Claimants must approach proceedings in reasonable manner to take advantage of PCC

United Kingdom

The decision of the Patents County Court (PCC) in Comic Enterprises Ltd v Twentieth Century Fox Film Corp ([2012] EWPCC 13, March 22 2012) shows that claimants who wish to take advantage of the costs cap available in the PCC must approach the proceedings in a reasonable and proportionate manner. Claimants who approach the proceedings as they would High Court proceedings in a full-on attack on the defendant risk having the proceedings transferred to the High Court.

In England, IP claims can be heard in the senior High Court or the junior PCC. Inevitably, claimants choose the forum that they consider gives them the greatest advantage. As the jurisdiction of the PCC overlaps to a significant extent with that of the High Court, disputes can arise between the claimant and the defendant as to which is the appropriate forum for the proceedings.

Established in 1990, the PCC was intended to provide a less costly and less complex alternative to the High Court and, in particular, was aimed at small and medium-sized enterprises (SMEs). However, for a number of years the PCC operated under the same procedure rules as the High Court and, as such, did not offer significant advantages for litigants seeking a lower-cost alternative to the High Court. Updated procedures were implemented in the PCC on October 1 2010 and the well-respected Queens Counsel, Colin Birss QC, was appointed as the PCC judge. 

The PCC procedure is intended to ensure that proceedings are managed in a reasonable and, most importantly, a cost-effective manner. In addition: 

  • damages in the PCC are capped at £500,000;
  • the winning party can recover no more than £50,000 of its costs; and
  • trials are generally limited to two days.

This compares with the High Court where damages are not capped and the winning party would generally expect to recover a significant percentage (as much as 70%) of costs incurred.  

Inevitably, there is considerable overlap in the jurisdiction of the PCC and that of the High Court. It is therefore possible for claimants, in particular SMEs, to exploit the perceived advantages of the PCC (in particular, the costs cap) while running proceedings in a manner that places significant burden on the defendant.

In Comic Enterprises, the defendant sought to have trademark and passing off proceedings relating to the mark GLEE transferred from the PCC to the High Court.

The claimant has since 1994 operated comedy clubs in the United Kingdom under the name The Glee Club and/or The Glee Comedy Club, and owns UK trademark registrations for THE GLEE CLUB. 

The defendant produces the popular Glee television show and also offers music, DVDs and associated merchandise under the mark GLEE. While the claimant knew of the Glee television programme in 2010, it did not issue proceedings until September 2011, immediately before the £500,000 cap on damages was introduced for trademark claims. Unusually, there was no letter before action.

The defendant sought to have the proceedings transferred to the High Court.

In his decision, his Honour Judge Colin Birss QC set out the factors to be considered by the PCC in deciding whether to transfer a case to the High Court. These factors are:

  • The financial position of the parties - consideration is given to whether one or both parties can only afford to bring or defend the claim in the PCC.
  • Whether the claim is appropriate for the PCC, considering factors such as:
    • the value of the claim;
    • the complexity of the issues; and
    • the estimated length of trial.
  • The importance of the outcome of the claim to the public in general.

Judge Birss QC noted that the primary role of the PCC is to improve access to justice for SMEs and this should therefore be the primary consideration when the PCC considers an application for transfer of proceedings to the High Court. However, he also pointed out that an SME does not have an unfettered right to stay in the PCC regardless of the nature of the case. 

While describing the case as a "conventional trademark and passing off claim", Judge Birss QC agreed with the defendant that the value of the claim was very high. However, much consideration was given to the financial position of the claimant and its director and sole shareholder, Mr Tughan. The defendant argued that the claimant would be able to meet the defendant's costs if the defendant was successful. Judge Birss QC accepted that this was the case, but noted that a substantial costs award against the claimant would have a very significant negative impact on the claimant's business.

However, the determinative factor in this dispute was the claimant's approach to the legal proceedings. The claimant had taken a very aggressive approach, no doubt seeking to exert maximum pressure on the defendant.  The judge likened this approach to full-scale High Court litigation.  

Judge Birss QC thus concluded that the claimant was seeking to "have its cake and eat it", running the proceedings in a manner more suited to High Court litigation while taking full advantage of the PCC's costs cap.

SMEs that wish to take advantage of the PCC and, in particular, the significant advantages of the costs cap, must approach the proceedings in an appropriate, considerate and proportionate manner. SMEs that seek to exploit the jurisdiction of the PCC while pursuing litigation in an aggressive manner aimed at maximising pressure on the defendant risk having the proceedings transferred to the High Court where the costs cap does not apply and where costs are likely to be higher due to the more detailed factual and legal analysis that will take place in High Court proceedings.

Nick Bolter, Edwards Wildman Palmer UK LLP, London

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