cap). The potential of a further undertaking being given by Fox Corporation to consent to a costs capping order in the High Court pursuant to CPR 44.18 was floated by the PCC but rejected.
Ultimately, ordering transfer to the High Court, the Judge concluded that an adverse High Court costs order would be a major blow but that the devastation predicted by the Claimant was an overstatement. He was also influenced by the Claimant’s approach to the proceedings up to that point and stated that it wanted to “have its cake and eat it”.
The Claimant had commenced in the PCC but was, in his view, acting like a litigant in High Court proceedings but benefitting from a £50,000 costs recovery limit. In particular, he noted that the scope of relief sought by the Claimant would have serious consequences for the Defendant, as the Glee TV programme and other associated merchandise would have to be taken off the air/the market, while it was considered whether it could be specifically tailored for the UK market. Fox Corporation had requested further and better particulars of the alleged infringements and instances of confusion but these had not been forthcoming. The Judge asked Comic Enterprises if it would be willing to withdraw the claim for an injunction to stay in the PCC, but it refused.
Overall, it is clear that the PCC was trying to assist the Claimant and felt that it did not help itself. However, while the conditions proposed by the PCC were practical the parties’ reasons for refusing them show the limits of pragmatism.
Fox Corporation may consider that the Claimant’s primary motivation is and always has been to hold a gun to its head to obtain a favourable financial settlement (many Defendants do) but while a party might make some admissions in privileged correspondence, could it ever surrender its right to an injunction against future conduct in open Court? This appears tantamount to accepting that the activities are not that damaging to its business, could colour its whole case and may result in a hardening of the counterparty’s approach to the action. Such an agreement is only likely to happen where the scope of the infringement is limited which itself would stop the issue arising.
Value of the Claim
There is no fixed guidance as to the appropriate value of a claim being heard in the PCC. An upper limit of £500,000 for claims in the PCC was provided but outside of this it will be a question of degree compared to the scope of the matter in dispute.
“Value” is not limited to the amount the Claimant could be awarded in damages. The PCC has accepted that in many intellectual property disputes the true value to the Claimant is the commercial value of the injunction and keeping the counterparty (and others) out of its market.
In DKH Retail Limited v Republic (Retail) Limited (CC12P01538) where the writers acted for DKH Retail the applicant sought to resolve this issue, initially by giving an undertaking not to produce the disputed product until the conclusion of the proceedings, when it would be free to use or prevented by a permanent injunction. However, this formulation still retained the value of the injunction, therefore, ultimately the counterparty agreed to give an irrevocable undertaking not to produce the disputed article again whatever the outcome. In order to try and stay in the PCC, A.S. Watson were prepared to voluntarily cap their damages to £400,000.
As with surrendering any injunction, a compromise of this type may not be possible in many cases.
Complexity and length of trial
Complexity in reality has two aspects, complexity of the law and complexity of the issues involved in the claim which goes hand in hand with the estimated length of any trial.
From the case law it is clear that arguments of legal complexity are unlikely to find favour with the PCC as a reason a matter should be heard in the High Court. Given that the panel of Judges in the PCC all originate from the intellectual property bar , there can be no suggestion that the Court does not have the expertise. The PCC is a designated Community Trade Mark Court, therefore, in theory there is no restraint on it hearing a multi jurisdictional action, however, in practice, the scope of the issues involved may make this type of case inappropriate. The ALK Abello case involved a patent action with a technical rating of 3 (top rating 5) and this was no concern for the Court.
Facts and subject matter
In addition to the financial position of the parties, facts and subject matter has been most significant to the Court’s thinking on determining transfer. A normal trial in the PCC will be no longer than 2 days although the Court can exceptionally accommodate slightly longer trials.
Under the new rules the pleadings produced by the parties are detailed with the objective being that the Court can use them as evidence in chief and where appropriate determine the action without further evidence. Inevitably, this will not happen in every case in the PCC, but the Court will look very carefully at the issues before ordering further evidence. Therefore, before attending the CMC, thought needs to be applied to the specific issues on which disclosure and witness evidence is being sought as the Court will test the positions of the parties.
What is necessary will be highly dependent on the case. In a straightforward design action where the only issues are validity and infringement, the Court may not need more than the prior art relied upon, the design and the alleged infringement. In trade mark cases and passing off matters the evidence needed is likely to be more comprehensive, covering distinctiveness, reputation, similarities and the all important consumer evidence. It was these issues and the fact that 14 countries needed to be considered which was fatal in the AS Watson action.
Estimating the length of trial in any matter comes with experience. Some matters could go either way and with appropriate focus would be able to fit a two day trial but with some it will be apparent that this will never happen. The Court has shown through the current cases that it is equally alive to the competing parties’ tendencies to either overplay or underplay the amount of evidence required depending upon the position taken on transfer.
Do you want to be in the PCC? If so, act that way. Often it will be a question of balancing the client’s commercial objective with the desire to be in the PCC. If you can’t do so without fundamentally damaging the case then it may be better to ground the action in the High Court rather than trying to push a square peg into a round hole and being vulnerable to transfer.
- Are there any ways that you can narrow the issues in dispute? If the client wants to be in the PCC then you may want to shape your action carefully and not take every available point but only include the strongest arguments.
- Can you limit the damages claimed?
- Can you limit the scope of the remedies claimed?
- Consider how you are going to approach and litigate the case from the outset. For instance, if you are the Defendant and proposing transfer, make sure your Defence is PCC compliant. It wasn’t the Claimant’s idea but it is yours, show the Court and the Claimant you are serious, save yourself time and money and there is no prejudice to having a PCC compliant Defence even if the action ultimately continues in the High Court.
- If you want to apply for transfer time it carefully – wait until the scope of issues in dispute is sufficiently defined – this may be once the pleadings have closed. However, in some cases it will be apparent from an earlier stage. In Comic Enterprises while the case was transferred to the High Court all the costs prior to transfer will remain assessed on the PCC basis.
- Pre-empt the measures that the PCC might suggest. If you want to transfer to the High Court are you willing to offer comfort to the other party in relation to costs capping or security, if appropriate?
ALK – Abello Limited v Meridian Medical Technologies  EWPCC 14
Application by the Defendant to transfer the case to the High Court. Action for patent invalidation in relation to an automatic injector pen for drugs, such as adrenaline. Both parties to the action were substantial undertakings. The Defendant’s market for its product, which the Claimant was inferred to wish to take a substantial chunk of, if it legally could, was US$ 24 million.
The new procedural rules did not apply to this case.
Caljan Rite-Hite Limited v Sovex Limited  EWHC 669
Application by the Defendant to transfer the action from the High Court. Action for rectification of the trade marks register and substitution of the Claimant for the Defendant as the proprietor of the mark.
A.S. Watson B.V. v The Boots Company PLC  EWPCC 026
Application by the Defendant, Boots, for A.S. Watson’s, Superdrug, action for trade mark infringement to be transferred to the High Court. The marks in question were Superdrug’s sun cream range SOLAIT and Boots soon to be launched (if not an infringement) range SOLEI. As the matter involved a Community Trade Mark the issues needed to be assessed over 14 different countries with the potential injunction being pan European.
Comic Enterprises Limited v Twentieth Century Fox Film Corporation  EWPCC 13
Application made by the Defendant, Fox, to transfer the action to the High Court. The action relates to Fox’s alleged infringement of the Claimant’s registered trade mark “the glee CLUB” and passing off through its broadcast and associated marketing of the TV programme Glee.
DKH Retail Limited v Republic (Retail) Limited  EWHC 877
Application to transfer agreed by consent. However, the Court considered whether under CPR 63.3 and CPR 30.5 Masters of the High Court have jurisdiction to hear transfer applications or whether these must be addressed by a Judge of the PCC.